Gregory v. Sprint Spectrum

Filed 8/30/06 Gregory v. Sprint Spectrum CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, Linda B. Quinn, Judge. Affirmed.

Dennis Gregory filed a class action complaint against his wireless telephone provider, Sprint Spectrum (Sprint), alleging Sprint improperly characterized a monthly customer charge as a tax rather than a rate increase. Sprint responded by moving to compel arbitration. After the matter was continued for a lengthy period, the trial court requested Sprint to identify the specific customer contract under which it was seeking arbitration. Sprint responded by stating it was seeking arbitration under the June 2004 version of its customer contract. This contract became effective after Gregory filed his lawsuit and after Sprint moved to compel arbitration.

The trial court denied Sprint's motion, finding the June 2004 arbitration provision was not applicable to all potential class member claims and concluding the class action prohibition contained in the arbitration provision was unenforceable because it was unconscionable under the California Supreme Court's decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148 (Discover Bank). The trial court declined to sever the unenforceable provision from the remaining arbitration clause because Sprint did not request a severance after the court inquired whether it was seeking this remedy.

On appeal, Sprint contends the court erred in finding the class action prohibition was unenforceable because application of Discover Bank to Sprint's telephone service contract is preempted by the Federal Communications Act. We do not reach this legal issue because we conclude Sprint failed to meet its preliminary factual burden to show Gregory's claims fall within the scope of the arbitration provision contained in Sprint's June 2004 customer contract. Based on this conclusion, we affirm the court order.

FACTUAL AND PROCEDURAL BACKGROUND

Gregory's Class Action Complaint

In February 2003, Gregory filed a class action complaint, alleging Sprint deceptively raised customer rates beginning in January 2002 by mischaracterizing a rate increase as a government imposed fee entitled "USA Regulatory Obligations & Fees" (USA Regulatory fee). According to the complaint, the misrepresentation was detrimental to Sprint customers because customers sign contracts for one-year or two-year terms that include an early termination penalty unless Sprint raises its prices. Gregory alleged that by misrepresenting its price increase as a government tax and not a rate increase, Sprint eliminated its customers' contractual rights to terminate their contracts without incurring a termination fee.

Gregory brought the action on behalf of "all persons and entities who contracted with [Sprint] for mobile phone service within California and incurred one or more" USA Regulatory fees. Gregory alleged that because of the small amount of individual damage and the expense of litigation, few class members would seek legal redress individually, and the class action would promote an orderly and expeditious administration and adjudication of the class claims. Gregory further alleged that common questions of law and fact predominate among class member claims.

Gregory alleged several causes of action, including: (1) violation of the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.); (2) violation of the unfair competition law (Bus. & Prof. Code, § 17200, et seq.); (3) false and misleading advertising (Bus. & Prof. Code, § 17500); (4) unjust enrichment; (5) breach of contract; and (6) fraud. Gregory sought damages, injunctive relief, and declaratory relief.

Sprint's Petition to Compel Arbitration

In July 2003, Sprint moved to compel arbitration of Gregory's individual claim. In support, Sprint submitted documents showing Gregory's customer history and the various customer contracts governing Gregory's wireless phone services. We summarize this evidence below.^[1]

In January 2001, Gregory first obtained Sprint wireless phone service. At this time, Sprint gave Gregory its standard customer contract, entitled "Terms and Conditions of Services," which stated that the contract was "part of your agreement with Sprint." The Terms and Conditions contained a provision notifying Gregory that Sprint was entitled to make changes to the contract "at any time," and providing Gregory with information as to how to learn about these changes. This contract did not contain an arbitration clause, but did contain a provision under which the customer agreed to waive rights to bring a class action.

Four months later, in May 2001, Sprint revised its Terms and Conditions. Of relevance here, Sprint deleted the provision prohibiting class actions and added an arbitration clause. This arbitration clause required "ANY CLAIM, CONTROVERSY OR DISPUTE . . . RELATED DIRECTLY OR INDIRECTLY TO THE SERVICES" to be resolved by arbitration under American Arbitration Association rules. The Terms and Conditions specified that the contract is governed by "federal law and the laws of the State of Kansas," a provision that was repeated in each subsequent version of the Terms and Conditions.

In November 2001 and May 2002, Sprint changed the Terms and Conditions, but the arbitration clause remained essentially the same.

Three months later, in August 2002, Sprint again modified the arbitration provision in the Terms and Conditions. Under the new arbitration provision, JAMS was substituted for the American Arbitration Association as the agreed arbitration service, and Sprint deleted provisions limiting discovery and limiting the arbitrator's authority to award various types of damages. This version of the arbitration clause also added a provision stating the parties shall arbitrate "ANY CLAIM, CONTROVERSY OR DISPUTE . . . REGARDLESS OF THE DATE OF ACCRUAL OF SUCH CLAIM . . . ." This revised customer contract did not contain a provision prohibiting class actions.

In February 2003, Gregory filed his class action complaint.

Four months later, in June 2003, Sprint again revised the Terms and Conditions. The arbitration provision was essentially identical to the August 2002 version except that it substituted the CPR Institute for Dispute Resolution (CPR) for JAMS as the agreed arbitration service. This agreement did not contain a provision prohibiting class actions.

The next month, in July 2003, Sprint filed its motion to compel arbitration, submitting copies of the six different versions of the Terms and Conditions applicable since Gregory became a Sprint customer (May 2000, May 2001, November 2001, May 2002, August 2002, June 2003). However, Sprint did not clarify which arbitration provision it was seeking to enforce, although at one point it appeared to be relying on the May 2001 Terms and Conditions.

Events Occurring After Sprint Filed Its Motion to Compel Arbitration

One month after Sprint moved to compel arbitration, in August 2003, Gregory purchased a new Sprint phone and signed a new contract with a mandatory two-year service plan. A provision directly above his signature obligated Gregory to arbitrate claims arising out of the contract.

Three months later, on November 24, 2003, Sprint adopted a new version of its Terms and Conditions, which contained essentially the same arbitration provisions. On November 30, 2003, Gregory changed his service plan, and thus was required to enter into another two-year service plan.

In December 2003, before Gregory had the opportunity to file a response to Sprint's motion to compel arbitration, conduct discovery, or seek class certification, the superior court stayed the matter based on a federal district court order enjoining all related actions against wireless carriers.

During the 10-month stay period, Sprint twice modified its Terms and Conditions, which included substantial changes to the arbitration provision. First, in May 2004, Sprint adopted a new version of its Terms and Conditions, which included only a minor change to the arbitration clause. However, the next month, on June 30, 2004, Sprint adopted a new customer contract that substantially changed the terms of the arbitration provision. For purposes of this case, the most important changes were as follows:

(1) Sprint eliminated the statement that the arbitration provision applies "REGARDLESS OF THE DATE OF ACCRUAL OF SUCH CLAIM, CONTROVERSY OR DISPUTE" and instead stated that the arbitration provision applies to those "CLAIMS, CONTROVERSIES, OR DISPUTES . . . ARISING OUT OF OR RELATING TO THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, THE SERVICES, ANY PHONES/EQUIPMENT, OR ADVERTISING, EVEN IF IT ARISES AFTER YOUR SERVICES HAVE TERMINATED, AND INCLUDING CLAIMS YOU MAY BRING AGAINST SPRINT'S EMPLOYEES, AGENTS, AFFILIATES OR OTHER REPRESENTATIVES . . . ";

(2) Sprint added a provision prohibiting class actions or joinder of claims in a "lawsuit, arbitration or other proceeding" (capitalization omitted); and

(3) Sprint deleted reference to the CPR arbitration service and instead provided that the arbitration will be conducted under the rules of "either JAMS or the National Arbitration Forum ('NAF'), or, alternatively, as we may mutually agree."

Three months later, in September 2004, the federal court lifted the stay. In a supplemental memorandum in support of its motion to compel arbitration, Sprint presented updated factual information about its latest modifications to its customer contracts and cited a recent federal district court decision rejecting the argument that a consumer arbitration provision was unconscionable under Kansas law. (See In re Universal Serv. Fund Tel. Billing Practices Litig. (D.Kan. 2003) 300 F.Supp.2d 1107, 1125-1126 (In re Universal Service Fund).)

Gregory raised numerous arguments in opposition, including: (1) the unilateral addition of the mandatory arbitration requirement was unconscionable under California law (see Badie v. Bank of America (1998) 67 Cal.App.4th 779); (2) granting arbitration would effectively eliminate Gregory's rights because the cost of arbitration far outweighs the individual recovery sought; and (3) Gregory's class claims and equitable claims for injunctive relief are not subject to arbitration and all claims should be tried in one forum. Gregory additionally emphasized the difficulty in responding to Sprint's motion given that Sprint had never specified which "particular iteration of the 'Terms and Conditions' it contends governs the claims plaintiff has alleged against it in this action." Gregory argued, for example, that if Sprint is relying on a version of the agreement that mandated CPR arbitration, the provision would be unenforceable because CPR does not arbitrate consumer claims and the costs would be prohibitive given that the average hourly rate for a CPR arbitrator dwarfs the average value of an individual claim ($22.96).

In its reply, Sprint focused primarily on the August 2003 and November 2003 Terms and Conditions as the basis for its motion to compel arbitration.

Two weeks later, the court requested the parties to submit supplemental briefing on several specific issues, including (1) the identity of the specific contract that Sprint contends "gives rise to arbitration and encompasses plaintiff's complaint"; (2) "the terms, if any, of that agreement that should be severed as inconsistent with California and/or Kansas law"; and (3) "the impact of [Discover Bank] (assuming a decision is issued by the time of the new hearing date)." At the time, Discover Bank was pending in the California Supreme Court on the issue whether a judicial finding that a class action prohibition in a consumer contract is unconscionable is preempted by the Federal Arbitration Act.

Ten days later, the Supreme Court filed its decision in Discover Bank, holding: (1) under California law, class action waivers in consumer adhesion contracts are unenforceable under certain circumstances, and this rule applies regardless whether the consumer is being asked to waive the right to class action litigation or the right to classwide arbitration; and (2) this California rule is not preempted by the Federal Arbitration Act (FAA). (Discover Bank, supra, 36 Cal.4th at p. 153.) In reaching these conclusions, the Discover Bank court reaffirmed the "well accepted" rule that class actions may be litigated in an arbitration forum if the asserted claims fall within the scope of an enforceable arbitration agreement. (Id. at p. 152.) The court, however, did not make a final determination on the arbitration enforceability issue in the case because it remanded the case to the Court of Appeal to determine whether California or Delaware law applied under choice-of-law principles. (Id. at pp. 173-174.)

Sprint thereafter filed its supplemental memorandum in response to the trial court's request for supplemental briefing. In the supplemental memorandum, Sprint made clear it was seeking arbitration under the June 30, 2004 version of the Terms and Conditions. Sprint resubmitted a copy of this contract and stated "the June 30, 2004 provision . . . is the one that applies to resolve this dispute." Sprint additionally expressly declined to request a severance of the class action provision, arguing that "[q]uestions about whether provisions separate and distinct from the arbitration provision should be severed . . . are for the arbitrator and not this Court." Finally, Sprint asserted that it believed the Discover Bank decision "is in error concerning the issue of whether the FAA preempts claims of unconscionability under California substantive law," and it sought to preserve the argument in the event the United States Supreme Court reversed the decision.

In response, Gregory argued that the June 2004 arbitration provision was inapplicable to his claims because the express terms of that provision apply only to claims, controversies, or disputes "arising out of or relating to this agreement," and his claims do not arise from the June 2004 agreement. Gregory also argued the arbitration provision was unenforceable because the class action prohibition was unconscionable under Discover Bank, supra, 36 Cal.4th 148, and the unilateral addition of the arbitration provision and the subsequent changes to the provision were unconscionable under Badie v. Bank of America, supra, 67 Cal.App.4th 779.

During the hearing on the matter, the court observed that throughout the proceedings the issue as to which contract was operative was unclear. The court stated to Sprint's counsel: "The first round of briefing . . . basically said here's all our contracts, you figure out which one is operative. I sent it back to you to brief . . . the [Discover Bank] case, and also say, . . . you tell me which one is operative . . . since you're representing the client. . . ." In response, Sprint's counsel stated: "I think that our answer [in the supplemental briefs] was fairly clear as to the court's first question, as to which provision applies, and I don't think there was any ambiguity in that response." (Italics added.) The court responded "No, I think we've got it nailed down now as far as the [June 2004] agreement."

The court ultimately denied the motion to compel arbitration. The court explained its ruling as follows:

"Defendant in its most recent briefing specified the arbitration agreement that it contends controls this dispute. [i].e., the June 30, 2004 agreement. . . . This is not the agreement in effect at the time this action was filed. The June 30, 2004 agreement does not apply to those class members who cancelled their services with defendant before June 30, 2004. [¶] Moreover, the California Supreme Court's recent decision in Discover Bank v. Superior Court (2005) 36 Cal.4th 148 precludes enforcement of the class action prohibition in the June 30, 2004 agreement. In addition, defendant fails to articulate any provision from the June 30, 2004 agreement that is unenforceable and may be severed. . . . [¶] . . . [¶] Defendant is not precluded from bringing a renewed petition to compel arbitration and stay action. In addition, the Court may revisit arbitration following the Court's review of class issues."^[2]

DISCUSSION

I. Overview

Sprint devotes much of its appellate briefs in an effort to challenge the trial court's legal conclusion that Sprint's June 2004 contractual prohibition on class actions is unenforceable under Discover Bank. Sprint contends the Federal Communications Act (FCA) preempts Discover Bank's holding as applied to a mobile telephone provider because the FCA prohibits a state from enforcing a rule against a common carrier that gives a person "any undue or unreasonable prejudice or disadvantage . . . ." (47 U.S.C. § 202(a).) The federal courts have reached conflicting conclusions on the FCA preemption issue. (See Boomer v. AT & T Corp. (7th Cir. 2002) 309 F.3d 404 [finding state law preempted]; Ting v. AT&T (9th Cir. 2003) 319 F.3d 1126 [finding no preemption].)

We do not reach the preemption issue in this case because we conclude Sprint has not met its predicate burden to show Gregory's claims fall within the scope of the June 2004 arbitration provision. Under the plain meaning of the June 2004 arbitration provision, arbitration is required for claims arising out of or relating to "this agreement," and Gregory's claims do not arise out of or relate to the June 2004 agreement. On this

basis, we affirm the court's order denying Sprint's motion to compel arbitration.

II. Generally Applicable Legal Principles

A petition to compel arbitration "'"is in essence a suit in equity to compel specific performance of a contract."'" (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 411.) Thus, the "right to arbitrate depends on the terms of [the] contract." (Provencio v. WMA Securities, Inc. (2005) 125 Cal.App.4th 1028, 1031.) The party petitioning to compel arbitration "bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence . . ." (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972), and that the claims fall within the scope of the agreement. (Victoria v. Superior Court (1985) 40 Cal.3d 734, 739.) Federal and state law "express[ ] a strong public policy favoring the enforcement of valid agreements to arbitrate." (Boghos v. Certain Underwriters at Lloyd's of London (2005) 36 Cal.4th 495, 502.) All doubts concerning the scope of arbitration are to be resolved in favor of arbitration.

In ruling on an arbitration petition, the trial court sits as the trier of fact, weighing the documentary evidence and any oral testimony. (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at p. 972.) We apply a substantial evidence review to the trial court's resolutions of disputed facts. (Provencio v. WMA Securities, Inc., supra, 125 Cal.App.4th at p. 1031.) If "there is no conflicting evidence regarding the interpretation of an arbitration agreement, we exercise our independent judgment to determine as a matter of law whether the agreement applies to a controversy." (Ibid.)

Sprint contends we should apply Kansas law in interpreting the scope of the arbitration clause because the agreement states it is governed by Kansas law. Gregory does not dispute that the contract identifies Kansas law as the governing state law, nor does he argue this choice-of-law provision is unenforceable under the analytical test established by our high court. (See Discover Bank, supra, 36 Cal.4th at pp. 173-174; Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 916-917.) Instead, Gregory contends we should apply California law because Sprint waived its right to rely on Kansas law by failing to cite applicable Kansas authority in the proceedings below. (See Washington Mutual Bank, supra, 24 Cal.4th at p. 919.) We reject this contention with respect to the interpretation of the scope of the arbitration agreement. On our review of the record, Sprint sufficiently preserved its right to rely on Kansas law on this issue. In any event, even if there was a waiver, this is of no consequence to our decision because there is no substantive difference between Kansas law and California law regarding the contract interpretation matters at issue here.

Under both California and Kansas law, a contract that is plain and unambiguous on its face must be enforced according to its terms. (TIG Ins. Co. of Michigan v. Homestore, Inc. (2006) 137 Cal.App.4th 749, 755; Wagnon v. Slawson Exploration Co., Inc. (Kan. 1994) 874 P.2d 659, 666; Jayne v. Kennedy & Coe, L.L.C. (Kan.App. 1999) 978 P.2d 951, 953.) A court must give effect to the parties' intentions at the time they entered into the contract, as determined from the written instrument. (Oakland-Alameda County Coliseum, Inc. v. Oakland Raiders, Ltd. (1988) 197 Cal.App.3d 1049, 1057; City of Manhattan v. Galbraith (Kan.App. 1997) 945 P.2d 10, 14.) The court must construe the contract language in a fair, reasonable, and practical manner. (Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 762-766; Weber v. Tillman (Kan. 1996) 913 P.2d 84, 97.)

If an ambiguity exists, the "intent of the parties is ascertained by considering all language employed, circumstances existing when the agreement was made, the object sought to be obtained, and other circumstances which tend to clarify the intention of the parties. [Citation.]" (Jayne v. Kennedy & Coe, L.L.C., supra, 978 P.2d at p. 123; accord City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473-474.) Additionally, an ambiguity must be construed against the drafter. (Victoria v. Superior Court, supra, 40 Cal.3d at p. 739; Weber, supra, at p. 97.) "Whether an ambiguity exists in a written instrument is a question of law to be decided by the court." (Holly Energy, Inc. v. Patrick (Kan. 1986) 722 P.2d 1073, 1077; accord Wolf v. Superior Court (2004) 114 Cal.App.4th 1343, 1351.) "Regardless of the construction of a written contract made by the trial court, on appeal a contract may be construed and its legal effect determined by the appellate court. [Citation]." (Weber v. Tillman, supra, 913 P.2d at p. 96.)

III. Analysis

The arbitration provision in the June 2004 Terms and Conditions reads:

"MANDATORY ARBITRATION OF DISPUTES. INSTEAD OF SUING IN COURT, YOU AND SPRINT AGREE TO ARBITRATE ANY AND ALL CLAIMS, CONTROVERSIES OR DISPUTES AGAINST EACH OTHER ARISING OUT OF OR RELATING TO THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, THE SERVICES, ANY PHONES/EQUIPMENT, OR ADVERTISING, EVEN IF IT ARISES AFTER YOUR SERVICES HAVE TERMINATED, AND INCLUDING CLAIMS YOU MAY BRING AGAINST SPRINT'S EMPLOYEES, AGENTS, AFFILIATES OR OTHER REPRESENTATIVES, OR THAT SPRINT MAY BRING AGAINST YOU ('CLAIMS'). . . .

"YOU AND SPRINT FURTHER AGREE THAT NEITHER SPRINT NOR YOU WILL JOIN ANY CLAIM WITH THE CLAIM OF ANY OTHER PERSON OR ENTITY IN A LAWSUIT, ARBITRATION OR OTHER PROCEEDING; THAT NO CLAIM EITHER SPRINT OR YOU HAS AGAINST THE OTHER SHALL BE RESOLVED ON A CLASS-WIDE BASIS; AND THAT NEITHER SPRINT NOR YOU WILL ASSERT A CLAIM IN A REPRESENTATIVE CAPACITY ON BEHALF OF ANYONE ELSE. IF FOR ANY REASON THIS ARBITRATION PROVISION DOES NOT APPLY TO A CLAIM, WE AGREE TO WAIVE TRIAL BY JURY.

"A single arbitrator engaged in the practice of law will conduct the arbitration. The arbitration will be filed with and the arbitrator will be selected according to the rules of either JAMS or the National Arbitration Forum ('NAF'), or, alternatively, as we may mutually agree. We agree to act in good faith in selecting an arbitrator. The arbitration will be conducted by and under the then-applicable rules or JAMS or NAF, wherever the arbitration is filed or, if the arbitrator is chosen by mutual agreement of the parties, the then-applicable rules of JAMS will apply unless the parties agree otherwise. . . .

"If any party files a judicial or administrative action asserting a claim that is subject to arbitration and another party successfully stays such action or compels arbitration, the party filing that action must pay the other party's costs and expenses incurred in seeking such stay or compelling arbitration, including attorneys' fees."

The plain language of this agreement establishes that this arbitration requirement applies only to "claims, controversies or disputes . . . arising out of or relating to this agreement." (Italics added.) Gregory's complaint alleges that Sprint's wrongful conduct began in 2002. Thus, the dispute does not arise out of or relate to the June 2004 agreement. (See In re Universal Service, supra, 300 F.Supp. at pp. 1132-1133 [concluding that preexisting claims do not fall within the scope of an arbitration clause that covers "all . . . disputes arising out of or related to this Agreement"].) Other contractual phrases in the June 2004 arbitration provision similarly refer to future claims, rather then preexisting ones. For example, the first sentence of the provision begins "INSTEAD OF SUING IN COURT, YOU AND SPRINT AGREE TO ARBITRATE ANY AND ALL CLAIMS, CONTROVERSIES OR DISPUTES. . . . " This phrase logically refers to claims that have not yet been filed. "Instead of suing" prohibits a party from doing something now or in the future, rather than making a past act improper. Similarly, the reference to claims the customer "may bring" without also referencing claims that the customer "has brought" supports the deliberate limited scope of the arbitration provision.

This interpretation is reinforced by the fact that several previous versions of the Terms and Conditions stated that the arbitration requirement applied to claims "REGARDLESS OF THE DATE OF ACCRUAL OF SUCH CLAIM, CONTROVERSY OR DISPUTE." In the June 2004 Terms and Conditions, Sprint deleted this language and instead added that arbitration was required for claims that arose out of or were related to "THIS AGREEMENT." (Italics added.) By deleting a statement that the arbitration provision applies to all claims "REGARDLESS OF THE DATE OF ACCRUAL" and adding a statement that the provision applies to claims arising out of "THIS AGREEMENT," the only objectively reasonable interpretation is that the June 2004 arbitration provision did not apply to claims arising from earlier versions of the customer contract. In interpreting the agreement, all doubts must be resolved in favor of arbitrability. However, we must enforce the parties' expressed intentions.

Our interpretation does not mean that parties may not agree to a retroactive arbitration provision. (See 9 U.S.C. § 2 [providing for the enforceability of "an agreement in writing to submit to arbitration an existing controversy"].) However, to enforce an arbitration provision to litigation already pending, the provision should contain some language reflecting the parties' intent to do so. (See In re Universal Service Fund, supra, 300 F.Supp.2d at pp. 1123-1124 [holding that contract language "plainly and unambiguously" included preexisting claims where agreement states that all claims, controversies, or disputes between the parties will be resolved by arbitration "'regardless of the date of accrual of such claim, controversy or dispute'"]; see also Merrill Lynch, Pierce, Fenner & Smith, Inc. v. King (M.D. Fla. 1992) 804 F.Supp. 1512, 1514.) In this case, there was no language in the June 2004 agreement reasonably providing that the arbitration agreement would apply to an (1) existing dispute, (2) for which the plaintiff has already filed a lawsuit, and (3) for which defendants had already filed a motion to compel arbitration under various earlier versions of the arbitration agreement.

In a footnote in its reply brief, Sprint contends there was no need to state that the arbitration provision applies to pending litigation in the June 2004 Terms and Conditions because Gregory was notified from the very first contract that Sprint had the right to make changes to the Terms and Conditions and that these changes would take effect immediately.^[3] This argument misses the point. The issue is not whether the provision is effective immediately (i.e., to all disputes arising from the June 2004 agreement), but whether the claims in Gregory's complaint arise from the June 2004 agreement, and thus are encompassed by the arbitration clause.

Sprint additionally focuses on the evidence showing Gregory expressly agreed to arbitrate his disputes in August 2003. We agree the evidence supports this assertion, and that Gregory was informed that he would be bound by modifications unilaterally made by Sprint. However, the issue before us is whether the terms of the arbitration requirement Sprint seeks to enforce are broad enough to cover Gregory's claims, not whether Gregory was potentially subject to the August 2003 or June 2004 agreements.

In upholding the court's order, we recognize that a mandatory arbitration provision existed in most of Sprint's customer contracts during the time that Gregory was a customer. However, the fact that Gregory's claims potentially fell within one of these provisions does not mean the court erred in denying Sprint's motion to compel arbitration. In the trial court proceedings, Sprint made a deliberate election to seek to enforce only the June 2004 arbitration provision, presumably because Sprint wanted to additionally enforce the prohibition on class actions added in this version of its customer contract. Consistent with this position, Sprint did not request in its appellate briefs that it be permitted to enforce an earlier version of its Terms and Conditions, and at oral argument, Sprint's counsel reaffirmed that it sought to enforce only the June 2004 arbitration provision.

DISPOSITION

Order affirmed. Sprint to bear Gregory's costs on appeal.

HALLER, Acting P. J.

WE CONCUR:

McDONALD, J.

McINTYRE, J.

Publication Courtesy of California attorney referral.

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^[1] Although our resolution of this appeal concerns the interpretation of a specific provision in one specific contract, it is helpful to the analysis to view the contract in the context of Sprint's various modifications to its standard customer agreement. We thus set forth this evidence in some detail. We omit a discussion of the facts relevant solely to the issue whether Sprint's unilateral addition of the arbitration clause and class action prohibition to its customer contracts was unconscionable, as we do not decide this legal issue in this appeal.

^[2] We reject Gregory's argument that the denial of the motion without prejudice rendered the order nonappealable. (See Sanders v. Kinko's, Inc. (2002) 99 Cal.App.4th 1106, 1110; Henry v. Alcove Investment, Inc. (1991) 233 Cal.App.3d 94, 99.)

^[3] This notification stated that: "We may change this Agreement at any time (but see Service Plans). Any changes to the Terms are effective when we provide you with notice. If you use our Services or make any payment to us on or after the effective date of the changes, you accept the changes. If you do not accept the changes, you may terminate Services (but see Termination; Changing Service Plans). For purposes of the Agreement, 'use' includes keeping the right to access the Sprint PCS Network by not terminating Services. You may not modify the Agreement except for your Service Plan (see Termination; Changing Service Plans)." Sprint also stated that "For the most current version of the terms and conditions, please visit our website at www.sprintpcs.com or call Spring PCS Customer Care toll free at 1-888-211-4PCS, as the terms and conditions included with your Sprint PCS PhoneTM may not be the most current version. If you activated Sprint PCS Services before the effective date of these terms and conditions, these terms and conditions replace and supersede any previous terms and conditions."