T-Mobile to Court: Reverse Arbitration Award in Dealer Case Arising From Sprint Merger
T-Mobile and Sprint moved the court Monday to vacate an Aug. 23 award issued to defendant Wireless World. The arbitrator in the case “exceeded her powers, depriving herself of jurisdiction by voiding integral provisions of the operative arbitration agreement,” said the petition (docket 2:23-cv-01337) in U.S. District Court for Western Washington in Seattle. Plaintiffs called the award “completely irrational" and one that "manifestly disregards Washington law."
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For years before T-Mobile acquired Sprint, Wireless World was an authorized Sprint dealer. Under their retailer service agreement (RSA), Sprint had to approve Wireless World store locations, and the agreement allowed the carrier to withdraw approval of the dealer’s stores, “resulting in their closure, at any time or any reason or for no reason at all,” said the petition.
When the acquisition resulted in the new T-Mobile having “too many stores,” Wireless World was planning for store closures and took steps to mitigate the risk, including negotiating “merger protection” payments from Sprint in the event of closures, the petition said. T-Mobile offered Wireless World a chance to become one of its dealers, and the new RSA also allowed T-Mobile to close Wireless World stores “at any time for any reason or for no reason,” it said. In November 2020, T-Mobile announced further store closures for 2021, giving rise to Wireless World’s claims in arbitration. The retailer “voluntarily” sold its stores to T-Mobile dealer Verge Mobile and exited the business in September 2021, the petition said.
A “no prevailing party” section of the RSA says neither party in an arbitration will be deemed a prevailing party for the purposes of recovering attorneys’ fees and costs under the agreement “to encourage attempts at resolving any dispute before any hearing is needed,” said the petition. On Sept. 20, 2021, Wireless World initiated an arbitration against T-Mobile and Sprint with the JAMS Seattle office, demanding 10 claims for relief, including fraud, contract and statutory claims, said the petition. All were based on Wireless World’s assertion that T-Mobile’s decision to “close redundant stores” was improper in light of the parties’ contracts and “alleged representations” made by T-Mobile, it said.
On April 7, in advance of the final merits hearing, T-Mobile sent Wireless World a qualifying offer of settlement under Section 16.7 of the RSA, but Wireless World didn’t submit its own offer of settlement, “rendering it unable to collect attorneys’ fees and costs under the arbitration agreement,” the petition said. After a five-day final hearing in May, the judge in the case, retired Washington Supreme Court Justice Faith Ireland, overseeing the arbitration as the “neutral,” issued an interim award June 13, ruling “affirmatively for T-Mobile as to Wireless World’s franchise law claims.” Wireless World prevailed under its claim pursuant to the Washington Consumer Protection Act (WCPA), and Ireland awarded Wireless World compensatory damages.
Certain findings critical to Ireland’s award were “unexplained and devoid of any citation to any legal authority” or the evidentiary record, the petition said. The award "does not cite to any legal authority for the proposition that key contractual provisions in a commercial agreement between two sophisticated companies (each of whom were represented by lawyers during the negotiations) are summarily voidable,” it said.
Though the issue being arbitrated was a private one between T-Mobile and Wireless World, the arbitrator said the public interest element of the WCPA claim was satisfied because the T-Mobile-Sprint merger “was a matter of great public concern regarding competition, employment and public access to vital public services rendered by the providers” and that store closures affected “Legacy Sprint employee members of the public," the petition said.
Ireland awarded attorney’s fees and costs pursuant to the WCPA, said the complaint. She noted her award was “interim,” saying another hearing would be necessary to assess reasonable attorneys’ fees. By awarding fees and costs under the WCPA, the arbitrator “effectively re-wrote the parties’ arbitration agreement -- the agreement that provided her with jurisdiction in the first place -- to remove the carefully negotiated 'prevailing party' provisions,” the petition said.
T-Mobile filed a motion to correct the interim award, saying Wireless World wasn't a “prevailing party” under terms of the RSA because it didn’t extend an offer of settlement, the petition said. The carrier argued Ireland “exceeded her authority by ‘award[ing] fees and costs in contravention of a contractual prohibition otherwise.’” Wireless World said the attorneys’ fees provision was “unconscionable.” At a June 29 hearing, T-Mobile said Ireland exceeded her authority by awarding attorneys’ fees barred by the RSA’s arbitration agreement. On July 13, she issued an addendum denying T-Mobile’s request to correct the interim award.
Ireland issued her final award Aug. 23, awarding Wireless World attorneys’ fees and costs. The final award granted costs not specified by Washington’s statute for attorney compensation, and she voided portions of the RSA, the petition said. The arbitrator “voided key provisions in the arbitration agreement regarding attorneys’ fees and costs and, in doing so, exceeded the authority granted to her by the parties’ arbitration agreement.” T-Mobile asserts a vacatur of arbitration award under the Federal Arbitration Act and asks the court to vacate Ireland’s final award.