4th Circuit Panel Overturns Ruling Granting Verizon Arbitration Motion in ETF Dispute
Federal appellate judges reversed and remanded a lower court ruling that granted a Verizon arbitration motion in a contract dispute with a customer over an early termination fee. "The district court erred by failing to fully apply Virginia law as…
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per the parties’ clear intent reflected in the contractual choice of law provision in [a] 2010 Agreement," said the per curiam opinion Thursday of a three-judge panel of the 4th U.S. Circuit Court of Appeals (Jason Klein v. Verizon, No. 14-1660). Klein in 2010 contracted with Verizon and subsidiaries to receive internet and phone services, agreeing to initial terms of service, including a "choice of law" provision saying Virginia law governed any contractual dispute, said the opinion. They agreed to new terms of service in 2011 with the same "choice of law" provision, but first Klein terminated the 2010 agreement, leading Verizon to charge him a $135 early termination fee (ETF). The company in 2012 emailed Klein to notify him of term changes, including a new provision to arbitrate disputes. Klein then filed a class-action complaint alleging Verizon's ETF violated Virginia law, and the carrier moved to compel arbitration under the 2012 notification. The U.S. District Court for the Eastern District of Virginia in Alexandria granted the telco motion, saying the 2012 notification terms controlled the dispute. "We take issue with the path the district court took to reach this conclusion," the 4th Circuit panel wrote. "It failed to abide by the choice of law provision in the 2010 Agreement and apply Virginia law to the question of whether the 2010 Agreement was, in fact, modified by the 2012 Notification. Therefore, we remand with instructions that the district court apply Virginia law, pursuant to the 2010 Agreement, to determine whether that agreement was effectively modified." The opinion was listed as "unpublished," meaning it doesn't set binding precedent in the circuit.