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A federal district court in California refused to stay a class action during the pendency of an appeal from the Court’s ruling that a class waiver rendered the arbitration agreement unconscionable under California law. The Court found that the party seeking arbitration presented a “substantial question” in arguing for enforcement, but denied a stay based on the balance of equities.
In Bradberry v. T-Mobile USA, Inc., No. C 06-6567 CW, 2007 WL 2221076 (N.D. Cal. Aug. 2, 2007), Bradberry filed a class action lawsuit against T-Mobile, alleging that it was charging customers for services used by former customers who had previously been assigned the same phone number.
In response, T-Mobile moved to compel arbitration pursuant to an arbitration agreement in Bradberry’s service contract. The Court denied the motion on the ground that the arbitration agreement’s bar on class-wide proceedings (i.e., class waiver) rendered it unconscionable.
After filing an appeal of that ruling, T-Mobile filed a motion to stay all proceedings pending the outcome of the appeal. Under the law of most circuits, a stay is mandatory when a party appeals an order denying arbitration, but Ninth Circuit law leaves it to the trial court’s discretion.
More specifically, under Ninth Circuit law, a stay may be warranted if the motion to compel arbitration presents a “substantial question.” The Court found that T-Mobile had presented a “substantial question” in arguing that the arbitration agreement was “consumer-friendly” and thus not unconscionable or, alternatively, that the Federal Arbitration Act preempted an unconscionability determination.
Even though T-Mobile’s argument presented a “substantial question,” the Court denied the motion for a stay on the ground that the balance of equities did not favor a stay. Specifically, the Court found that pretrial litigation during the pendency of the appeal would not cause irreparable harm to T-Mobile.
Nevertheless, the Court acknowledged that the threat of “irreparable harm” could materialize as the trial date approached or if discovery became burdensome. Accordingly, the Court denied the motion for a stay without prejudice.
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