While being a defendant in a lawsuit is no fun, being a defendant in a class action lawsuit is especially painful. If you are in-house counsel in a service business, you may be particularly vulnerable to such actions and, no doubt, want to do whatever you can to avoid them. One strategy that has been employed over the years to thwart class actions is to include an arbitration clause in service agreements. Sometimes, however, companies also want to reserve the right to unilaterally modify the terms of their agreements – and doing so can invalidate an arbitration clause. Nevertheless, a recent decision from the Federal District Court of Massachusetts in Wainblat v. Comcast shows how one company was able to thread this needle and achieve both objectives.
Robert Wainblat was a Comcast customer, and in 2017 he agreed to a Subscriber Agreement that required arbitration for:
[A]ny claim or controversy related to [Comcast] or our relationship, including but not limited to any and all: (1) claims for relief and theories of liability, whether based in contract, tort, fraud, negligence, statute, regulation, ordinance, or otherwise; (2) claims that arose before this or any prior Agreement; (3) claims that arise after the expiration or termination of this Agreement, and (4) claims that are the subject of purported class action litigation.
In addition, Comcast reserved the unilateral right to modify the Subscriber Agreement through the following statement:
We [Comcast] may deliver any notice concerning our relationship with you, including notice of any change to this Agreement, … If you find any change to this Agreement to be unacceptable, you have the right to cancel your Service(s). Your continued receipt of the Service(s) for more than 30 days after we deliver notice of the change, however, will constitute your acceptance of the change.
Thereafter, Wainblat filed a class action lawsuit against Comcast, alleging that the company had violated various state and federal privacy laws. Comcast moved to compel arbitration pursuant to the terms of the Subscriber Agreement, and Wainblat countered by arguing that the arbitration clause was unenforceable because Comcast’s unilateral ability to modify the contract rendered the arbitration clause illusory. In addressing this issue, the Court noted that:
The key question was whether the [enforcing party] has the power to make changes to its arbitration policy that have retroactive effect, meaning changes to the policy that would strip the right of arbitration from a party who has already attempted to invoke it.
In this case, however, the Subscriber Agreement would not have permitted Comcast to avoid arbitration if it had been invoked by Wainblat. The Court also went on to note that while Comcast had the right to modify the Subscriber Agreement, Wainblat had 30 days to reject any such modifications. Thus, the Court found the arbitration clause to be enforceable and allowed the motion to stay.
In light of Wainblat, any in-house counsel who wants to try to have its cake (require arbitration) and eat it, too (reserve the unilateral right to modify the company’s agreement) is well-advised to follow the formula successfully used by Comcast.