Frazier et al v. Western Union Company, The et al

Filing 58

ORDER by Magistrate Judge Kristen L. Mix on 3/27/19 GRANTING 33 Motion to Stay Proceeding Pending Arbitration Pursuant to Section 3 of the Federal Arbitration Act. IT IS FURTHER ORDERED that the Clerk of Court shall administratively close this cas e in order to allow the parties to participate in arbitration proceedings. IT IS FURTHER ORDERED that, no later than twenty days after the completion of the arbitration proceedings, the parties shall file a Status Report in which they advise the Court whether the parties believe the case should be reopened for good cause or whether the case should be dismissed. (nmarb, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 18-cv-00998-KLM
KAZMIERA FRAZIER,
RHONDA LAUBLER,
TERESA RIGGS,
ANITA SEWARD, and
KOALESHIA SIMON,
individually and on behalf of all others similarly situated,
Plaintiffs,
v.
THE WESTERN UNION COMPANY,
WESTERN UNION FINANCIAL SERVICES, INC.,
HIKMET ERSEK, and
VARIOUS “DOE” DEFENDANTS, including Western Union Officers, Directors, and Agents,
Defendants.
_____________________________________________________________________
ORDER
_____________________________________________________________________
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Defendants’ Motion to Stay Proceeding
Pending Arbitration Pursuant to Section 3 of the Federal Arbitration Act [#33]1 (the
“Motion”).2 Thereafter, Defendants filed a Factual Supplement [#48], Plaintiffs filed a
Response [#52] in opposition to the Motion [#33], and Defendants filed a Reply [#56]. The
Court has reviewed the relevant briefs, the entire case file, and the applicable law, and is

1

“[#33]” is an example of the convention the Court uses to identify the docket number
assigned to a specific paper by the Court’s case management and electronic case filing system
(CM/ECF). This convention is used throughout this Order.
2

This case has been referred to the undersigned for all purposes pursuant to
D.C.COLO.LCivR 40.1(c) and 28 U.S.C. § 636(c), on consent of the parties. See [#12, #13].

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sufficiently advised in the premises. For the reasons set forth below, the Motion [#33] is
GRANTED.
I. Summary of the Case
Plaintiffs initiated this putative class action against The Western Union Company
(“Western Union”), Western Union Financial Services, Inc. (“WUFSI”), Western Union’s
Chief Executive Officer Hikmet Ersek (“Ersek”), and various other unnamed Doe
Defendants (collectively, “Defendants”). Am. Compl. [#27] at 4. Plaintiffs assert claims
under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Colorado
Organized Crime Control Act, and their respective state consumer protection laws.3 Id. at
46-72. WUFSI, a subsidiary of Western Union, operates a “Money Transfer System”
through which consumers send money to other individuals in the United States and around
the world. Id. at 16. Each of the named Plaintiffs alleges that she was defrauded by an
unnamed third-party fraudster who convinced her to send a fraudulent money transfer
order. Id. at 5-6.
Money transfer orders sent through WUFSI are subject to a set of contractual terms
and conditions (“Terms and Conditions”) located on a pre-printed Send Money Form.
Motion [#33] at 10, 12-13. The Terms and Conditions in place at the time of each of the
named Plaintiffs’ alleged money transfers included arbitration clauses, requiring the parties
to arbitrate any disputes individually, rather than on a class-wide basis (the “Arbitration
Clauses”). Id. at 10-11. Defendants maintain that the Terms and Conditions are included
3

These consumer protection law claims are the California Unfair Competition Law, the
Florida Deceptive and Unfair Trade Practices Act, the Georgia Fair Business Practices Act, the
Illinois Consumer Fraud and Deceptive Business Practices Act, and the New Jersey Consumer
Fraud Act. Am. Compl. [#27] at 60-72.

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in both the Send Money Form customers fill out to send money and on the receipts given
to customers after sending money transfer orders. Id. at 12-13. Defendants also assert
that before a customer can send money using a Send Money Form, WUFSI’s standard
business practices require the customer to sign the form, agreeing to the accompanying
terms and conditions. Id. at 13. Once the information on the Send Money Form is verified
by a Western Union clerk on location, the clerk then prints a receipt for the customer. Id.
at 14. Like the Send Money Form, Defendants assert that WUFSI’s standard business
practices require the customer to sign the receipt. Id.
At the relevant times of Plaintiffs’ alleged fraudulently-induced money transfer
orders, two separate Arbitration Clauses appeared in Defendants’ Terms and Conditions.
Id. at 11-12; Response [#52] at 10. One Arbitration Clause appeared in Send Money Form
Terms and Conditions in 2005, and the other Arbitration Clause appeared in Send Money
Form Terms and Conditions in 2016 and 2017. Motion [#33] at 11-12; Response [#52] at
10.
Defendants seek a stay of this case while arbitration proceedings are held. Motion
[#33] at 7. At issue in the instant motion is: (1) whether Plaintiffs are bound by the
Arbitration Clauses in dispute, (2) whether Defendants Ersek, Western Union, and WUFSI
respectively are bound by the Arbitration Clauses in dispute, (3) whether the two individual
Arbitration Clauses in question are enforceable, and (4) whether Plaintiffs’ RICO claims fall
within the scope of the Arbitration Clauses.
II. Standard of Review
Issues of arbitrability are governed by the Federal Arbitration Act (“FAA”). Belnap

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v. Iasis Healthcare, 844 F.3d 1272, 1279 (10th Cir. 2017). The FAA “manifests a liberal
federal policy favoring arbitration.” Comanche Indian Tribe v. 49, L.L.C., 391 F.3d 1129,
1131 (10th Cir. 2004) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25
(1991)); see also Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1621 (2018). Consequently,
the Court must “resolve ‘any doubts concerning the scope of arbitrable issues . . . in favor
of arbitration.’” P&P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 866 (10th Cir. 1999)
(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
In addition, “this liberal policy ‘covers more than simply the substantive scope of the
arbitration clause,’ and ‘encompass[es] an expectation that [arbitration] procedures will be
binding.’” Id. (citation omitted).
Under the FAA, when parties agree to settle a controversy by arbitration, courts
must enforce that agreement “save upon grounds as exist at law or in equity for the
revocation of any contract.” 9 U.S.C. § 2 (2018). Such grounds include “generally
applicable contract defenses, such as fraud, duress, or unconscionability.” Rent-A-Center,
W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (quoting Doctor’s Assocs., Inc. v. Casarotto,
517 U.S. 681, 687 (1996)). “Under the FAA, unless the arbitration provision states
otherwise, the question of the enforceability of a contract as a whole is a matter for the
arbitrator. Only if an enforceability argument applies specifically to the arbitration provision
(such as a claim that the provision is unconscionable or that a party was defrauded into
agreeing to the arbitration provision) is enforceability to be decided by the court.” In re Cox
Enters., Inc. Set-top Cable Television Box Antitrust Litig., 835 F.3d 1195, 1209 (10th Cir.
2016). While the Supreme Court recently held that courts should decide whether certain

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types of employment contracts meet FAA exceptions prior to ordering arbitration, see e.g.,
New Prime Inc. v. Oliveira, 139 S. Ct. 532, 538 (2019), this holding does not impact
whether courts or the arbitrator should decide challenges to the overall contract.
Just as parties can agree to arbitrate the merits of a dispute, they can agree to
arbitrate arbitrability, such as the validity and scope of an arbitration provision. Rent-ACenter, W., Inc., 561 U.S. at 69. If the parties’ contract delegates the issues of arbitrability,
the party opposing arbitration must specifically dispute the validity of the delegation clause.
Id. at 72.
“[A]lthough the presence of an arbitration clause generally creates a presumption
in favor of arbitration, this presumption disappears when the parties dispute the existence
of a valid arbitration agreement.” Bellman v. i3Carbon, LLC, 563 F. App’x 608, 613 (10th
Cir. 2014). Determining whether a dispute is subject to arbitration is “similar to summary
judgment practice.” Id. at 612 (quoting Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248,
1261 (10th Cir. 2012)). The party moving to compel arbitration must present “evidence
sufficient to demonstrate the existence of an enforceable agreement.” Id. If sufficient
evidence of an enforceable agreement is presented, the burden then shifts to the
nonmoving party to “raise a genuine dispute of material fact regarding the existence of an
agreement.” Id.; BigBen 1613, LLC, v. Belcaro Grp., Inc., No. 17-cv-00272-PAB-STV, 2018
WL 4257321, at *2 (D. Colo. Sept. 6, 2018). When analyzing whether the parties agreed
to submit a specific dispute to arbitration, “[a]ll ‘doubts are to be resolved in favor of
arbitrability.’” Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995)
(quoting Oil, Chem., & Atomic Workers Int’l Union, Local 2-124 v. Am. Oil Co., 528 F.2d

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252, 254 (10th Cir. 1976)).
Stays are generally disfavored in this District. See Wason Ranch Corp. v. Hecla
Mining Co., No. 07-cv-00267-EWN-MEH, 2007 WL 1655362, at *1 (D. Colo. June 6, 2007).
However, a stay may be appropriate in arbitration disputes given the strong federal policy
in favor of arbitration agreements under the FAA. McWilliams v. Logicon Inc., 143 F.3d
573, 576 (10th Cir. 1998). Once the Court determines that the claims are subject to an
arbitration agreement, the Court must stay “the action until such arbitration has been had
in accordance with the terms of the agreement, providing the applicant for the stay is not
in default in proceeding with such arbitration.” 9 U.S.C. § 3. If “all of [the] plaintiff’s claims
are subject to arbitration, under the FAA, [the Court] must stay litigation of the entire case
pending arbitration.” GATX Mgmt. Servs., LLC v. Weakland, 171 F. Supp. 2d 1159, 1167
(D. Colo. 2001).
III. Analysis
The analysis begins by examining whether enforceable Arbitration Clauses exist
between the parties. The Court first determines whether each Plaintiff is bound by an
existing Arbitration Clause. Next, the Court resolves whether Defendant WUFSI is bound
by an Arbitration Clause, and whether Defendants Western Union and Ersek may enforce
arbitration through equitable estoppel.
After determining whether Arbitration Clauses exist, the Court then examines
whether the existing Arbitration Clauses are enforceable and whether Plaintiffs’ disputes
fall within their scope. Regarding enforceability, the Court examines the enforceability of
an Arbitration Clause which names an arbitrator who is no longer available for consumer

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disputes. Additionally, the Court determines whether a separate Arbitration Clause is
unconscionable. Finally, regarding the scope of Plaintiffs’ disputes, the Court examines
whether Plaintiffs’ RICO claims fall within the scope of the Arbitration Clauses under the
FAA.
A.

Whether the Parties are Bound by the Arbitration Clauses
The Court starts by determining which parties are bound by the Arbitration Clauses.

Defendants argue that an enforceable Arbitration Clause exists from each alleged
fraudulent transaction asserted by each named Plaintiff. Motion [#33] at 18. In support of
this argument, Defendants argue that each named Plaintiff assented to the Terms and
Conditions in order to send her money transfers as required by WUFSI’s standard business
practices. Id. at 18-19. Additionally, Defendants argue that WUFSI is bound by the
relevant Arbitration Clauses, and that both Arbitration Clauses apply to non-signatory
Defendants Western Union and Ersek through the doctrine of equitable estoppel. Id. at 2834.
Plaintiffs, by contrast, deny that Plaintiffs Kazmiera Frazier (“Frazier”) and Koaleshia
Simon (“Simon”) ever agreed to Defendants’ Terms and Conditions, which contain the
Arbitration Clauses. Response [#52] at 26-32. Plaintiffs argue that WUFSI is not bound
by the Term and Conditions, and therefore it cannot compel arbitration pursuant to the
Arbitration Clause therein. Id. at 32-33. Further, Plaintiffs argue that the nonsignatory
Defendants Western Union and Ersek also cannot enforce arbitration. Id. at 33-37.
At the outset, the Court notes Plaintiffs’ position regarding who among Defendants
is bound by the Terms and Conditions, and thus the Arbitration Clauses. It appears that

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Plaintiffs assert that none of the named Defendants are parties or signatories to the Terms
and Conditions. Plaintiffs argue that WUFSI cannot be bound by the Terms and Conditions
and Arbitration Clauses as a nonsignatory. Id. at 32. Further, Plaintiffs argue that as
nonsignatories to the Terms and Conditions, Defendants Western Union and Ersek are also
not bound by the Arbitration Clauses. Id. at 33. It appears Plaintiffs argue that there is no
Defendant who is bound by the Terms and Conditions giving rise to their substantive
claims. Id. at 32-37. If that is the case, Plaintiffs’ case seeks to hold Defendants
accountable for a scheme to defraud customers through money order transactions, while
they also argue that Defendants are not bound by the very agreements used in those
transactions. See Am. Compl. [#27] at 22-36; Response [#52] at 32-37. Plaintiffs’
contradictory argument defies logic, and the Court addresses this novel position in
examining which Defendants can enforce arbitration in the analysis below.
Disputes are subject to arbitration when a valid and enforceable arbitration
agreement exists, and when the dispute falls within the scope of those identified in the
arbitration agreement. See 9 U.S.C. § 2; Green Tree Fin. Corp. Ala. v. Randolph, 531 U.S.
79, 89 (2000); Newmont U.S.A. Ltd. v. Ins. Co. of N. Am., 615 F.3d 1286, 1274 (10th Cir.
2010). In determining whether a valid arbitration agreement exists, the Tenth Circuit relies
on state law principles of contract formation to determine whether parties have agreed to
arbitrate an issue or claim. Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 475 (10th
Cir. 2006); Avedon Eng’g, Inc. v. Seatex, 126 F.3d 1279, 1287 (10th Cir. 1987). Thus,
under Colorado law,4 contract formation principles govern whether parties have agreed to
4

Both sets of Terms and Conditions in dispute contain a provision stating that the
agreement is “governed by Colorado law without regard” to conflict of law rules. See Ex. 14 [#33-

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submit disputes to arbitration. Allen v. Pacheco, 71 P.3d 375, 378 (Colo. 2003). An
arbitration agreement governed by the FAA is presumed to be valid and enforceable, and
the party resisting arbitration bears the burden of proving that Congress intended to
preclude arbitration of the claims at issue. Randolph, 531 U.S. at 91-92.
In ruling on a motion to stay pending arbitration, a federal court may consider “only
issues relating to the making and performance of the agreement to arbitrate.” Prima Paint
Corp., 388 U.S. at 404. This includes whether any agreement between the parties was
ever concluded. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 441 n.1 (2006).
However, the arbitrator, not the Court, should determine whether the contract overall is
otherwise enforceable. In re Cox, 835 F. 3d at 1210. Thus, the Court begins its analysis
by determining whether any arbitration agreements exists, and what parties are bound by
them.
The party seeking arbitration must present sufficient evidence demonstrating the
existence of an arbitration agreement. Bellman, 563 F. App’x at 612. If sufficient evidence
of an enforceable agreement is presented, the burden then shifts to the nonmoving party
to “raise a genuine dispute of material fact regarding the existence of an agreement.” Id.;
BigBen 1613, LLC, 2018 WL 4257321, at *2. Facts are “material” if they are essential to
the proper disposition of the claim under the relevant substantive law. Wright v. Abbott
Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute is “genuine” if the evidence
might lead a reasonable juror to return a verdict for the nonmoving party. Allen v.
Muskogee, Okla., 119 F.3d 837, 839 (10th Cir 1997).
16] at 6; Ex. 2 [#33-4] at 6. Also, both parties employ Colorado contract law in their arguments
pertaining to contracts at large. See Response [#52] at 21; Reply [#56] at 18.

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In order to meet their initial burden of demonstrating the existence of enforceable
arbitration agreements here, Defendants rely on: (1) the signed Terms and Conditions
containing the Arbitration Clauses produced by certain Plaintiffs, (2) deposition testimony
of certain Plaintiffs admitting that they signed the Terms and Conditions when conducting
their transactions, and (3) WUFSI’s standard business practices and procedures in sending
money orders, with respect to Plaintiffs who have not produced signed Terms and
Conditions and who testified that they do not recall signing arbitration agreements during
their respective transactions. Reply [#56] at 8; Motion [#33] at 18-19; see also Factual
Suppl. [#48] at 3-6. To further establish the practices and procedure associated with
WUFSI money order transactions, Defendants submitted the Declarations of Edgardo
Torres (“Torres”)5 and Lisa Sherman (“Sherman”).6 Reply [#56] at 8; Motion [#33] at 18-19;
Torres Decl. [#33-1] at 1-5; Sherman Decl. [#33-2] at 1-12.
Additionally, the Court considers whether Defendants Western Union, Ersek, and
WUFSI are bound by the Arbitration Clauses, allowing them to enforce arbitration.
Defendants argue that despite being a nonsignatory to the Terms and Conditions, WUFSI
is still bound by the Arbitration Clauses. Motion [#33] at 28; Reply [#56] at 25. Similarly,
Defendants argue that Defendants Western Union and Ersek can enforce arbitration
without being signatories to the Terms and Conditions through the doctrine of equitable
estoppel. Motion [#33] at 32; Reply [#56] at 25. The Court address these arguments in

5

Mr. Torres is Western Union’s Global Head of Agent Operations. Torres Decl. [#33-1] at

1-2.
6

Ms. Sherman is a Senior Manager, Vendor Relations for Western Union LLC. Sherman
Decl. [#33-2] at 1.

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turn.
1.

Whether Plaintiffs Laubler, Riggs and Seward are Bound by the
Arbitration Clauses

It is undisputed that Plaintiffs Rhonda Laubler (“Laubler”), Teresa Riggs (“Riggs”),
and Anita Seward (“Seward”) either produced signed Terms and Conditions from their
alleged fraudulent transactions or testified that they signed agreements prior to sending
their money orders. Factual Suppl. [#48] at 3-4. Plaintiffs Laubler, Riggs, and Seward’s
relevant transactions took place throughout 2016 and 2017. Id. During this period, the
Terms and Conditions contained on the Send Money Forms and order receipts included
an arbitration clause stating that National Arbitration and Mediation (“NAM”) (the “NAM
Arbitration Clause”) will administer any arbitration arising from a dispute. Motion [#33] at
12.
Defendants assert that the copies of signed receipts and affirmative testimony
regarding signed receipts are sufficient to establish the existence of an agreement to
arbitrate. Id. at 19; Factual Suppl. [#48] at 3-6. The Court agrees. See Bellman, 563 F.
App’x at 613; Hancock, 701 F.3d at 1264. Plaintiffs Seward and Laubler each produced
copies of receipts that they received in connection with their transactions at issue. Factual
Suppl. [#48] at 3-4. Plaintiff Riggs did not produce any documentation relating to her
transactions but testified that she completed and signed a Send Money Form in connection
with each of her money transfers. Id. at 4. Thus, Defendants have produced evidence that
the parties were presented with the NAM Arbitration Clause in the course of their disputed
transactions, and that Plaintiffs Laubler, Riggs, and Seward assented to the agreements
with their signatures. As a result, Defendants have met their initial burden of demonstrating
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an enforceable arbitration agreement with respect to the NAM Arbitration Clause. Bellman,
563 F. App’x at 613.
Plaintiffs do not dispute the existence of agreements for Plaintiffs Laubler, Riggs,
and Seward because these three Plaintiffs have produced copies of signed Terms and
Conditions from their transactions or testified to signing receipts. Response [#56] at 27;
Factual Suppl. [#48] at 3-5. Therefore, Plaintiffs do not raise a genuine issue of material
fact. Bellman, 563 F. App’x at 613. Thus, the Court finds that Plaintiffs Laubler, Riggs, and
Seward are bound by the Arbitration Clauses.
2.

Whether Plaintiffs Frazier and Simon are Bound by the Arbitration
Clauses

Unlike Plaintiffs Laubler, Riggs, and Seward, Plaintiffs Frazier and Simon did not
produce any evidence or testimony of signed Terms and Conditions. Factual Suppl. [#48]
at 4-6. Plaintiff Simon’s disputed transaction occurred in 2016, purportedly making her
subject to the NAM Arbitration Clause included in the Terms and Conditions from 2016
through 2017. Response [#52] at 10. Plaintiff Frazier’s disputed transaction occurred in
2005, purportedly making her subject to an older version of the Terms and Conditions
which listed the National Arbitration Foundation (“NAF”) (the “NAF Arbitration Clause”) as
the arbitrator. Id. Plaintiffs Frazier and Simon both testified that they do not specifically
recall whether they signed any documentation with respect to their transactions in dispute.
Id. Plaintiff Frazier testified that she filled out a form provided at the Western Union
location where she completed her transaction that looked like a Send Money Form, and she
received a receipt. Id. at 5-6. However, she does not recall whether she signed either the
money transfer form or her receipt. Id. Plaintiff Simon similarly testified that she filled out
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a form in connection with her transaction and received a receipt but cannot recall signing
either document. Id. at 4-5.
Evidence of an organization’s routine practice “may be admitted to prove that on a
particular occasion the . . . organization acted in accordance with the . . . routine practice.”
Hancock, 701 F.3d at 1261 (citing Fed. R. Evid. 406). Such evidence of routine practice
is admissible “regardless of whether it is corroborated or whether there was an eyewitness.”
Hancock, 701 F.3d at 1261. Personal knowledge of what happened when the individual
plaintiffs completed their transactions is not required to admit Rule 406 routine practice
evidence. Id. at 1264 (citing Derby & Co., Inc. v. Seaview Petroleum Co., 756 F. Supp.
868, 867 n.8 (E.D. Pa. 1991)). Personal knowledge of whether the standard practice is
followed when customers complete transactions is “enough to raise the inference that the
standard practice was followed,” and “shift[s] the burden to the Plaintiffs to raise a genuine
factual dispute.” Hancock, 701 F.3d at 1264.
Defendants argue that despite the lack of physical evidence and testimony, they
have demonstrated the existence of arbitration agreements with respect to Plaintiffs Frazier
and Simon due to evidence of WUFSI’s standard business practices and procedures.
Motion [#33] at 18-19; Reply [#56] at 7-12. In support of this argument, Defendants rely
on the declaration and testimony of Mr. Torres to establish the standard business practices
followed by Western Union and WUFSI in operating their Money Transfer System. Motion
[#33] at 18-19; Reply [#56] at 10. Further, Defendants argue that separate from WUFSI’s
standard business practices, Plaintiffs Frazier and Simon were both on notice of the Terms
and Conditions containing the Arbitration Clauses and accepted them through the course

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of their conduct alone. Reply [#56] at 12. Finally, Defendants argue that signatures are
not required to establish an enforceable arbitration agreement. Id.
Plaintiffs dispute that Plaintiffs Frazier and Simon ever entered into the Terms and
Conditions with Defendants. Response [#52] at 26. They note that Defendants admit that
they do not possess signed Terms and Conditions, on either Send Money Forms or
receipts, for Plaintiffs Frazier and Simon. Id. at 27. Further, Plaintiffs argue that since
Plaintiffs Simon and Frazier did not produce signed Terms and Conditions in discovery and
do not recall signing an agreement as a part of their relevant transactions, no evidence of
any agreement to arbitrate exists. Id. Plaintiffs argue that Defendants improperly rely on
habit evidence to demonstrate that Plaintiff Simon signed her Send Money Forms or
receipts because there is no direct evidence that she “reflexively” signed Send Money
Forms or receipts. Id. at 28. Finally, Plaintiffs argue that Defendants have failed to
establish the existence of an Arbitration Clause through WUFSI and Western Union’s
standard business practices because the declarations of Mr. Torres and other Western
Union employees cannot establish that these practices are followed at every location and
in every transaction sending a money order. Id. at 29-30.
Here, the Declarations of Mr. Torres and Ms. Sherman support their personal
knowledge of the standard practices followed in WUFSI transactions when customers
agree to the Terms and Conditions. Motion [#33] at 18-20; Reply [#56] at 7-12; Torres
Decl. [#33-1] at 1-5; Sherman Decl. [#33-2] at 1-12. Plaintiffs’ arguments that Mr. Torres
does not have personal knowledge of the specific transactions in question and the habits
of independent location clerks and agent locations are not material to the Court’s inquiry

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here. Hancock, 701 F.3d at 1264; Response [#52] at 29-30. Rather, the Court looks to
the declarations of Mr. Torres and Ms. Sherman regarding their personal knowledge of the
standard practices employed by WUFSI in sending money orders. Hancock, 701 F.3d at
1264.

Mr. Torres is responsible for overseeing and developing procedures that

independent agents follow when they process money transfers.

Reply [#56] at 10.

Additionally, Mr. Torres is familiar with the process in which customers send money
transfers, and when customers receive or have a chance to sign a copy of the Terms and
Conditions. Id. Specifically, Mr. Torres is aware that a copy of the Terms and Conditions
is included on all receipts given to customers, and he is also not aware of any situations
in which a money transfer is sent without a customer failing to sign a receipt. Id. Thus, the
Court finds that Defendants have presented sufficient evidence that the standard practices
employed by WUFSI included use of documents with arbitration clauses. Hancock, 701
F.3d at 1262; Factual Suppl. [#48] at 4-6.
The fact that Plaintiffs Frazier and Simon do not specifically recall whether they
signed receipts or Send Money Forms is also not material to this inquiry. Response [#52]
at 27. A signature is not required to establish the existence of an enforceable arbitration
agreement. See E-21 Eng’g, Inc. v. Steve Stock & Assoc., Inc., 252 P.3d 36, 39 (Colo.
App. 2010); Todd Haberman Constr. Inc. v. Epstein, 70 F. Supp. 2d 1170, 1174 (D. Colo.
1999). Parties can be bound to agreement of essential contract terms by their conduct.
Yaekle v. Andrews, 195 P.3d 1101, 1107 (Colo. 2008). Given that Plaintiffs Frazier and
Simon both testified to receiving receipts after their transactions in question, their conduct
evidences assent to the Terms and Conditions. Yaekle, 195 P.3d at 1107; Factual Suppl.

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[#48] at 4-6. Additionally, Plaintiffs Frazier and Simon do not deny signing receipts or Send
Money Forms; rather, they simply cannot recall specifically whether they signed them.
Response [#56] at 27-28. The fact that Plaintiffs Frazier and Simon recall receiving
receipts and do not affirmatively deny signing a Send Money Form or receipt means there
is no genuine issue of material fact sufficient to dispute the existence of arbitration
agreements. Bellman, 563 F. App’x at 613.
Thus, the Court finds that Defendants have met their initial burden of presenting
sufficient evidence that there was notice of and assent to the Terms and Conditions
containing Arbitration Clauses for Plaintiffs Frazier and Simon. Id. Additionally, the Court
also finds that Plaintiffs, in response, failed to meet their burden of raising a dispute of
material fact with respect to the existence of Terms and Condition with Plaintiffs Frazier and
Simon. Therefore, the Court finds the existence of enforceable Arbitration Clauses, and
Plaintiffs Frazier and Simon are bound by them.
3.

Whether Defendant WUFSI is Bound by the Arbitration Clauses

WUFSI is Western Union’s subsidiary in charge of the global Money Transfer
System.

Am. Compl. [#27] at 5. Defendants contend that WUFSI is bound by the

Arbitration Clauses discussed above. Motion [#33] at 28. The Arbitration Clause in place
in 2005 contained a provision naming the NAF as the arbitrator in the NAF Arbitration
Clause. Sherman Decl. [#33-2] at 3. Defendants contend that WUFSI is a party to the
NAF Arbitration Clause, making it bound to the provisions of the Arbitration Clause. Motion
[#33] at 28-31. In opposition, Plaintiffs rely on Tennille v. Western Union Co., in which the
Court held that WUFSI was not entitled to a stay of proceedings to enforce arbitration.

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Nos. 09-cv-938-JLK, 10cv-765-JLK, 2011 WL 6778780, at *1 (D. Colo. Dec. 23, 2011).
Finding that WUFSI failed to prove the existence of a binding arbitration agreement with
the plaintiffs, the Court supported its decision with two main lines of reasoning. Id. at *1-2.
First, the Court held that WUFSI was neither a signatory nor a party to the arbitration
agreement found in the adhesion contract. Id. Second, the Court found that there was no
“factual or legal distinction between WUFSI and [Western Union] that would permit WUFSI
to enforce the agreement against [the] [p]laintiffs two years into [ ] litigation” after Western
Union had already submitted to the jurisdiction of the court and litigated substantive
defenses. Id. at *2.
While the Court has considered the decision in Tennille, the Court finds that material
differences exist between the circumstances in Tennille and the situation here. With respect
to Tennille’s first line of reasoning, Defendants assert that WUFSI is bound by the NAF
Arbitration Clause, and ask that the Court distinguish Tennille for the purposes of the
instant Motion. [#33] at 28. Given Plaintiffs’ argument (addressed below) that nonsignatory
Defendants Western Union and Ersek cannot be bound by the Terms and Conditions or
Arbitration Clauses, Plaintiffs essentially assert that there is no Defendant or Western
Union-linked entity that could be bound by the Terms and Conditions or Arbitration Clauses.
Id. Following this line of reasoning would ultimately mean that Western Union and WUFSI
created Terms and Conditions containing Arbitration Clauses that were applicable to their
customers, but not to any of the money transferring entities. Motion [#33] at 30. That result
would be, of course, implausible.
Plaintiffs here acknowledge that WUFSI operates Western Union’s Money Transfer

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System. Am. Compl. [#27] at 5. Unlike Tennille, there is no ambiguity regarding whether
WUFSI is a party bound by the Terms and Conditions on the Send Money Forms used to
initiate transactions in WUFSI’s Money Transfer System. 2011 WL 6778780 at *1. Here,
the Terms and Conditions apply to the customers using the Money Transfer System and
the party providing the money transfer services. In Plaintiffs’ transactions, those two
parties are clearly Plaintiffs and WUFSI. Am. Compl. [#27] at 5.
Moving to Tennille’s second line of reasoning that there is no factual or legal
distinction between Western Union and WUFSI that would permit WUFSI to enforce the
Arbitration Clause two years into litigation after Western Union submitted substantive
defenses, the present circumstances are again inapplicable to Tennille’s holding. First, the
case here has been in litigation for less than one year, and no Defendants have submitted
any substantive defenses at this stage of the litigation. Am. Compl. [#27] at 1, 73. Second,
any further factual or legal distinction between Western Union and WUFSI does not bear
on the Court’s analysis. Here, Plaintiffs’ claims all stem from the same conduct alleged
against all named Defendants, which makes any legal distinction between these entities
immaterial so long as some Western Union entity is covered by the Terms and Conditions.
Am. Compl. [#27] at 8-41; See Meister v. Stout, 353 P.3d 916, 918 (Colo. App. 2015)
(holding that a signatory plaintiff “may be equitably estopped from avoiding arbitration when
he sues a nonsignatory on claims that . . . allege interconnected and concerted misconduct
between the nonsignatory and one or more of the signatories related to that agreement”).
WUFSI is a Western Union entity covered by the Terms and Conditions, making any further
legal distinction between other nonsignatory entities immaterial to the Court’s analysis.

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Finally, principles of contract interpretation also guide the Court’s decision. In
determining the meaning of a contract, courts “seek to give effect to all provisions so that
none will be rendered meaningless.” Mapes v. City Council of City of Walsenburg, 151
P.3d 574, 577 (Colo. App. 2006). If the Court applied the logic of Tennille to the present
case, the Court would be rendering countless contractual Terms and Conditions between
WUFSI and customers around the country meaningless. Thus, the Court respectfully finds
that Tennille is distinguishable, and finds that WUFSI is bound by the Terms and Conditions
and its Arbitration Clause.
4.

Whether Defendants Western Union and Ersek are Bound by the
Arbitration Clauses

Plaintiffs contend that Defendants Western Union and Ersek cannot enforce
arbitration because they are not parties to the agreements containing the Arbitration
Clauses. Response [#52] at 32-37. Defendants argue that although they are nonsignatories to both the NAF and NAM Arbitration Clauses, Defendants Western Union and
Ersek can enforce arbitration through equitable estoppel. Id. at 31-34; Reply [#56] at 2528.
Colorado law governs whether Defendants Western Union and Ersek can enforce
arbitration. See Belnap, 844 F.3d at 1293. In Colorado, “both signatory and nonsignatory
parties may be bound by an arbitration agreement if so dictated by ordinary principles of
contract law.” Meister v. Stout, 353 P.3d 916, 920 (Colo. App. 2015). Equitable estoppel
binds parties to arbitration agreements in two scenarios. Id. As relevant here, the second
scenario arises when a signatory asserts a claim arising from a contract against a
nonsignatory to the contract. Id. Under the second scenario, equitable estoppel is also
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available “when a signatory alleges substantially interdependent and concerted misconduct
by a nonsignatory and one or more signatories to the agreement.” Id. at 921 (citing GATX
Mgmt. Servs., 171 F. Supp. 2d at 1166). Allegations of interconnected misconduct support
estoppel “only when they establish that the claims against the nonsignatory are intimately
founded in and intertwined with the obligations imposed by the contract containing the
arbitration clause.” Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 449 F. App’x 704,
710 (10th Cir. 2011) (quoting In re Humana, Inc., Managed Care Litig., 25 F.3d 971, 975
(11th Cir. 2002) (internal quotation marks omitted)).
Defendants argue that this scenario is applicable in this case, thus allowing
nonsignatories Defendants Western Union and Ersek to enforce arbitration. Motion [#33]
at 33-34; Reply [#56] at 25-28. In support of this argument, Defendants assert that each
of Plaintiffs’ claims apply equally to Defendants Western Union and Ersek. Motion [#33]
at 33-34. Further, Defendants argue that Plaintiffs’ claims are intertwined with the Terms
and Conditions, because Plaintiffs’ claims arise out of money transfers governed by the
Terms and Conditions. Reply [#56] at 27.
Plaintiffs argue that this scenario is inapplicable here, because there is no need for
an arbitrator to reference the Terms and Conditions in adjudicating Plaintiffs’ claims.
Response [#52] at 36. Therefore, Plaintiffs assert that their claims are not intertwined with
the duties and obligations of the Terms and Conditions. Id.
The Court finds that the nonsignatory Defendants may enforce the Terms and
Conditions and the Arbitration Clauses. First, Plaintiffs’ claims against the signatory and
nonsignatory Defendants Western Union and Ersek are interdependent. Meister, 353 P.3d

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at 921. Plaintiffs assert all of their claims collectively against all Defendants. Am. Compl.
[#27] at 46-72 (asserting RICO claims “Against All Defendants”).
Second, the Court finds that Plaintiffs’ claims are intertwined with the duties and
obligations arising from the Terms and Conditions. “As the main document[s] governing
the parties’ relationship, the arbitrator will have to reference the [agreements’] terms,
requirements, and duties in adjudicating Plaintiffs’ claims.” Santich v. VCG Holding Corp.,
No. 17-cv-00631-RM-MEH, 2017 WL 4251944, at *23 (D. Colo. Sept. 26, 2017). All of
Plaintiffs’ claims arise from disputed transactions involving the Terms and Conditions
contained on the Send Money Forms and receipts. Am. Compl. [#27] at 8-15. The Court
finds the reasoning in Pollard v. ETS PC, Inc. to be persuasive. 186 F. Supp. 3d 1166 (D.
Colo. 2016). In Pollard, the Court found that the plaintiffs’ Fair Labor Standards Act claims
against nonsignatory defendants were intertwined with the duties and obligations from the
parties’ employment agreement because “an arbitrator will need to examine and interpret”
the employment agreements to determine whether the “[p]laintiffs’ claims implicate or are
affected by those [a]greements.” Id. at 1175.
Plaintiffs dispute that the duties and obligations set forth in the Terms and Conditions
are necessary to resolve their claims, pointing to the fact that the Arbitration Clause and
the Terms and Conditions are not mentioned at all in the Amended Complaint [#27].
Response [#52] at 36. Plaintiffs argue that Lenox MacLaren Surgical Corp. v. Medtronic,
Inc. is more persuasive in this scenario. 449 F. App’x 704, 710 (10th Cir. 2011). In
Medtronic, the court found that the plaintiffs’ antitrust claims were not intertwined with the
duties and obligations of the licensing agreement containing an arbitration provision. Id.

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at 710-11. Holding that the nonsignatory parent company could not compel arbitration, the
court found that the arbitrator would not need to analyze the terms and obligations of the
licensing agreement to determine whether the signatory and non-signatory defendants had
agreed to engage in anticompetitive conduct. Id. at 711.
The Court finds the situation here distinct from Medtronic. The arbitrator in this case
would need to consider the Terms and Conditions in resolving Plaintiffs’ claims. Pollard,
186 F. Supp. 3d at 1175. For example, Plaintiffs allege that Defendants failed to warn
Plaintiffs about “fraud occurring through Western Union’s Money Transfer System.” Am.
Compl. [#27] at 34. The arbitrator would need to look to the only documentation involved
in Plaintiffs’ transactions, the Send Money Forms containing the Terms and Conditions and
receipts, in order to fully understand what kind of warnings, if any, were provided by
Defendants. Further, the Terms and Conditions are also relevant to Plaintiffs’ claims
because of the limited liability clause, which provides that Western Union shall not be liable
for any damages over $500. See Ex. 1 [#33-3] at 5; Ex. 14 [#33-16] at 6. Here, Plaintiffs
seek over $500 in damages, making the limited liability clause relevant to the arbitrator’s
assessment of damages. Response [#52] at 18; Am. Compl. [#27] at 72-73.
Thus, the Court finds that Plaintiffs’ claims asserted against the signatory Defendant
WUFSI are interdependent with those claims asserted against the nonsignatory Defendants
Western Union and Ersek and are intertwined with the Terms and Conditions. As such, the
Court finds that Defendants Western Union and Ersek are bound by the Arbitration
Clauses, and may enforce arbitration against Plaintiffs pursuant to the Arbitration Clauses.

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B.

Whether the Existing Arbitration Clauses are Enforceable and the Disputes
Fall Within Their Scope
Defendants have established the existence of contractual Terms and Conditions

including the Arbitration Clauses, satisfying the first requirement to enforce arbitration. See
9 U.S.C. § 2; Randolph, 531 U.S. at 89; Newmont U.S.A. Ltd., 615 F.3d at 1274. The
second step to enforce arbitration is a showing that the arbitration clauses are enforceable
and the disputes fall within their scope. Randolph, 531 U.S. at 89; Newmont U.S.A. Ltd.,
615 F.3d at 1274. Plaintiffs challenge both the enforceability of the Arbitration Clauses and
their scope, specifically as to their respective RICO claims.
Importantly, the Court notes at the outset that challenges to the contract as a whole
are for the arbitrator to decide. Prima Paint Corp., 388 U.S. at 404; In re Cox, 835 F.3d at
1209. The Court only decides enforceability issues specific to arbitration provisions, such
as unconscionability or fraudulent inducement. Id. A challenge to the enforceability of a
larger contract in this case is for the arbitrator to decide, not the Court. In re Cox, 835 F.3d
at 1209. Here, any arguments relating to the enforceability of the Terms and Conditions
as a whole are for the arbitrator. Further, as addressed below, any attempts to invalidate
specific provisions of the Arbitration Clause, such as a delegation provision, by challenging
the validity of a larger agreement are for the arbitrator to decide. See Rent-A-Center, W.,
Inc., 561 U.S. at 74.
1.

Enforceability of the Arbitration Clauses

Plaintiffs raise separate arguments disputing the enforceability of the NAF and NAM

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Arbitration Clauses. Response [#52] at 10-26. Regarding the NAF Arbitration Clause,7
Plaintiffs argue that the designation of an unavailable arbitrator renders the agreement
unenforceable. Id. at 11. With respect to the NAM Arbitration Clause,8 Plaintiffs argue that
the agreement is unenforceable because it precludes the effective vindication of Plaintiffs’
RICO claims and is unconscionable, and because the individual NAM Rules cannot be
severed from the agreement. Id. at 15-25.
a.

Whether the NAF Arbitration Clause is Enforceable

Plaintiffs argue that if Plaintiff Frazier is bound by the NAF Arbitration Clause, she
would then be subject to an arbitrator which is no longer allowed to arbitrate consumer
disputes. Motion [#33] at 22-23; Response [#52] at 11. Plaintiff Frazier’s dispute arises
from a transaction in 2005. Response [#52] at 10. The Terms and Conditions included on
Send Money Forms used in 2005 contained provisions naming the NAF as the forum to
administer any arbitration arising from a dispute. Motion [#33] at 11; Response [#52] at 11.
The following language is included in the 2005 NAF Arbitration Clause:
Any dispute or claim arising from or relating to this transaction, including
disputes regarding this paragraph, shall be settled by binding arbitration
administered by the National Arbitration Forum (“NAF”) under its Code of
Procedure in effect when the dispute is filed, and shall be arbitrated in the
most populous city in the state where the transaction was sent. Each party
shall bear its own attorneys’, experts’ and witness fees. Neither party shall
have the right to participate as a member of any class of claimants pertaining
to any claim. Third parties’ claims shall not be joined in any arbitration
between the parties. Information may be obtained and disputes may be filed
at a NAF office, www.arbitration-forum.com, or at P.O. Box 50191,

7

The NAF Arbitration Clause applies to Plaintiff Frazier’s transaction from 2005. Response
[#52] at 10.
8

The NAM Arbitration Clause applies to Plaintiffs Laubler, Riggs, Seward, and Simon’s
transactions from 2016 and 2017. Response [#52] at 15 n.6.

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Minneapolis, MN 55405. This paragraph is made pursuant to a transaction
involving interstate commerce and shall be governed by the Federal
Arbitration Act, 9 U.S.C. § 1-16. EXCEPT AS EXPRESSLY PROVIDED IN
THIS PARAGRAPH, THE PARTIES WAIVE ALL RIGHTS TO A COURT OR
JURY TRIAL TO RESOLVE AGREEMENT DISPUTES.
Motion [#33] at 11. It is undisputed that NAF, however, no longer conducts consumer
arbitrations. Motion [#33] at 22; Response [#52] at 11. NAF has not been accepting new
consumer cases for arbitration since July 2009, when it settled a suit brought by
Minnesota’s Attorney General. See Green v. U.S. Cash Advance Ill., LLC, 724 F.3d 787,
788 (7th Cir. 2013). Thus, Plaintiffs argue that the unavailability of the forum mentioned
in the NAF Arbitration Clause renders the Arbitration Clause unenforceable for Plaintiff
Frazier. Id.
Defendants argue that the FAA and Colorado contract law both support upholding
the enforceability of the NAF Agreement despite the unavailability of NAF. Motion [#33] at
22. Defendants assert that Section 5 of the FAA explicitly contemplates a situation where
a named arbitrator is unavailable. Id. at 23. Further, Defendants argue that while the
Tenth Circuit has not addressed the issue directly, a majority of federal circuit courts have
upheld arbitration agreements even when NAF is not available. Id. at 25. Given the FAA’s
“liberal policy favoring arbitration agreements,” the Court agrees. Epic Sys. Corp., 138 S.
Ct. at 1621 (quoting Moses H. Cone Mem’l Hosp., 460 U.S. at 24).
Federal circuits are split on this issue. Although, the Tenth Circuit Court of Appeals
has apparently not yet ruled on this specific issue, the Second, Third, Fifth, Sixth, Seventh,
Eighth, Ninth, and Eleventh Circuits have all issued opinions on the topic. See Robinson
v. EOR-ARK, LLC, 841 F.3d 781, 784 (8th Cir. 2016); Moss v. First Premier Bank, 835 F.3d

-25-

260, 265 (2d Cir. 2016); Smith v. ComputerTraining.Com, Inc., 531 F. App’x 713, 714 (6th
Cir. 2013); Green, 724 F.3d at 792-93 (7th Cir.); Khan v. Dell Inc., 669 F.3d 350, 354 (3d
Cir. 2012); Ranzy v. Tijerina, 393 F. App’x 174, 176 (5th Cir. 2010); Reddam v. KPMG LLP,
457 F.3d 1054, 1060-61 (9th Cir. 2006). Most circuits narrow this issue to an interpretation
of whether Section 5 of the FAA applies, allowing courts to appoint a substitute arbitrator.
See Khan v. Dell Inc., 669 F.3d 350, 354 (3d Cir. 2012); Brown v. ITT Consumer Fin. Corp.,
211 F.3d 1217, 1222 (11th Cir. 2000). Section 5 of the FAA provides a mechanism for
substituting an arbitrator when the designated arbitrator is unavailable. 9 U.S.C. § 5
(stating “if for any other reason there shall be a lapse in the naming of an arbitrator or
arbitrators or umpire . . . then upon the application of either party to the controversy the
court shall designate and appoint an arbitrator”). Courts have construed this provision as
requiring a determination of whether the designation of the arbitrator was “integral” to the
arbitration provision, or was merely an ancillary consideration. Khan, 669 F.3d at 354.
Five federal circuit courts, the Third, Sixth, Seventh, Eighth, and Ninth Circuits, have
upheld arbitration agreements despite their naming of an unavailable arbitrator. See
Robinson, 841 F3.d at 784; Smith, Inc., 531 F. App’x at 714; Green, 724 F.3d at 792-93;
Khan, 669 F.3d at 354; Reddam, 457 F.3d at 1060-61. The Third, Fifth, and Eighth Circuits
have found circumstances where NAF is not integral to the arbitration provision. See
Robinson, 841 F3.d at 784; Smith, 531 F. App’x at 714; Khan, 669 F.3d at 354.
Additionally, while not dealing specifically with NAF, the Ninth Circuit has similarly held that
the choice of arbitrator was not integral to the arbitration agreement and upheld the
agreement. Reddam, 457 F.3d at 1060-61. The Seventh Circuit rejected the “integral” test,

-26-

finding that no court has ever explained what part of the FAA requires or authorizes such
a test. Green, 724 F.3d at 792-93 (holding an arbitration agreement naming NAF as an
arbitrator valid because the parties clearly selected private dispute resolution).
Conversely, the Second and Fifth Circuits have found circumstances where NAF is
integral to the arbitration agreement, invalidating the agreements. See Moss v. First
Premier Bank, 835 F.3d 260, 265 (2d Cir. 2016); Ranzy v. Tijerina, 393 F. App’x 174, 176
(5th Cir. 2010).
Although there is no applicable guidance from the Tenth Circuit on this specific
issue, this District has upheld arbitration agreements where the named arbitrator is not
available. See, e.g., McGuire, Cornwell & Blakely v. Grider, 771 F. Supp. 319, 320 (D.
Colo. 1991); Stone v. Vail Resorts Dev. Co., No. 09-cv-02081-WYD-KLM, 2012 WL
6634906, at *1 (D. Colo. Dec. 20, 2012). Colorado contract law instructs courts to give full
effect to the general purposes of a contract, and the intent of the parties should not be
defeated by “inept expressions.” Ad Two, Inc. v. City & Cty. of Denver ex rel. Manager of
Aviation, 9 P.3d 373, 377 (Colo. 2000). With the backdrop of a liberal policy in favor of
arbitration agreements, the Court finds that Defendants’ arguments here are more
persuasive. See Epic Sys. Corp., 138 S. Ct. at 1621.
In evaluating the specific language of the NAF Arbitration Clause applicable here,
the Court finds the language is most similar to the arbitration provision in Khan v. Dell Inc.,
669 F.3d at 351; Motion [#33] at 11. In Khan, the relevant language stated that any
disputes “SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING
ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF) under

-27-

its Code of Procedure . . . .” Id. The court in Khan found the “integral” issue to be
ambiguous, because it was unclear if the “exclusive” language modified “BINDING
ARBITRATION, THE NATIONAL ARBITRATION FORUM, or both.” Id. at 355 (internal
quotation marks omitted). The court found that this ambiguity should be resolved in favor
of arbitration. Id. at 356.
The language in the NAF Arbitration Clause here states that any dispute “shall be
settled by binding arbitration administered by the National Arbitration Forum (“NAF”) under
its Code of Procedure . . . .” Motion [#33] at 11. Here, as in Khan, it is unclear whether the
language “settled by” modifies “binding arbitration,” NAF, or both. Id. The Court finds the
same reasoning applied in Khan persuasive here. The ambiguity in the NAF Arbitration
Clause’s NAF provision should also be resolved in favor of arbitration. Khan, 669 F.3d at
356.
Even if the “integral” test does not control, the text of the FAA supports arbitration
in this situation. The Seventh Circuit in Green rejected application of the “integral” test,
finding no link to such a test in the text or background of the FAA. 724 F.3d at 792.
Pointing to recent Supreme Court precedent insisting that the FAA not be “added to in a
way that overrides contracts to resolve disputes by arbitration,” the Green court found that
the language of the agreement in question made the parties’ intent to arbitrate clear. Id.
at 792-93 (citing Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2340 (2013)). Here,
as in Green, the intent of the parties to arbitrate their claims is clear. The language of the
NAF Agreement states “EXCEPT AS EXPRESSLY PROVIDED IN THIS PARAGRAPH,
THE PARTIES WAIVE ALL RIGHTS TO A COURT OR JURY TRIAL TO RESOLVE

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AGREEMENT DISPUTES.” Motion [#33] at 11. Thus, the Court gives full effect to the
general purpose of the agreement, which in the NAF Arbitration Clause is to arbitrate. Ad
Two, Inc., 9 P.3d at 377. Accordingly, the Court finds the NAF Arbitration Clause to be
enforceable with respect to Plaintiff Frazier despite the unavailability of the named
arbitrator. See Green, 724 F.3d at 792-93; Khan, 669 F.3d at 354.
b.

Whether the NAM Arbitration Clause is Enforceable

Plaintiffs also challenge the enforceability of the NAM Arbitration Clause. Response
[#52] at 15. Plaintiffs assert that the NAM Arbitration Clause is unenforceable because it
is unconscionable. Id. at 20-25.
In Colorado, for a contract to be unconscionable, it must be both substantively and
procedurally unconscionable. Vernon v. Qwest Commc’ns Int’l, Inc., 925 F. Supp. 2d 1185,
1194 (D. Colo. 2013) (citing Davis v. M.L.G. Corp., 712 P.2d 985, 991 (Colo. 1986)).
Seven factors are evaluated when determining whether a contract is unconscionable: (1)
whether the contract is a standardized agreement executed by parties of unequal
bargaining power; (2) lack of an opportunity to read or become familiar with the document
before signing it; (3) use of fine print in the portion of the contract containing the provision;
(4) absence of evidence that the provision was commercially reasonable; (5) the terms of
the contract; (6) the relationship of the parties, including factors of assent, unfair surprise,
and notice; and (7) all the circumstances surrounding the formation of the contract. Id. The
first, second, third, sixth, and seventh factors relate to procedural unconscionability.
Vernon, 925 F. Supp. 2d at 1195. The fourth and fifth factors relate to substantive
unconscionability. Id.

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Arbitrability disputes are for the arbitrator unless the party contesting arbitration
specifically challenges the delegation clause included in the parties’ agreement. Rent-ACenter, W., Inc., 561 U.S. at 72. The NAM Arbitration Clause contains a delegation clause
providing, “[t]he arbitrator shall also decide what is subject to arbitration.” Motion [#33-2]
at 8. The Court finds that Plaintiff’s procedural unconscionability arguments challenge the
larger Terms and Conditions, not just the specific delegation clause of the NAM Arbitration
Clause. For example, Plaintiffs argue that the NAM Arbitration Clause is a “standardized
agreement executed by parties of unequal bargaining power.” Response [#52] at 21.
However, Plaintiffs support this proposition by citing to a case that refers to the larger
Terms and Conditions as an “adhesion contract.” See Tennille, 2011 WL 6778780, at *1.
The same “non-negotiable” nature that Plaintiffs assert regarding the NAM Arbitration
Clause also applies to the entirety of the Terms and Conditions, because the individual
Plaintiffs were in no better position to negotiate the NAM Arbitration Clause provision than
any of the other provisions in the Terms and Conditions. Challenges that are “related to
the enforceability of the arbitration agreement as a whole, rather than a specific challenge
to the arbitration agreement’s delegation clause” are for the arbitrator. Colon v. Conchetta,
Inc., No. 17-0959, 2017 WL 2572517, at *4 (E.D. Pa. June 14, 2017).
Here, most of Plaintiffs’ arguments are directed at the NAM Arbitration Clause and
Terms and Conditions in their entirety, not the delegation clause. Sherman Decl. [#33-2]
at 8. Plaintiffs argue, for example, that the individual Plaintiffs “did not have an opportunity
to read or become familiar with the relevant terms of the agreement before signing it.”
Response [#52] at 22. However, nothing in Plaintiffs’ argument specifically challenges
Plaintiffs’ ability to read and understand the delegation clause. Id. at 21-25. The Supreme
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Court has rejected attempts to determine the validity of a delegation clause only on the
basis of the clause’s inclusion in an invalid agreement. Rent-A-Center, W., Inc., 561 U.S.
at 73. Thus, without deciding whether the Terms and Conditions are unconscionable,
Plaintiffs’ failure to specifically challenge the delegation clause requires that the Court sever
and enforce that clause. Id. at 72.
Substantively, Plaintiffs’ arguments relating to the fourth and fifth elements concern
whether Plaintiffs were stripped of their substantive rights to pursue statutory RICO claims.
Response [#52] at 22. RICO dictates that prevailing parties “shall recover” the costs of the
lawsuit and reasonable attorneys’ fees. See 18 U.S.C. § 1964(c) (2018). Plaintiffs argue
that because the NAM Arbitration Clause does not explicitly guarantee Plaintiffs attorneys’
fees and gives the arbitrator discretion in awarding costs and fees, Plaintiffs are stripped
of their rights to pursue RICO claims because arbitration leaves open the possibility that
Plaintiffs will have to pay Defendants’ and their own attorneys’ fees. Response [#52] at 16,
22. Plaintiffs’ substantive unconscionability arguments are effective vindication arguments.
Response [#52] at 22. “Effective vindication” is an exception to the FAA which invalidates
arbitration agreements that waive certain rights to pursue statutory remedies. Italian Colors
Rest., 133 S. Ct. at 2310. Plaintiffs assert that because RICO guarantees attorneys’ fees
to prevailing parties and does not contemplate exposing a plaintiff to the risk of paying a
defendant’s attorneys’ fees, Plaintiffs should not have anticipated a situation where they
must risk paying their own attorneys’ fees to pursue their RICO claims. Response [#52]
at 23. Further, Plaintiffs assert that the NAM Arbitration Clause places them at risk of
incurring greater costs than they otherwise would by litigating their substantive RICO claims
in federal court, and thus they are stripped of their right to pursue these substantive claims.
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Id. at 22-23. Plaintiffs’ arguments here are the same as their arguments regarding effective
vindication, which is discussed below in Section III.2, and also fall short in the context of
unconscionability. The NAM Arbitration Clause only subjects Plaintiffs to up to $125 in
arbitration costs, and allows the arbitrator to reduce this amount on a demonstration of
hardship. Motion [#33-2] at 8. The parties have directed the Court’s attention to nothing
in the NAM Arbitration Clause or Rules mandating that Plaintiffs pay Defendants’ attorneys’
fees if their claims are unsuccessful. See id. Moreover, arbitrator discretion with respect
to attorneys’ fees, as discussed below, does not automatically invalidate an arbitration
agreement. See Hill v. Ricoh Americas Corp., 603 F.3d 766, 779-80 (10th Cir. 2010).
Additionally, these arguments suffer a similar flaw as Plaintiffs’ procedural
unconscionability arguments because they challenge a provision of the NAM Arbitration
Clause other than the delegation clause. When a delegation clause is present in an
arbitration agreement, the party opposing arbitration must specifically dispute the validity
of the delegation clause. Rent-A-Center, W., Inc., 561 U.S. at 72.

Otherwise, the

delegation clause can be severed from the arbitration provision as a whole and the
arbitrator must decide arbitrability disputes. Id. Plaintiffs’ arguments challenge the use of
NAM’s Comprehensive Dispute Resolution Rules and Procedures (the “NAM Rules”) in the
NAM Arbitration Clause, and application of the NAM Rules in the context of attorneys’ fees.
Response [#52] at 22. Plaintiffs assert that if the NAM Rules apply, Plaintiffs will not be
able to recover the attorneys’ fees they are entitled to under RICO, and that the NAM Rules
subject Plaintiffs to the risk of paying Defendant’s attorneys’ fees. Id. at 22-23. This

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argument is not directed at the specific delegation provision9 contained in the Arbitration
Clause; rather it is directed to the provision of the Arbitration Clause which calls for use of
the NAM Rules, implicating the entire cost of the arbitration dispute. Arguments relating
to the cost of arbitrating the entire dispute do not specifically address the cost of permitting
the arbitrator to determine only arbitrability through the delegation clause. Therefore, they
are for the arbitrator to decide. See Rent-A-Center, W., Inc., 561 U.S. at 74 (holding that
fee sharing and discovery cost arguments do not raise specific challenges to the delegation
provision).

Accordingly, the Court finds that Plaintiffs’ procedural and substantive

unconscionability arguments challenge the validity of the NAM Arbitration Clause and the
larger Terms and Conditions as a whole. Given that Plaintiffs do not separately contend
that the delegation clause is unconscionable, the Court severs that clause to allow the
arbitrator to decide Plaintiffs’ unconscionability arguments. Id. at 72.
2.

Whether Plaintiffs’ RICO Claims Fall Outside the Scope of the
Arbitration Clause and the FAA

While the FAA favors a liberal policy favoring arbitration, the final clause of Section
2 of the statute contains a “savings clause.” Nesbitt v. FCNH, Inc., 811 F.3d 371, 376 (10th
Cir. 2016). This clause allows an arbitration agreement to be invalidated by “generally
applicable contract defenses, such as fraud, duress, or unconscionability, but not defenses
that apply only to arbitration or that derive their meaning from the fact that an agreement
to arbitrate is at issue.” Id. (internal quotation marks omitted). As explained above, federal
courts recognize an effective vindication exception to the FAA, invalidating arbitration

9

The delegation clause in the NAM Arbitration Clause provides “[t]he arbitrator shall also
decide what is subject to arbitration.” Sherman Decl. [#33-2] at 8.

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agreements that operate as a “prospective waiver of a party’s right to pursue statutory
remedies.” Italian Colors Rest., 133 S. Ct. at 2310 (quoting Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985)) (internal quotation marks
omitted). Arbitration agreements which prohibit the use of judicial forums as the means of
resolving statutory claims “must also provide for an effective and accessible alternative
forum.” Shankle v. B–G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1233-35 (10th Cir.
1999).
Plaintiffs argue that the NAM Arbitration Clause fails to provide an effective forum
for resolving Plaintiffs’ RICO claims because: (1) the NAM Arbitration Clause strips
Plaintiffs of their right to attorneys’ fees and costs as prevailing parties under RICO; (2) the
NAM Arbitration Clause exposes Plaintiffs to the possibility of paying Defendants’ attorneys’
fees; and (3) the NAM Arbitration Clause limits Plaintiffs’ discovery in a way that effectively
precludes Plaintiffs from asserting their RICO claims. Response [#52] at 15-16.
The effective vindication exception prevents a party from waiving its right to pursue
statutory remedies, and covers arbitration agreements “forbidding the assertion of certain
statutory rights.” Italian Colors Rest., 570 U.S. at 236. However, financial constraints on
proving a statutory remedy do not eliminate the right to pursue that remedy. Id. The fact
that the arbitrator in the NAM Arbitration Clause retains discretion to award costs and fees
does not preclude Plaintiffs from collecting attorneys’ fees if they prevail on their RICO
claims. See Hill, 603 F.3d at 779-80 (holding that an arbitration agreement that grants
discretion to the arbitrator to award costs and fees did not prevent the plaintiff from
pursuing Sarbanes-Oxley Act claims). Further, Plaintiffs’ speculation and assumption that
the arbitrator will be hostile to the substantive rights of their RICO claims regarding
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attorneys’ fees does not justify the invalidation of the NAM Arbitration Clause. Green Tree
Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91 (2000). The “Supreme Court has made it
clear [that] such an assumption is inappropriate.” Hill, 603 F.3d at 779-80 (citing 14 Penn
Plaza LLC v. Pyett, 556 U.S. 247 (2009)).
a.

Attorneys’ Fees

The Court addresses Plaintiffs’ two arguments regarding attorneys’ fees together.
As stated above, Plaintiffs argue that the NAM Arbitration Clause deprives Plaintiffs of their
automatic right to attorneys’ fees as a prevailing party. Id. at 16. The NAM Arbitration
Clause requires arbitration to be conducted under the NAM Rules, which state that the
arbitrator “may” award the total costs of arbitration or legal representation to one party, or
apportion costs as the arbitrator deems appropriate. Response [#52] at 16; Levitt Decl.
[#52-2] at 20. Because RICO10 mandates that prevailing parties “shall recover” costs and
reasonable attorneys’ fees, Plaintiffs argue that the discretion left to the arbitrator to award
attorneys’ fees and costs denies Plaintiffs their guaranteed right of recovery of attorneys’
fees and costs. Response [#52] at 16. Further, Plaintiffs argue that the arbitrator discretion
in the NAM Rules would also improperly expose Plaintiffs to the risk of paying Defendants’
attorneys’ fees. Id. at 18.
Defendants argue that the NAM Arbitration Clause does not preclude Plaintiffs’ right
to pursue statutory RICO claims.

Reply [#56] at 14.

In support of this argument,

Defendants assert that the NAM Rules, while granting discretion to the arbitrator in
awarding fees, do not mandate that the arbitrator “disregard applicable law in rendering any

10

See 18 U.S.C. § 1964(c).
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decisions.” Id. at 15. Defendants also argue that similar arguments regarding discretionary
fee awards by the arbitrator have been rejected in the Tenth Circuit and by the Supreme
Court. Id. at 15-16. The Court agrees.
Here, nothing in the NAM Arbitration Clause requires Plaintiffs to incur their own
costs and attorneys’ fees if they prevail, nor does it require Plaintiffs to pay Defendants’
attorneys’ fees if they lose. Motion [#33-2] at 8. Additionally, while the NAM Arbitration
Clause requires Plaintiffs to bear some arbitration cost, that cost is expressly limited to
$125. Id. Here, Plaintiffs’ concern that the arbitrator will ignore Plaintiffs’ rights to
attorneys’ fees and costs under the appropriate RICO statute is speculative. Randolph,
531 U.S. at 91. Thus, Plaintiffs’ have not demonstrated that the NAM Arbitration Clause
strips them of their statutory rights under RICO to pursue claims.
Plaintiffs point to three cases in support of their position. Response [#52] at 16-18.
Plaintiffs’ authority, however, involves situations in which the plaintiffs faced arbitration
agreements requiring them to pay attorneys’ fees and costs. See Nesbitt v. FCHN, Inc.,
811 F.3d 371, 375, 380-81 (10th Cir. 2016) (invalidating an arbitration agreement with rules
mandating each party to bear the expense of its own counsel, experts, witnesses and
preparations of proof); Shankle v. B-G Maint. Mgmt. of Colo. Inc., 163 F.3d 1230, 1234-35
(10th Cir. 1999) (invalidating an arbitration agreement that required plaintiff to pay
arbitration costs of up to $5,000); Grigsby v. Income Prop. USA, LLC, No. 2:17-CV-1110,
2018 WL 4621766, at *6, *8 (D. Utah Sept. 26, 2018) (invalidating an arbitration agreement
that required arbitrating parties to incur their own attorneys’ fees and costs). Here, neither
the NAM Arbitration Clause nor the NAM Rules require Plaintiffs to incur their own
attorneys’ fees and costs. Motion [#33-2] at 8; Levitt Decl. [#52-2] at 20. Thus, the Court
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finds that the NAM Arbitration Clause is not invalidated by the arbitrator’s discretion
regarding attorneys’ fees and costs.11
b.

Discovery Costs

Turning to discovery costs, Plaintiffs assert that the provision of the NAM Arbitration
Clause providing that “the costs of discovery must be commensurate with the amount of
the claim” precludes effective vindication of Plaintiffs’ RICO claims. Response [#52] at 19.
Plaintiffs argue that the broad and technical nature of RICO claims, and the burden of
establishing a pattern of racketeering activity, warrant extensive discovery. Id. Additionally,
Plaintiffs contend that a “single three-hour deposition . . . limited solely to the issue of
arbitrability” would cost over $500. Id. at 20. Therefore, Plaintiffs contend that limiting
Plaintiffs’ discovery to the amounts commensurate with each Plaintiffs’ individual claim (a
range of $525-$12,000) effectively precludes Plaintiffs’ RICO claims. Id.
Defendants assert that the Supreme Court rejected a similar argument in Italian
Colors Restaurant, and other federal courts have applied that same reasoning specifically
to RICO claims. 570 U.S. at 231-36; Reply [#56] at 17. The Court agrees. In Italian Colors
Restaurant, no plaintiff’s claim exceeded $38,549, and the cost of discovery was estimated
at over $1 million. 570 U.S. at 231. The Supreme Court found “the fact that it is not worth
the expense involved in proving a statutory remedy does not constitute the elimination of

11

Plaintiffs also challenge the severability of the NAM Rules from the NAM Arbitration
Clause. Response [#52] at 25. Plaintiffs argue that even if the Court finds that the NAM Arbitration
Clause prevents Plaintiffs from effective vindication of their RICO claims, Defendants will try to
sever the impermissible attorneys’ fees NAM Rules. Id. at 25. Plaintiffs further argue that neither
the NAM Arbitration Clause itself nor the NAM Rules allow severance of individual NAM Rules. Id.
However, as discussed above, the Court finds nothing invalid regarding the NAM Arbitration Clause
or NAM Rules with respect to attorneys’ fees that require severance. Therefore, there is no need
to address severability in this instance.

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the right to pursue the remedy.” Id. at 236. Here, the possibility that discovery costs will
greatly outweigh the amount recoverable in Plaintiffs’ arbitration claims does not prevent
Plaintiffs from pursuing their statutory RICO rights. Thus, Plaintiffs’ effective vindication
argument with respect to discovery costs fails. Id.
IV. Conclusion
Based on the foregoing,
IT IS HEREBY ORDERED that the Motion [#33] is GRANTED. Accordingly,
IT IS FURTHER ORDERED that the Clerk of Court shall administratively close this
case in order to allow the parties to participate in arbitration proceedings.

See

D.C.COLO.LCivR 41.2 (“. . . [A] magistrate judge exercising consent jurisdiction may order
the clerk to close a civil action administratively subject to reopening for good cause.”).
IT IS FURTHER ORDERED that, no later than twenty days after the completion
of the arbitration proceedings, the parties shall file a Status Report in which they advise the
Court whether the parties believe the case should be reopened for good cause or whether
the case should be dismissed.

Dated: March 27, 2019

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