Rowe et al v. Affordable Motors, Inc. et al

Filing 26

RULING AND ORDER granting 20 Motion to Compel Arbitration and Stay All Proceedings. For the reasons explained in the attached Ruling and Order, Credit Acceptance's motion to compel arbitration is GRANTED. The Court orders the parties to arbitr ate these claims. These proceedings are hereby STAYED under 9 U.S.C. § 3. The Clerk of the Court is directed to administratively close this case due to the stay of these proceedings. If the parties require additional relief from this Court following the arbitration, they may move to re-open this case. Signed by Judge Victor A. Bolden on 11/30/2018. (Baran, Hugh)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
RUTH ROWE and HORACE ROWE,
Plaintiffs,
v.

No. 3:17-cv-1592 (VAB)

AFFORDABLE MOTORS, INC. and
CREDIT ACCEPTANCE CORP.,
Defendants.
RULING AND ORDER ON MOTION TO COMPEL ARBITRATION
AND STAY ALL PROCEEDINGS
On April 23, 2018, Defendant Credit Acceptance Corporation (“Credit Acceptance” or
“CA”) filed a motion to compel arbitration and stay all proceedings in this action. Motion to
Compel Arbitration, dated Apr. 23, 2018 (“CA Mot.”), ECF No. 20. Ruth Rowe and Horace
Rowe (“Plaintiffs”) have failed to file any opposition to the motion for over seven months, and
have not responded to an Order to Show Cause directing any such response to be filed by
November 6, 2018.
As explained below, because Mr. and Ms. Rowe’s failure to respond may be deemed
sufficient cause to grant the motion, and because the motion and pleadings do not provide any
basis for the Court to otherwise deny the motion, Credit Acceptance’s motion to compel
arbitration and stay all proceeding is GRANTED.
I.

FACTUAL AND PROCEDURAL BACKGROUND

A. Factual Allegations
The original transaction that gave rise to this litigation is not in dispute. On September
24, 2016, Ruth Rowe and her son Horace Rowe (“Plaintiffs”), both residents of Bridgeport,
Connecticut, entered into a Retail Installment Contract to purchase a used 2007 BMW 3-series

automobile from Affordable Motors, Inc. (“Affordable Motors”), a Connecticut corporation that
operates an automobile dealership in Bridgeport, Connecticut. See Complaint, dated Sept. 23,
2017 (“Compl.”), ECF No. 1, ¶¶ 2, 3, 9, 14–19; Memorandum of Law in Support of CA Mot.,
dated Apr. 23, 2018 (“CA Mem.”), annexed to CA Mot., ECF No. 20-1, at 2–3. Credit
Acceptance, a Michigan corporation, “was the assignee of the contract and, under its terms,
subject to all claims and defenses that Plaintiffs could assert against Affordable Motors up to the
amounts paid.” Compl. ¶¶ 4, 25.
The Rowes, however, allege, inter alia, that Affordable Motors charged them a higher
price than was advertised, attempted to deliver a different BMW 3-series than the one they had
purchased, and—when the Rowes would not accept the different vehicle—refused to refund the
Rowes’ deposit and down payment. Id. ¶¶ 20–24, 26–35. They further allege that after this, they
contacted Credit Acceptance, which stated it would investigate the matter. Id. ¶ 36. The Rowes
allege, however, that Credit Acceptance subsequently claimed the Rowes had violated the
contract, “repossessed” and sold the undelivered car, and began pursuing a $2,271.62 deficiency
payment, plus fees, costs, and interest, against the Rowes. Id. ¶¶ 37–43. The Rowes allege that
Credit Acceptance’s actions have negatively affected their credit rating, which they allege caused
Mr. Rowe to be denied student loans necessary to afford his college education. Id. ¶¶ 44–45.
B. Procedural History
On September 23, 2017, the Rowes sued Affordable Motors and Credit Acceptance
(“Defendants”), alleging that Defendants’ actions violated, inter alia, express warranties to the
Rowes, the Truth in Lending Act, 15 U.S.C. § 2301 et seq., the Connecticut Unfair Trade
Practices Act (“CUTPA”), CONN. GEN. STAT. § 42-110a et seq., and the Connecticut Creditors
Protection Act, CONN. GEN. STAT. § 36a-645 et seq. Id. ¶¶ 46–89. The Rowes seek “actual

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damages, statutory damages, common law punitive damages, statutory punitive damages, an
order rescinding the sale, attorney’s fees and costs.” Id. at 11.
After a significant period of delay, Affordable Motors and Credit Acceptance were
served on February 26, 2018 and March 8, 2018, respectively. See Summons Returned Executed,
filed Mar. 2, 2018, ECF No. 10; Summons Returned Executed, filed Mar. 8, 2018, ECF No. 11.
Defendants subsequently moved for and were granted three extensions of time to answer, move,
or otherwise respond to the Complaint. See Orders, dated Mar. 21, 2018, Mar. 27, 2018, and Apr.
22, 2018.
On April 23, 2018, Credit Acceptance filed a motion to compel arbitration and stay all
proceedings in this action under Sections 2 through 4 of the Federal Arbitration Act (“FAA”).
CA Mot. Credit Acceptance asserts that Affordable Motors assigned all “right, title and interest,
including its security interest, in and to the Contract and the Vehicle,” to Credit Acceptance. CA
Mem. at 2.
Credit Acceptance alleges that Plaintiffs agreed to be bound by an arbitration clause
contained in the Retail Installment Contract. That provision states that either party (including
Credit Acceptance) “may require any Dispute to be arbitrated and may do so before or after a
lawsuit has been started over the Dispute or with respect to other Disputes or counterclaims
brought later in the lawsuit.” See Retail Installment Contract, dated Sept. 24, 2016 (“Contract”),
annexed as Ex. A to Mem., ECF No. 20-2, at 4–5.
Credit Acceptance therefore contends that “since the parties have unequivocally agreed
that, after invocation by one of the parties, whether before or after a lawsuit has been started . . .
any and all Disputes arising out of or in any way related to the Contract should be resolved by
binding arbitration pursuant to the rules and procedures of either [the American Arbitration

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Association] or JAMS, this Court should compel arbitration and stay this action pending
arbitration.” CA Mem. at 5.
More than six months have passed since Credit Acceptance moved to compel arbitration,
and no opposition has been filed. Based on the lack of activity on the docket, Plaintiffs have also
failed to otherwise attempt to prosecute this action.
On October 23, 2018, the Court ordered Plaintiffs to show cause why the motion to
compel should not be granted by November 6, 2018. Order to Show Cause, dated Oct. 23, 2018,
ECF No. 25. To date, Plaintiffs—who are represented by counsel—have not responded to the
Court’s Order.
II.

LEGAL STANDARD
“Failure to submit a memorandum in opposition to a motion may be deemed sufficient

cause to grant the motion, except where the pleadings provide sufficient grounds to deny the
motion.” D. Conn. L. Civ. R. 7(a)(2).
The FAA “establishes a national policy favoring arbitration when the parties contract for
that mode of dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349 (2008). Section 2 of the
FAA provides that “[a] written provision in . . . a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such contract or
transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 4 of the FAA enables
any “party aggrieved” by the failure of another to arbitrate under a written agreement for
arbitration to petition a United States District Court “for an order directing that such arbitration
shall proceed in the manner provided for in such agreement.” 9 U.S.C. § 4.

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Courts follow a two-part test to determine whether claims are subject to arbitration
considering “(1) whether the parties have entered into a valid agreement to arbitrate, and, if so,
(2) whether the dispute at issue comes within the scope of the arbitration agreement.” In re Am.
Express Fin. Advisors Sec. Litig., 672 F.3d 113, 128 (2d Cir. 2011). “A court may not deny
arbitration where there is a valid arbitration agreement that covers the asserted claims.” Davis v.
Macy’s Retail Holdings, Inc., No. 3:17-cv-1807 (JBA), 2018 WL 4516668, at *2 (D. Conn. Oct.
22, 2018) (citation omitted).
In the context of a motion to compel arbitration brought under the FAA, courts apply “a
standard similar to that applicable for a motion for summary judgment.” Bensadoun v. Jobe-Riat,
316 F.3d 171, 175 (2d Cir. 2003); see also McAllister v. Conn. Renaissance Inc., No. 3:10-cv1488 (WWE), 2011 WL 1299830, at *3 (D. Conn. Apr. 5, 2011) (applying summary judgment
standard in the context of a motion to compel arbitration). The party seeking to compel
arbitration must “substantiate [its] entitlement [to arbitration] by a showing of evidentiary facts”
that support its claim that the other party agreed to arbitration. Oppenheimer & Co., Inc. v.
Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995). “If the party seeking arbitration has substantiated the
entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but
must submit evidentiary facts showing that there is a dispute of fact to be tried.” Id. If the
evidence suggests a genuine issue of material fact, the district court must summarily proceed to
trial. Bensadoun, 316 F.3d at 175 (citing 9 U.S.C. § 4).
The district court, “upon being satisfied that the issue involved in such suit or proceeding
is referable to arbitration under such an agreement, shall on application of one of the parties stay
the trial of the action until such arbitration has been had in accordance with the terms of the
agreement . . . .” 9 U.S.C. § 3; Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016)

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(“The district court must stay proceedings once it is ‘satisfied that the parties have agreed in
writing to arbitrate an issue or issues underlying the district court proceeding.’”) (quoting
WorldCrisa Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir. 1997)).
III.

DISCUSSION
Credit Acceptance argues that the parties entered into a valid agreement to arbitrate and

that the dispute clearly falls within the scope of the arbitration agreement. Based on the evidence
before the Court, and in the absence of any showing by Plaintiffs that there is any genuine
dispute as to either of these issues, the Court agrees.
A. Validity of Agreement to Arbitrate
Whether the Retail Installment Contract was a valid agreement to arbitrate is a matter of
state contract law. See First Options of Chi. v. Kaplan, 514 U.S. 938, 944 (1995) (“When
deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts
generally . . . should apply ordinary state-law principles that govern the formation of contracts.”)
(citations omitted); Schnabel v. Trilegiant Corp., 697 F.3d 110, 119 (2d Cir. 2012) (“Whether or
not the parties have agreed to arbitrate is a question of state contract law.”) (citations omitted);
Chelsea Square Textiles, Inc. v. Bombay Dyeing & Mfg. Co., 189 F.3d 289, 295–96 (2d Cir.
1999) (“[W]hile § 2 of the FAA preempts state law that treats arbitration agreements differently
from any other contracts, it also ‘preserves general principles of state contract law as rules of
decision on whether the parties have entered into an agreement to arbitrate.’”) (quoting
Progressive Cas. Ins. Co. v. C.A. Reaseguradora Nacional De Venezuela, 991 F.2d 42, 46 (2d
Cir. 1993)).
In Connecticut, a contract is formed through an offer and an acceptance of that offer. See
Bridgeport Pipe Eng’g co. v. DeMatteo Constr. Co., 159 Conn. 242, 246 (1970) (“It is

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elementary that to create a contract there must be an unequivocal acceptance of an offer . . . . The
acceptance of the offer must, however, be explicit, full and unconditional.”) (citations omitted);
see also Ubysz v. DiPietro, 185 Conn. 47, 51 (1981) (“[I]n order to form a contract, generally
there must be a bargain in which there is a manifestation of mutual assent to the exchange
between two or more parties; and the identities of the contracting parties must be reasonably
certain.”) (internal citations omitted).
Here, the Retail Installment Contract was electronically signed by Ms. Rowe and Mr.
Rowe on September 24, 2016. See Contract at 2. Plaintiffs admit that they signed the Contract
and therefore agreed to be bound by its terms, including the agreement to arbitrate. See Compl.
¶¶ 18, 24, 32. The first page of the Contract clearly indicates that the agreement to arbitrate was
part of the contract terms. See Contract at 1. Plaintiffs also electronically initialed the two pages
containing the agreement to arbitrate. See id. at 4–5. In addition, Plaintiffs physically signed a
separate document generated by Credit Acceptance acknowledging that they had electronically
signed “all documents necessary to process a retail installment transaction” with Affordable
Motors. See Declaration Acknowledging Electronic Signature Process, dated Sept. 26, 2016,
annexed as Ex. B to CA Mem, ECF No. 2.
The arbitration agreement explicitly provided Plaintiffs thirty days to reject the clause—
without affecting any of their other rights under the Contract—by mailing a written rejection
notice, postmarked thirty days or less after the date of the Contract, to a Michigan post office
box. See Contract at 4; Mem. at 4. Credit Acceptance contends that Plaintiffs never used this
procedure to opt out of the agreement. Mem. at 4. Plaintiffs’ pleadings do not discuss arbitration,
nor do they contain any indication that they opted out of the arbitration agreement.

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Because Credit Acceptance has submitted evidentiary facts showing that an agreement to
arbitrate was formed, and because Plaintiffs have failed to submit facts showing a dispute, the
Court concludes that a valid agreement to arbitrate was formed under Connecticut law. See
Oppenheimer, 56 F.3d at 358.
B. Scope of Arbitration Agreement
“In accordance with the strong federal policy in favor of arbitration, the existence of a
broad agreement to arbitrate creates a presumption of arbitrability which is only overcome if it
‘may be said with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.’”
WorldCrisa, 129 F.3d at 74 (quoting Assoc. Brick Mason Contractors of Greater N.Y., Inc. v.
Harrington, 820 F.2d 31, 35 (2d Cir. 1987)).
“When considering whether claims fall within the scope of an arbitration clause . . . we
analyze the factual allegations made” in Plaintiffs’ Complaint. Holick v. Cellular Sales of N.Y.,
LLC, 802 F.2d 391, 395 (2d Cir. 2015) (citing Smith/Enron Cogeneration Ltd. v. Smith
Cogeneration Int’l, Inc., 198 F.3d 88, 99 (2d Cir. 1999)). “If the allegations underlying the
claims touch matters covered by the parties’ . . . agreements, then those claims must be
arbitrated, whatever the legal labels attached to them.” Id. (quoting Smith/Enron, 198 F.3d at 99).
Here, the Contract’s arbitration clause covers all disputes, defined as follows:
A “Dispute” is “any controversy or claim between You [Buyers]
and Us [Affordable Motors, Credit Acceptance, and their
employees, assignees, or any third party providing any goods or
services in connection with the origination, servicing, and
collection of amounts due under the Contract] arising out of or in
any way related to this Contract, including, but not limited to, any
default under this Contract, the collection of amounts due under
this Contract, the purchase, sale, delivery, set-up, quality of the
Vehicle, advertising for the Vehicle or its financing, or any product
or service included in this Contract. “Dispute” shall have the
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broadest meaning possible, and includes contract claims, and
claims based on tort, violations of laws, statutes, ordinances or
regulations or any other legal or equitable theories.
Notwithstanding the foregoing, “Dispute” does not include any
individual action brought by You in small claims court or Your
state’s equivalent court, unless such action is transferred, removed
or appealed to a different court. “Dispute” does not include any
repossession of the Vehicle upon Your default and any exercise of
the power of sale of the Vehicle under this Contract or any
individual action by You to prevent Us from using any such
remedy, so long as such individual action does not involve a
request for monetary relief of any kind. In addition, “dispute” does
not include disputes about the validity, enforceability, coverage or
scope of this Arbitration Clause or any part thereof (including,
without limitation, the Class Action Waiver described in the sixth
paragraph of this Arbitration Clause, the last sentence of the
seventh paragraph of this Arbitration Clause and/or this sentence
Contract at 5.
The claims made in the Complaint—which allege, inter alia, literal breaches of contract
by Defendants and misrepresentations both during and after the execution of the Contract—
unquestionably relate to or arise out of the Contract by the arbitration agreement’s own terms,
and therefore “touch matters covered” by the arbitration clause. Holick, 802 F.2d at 395 (quoting
Smith/Enron, 198 F.3d at 99).
Moreover, in failing to respond to the motion or the order to show cause, Plaintiffs have
failed to put forward any evidence to rebut the evidentiary facts put forward by Credit
Acceptance as to the scope of the Contract. Oppenheimer, 56 F.3d at 358 (“If the party
seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party
opposing may not rest on a denial but must submit evidentiary facts showing that there is a
dispute of fact to be tried.”)
For both these reasons, the Court finds that the claims in this lawsuit fall within the scope
of the arbitration agreement.

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IV.

CONCLUSION
For the reasons explained above, Credit Acceptance’s motion to compel arbitration is

GRANTED. The Court orders the parties to arbitrate these claims. These proceedings are hereby
STAYED under 9 U.S.C. § 3.
The Clerk of the Court is directed to administratively close this case due to the stay of
these proceedings. If the parties require additional relief from this Court following the
arbitration, they may move to re-open this case.
SO ORDERED at Bridgeport, Connecticut, this 30th day of November, 2018.
/s/ Victor A. Bolden
Victor A. Bolden
United States District Judge

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