-: SJC-12813 Philip Landry V. Transworld System Inc.
-: Mr. Shartle, good morning.
-: Morning, Your Honor.
My name is Bryan Shartle, on behalf of the defendant,
Apalent Transworld Systems Inc.
The issue before the court is narrow
and relates to whether the lower court aired in concluding
that TSI could not enforce
the relevant arbitration provision.
The defendant filed a motion to compel arbitration,
which the court denied. Concluding that the arbitration
provision only applied to claims
between the plaintive renter and Enterprise rental car.
The court concluded that there was no clear
and unmistakable evidence that
the plaintive agreed to arbitrate claims against
an entity such as TSI.
We ask that the court reverse
and order the parties to compel arbitration.
It's clear, Your Honor, when you look at the arbitration
prevision that the agreement includes claims
against agents or representatives of Enterprise
to accept the lower courts ruling
and agree with the plaintive here would require
that the court read out that part
of the arbitration prevision.
-: Now the reason for the arbitration
is that there's been a claim made against the debt collector
for having violated 93A, right?
Shartle: Yes, Your Honor.
-: It has nothing to do with the contract between the--
-: Well, Your Honor, I would disagree because the arbitra--
-: The techniques that we're used
by the debt collector are the problem here.
Not the--
-: Correct, correct, but TSI was retained
to collect what was owed to Enterprise.
Justice Lenk: In a lawful way, presumably.
Shartle: I'm sorry.
-: I presume it was retained to do it in a lawful way.
-: Absolutely, Your Honor, but the arbitration
prevision includes any claim arising out of
or relating to that agreement.
Under which we were trying to collect.
And so, to accept the argument that it doesn't include
a claim that relates to the collection of the indebtedness
would mean that in fact,
if Enterprise were the defendant here,
and that they were trying to collect
what was owed to them under the agreement.
-: Only if they were considered to be subject
to 93A in the same way, right?
-: Well, Your Honor, actually, and that's an interesting part
of the case, really not before the court,
but the statute, the regulation,
that they're alleging was violated
here does apply to creditors.
There's a limitation under the Massachusets AG
regulation that creditors
such as Enterprise cannot contact a consumer more than twice
in a seven day period.
So if Enterprise were the defendant here,
under this exact statute,
which they could be sued under, then it would I suppose
be plaintive position that because Enterprise
was collecting what was owed to them that it didn't fall
within the arbitration prevision.
-: How come you argue agency
and then you're an independent contractor
until you don't want to be an independent contractor?
-: Well, Your Honor, the lower court pointed that out.
That the how can you play this game that the contract
says one thing but now your taking the position
that you know you could ignore the contract.
The case laws clear on that point, though.
You've got to look behind the curtain and how the parties
identify themselves is not the end of the game.
You have to look at the amount of control that the principal
actually has over the--
-: Does Enterprise tell you how to collect the debt?
-: They do have certain requirements
relating to how often we have to communicate,
how often we have to collect, where the moneys got to be
remitted, and so we lay all that out.
-: How often they communicate to you?
They don't tell you how to collect the debt.
-: No, No, they do have certain restrictions
relating to how often we have to attempt to reach out
and communicate with the consumer.
-: Do they keep those requirements
consistent with Massachusets law?
-: Yes, I would certainly not argue that they require
that we violate the law to the contrary.
I mean, those requirements
require that we comply with the law.
But my point is that those factors weigh in
to the amount of control that they exercise over us.
Such that we can be deemed an agent.
But there's another part of the--
Justice Gants: Then why are you
an independent contractor?
That's puzzling.
-: Well, that's how our positions were not,
that's how we're categorized under the contract.
But again you have to look behind the curtain.
You can't just simply say because they put
that label on us that we, in fact, are--
Justice Gants: The label you put on yourself.
-: Well, its true that there's an agreement
between Enterprise and TSI.
Which labels us an independent contractor
but setting aside that issue, which I recognize that--
Justice Gants: It's a big set aside.
-: Well, but again, plenty of cases
that talk about how you have to look behind the curtain
and the simple label
that's placed on you in an agreement is not controlling.
You have to look at the facts and how much control
the principal actually exercises
over the company to determine
whether they're an independent contractor.
But setting that issue aside, what really has been ignored
is that there's another part of this arbitration prevision,
which includes representatives.
And that does not have the same issue with respect
to how we're labeled into the agreement.
We clearly are acting as a representative for Enterprise
when we're engaged in collection of this account.
And again, what the lower courts decision does is
it reads out completely that term of art in the agreement.
Reads out the fact that the agreement says that claims
against Enterprise's representatives
shall be subject to arbitration.
And so it's our position
that by accepting the plaintive
argument here that you've made that part of the arbitration
prevision completely allusive.
Justice Budd: I'm really having some
trouble understanding.
-: Lets look to the agreement.
Fortunately my eyes are good so I can tell you put
some part in bold.
But the rest is small.
This is a classic adhesion contract, correct?
You've got to sign this, otherwise you don't rent the car.
-: Sure, if you wanna rent with Enterprise
this is terms of the agreement.
-: Why have the option of crossing off
the mandatory arbitration agreement
when I sign on to Enterprise?
-: I don't think that that would be accepted by Enterprise
if they were aware of it.
-: So, I am a renter and I look to,
I've got a claim here
and I look to the procedure section.
And the procedure section must send a notice
of dispute to the owner,
the owner being Enterprise, correct?
Shartle: Correct.
-: So I've got a claim, now I've got to send a notice
to the owner and then
I can't file the claim unless
I attempt to resolve a dispute with,
not with Transworld,
but with the owner.
Shartle: Sure, there are certain previsions--
-: So how am I to resolve, if I'm looking at this,
why would I think that this effects anything
other than the owner or persons who have responded
to that superior relationship
to the owner if I have to resolve it with the owner?
With Enterprise?
-: There are certainly previsions in here which relate
to claims that are being brought against Enterprise.
The gap filler here would be the AAA rules.
And in the fact that it doesn't specify exactly
the procedures when you're dealing
with a claim against a representative.
Doesn't mean that those gaps
can't be filled with the AAA rule.
-: Okay, so I've got,
so I wanna sue Transworld.
Actually I want to respect the arbitration agreement
so I'm supposed to recognize
that Transworld is a representative.
I'm supposed to then give notice
to Enterprise and then I have to negotiate with Enterprise?
According what this-- -: No.
-: That's what the agreement says.
Shartle: Well, again I think--
-: It's saying I should look to below and it say's that
it should be done according
to the AAA commercial arbitration rules
and I should understand from that
that although it says owner meaning Enterprise
that it doesn't mean that,
it means that I should be negotiating with someone else.
-: Again, Your Honor, I understand the point,
but the answer is that
you don't have to spell out every single
step along this process.
And that the fill gap here would br the AAA rules.
So to answer your question, yes, you would look
to the AAA rules with respect to how the arbitration
process is going to work.
-: Isn't the legal standard that language that the chief
just read to you has to manifest clear and unmistakable
intent to benefit a third party, non-secondtory?
-: Well, here it does, Your Honor, because--
-: How is it when he just read through the cosensitize
where you have to fill in gaps and then you have to know
as a consumer, the AAA rules?
-: You're focused on just this procedure part here.
Which specifies the procedure with respect
to arbitration of claims against Enterprise.
It doesn't address claims against a representative.
But you don't have to spell out all of those details.
Here where there's manifest clear and unmistakable
intent arbitrary is when you look at the arbitration
prevision itself which absolutely includes claims
against a representative and again,
the rule here is to favor arbitration
and so that has to be taken into consideration also.
Justice Gants: Isn't there a cotivel on public
policy rule as well. -: I'm sorry.
-: That's a public policy rule, right?
Shartle: Yes.
-: Don't we also have a policy that favors the vigorous
enforcement of 93A?
-: We do, Your Honor, but this is not,
and it's an important point I think your raising.
This case is not going to have some sweeping impact
where all consumer cases
henceforth are going to be subject to arbitration.
This case can and should be decided
on the unique facts presented here.
We've got an arbitration prevision,
which unmistakably, very clearly includes claims
against a representative.
-: Which has the result of borrowing any class action.
-: It does.
-: Which means that, makes it pragmatically
almost impossible for somebody to invest in the attorney
fees involved in trying to bring a claim
because it can't be a class action.
It can only bring individual claims.
Shartle: I understand that, Your Honor, but-
-: It has enormous consequences.
The debt collection companies can now invoke
their arbitration agreement entered into by the entity
for whom they are collecting.
And therefor avoid any risk of a class action
and any risk of enforcement by a class action.
-: In this arbitration prevision,
again, not every arbitration prevision is written this way.
Not every arbitration prevision,
in fact this is rather unusual.
To have an arbitration prevision
which includes a representative.
Most often, they do not.
And so it's not going to have some sweeping impacted
where every single 93A case
now is going to be subject to arbitration
and you're going to be prohibited from perusing the claim--
Justice Lenk: You don't think that the contract
should be rewritten?
You don't think the contract should then get rewritten?
-: No, Your Honor, I don't believe that is going to happen.
Justice Lenk: Why not?
-: I don't believe it works like that.
I don't believe that--
Justice Lenk: An association wouldn't do that for you?
-: I'm sorry.
-: Traders Association wouldn't make sure that happened?
-: No, no I don't believe that that would happen.
I mean, these agreements are not changed
on a whim as case law changes.
And look, you look at the U.S. Supreme Court decision
conception cases since conception has been decided
I mean, I understand the point, and the concern
that consumer claims now could be subject
to arbitration but that is the law.
Under FAA that is the law.
And--
Judge Gants: I've read conseption.
-: Yeah, and so--
-: So lets turn to the attorneys arbitration cost prevision.
Shartle: Yes.
-: If it turns out that the arbitrator determines
that the claim is frivleless then the owner
may seek reasonable attorneys fees.
Meaning Enterprise.
Shartle: Correct.
-: And then the owner will pay so basically
if this claim is brought to an arbitrator against
Transworld and the arbitrator says it is frivolous
then the payment to attorneys fees is paid to Enterprise.
-: Again, Your Honor, it's the same point.
That the fact that the agreement
has some specifics that relate to a claim
against Enterprise and does not list exactly
every step of the process when the claim
is against and agent or representative
doesn't mean that you then interpret the agreement
to exclude words
claimed against the agent
or the representative.
Justice Gants: We're supposed to read this
in its entirety. -: You fill the gap.
I'm sorry.
-: You want us to say,
"Oh ignore, these two previsions"
or say,
"Oh, AAA overcomes them." -: No.
-: But say you wanna grab the word representative and say,
"Uh-huh, that should tell anybody who's signing
"onto this agreement because adhesion agreement
"says we have said
"when interpreting adhesion agreements we seek to effectuate
"not the actual intent of the parties
"but instead the meaning and objectively reasonable person
"in the non drafting parties position
"would give to the language in the contract."
So that's the standard we established in Nudder last year.
How does this help an objectively
reasonable person to understand
that this type of claim must but arbitrated?
-: Okay, again, I'm not saying that you ignore
these specific previsions
that relate to a claim against Enterprise.
There, in the agreement and to the extent the arbitration
involves Enterprise they apply.
What I'm saying is that when those previsions don't address
a claim against another entity
covered by the arbitration prevision that the gap is filled
with the AAA arbitration rules.
-: I'm looking, the print is small,
but I don't see anything which says where the claim
is not against the owner than attorneys fees should be paid
to the representative.
Or do I see anything that says--
-: The AAA rule would address that.
-: So you incorporate by reference
to AAA rules and this is what's supposed to be understood
by reasonable persons signing
on to this agreement.
-: Because the agreement
specifically says that its subject to AAA rules.
-: And do the AAA rules attached in any way to the--
Shartle: No, Your Honor, but I--
-: Was to incorporate by reference to the poor sucker
who's renting from Enterprise
and supposed to be assumed they understand the AAA rules
when they sign on to this agreement.
-: No, Your Honor, perhaps that is not a fair assumption
but the fact of the matter is it does incorporate
the AAA rules and I don't think
that your required to actually attach the AAA rules
to the agreement in order to incorporate them
and put the consumer on notice that the claims
are going to be subject to those rules.
Justice Gants: Okay, thank you.
-: Unless there is anything else, Your Honor.
-: Mr. Lemberg.
-: May I please the court.
My name is Sergei Lemberg,
I represent Mr. Landry.
You are correct, Justice Gants,
we are in the world of small print.
So small that even with my younger eyes
I can't read it.
But I didn't-- (crosstalk)
-: Let me help you here.
(laughing)
Or let me at least give you the name
of my optision, perhaps. (laughing)
-: But I did find something in the small print agreement
which hadn't been picked up in any briefing before
and it's right at the beginning of it.
Now, let me remind the court that my brothers burden
here is to show that there was clear and unmistakable
intent to benefit a third party
that is not named in this agreement.
That is the law, in the first circuit , that is the law,
in Constantino and we go to the beginning
of this agreement that additional terms in tiny print
but its there
it says, renter, right of the front, page two of four.
Renter, expressly acknowledges that renter and owner
are the only parties of this agreement.
Not withstanding that the reservation for vehicle
may have been arranged by a third party
that a third party my pay for all or part of the rental bill
and or and third party may negotiate certain terms
or the rental
and yada, yada, yada.
(laughing)
How'd you go from there to arguing
that the agreement
clearly and unmistakably confers upon a third party
in your rights beats me.
Justice Gants: What's a representative or an affiliate?
-: Its ambiguous, I don't know.
I think a fair reading of this.
Justice Gants: I was thinking it could be
an employee of Enterprise.
-: I think a fair reading of this is that Enterprise
wants to make it as clear as possible
unambiguous, that unaffiliated third parties
that are out there in the world making reservations
somehow arranging for this are not part or this.
-: Well I assumed that
the language that you just read means that
if a company has an employee
rent a car the person who signs for the car
is on the hook as apposed to Acme Corporation
that sends them on the business trip.
Right?
-: I think that the fair reading of this thing is that the,
well, like the person that's at the counter
wearing an Enterprise badge.
Well, that's a representative.
Right?
That person, if that representative runs you over
in the parking lot
and then you sue them
and then Enterprise,
then Enterprise says,
"All right, well interpreted broadly."
But I don't even think in that scenario
under the Constintino case
and the Hogan case from the first circuit
that agent would 100%
be able to enforce the agreement
even there they would have a hard time
because you'd say, well, jeez, the nurses in Constantino,
Right, they were employees too
it's not like they weren't the agents
they were taking care of their grandma.
And they couldn't force their arbitration
agreement because it wasn't clear as day
that the arbitration agreement entered into by the grandma
was meant to cover them.
-: Excuse me, could you tell me
the difference between agent and representative,
as you understand it?
-: I think it's ambiguous.
Justice Lenk: Okay.
-: I think it's not clear
and I think that
because of that lack of clarity
you interpret the ambiguity
against the drafter.
Here, the drafter's Enterprise and you preclude--
-: So you're not saying an independent
contractor can't be a representative
but the language in the statute,
in the agreement, excuse me,
is ambiguous enough that
we can't necessarily say that
those claims can be brought.
-: My position is,
I think I'm with the first circuit and Constantino.
We're in this adhesion contract world, right?
The enterprise is one of the largest privately owned
companies in the United States.
7,200 locations.
God knows how many cars.
They could draft this thing
so that its crystal clear what they want.
-: Well even, I think you have an argument
to where you can get to the adhesion contract.
Though what were calling the adhesion contract
isn't your argument that
this language covers the scope of the claims?
Lemberg: Well that's the next thing--
-: Is that your first argument?
That it doesn't even apply?
-: I think the first, second, and the third
are all strong enough
but they, yes, its a scope issue.
And the law is that you cannot expand
who can enforce the contract
by looking at the scope previsions.
And that's, again,
the Constantino case,
but that also the Hogan case
and there's other cases out there.
Which speak to that.
-: Are you saying the ambiguous have to be the drafter?
The drafter here would be Enterprise, right?
Not Transworld systems.
-: Against the reported drafter.
The entity that has attempted to enforce it.
Justice Lenk: Enterprise is not a party in this suit.
-: True.
My brother is attempting to stand in Enterprises shoes
and so I think would be fair to interpret it
against Transworld as well.
But let...
Justice Gants.
-: If you were suing Enterprise
saying that that they were indeed,
Transworld is indeed somebody
for whom there responded to yet superior
obligations of Enterprise
then you would be governed
by this arbitration agreement, correct?
Lemberg: I think in likelihood, yes.
-: So basically what you essentially saying
is however we determine,
however we evaluate employees or representatives,
you're saying that
it would be in any context
in which there would be responding and superior liability
on the part of Enterprise.
-: I think that would be a closer case.
I think if we were suing Enterprise here on
and respond yet superiority that would be a closer case.
That would be nurses in a nursing home.
That would be harder.
I think that we'd still win on that.
But I think it's harder.
We still win against Transworld on this.
Because its not clear and unmistakable
that Transworld was intended
to be benefited by the contract.
But we're not in that world.
I think were in a far removed world.
-: I'm saying that if you were to have sued
Enterprise, and said that Enterprise was responsible
for the collection tactics of Transworld,
Then you may be within arbitration.
-: I think it's conceivable in that scenario.
It's a closer case as I said.
Now, again, I'm beating a dead horse,
but the contract between Enterprise and Transworld.
Justice Lenk: You could get a better metaphor.
(Lemberg laughs)
-: Their contract, twice, two different places,
on page 47 and 56,
of the appendix establishes that Enterprise wants nothing,
whatsoever to do with anything that Transworld
is doing out there in the world.
To collect this bill--
-: If you were suing
the debt collector,
based on the prevision itself,
wouldn't you have a problem?
I mean if the lawsuit were based on the contract directly.
If it were, you owe me money,
or you know, the debtor is suing you
and they've stepped in the shoes
of Enterprise to collect the money.
And you're saying
no was owed a refund under that contract.
Wouldn't that have to go through arbitration?
Lemberg: We would be inequitable
to stop a world.
-: So misattach would trigger you into arbitration.
So its really Justice Lenk's first question.
This has nothing to do with this contract, right?
Cause this thing is all,
whatever the contract says this is about making more
than two phone calls.
In a week, right?
Just because you're making those calls in a contract.
-: To be completely frank.
I think it would be an over statement
to say it had nothing to do with it.
It would not meet the-
Justice Gaziano: Under but four causation
but doesn't arise out of the contract.
-: Right.
-: It arises the alleged bad
93A violation of the debt collector.
-: We've got a nonsignatory trying to enforce
an arbitration prevision for something that
is about, that isn't based on the contact.
Its a multiple cause,
isn't this case easy?
Don't you win that way whether than trying to find
that they're not a representative?
It seems really difficult.
-: Well, it maybe why they balance,
having raised that theory of equitable
to stop them below
dropped it on appeal here.
And didn't raise it
because they, I'm surmising,
but they perhaps recognized that
they cannot establish that the claim and the contract
were inextricably intertwined
under the equitable Estople case
such that would enable
them to enforce their arbitration agreement.
Unless the court has any questions.
I am pretty much done.
-: Okay, thank you. -: Thank you.
(papers ruffling)