Ohanian v. Apple Inc.

Background

Tigran Ohanian and Regge Lopez brought a proposed class action against T-Mobile USA, Inc. and Apple Inc. They alleged violations of New York consumer-protection laws, fraudulent misrepresentation, and unjust enrichment. Their claims concerned T-Mobile’s alleged practice of reusing phone numbers associated with prior users’ Apple accounts and Apple’s alleged failure to disclose an iPhone software security flaw that could cause iMessages and FaceTime calls to reach later users of recycled numbers.

Both defendants moved to compel arbitration based on an arbitration provision in T-Mobile’s terms and conditions. After the motions were filed, Lopez voluntarily dismissed his claims against T-Mobile, leaving claims against Apple. The opinion addresses whether Ohanian’s and Lopez’s claims had to be arbitrated; it does not decide the underlying allegations against T-Mobile or Apple.

Ohanian’s Claims

The court reserved decision on the defendants’ motions concerning Ohanian’s claims because a factual dispute remained about whether Ohanian agreed to arbitrate with T-Mobile. T-Mobile argued that Ohanian received a form stating that activating or using T-Mobile service meant accepting T-Mobile’s terms and that disputes would be arbitrated. Ohanian stated that he received only a receipt and did not receive the form or information stating that he was agreeing to the terms.

Applying New York contract law, the court explained that the party seeking arbitration must prove that a valid arbitration agreement exists. The court found Ohanian’s sworn denial sufficient to create a genuine factual dispute requiring further proceedings under the Federal Arbitration Act. The receipt’s reference to T-Mobile’s terms was not enough, because it was inconspicuous and did not clearly tell a reasonable consumer that using T-Mobile’s service would constitute acceptance of contractual terms or an arbitration requirement.

Lopez’s Claims Against Apple

The court denied Apple’s motion to compel arbitration of Lopez’s claims. Apple was not a party to the T-Mobile agreement, and the court applied Florida law because the T-Mobile terms selected the law associated with the customer’s billing address. Under that law, a nonparty ordinarily cannot compel arbitration under an agreement it did not sign, subject to limited exceptions.

The court rejected Apple’s reliance on equitable estoppel, a doctrine that can sometimes prevent a party from avoiding arbitration when its claims depend on an agreement or allege closely connected misconduct by the signatory and non-signatory. Lopez’s claims against Apple did not rely on or presume the existence of a written agreement with T-Mobile. The complaint also alleged separate conduct by Apple and T-Mobile, rather than substantially interdependent or concerted misconduct.

The court also rejected Apple’s argument that the arbitration clause independently covered claims against third parties. The court concluded that the clause did not give Apple third-party-beneficiary rights in these circumstances, particularly because Apple did not claim to be a controlled subsidiary, assignee, or agent of T-Mobile and Lopez no longer asserted claims against T-Mobile.

Disposition

Judge Lorna G. Schofield reserved decision on the defendants’ motions to compel arbitration of Ohanian’s claims pending further proceedings about whether Ohanian agreed to arbitrate with T-Mobile. The court denied Apple’s motion to compel arbitration of Lopez’s claims. The parties were ordered to meet and confer and file a joint letter explaining how they wished to resolve the factual issue concerning Ohanian.