After denying a wireless provider’s motion to compel arbitration, a federal court in California also denied a motion to stay litigation pending appeal because there was a lack of probability of success on the merits of the appeal.

In Kaltwasser v. Cingular Wireless LLC, No. C 07-00411, 2008 WL 3925445 (N.D. Cal. Aug. 22, 2008), Kaltwasser sued Cingular Wireless (Cingular), and after settlement negotiations failed, Cingular moved to compel arbitration pursuant to an arbitration agreement in the parties’ wireless contract.

The Court denied Cingular’s motion to compel arbitration, holding that the arbitration agreement was unconscionable under California law because it contained a class waiver provision. Cingular had argued that the Court should apply Virginia law because Kaltwasser had a Virginia address at the time he sued Cingular. Kaltwasser, on the other hand, had argued that California law should be applied because he had a California billing address at the time he entered into the contract with Cingular.

Following § 187(2) of the Restatement (Second) of Conflict of Laws, the Court held that California law applied because application of Virginia law would conflict with California public policy disfavoring class action waivers. Thus applying California law, the Court held that the arbitration agreement was unconscionable because it waived Kaltwasser’s right to bring a class action against Cingular.

Cingular appealed the Court’s decision, and moved to stay litigation pending the outcome of its appeal. The Court held that the party seeking a stay of litigation "must show both a probability of success on the merits of its appeal and the possibility of irreparable injury."

Cingular argued that it was likely to succeed on appeal because the Court’s choice of law determination was erroneous, as it disregarded the parties’ intent to have the choice of law provision refer to the billing address at the time a lawsuit was filed. The Court rejected Cingular’s argument, holding that irrespective of the parties’ intent, it would be inappropriate to apply Virginia law because such an application would violate California’s public policy disfavoring class waivers. Accordingly, the Court held that Cingular was not likely to be successful on appeal.

Both Kaltwasser and Cingular argued that they would be irreparably harmed if the motion for stay was not decided in their favor. Kaltwasser argued that further delay of the lawsuit would lead to a loss of evidence and "fading memories." Cingular argued that the cost of litigating class certification, conducting discovery, filing dispositive motions and proceeding to trial outweighed any potential cost to Kaltwasser. Without explanation, the Court stated that it "agree[d] with Kaltwasser."

Based on those factors, the Court denied Cingular’s motion for a stay pending appeal.