Richard Geier v. M-Qube Inc , 824 F.3d 797 ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RICHARD A. GEIER, individually No. 13-36080
and on behalf of all others
similarly situated, D.C. No.
Plaintiff-Appellee, 2:13-cv-00354-TSZ
v.
OPINION
M-QUBE INC.; MOBILE
MESSENGER AMERICAS INC.,
DBA Mobile Messenger,
Defendants-Appellants.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, Senior District Judge, Presiding
Argued and Submitted February 4, 2016
Seattle, Washington
Filed May 26, 2016
Before: Alex Kozinski, Diarmuid F. O’Scannlain
and Ronald M. Gould, Circuit Judges.
Per Curiam Opinion
2 GEIER V. M-QUBE, INC.
SUMMARY*
Arbitration
The panel reversed the district court’s denial of
defendants’ motion to compel arbitration in a class action
alleging that defendants engaged in a scheme that caused
Washington consumers to become unknowingly and
unwittingly subscribed to premium text messages services,
and remanded for further proceedings.
Defendants are “billing aggregators” who serve as
financial intermediaries between customers and content
providers. Pow! Mobile, not a party, is a mobile content
provider that marketed a game called “Bid and Win,” and is
defined as the “Company” in the subscription contract’s
Terms and Conditions. Plaintiff’s wife allegedly subscribed
to the mobile version of Bid and Win.
The panel held that under Washington law, the Terms and
Conditions provide that the “Company’s suppliers” are
intended third-party beneficiaries of the Terms and
Conditions. The panel further held that if defendants are
Company’s suppliers, they may enforce the arbitration clause
in the Terms and Conditions. The panel remanded for the
district court to determine whether plaintiff’s wife assented to
the Terms and Conditions, and whether defendants are Pow!
Mobile’s suppliers.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
GEIER V. M-QUBE, INC. 3
COUNSEL
Stephen M. Rummage, Candice M. Tewell (argued), Colin G.
Prince, Davis Wright Tremaine LLP, Seattle, Washington, for
Defendants-Appellants.
Toby J. Marshall, Erika L. Nusser (argued), Terrell Marshall
Law Group PLLC, Seattle, Washington; Darrell W. Scott,
Matthew J. Zuchetto, The Scott Law Group, P.S., Spokane,
Washington, for Plaintiff-Appellee.
OPINION
PER CURIAM:
We consider whether defendants are third-party
beneficiaries of an arbitration clause that accompanied the
subscription to a mobile game.
FACTS
Pow! Mobile, not a party here, is a mobile content
provider that marketed a “reverse auction” game called “Bid
and Win.” In this type of game, players bid on prizes, and
whoever makes the lowest unique bid wins. Users could
subscribe to Pow! Mobile’s cell phone content service, and
play by submitting bids via text message. Bid and Win’s
$9.99 monthly subscription charge was billed directly to the
subscriber’s cell phone bill.
Defendant m-Qube, Inc. is a “connection aggregator.” It
markets mobile games and other subscription-based content
to the public. Defendant Mobile Messenger Americas, Inc.
4 GEIER V. M-QUBE, INC.
(“Mobile Messenger”) “built a computer ‘gateway’ to each of
the major wireless carriers (e.g., AT&T, Verizon, Sprint, T-
Mobile), allowing charities and businesses to send and
receive text messages with customers.” Both Mobile
Messenger and m-Qube are “billing aggregators” who serve
as financial intermediaries between customers and content
providers. Defendants’ parent company is Messenger Global,
Inc.
Margaret Wells, Richard Geier’s wife, allegedly
subscribed to the mobile version of Bid and Win. According
to defendants, Wells accepted Pow! Mobile’s Terms and
Conditions (the “Terms”) upon subscribing. Geier, however,
counters that his wife never subscribed to the service and thus
didn’t assent to the Terms. The Terms include a clause
compelling arbitration for “any controversy . . . arising out of
or relating to a service agreement between” Pow! Mobile and
its subscriber.
Geier’s class action complaint alleges defendants have
engaged in a scheme “that causes Washington consumers to
become unknowingly and unwittingly subscribed to premium
text message services.” Geier filed his complaint in state
court, but defendants removed the case to federal court
pursuant to the Class Action Fairness Act. After Geier filed
an amended complaint, defendants moved to compel
arbitration.
Without determining whether Wells agreed to the Terms,
the district court held that “defendants are not intended third-
party beneficiaries entitled to enforce the arbitration clause”
and thus denied defendants’ motion to compel arbitration.
GEIER V. M-QUBE, INC. 5
DISCUSSION
We review the district court’s ruling on the validity and
scope of an arbitration clause de novo. Nagrampa v.
MailCoups, Inc., 469 F.3d 1257, 1267 (9th Cir. 2006) (en
banc). Under the Federal Arbitration Act, federal district
courts must compel arbitration if (1) a valid agreement to
arbitrate exists and (2) the dispute falls within the scope of
that agreement. See Chiron Corp. v. Ortho Diagnostic Sys.,
Inc., 207 F.3d 1126, 1130 (9th Cir. 2000).
Under paragraph 11 of the Terms, the Bid and Win
subscriber agrees to waive all claims “against [his] wireless
carrier, any of Company’s suppliers, or anyone other than
Company, relating to the Service.” The Terms define
“Company” as Pow! Mobile, but do not define “Company’s
suppliers.” Geier argues that defendants aren’t Company’s
suppliers, but the district court for purposes of its analysis
assumed that they were.
Pursuant to the arbitration clause contained in paragraph
12 of the Terms, subscribers “agree that any dispute will be
resolved by binding arbitration.” Subscribers “also agree
[that] any arbitration will be limited to the dispute between
[them] and the Company and will not be part of a class-wide
or consolidated arbitration proceeding.”
When interpreting the Terms, the district court here held
that Rajagopalan v. NoteWorld, LLC, 718 F.3d 844 (9th Cir.
2013) (per curiam), controls. Rajagopalan signed up for a
debt settlement program with First Rate Debt Solutions
(“First Rate”). Id. at 845. First Rate’s contract included an
arbitration clause; so, rather than suing First Rate, plaintiff
filed a class action against NoteWorld, a third party that
6 GEIER V. M-QUBE, INC.
provided transaction management and processing services to
First Rate. Id. at 845–46.
On appeal, we affirmed the district court’s refusal to
compel arbitration: “Though it is true that NoteWorld’s name
is mentioned in the contract, ‘indirect reference to a third
party does not make the third party a beneficiary of the
[contract].’” Id. at 847 (alteration in original) (quoting
Tooley v. Stevenson Co-Ply, Inc., 724 P.2d 368, 371 (Wash.
1986)). We noted that under Washington law, a third party
is a beneficiary of a contract if “performance under the
contract would necessarily and directly benefit that party.”
Id. (quoting Postlewait Constr., Inc. v. Great Am. Ins. Cos.,
720 P.2d 805, 807 (Wash. 1986)). Thus, “[t]he creation of a
third party beneficiary contract requires that the parties intend
that the promisor assume a direct obligation to the intended
beneficiary at the time they enter into the contract.” Id.
(alteration in original) (quoting Burke & Thomas, Inc. v. Int’l
Org. of Masters, Mates & Pilots, 600 P.2d 1282, 1285 (Wash.
1979)). NoteWorld “submitted no evidence that Rajagopalan
intended to designate NoteWorld as a third-party beneficiary,
that NoteWorld assumed any duties or obligations under the
First Rate contract, or that any party assumed direct
obligations to NoteWorld.” Id. We thus held that NoteWorld
was not a third-party beneficiary of the contract containing
the arbitration clause. Id.
Unlike the agreement in Rajagopalan, the Terms here
create a direct obligation from the subscriber to the
Company’s suppliers. Under paragraph 11 of the Terms, the
subscriber waives all claims against Pow! Mobile’s suppliers.
Because there is evidence of a direct obligation from a
subscriber to the Company’s suppliers, this case is
distinguishable from Rajagopalan.
GEIER V. M-QUBE, INC. 7
This case is more akin to Gibson v. Wal-Mart Stores, Inc.,
181 F.3d 1163 (10th Cir. 1999). After Gibson was injured
while stocking shelves at a Wal-Mart store, an assistant
manager told her that Wal-Mart would pay for her medical
expenses if she signed release papers. Id. at 1165–66.
Gibson released all claims “against Wal-Mart, its officers,
directors, employees, agents or attorneys as the result of any
accident.” Id. at 1166. Gibson also “agree[d] to arbitrate any
disputes as to entitlement to benefits under Wal-Mart’s
workers’ compensation plan.” Id. (alteration in original).
Eventually she sued Wal-Mart and a former co-employee,
Becky Brooks, alleging that they negligently caused her
injuries. Id. Invoking the release agreement, Wal-Mart filed
a motion to compel arbitration, which the district court
granted as to both Wal-Mart and Brooks. Id.
The Tenth Circuit affirmed, reasoning that “[t]he fact that
Brooks did not individually sign the Agreement does not
preclude enforcement of the Agreement with respect to
Gibson’s claims against her because it is clear that Brooks
was, at the very least, a third party beneficiary of the
Agreement.” Id. at 1170 n.3. The Gibson court relied on the
Eleventh Circuit’s decision in MS Dealer Serv. Corp. v.
Franklin, 177 F.3d 942 (11th Cir. 1999), which it
characterized as having held that “a nonsignatory may
enforce an arbitration agreement under a third party
beneficiary theory when the parties to the agreement have
agreed, upon the formation of their agreement, to confer the
benefits thereof to the nonsignatory.” Gibson, 181 F.3d at
1170 n.3.
Although Gibson interprets Wyoming law, the factual
background there is informative. The parties here agree that
Washington law controls. Under that law, “[i]f the terms of
8 GEIER V. M-QUBE, INC.
the contract necessarily require the promisor to confer a
benefit upon a third person, then the contract, and hence the
parties thereto, contemplate a benefit to the third person.”
Lonsdale v. Chesterfield, 662 P.2d 385, 389 (Wash. 1983) (en
banc) (quoting Vikingstad v. Baggott, 282 P.2d 824, 825
(Wash. 1955)). As described above, the signatory to the
Terms agrees to waive all claims against the Company’s
suppliers. Therefore, the Company’s suppliers are intended
third-party beneficiaries of the Terms. Thus, if defendants
are suppliers of the Company, they may enforce the
arbitration clause.
Whether defendants may enforce the arbitration clause
against Geier requires two findings not made by the district
court: Did Wells assent to the Terms? And, are defendants
Pow! Mobile’s suppliers? We remand so that the district
court can make these determinations in the first instance.
We therefore REVERSE the district court’s denial of
defendants’ motion to compel and REMAND for further
proceedings consistent with this opinion.