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Subway's win in class action over free sub offer appealed to Ninth Circuit

By Jireh Gibson | Feb 16, 2017

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SEATTLE (Legal Newsline) – Plaintiffs suing Subway over a text message have appealed a federal judge's decision to dismiss their class action lawsuit and send their claims to arbitration.

On Jan. 31, David and Yehuda Rahmany filed their notice of intent to appeal  U.S. District Judge John C. Coughenour's Jan. 5 decision in their class action. Their appeal will be heard by the U.S. Court of Appeals for the Ninth Circuit.

On Sept. 1, the Rahmanys said they received a text promoting a free 6-inch Oven Roasted Chicken sub sandwich at Subway. Subsequently, the plaintiffs filed a putative class action complaint against T-Mobile and Subway alleging violations of the Telephone Consumer Protection Act.

The text read: "This T-Mobile Tuesday, Score a free 6" Oven Roasted Chicken sub at SUBWAY, just for being w/T-Mobile. Ltd. Supply. Get app for details:"

However, just two days later, the plaintiffs voluntarily dropped T-Mobile from the complaint, yet failed to amend it. Therefore, all claims against T-Mobile and Subway remained against Subway. This oversight may have been the extra push Subway needed.

In August 2015, the plaintiffs had activated telephone contracts with T-Mobile. One of the service agreements required arbitration of all disputes.

The notice states in bold print that T-Mobile requires arbitration of disputes unless customers opt out within 30 days of activation. The other agreement in all caps reads, “Any and all claims or disputes in any way related to or concerning this [agreement] our privacy policy, our services, equipment devices or products." Both agreements included an opt-out provision.

Coughenour applied California law to the Rahmanys' claims. When the plaintiffs claimed the arbitration agreement was unconscionable, Coughenour found the cases they cited contained factual scenarios not present in the Rahmanys' case.

Coughenour wrote that the plaintiffs could have opted out of the arbitration clause within 30 days of activating their phones but did not. Therefore, the court found that the text message was within the scope of the arbitration agreement since it was not substantively or procedurally unconscionable.

The court used its discretion to dismiss the case because, under California law, equitable estoppel applied to allow Subway, a non-signatory, to enforce the agreement.

The victory for Subway was the most recent of a string of class action suits dismissed in favor of arbitration since a Supreme Court ruling in a seminal case interpreting arbitration clauses in 2011, J.R. Skrabanek, senior counsel for the Snell Law Firm, said.

When asked if what happened in the Subway victory is common, he said, “Yes. Ever since the Supreme Court’s decision in AT&T v. Concepcion, using arbitration clauses to defeat class actions has been an increasingly popular and effective tactic.”

Why did the court apply T-Mobile’s arbitration provision to Subway? “Because even though it was a joint promotion, it was sent by, through, and for T-Mobile customers. These customers consented to it when they accepted T-Mobile's services, which included a mandatory arbitration clause," Skrabanek said.

The Austin, Texas-based attorney suggests that if consumers want relief from arbitration provisions, they should lobby Congress to pass a law to overturn the AT&T decision. 

"At present, contracts containing arbitration requirements will almost always be upheld by courts if consumers agree to them when accepting service,” he said.

The Rahmanys are represented by Abbas Kazerounian of Kazerouni Law Group. Their opening brief is due to the Ninth Circuit by May 11, and Subway's response is due a month later.

Subway is represented by the Seattle firm Corr Cronin Michelson Baumgardner Foxx & Moore and the Atlanta firm Alston & Bird.

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U.S. District Court for the Western District of Washington