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Patricia O'Connell
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Law360 Highlights Wireless Industry’s Successful Petition to Arbitrate Antitrust Suit

September 19, 2013

An important victory Wiley Rein secured this week for the wireless industry garnered coverage  in Law360, which noted that the industry prevailed in a petition to compel arbitration—in lieu of a class action—in an antitrust case involving commercial text messages.

The class action complaint was filed last year against major wireless carriers, CTIA-The Wireless Association, and a group of message aggregators.  In an article published yesterday, Law360 noted that U.S. District Judge Alison J. Nathan of the Southern District of New York granted the wireless carrier defendants’ motion to stay the court proceedings and send the case—In re A2P SMS Litigation—to individual arbitration.

Andrew G. McBride, who chairs Wiley Rein’s Communications Litigation Practice and co-chairs its Appellate Practice, argued the motion on behalf of all the wireless carrier defendants.  He represents Verizon Wireless in the case and was assisted in the case by Wiley Rein attorneys Thomas R. McCarthy and Michael Connolly.

The case concerns the common short code (CSC) system that was established in 2003 by national wireless carriers and CTIA, a trade association.  CSCs are five- or six-digit numbers that are shared or “common” to all of the carriers.  The complaint alleged that the industry’s system for assigning CSCs violated the Sherman Antitrust Act.

Under the CSC system, businesses or other organizations are able to lease CSCs for the purpose of sending text messages in bulk—from computers and across multiple carriers’ networks—to individuals’ wireless devices.  The system also enables individual consumers to communicate with those businesses and organizations by sending text messages to the five- or six-digit CSC.  This form of communication is known as application-to-person (A2P) messaging.

To obtain a CSC lease, a business must first submit a Registrant Sublicense (RS) Agreement through the Common Short Code Administration website, which is operated by NeuStar, Inc. through a license with CTIA.  A consolidated complaint filed by three CSC lessees in 2012 alleges that the wireless industry conspired to create the CSC system in order to inflate the prices of A2P text messaging.

The wireless carrier defendants successfully argued that the CSC lessee-plaintiffs’ claims are subject to individual arbitration on the basis of an arbitration clause included in the RS Agreement.  The court agreed, finding that that the dispute falls within the scope of the arbitration clause.

As Law360 noted, the court rejected the CSC lessee-plaintiffs’ argument that their claims were not arbitrable because none of the wireless carrier defendants were signatories to the RS Agreement.  In her September 16 ruling, Judge Nathan concluded that the wireless carriers were entitled to enforce the arbitration agreement under principles of equitable estoppel because plaintiffs’ claims fall within the broad scope of the arbitration agreement and because plaintiffs’ relationship with the wireless carrier defendants is “sufficiently close to justify estopping [plaintiffs] from denying their contractual obligation … to arbitrate disputes of this kind.”