Banks v. Cashcall, Inc. et al
Filing
59
ORDER granting in part and denying in part 15 Motion to dismiss for lack of jurisdiction or, Alternatively, to Compel Arbitration. Signed by Judge Roy B. Dalton, Jr. on 5/26/2016. (SN)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
EDDIE L. BANKS,
Plaintiff,
v.
Case No. 6:14-cv-488-Orl-37TBS
CASHCALL, INC.; and DELBERT
SERVICES CORPORATION,
Defendants.
ORDER
This cause is before the Court on the following:
1.
Defendants’ Motion to Dismiss or, Alternatively, to Compel Arbitration and
Stay or Dismiss the Case, and Memorandum in Support (Doc. 15), filed
April 2, 2014;
2.
Memorandum of Law in Opposition to Defendants’ Motion to Dismiss, or
Alternatively, to Compel Arbitration and Stay or Dismiss the Case (Doc. 30),
filed April 30, 2014;
3.
Defendants’ Reply Memorandum of Law in Further Support of their Motion
to Dismiss or, Alternatively, to Compel Arbitration and Stay or Dismiss the
Case (Doc. 33), filed May 19, 2014;
4.
Defendants’
Notice
of
November 11, 2015; and
Supplemental
Authorities
(Doc.
55),
filed
5.
Defendants’ [Second] Notice of Supplemental Authorities (Doc. 58), filed
February 16, 2016.
Upon consideration, the Court finds that the Motion is due to be granted in part and denied
in part.
BACKGROUND
The instant action is but one of many that seeks to challenge the terms of a
high-interest loan agreement issued by Western Sky Financial, LLC (“Western Sky”).
(See Doc. 3 (“Complaint”); see also Doc. 1-1, pp. 30–35 (“Loan Agreement”).)
According to the Complaint, Plaintiff executed the Loan Agreement on May 1, 2012,
pursuant to which Western Sky loaned him the principal amount of $9,925.00 at an annual
interest rate of 89.68% (“Loan”). (Doc. 3, ¶¶ 14, 15.) Western Sky subsequently
transferred and sold the Loan to Defendant Delbert Services Corporation (“Delbert”). (Id.
¶ 16.) Plaintiff alleges that, in exchange for compensation, Defendant CashCall
(“CashCall”), inter alia: (1) bears all risk of loss on the loans issued by Western Sky,
services the loans, and tracks all consumer complaints regarding such loans; and
(2) agrees to indemnify Western Sky for all costs arising or resulting from any and all civil,
criminal, or administrative claims or actions relating to the loans. (Id. ¶ 18.)
Plaintiff made payments on the Loan from May 25, 2012, through December 15,
2013. (Id. ¶ 17.) Frustrated by the terms of the Loan Agreement, Plaintiff initiated the
instant action alleging that Defendants violated: (1) the Florida Deceptive and Unfair
Trade Practices Act; (2) the Florida Consumer Finance Act on excessive interest rates;
(3) the Florida Interest, Usury, and Lending Practices Act; (4) the Florida Consumer
Collection Practices Act; and (5) the Fair Debt Collection Practices Act. (Id., ¶¶ 24–82.)
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Defendants removed the action to this Court on the basis of federal question jurisdiction,
supplemental jurisdiction, and diversity jurisdiction. (Doc. 1.)
Shortly thereafter, Defendants moved for dismissal on two distinct grounds and
alternatively moved to compel arbitration. (Doc. 15 (“Motion”).) First, citing a
forum-selection clause (“Forum-Selection Clause”) within the Loan Agreement—which
provides that “[t]he Loan Agreement is subject solely to the exclusive laws and jurisdiction
of the Cheyenne River Sioux Tribe [“Tribe”] (Doc. 1-1, p. 30)—Defendants request that
the Court dismiss the action under the doctrine of forum non conveniens (“Ground One”).
(Id. at 2, 5–6, 9–15.) Second, pursuant to both the Forum-Selection Clause and the
doctrine of tribal exhaustion, Defendants contend that Plaintiff is required to exhaust his
remedies in tribal court before pursuing claims in federal court. (Id. at 2–3, 16–18.) Finally,
as an alternative to Grounds One and Two, Defendants: (1) move to compel Plaintiff to
arbitrate his claims pursuant to the arbitration provisions (“Arbitration Requirement”)
within the Loan Agreement (see Doc. 1-1, pp. 32–33); and (2) request that the Court stay
or dismiss the case in favor of arbitration (collectively, “Alternative Ground”). (Id. at 3,
6–8, 19–23.)
In response, Plaintiff argues that: (1) the Forum-Selection Clause and Arbitration
Requirement are unenforceable; and (2) the doctrine of tribal exhaustion does not apply.
(Doc. 30.) In support, Plaintiff contends that: (1) Defendant’s loan activities are prohibited
by the Tribe’s laws (id. at 4); (2) the Forum-Selection Clause was fraudulently put in place
to avoid state and federal regulation of Defendants’ practices, seeks to improperly extend
tribal jurisdiction to the activities of non-tribal members occurring off the reservation, and
is against public policy (id. at 5–8); (3) the disclaimer of the applicability of federal law in
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the Loan Agreement (“Federal Law Disclaimer”) bars Defendants from compelling
arbitration under the Federal Arbitration Act (“FAA”) (id. at 9–11); and (4) the Arbitration
Requirement is void because the entire Loan Agreement unconscionable, illegal, and
unenforceable (id. at 11–15).
After obtaining leave of Court (see Docs. 31, 32), Defendants filed a reply
contending, inter alia, that: (1) Plaintiff has not met his burden to show that the
Forum-Selection Clause is unenforceable and, specifically, has not shown that the
Forum-Selection Clause itself was based on fraud; (2) Plaintiff must exhaust his tribal
remedies as he does not contest Defendants’ demonstration that tribal jurisdiction is
colorable; (3) under federal law, the FAA governs the enforceability of the Arbitration
Requirement despite the Federal Law Disclaimer; and (4) the Court must compel
arbitration because Plaintiff did not specifically challenge the delegation provision
(“Delegation Provision”)1 in the Arbitration Requirement. (Doc. 33.)
On July 11, 2014, the Court held a hearing on the Motion and took the matter under
advisement. (See Doc. 42.) However, in the interest of judicial economy, the Court stayed
the action pending resolution of two interlocutory appeals (“Appeals”) within the Eleventh
Circuit, which raised the same issues as the Motion—(1) Inetianbor v. CashCall, Inc.,
962 F. Supp. 2d 1303 (S.D. Fla. 2013), aff’d, 768 F.3d 1346 (11th Cir. 2014)
(“Inetianbor”); and (2) Parnell v. Western Sky Financial, LLC, Case No. 4:14-cv-24-HLM,
Doc. 19 (N.D. Ga. 2014), rev’d, Parnell, 804 F.3d 1142 (“Parnell”). (Doc. 45 (“Stay
1
As defined by the U.S. Court of Appeals for the Eleventh Circuit, a delegation
provision in an arbitration agreement is one that “commit[s] to the arbitrator the threshold
determination of whether the agreement to arbitrate is enforceable.” Parnell v. CashCall,
Inc., 804 F.3d 1142, 1144 (11th Cir. 2015).
4
Order”).)
The pertinent arbitration provisions in Inetianbor required an authorized
representative of the Tribe to conduct arbitration of the parties’ disputes. 768 F.3d
at 1350–51. However, in light of evidence showing that “the Tribe does not involve itself
in arbitration between private parties at all,” the Eleventh Circuit agreed with the district
court’s conclusion that the arbitral forum was unavailable, id. at 1354, and—on October 2,
2014—affirmed the district court’s denial of the defendant’s motion to compel arbitration,
id. at 1347.
A year later, on October 28, 2015, the Eleventh Circuit issued a decision in the
Parnell appeal. 804 F.3d 1142. The arbitration provisions under the Parnell loan
agreement gave the plaintiff the option to submit his disputes to the American Arbitration
Association, JAMS, or any other arbitration organization agreed upon by the plaintiff and
defendant (“Choice of Arbitrator Provision”). Parnell, Case No. 4:14-cv-24-HLM,
Doc. 1-3, p. 30. The Parnell arbitration provisions also contained a delegation provision
committing disputes “concerning the validity, enforceability, or scope of [the] loan or the
[a]rbitration agreement” to the arbitrator. 804 F.3d 1147–48. Consequently, the Eleventh
Circuit reversed the district court’s denial of the defendant’s motion to compel arbitration
on the ground that the district court did not have jurisdiction to review a challenge to an
arbitration agreement containing a delegation provision where the plaintiff did not directly
challenge the delegation provision. See id. at 1144 (citing Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. 63, 72 (2010)).
Upon receiving notification from the parties regarding the Eleventh Circuit’s
resolution of the Appeals (Docs. 46, 52), the Court issued an Order: (1) lifting its Stay
5
Order; and (2) directing the parties to notify the Court whether they (i) requested any
amendments to the pleadings, or (ii) intended to rest on the current record for resolution
of the Motion. (Doc. 53.) The parties each notified the Court of their intent to rest on their
previous filings. (Docs. 54, 55.) Defendants, however, submitted two notices of
supplemental authority in support of their position. (Docs. 55, 58.)
The matter is now ripe for the Court’s consideration. For the reasons explained
below, the Court finds that the Arbitration Ground is dispositive and, therefore, will compel
the parties to arbitrate their disputes, including their disagreement regarding Grounds
One and Two.
STANDARDS
Under the FAA, “courts must rigorously enforce arbitration agreements according
to their terms.” Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013).
Upon the motion of any party to a valid arbitration agreement, courts must stay litigation
of all claims that fall within the agreement’s scope and compel arbitration according to the
agreement’s terms. See 9 U.S.C. §§ 3–4. Arbitration agreements are presumptively valid
and enforceable. See id. § 2.
However, arbitration under the FAA is ultimately “a matter of consent, not
coercion,” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468,
479 (1989), and parties opposing arbitration can challenge the formation and validity of a
contract containing an arbitration clause. Specifically, the Eleventh Circuit recognizes
“three distinct types of challenges to a contract containing an arbitration clause”:
(1) challenges to the formation, or “the very existence,” of the contract; (2) challenges “to
the validity of the arbitration clause standing alone”; and (3) challenges “to the validity of
6
the contract as a whole.” Wiand v. Schneiderman, 778 F.3d 917, 924 (11th Cir. 2015).
Nonetheless, under a delegation provision “parties may agree to commit even
threshold determinations to an arbitrator, such as whether an arbitration agreement is
enforceable.” Parnell, 804 F.3d at 1146. “When an arbitration agreement contains a
delegation provision and the plaintiff raises a challenge to the contract as a whole, the
federal courts may not review his claim because it has been committed to the power of
the arbitrator.” Id. “[A]bsent a challenge to the delegation provision itself, the federal
courts must treat the delegation provision as valid . . . and must enforce it . . . , leaving
any challenge to the validity of the [a]greement as a whole for the arbitrator.” Id. at 1146–
47.
DISCUSSION
The terms of loan agreements both identical and similar to the one at issue have
prompted a wave of litigation across the country and sparked a plethora of decisions that
vary in their disposition of the matters at hand.2 In taking the matter under consideration,
the Court has reviewed many of these judicial decisions.
As an initial matter, the Court finds that the FAA governs the Loan Agreement,
notwithstanding the Federal Law Disclaimer. The Loan Agreement contains an Arbitration
2
See, e.g., Parnell, 804 F.3d 1142; Inetianbor, 768 F.3d 1346; Jackson v. Payday
Fin., LLC, 764 F.3d 765 (7th Cir. 2014); Smith v. W. Sky Fin., LLC, No. 15-3639,
2016 WL 1212697 (E.D. Pa. Mar. 4. 2016); Yaroma v. CashCall, Inc.,
130 F. Supp. 3d 1055 (E.D. Ky. 2015); Brown v. W. Sky Fin., LLC, 84 F. Supp. 3d 467
(M.D.N.C. 2015); Chitoff v. CashCall, Inc., No. 0:14-CV-60292, 2014 WL 6603987
(S.D. Fla. Nov. 17, 2014); Heldt v. Payday Fin., LLC, Case No. 3:13-cv-3023-RAL,
Doc. 58 (D.S.D. Mar. 31, 2014); see also CashCall, Inc. v. Office of the Att’y Gen., Dept.
of Legal Affairs, 173 So. 3d. 1056 (Fla. 2d DCA 2015) (involving suit against CashCall by
Florida’s Attorney General on the ground that the interest rates under the loan
agreements violate Florida’s Deceptive and Unfair Practices Act).
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Requirement, and Plaintiff executed it in Florida and then submitted it—via the Internet—
to Western Sky in South Dakota. (See Doc. 1, ¶¶ 8, 14, 40.) This is precisely the type of
agreement within the purview of the FAA. See Parnell, 804 F.3d at 1146 (finding that
“[t]he FAA governs the Loan Agreement because the parties conducted their business
across state lines”).
Additionally, despite the choice-of-law provision in the Loan Agreement—which
provides that the Loan Agreement is governed by the laws of the Tribe (Doc. 15-1, p. 3)—
the parties have not provided the Court with any tribal law regarding contract
interpretation. See also Parnell, 804 F.3d at 1147. Faced with the same predicament in
Parnell, the Eleventh Circuit applied Georgia’s plain-meaning rule after recognizing that
“the plain-meaning rule is a foundational principle of common law contract widely adopted
in the United States, including Georgia . . . in which [the plaintiff] viewed and signed the
[l]oan [a]greement.” Id. Adapting this approach to the almost identical circumstances in
the instant action, the Court will apply Florida’s own plain-meaning rule here.
“Under Florida law, if the terms of [a contract] are clear and unambiguous, a court
must interpret the contract in accordance with its plain meaning, and, unless an ambiguity
exists, a court should not resort to outside evidence or the complex rules of construction
to construe the contract.” Key v. Allstate Ins. Co., 90 F.3d 1546, 1548–49 (11th Cir. 1996).
The plain language of Loan Agreement demonstrates that the Arbitration Requirement
compels the parties to submit their disputes to arbitration.
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In pertinent part, the Arbitration Requirement reads as follows:3
Unless you exercise your right to opt-out of arbitration in the
manner described below[4], any dispute you have with
Western Sky or anyone else under this loan agreement will be
resolved by binding arbitration. Arbitration replaces the right
to go to court . . . . In [a]rbitration, a dispute is resolved by an
arbitrator instead of a judge or jury.
Agreement to Arbitrate. You agree that any Dispute,
except as provided below, will be resolved by [a]rbitration,
which shall be conducted by the Cheyenne River Sioux Tribal
Nation by an authorized representative in accordance with its
consumer dispute rules and the terms of this Agreement.
. . . A “Dispute’” is any controversy or claim between you
and Western Sky or the holder or servicer of the Note. The
term Dispute is to be given its broadest possible meaning
and includes, without limitation, all claims or demands
(whether past, present, or future, including events that
occurred prior to the opening of this Account), based on any
legal or equitable theory (tort, contract, or otherwise), and
regardless of the type of relief sought (i.e. money, injunctive
relief, or declaratory relief). A Dispute includes, by way of
example and without limitation, any claim based upon
marketing or solicitations to obtain the loan and the handling
or servicing of my account whether such Dispute is based on
any tribal, federal, or state constitution, statute, ordinance,
regulation, or common law, and including any issue
concerning the validity, enforceability, or scope of this
loan or the [a]rbitration agreement. . . .
. . . Regardless of who demands arbitration, you shall have
the right to select any of the following arbitration organizations
to administer the arbitration: the American Arbitration
Association . . . ; JAMS . . . ; or an arbitration organization
3 To
determine what disputes the parties agreed to arbitrate, the Court must begin
with the language of the applicable arbitration provision. World Rentals & Sales, LLC v.
Volvo Const. Equip. Rents, Inc., 517 F.3d 1240, 1245 (11th Cir. 2008). Accordingly, “[t]he
court can consider evidence outside of the pleadings for purposes of a motion to compel
arbitration.” Chambers v. Groome Transp. of Ala., 41 F. Supp. 3d 1327, 1334
(M.D. Ala. 2014).
4 Pursuant to a “Right to Opt Out” provision, borrowers were given the opportunity
to opt out of the Arbitration Provision by providing written notice within sixty days after the
date the loan was funded. (Doc. 1-1, p. 34.)
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agreed upon by you and the other parties to the Dispute. The
arbitration will be governed by the chosen arbitration
organization’s rules and procedures applicable to consumer
disputes, to the extent that those rules and procedures do not
contradict either the law of the Cheyenne River Sioux Tribe or
the express terms of this Agreement to Arbitrate . . . .
...
Waiver of Rights. YOU HEREBY AGREE THAT YOU ARE
WAIVING YOUR RIGHT TO A JURY TRIAL, TO HAVE A
COURT DECIDE YOUR DISPUTE, TO PARTICIPATE IN A
CLASS ACTION LAWSUIT, AND TO CERTAIN DISCOVERY
AND OTHER PROCEDURES THAT ARE AVAILABLE IN A
LAWSUIT. . . .
...
. . . Any dispute, which cannot be adjudicated within the
jurisdiction of a small claims tribunal, shall be resolved by
binding arbitration.
A close reading of the Arbitration Agreement reveals that all disputes involving the
Loan must be submitted to arbitration, with two explicit exceptions. First, the “Waiver of
Rights” provision provides that “the validity, effect, and enforceability of [the] waiver of
class action lawsuit and class-wide [a]rbitration is to be determined solely by a court of
competent jurisdiction located within the Cheyenne Rivers Sioux Tribal Nation, and not
by the arbitrator.” (Doc. 1-1, p. 33.) The Arbitration Requirement also contains an
exception for small claims, which are subject to the jurisdiction the Cheyenne River Sioux
Small Claims Court. (Id. at 34.)
Thus, the only claims not subject to arbitration are: (1) disputes regarding the
waiver of class action lawsuits and class-wide arbitration; and (2) small claims. (See
Doc. 1-1, pp. 33, 34.) All other disputes—including the enforceability of the
Forum-Selection Clause, the validity of the Arbitration Requirement, and the applicability
10
of tribal exhaustion—must be submitted to arbitration. See Yaroma, 130 F. Supp. 3d 1055
(compelling arbitration and declining to rule on the issue of forum non conveniens and
tribal exhaustion on similar grounds).
This result is also in accord with the Eleventh Circuit’s decision in Parnell. The
Arbitration Requirement here is identical to the one considered in Parnell and contains a
Delegation Provision requiring arbitration of “any issue concerning the validity,
enforceability, or scope of [the] [L]oan or the [a]rbitration agreement.” (Compare Doc. 1-1,
p. 33 (containing this provision), with Parnell, 804 F.3d at 1145 (same).) However, neither
Plaintiff’s Complaint, nor its response to the Motion, directly challenges the Delegation
Provision. Moreover, in light of the Parnell decision, the Court explicitly gave Plaintiff an
opportunity to amend its pleadings, yet despite such prompting, Plaintiff elected to rest
on his prior briefing. (Docs. 53, 54.) Therefore, in the absence of any challenge to the
Delegation Provision, the Court must enforce the Arbitration Requirement according to its
terms. See Parnell, 804 F.3d at 1149.
Here, the Arbitration Requirement provides that arbitration shall be conducted by
the Tribe, unless Plaintiff selects an alternative organization to administer the arbitration.
(See Doc. 1-1, pp. 32, 33.) Pursuant to the Choice of Arbitrator Provision, permissible
alternatives include the American Arbitration Association, JAMS, or an organization
otherwise agreed to by the parties. (Id. at 33.) In Inetianbor, the Eleventh Circuit did not
find the Tribe to be an available arbitral forum. 786 F.3d at 1347, 1354; accord Jackson,
764 F.3d at 779–80. Defendants have made no contrary showing here and, upon review
of the record, the Court finds none. Therefore, to ensure that Plaintiff has access to an
available arbitral forum, the Court will require the parties to select either the American
11
Arbitration Association or JAMS to administer the arbitration.5
CONCLUSION
Accordingly, it is hereby ORDERED AND ADJUDGED:
1.
Defendants’ Motion to Dismiss or, Alternatively, to Compel Arbitration and
Stay or Dismiss the Case, and Memorandum in Support (Doc. 15) is
GRANTED IN PART and DENIED IN PART.
a.
To the extent that Defendants seek to compel arbitration of Plaintiff’s
claims, the Motion is GRANTED.
b.
In all other respects, the Motion is DENIED.
2.
The case is STAYED pending arbitration.
3.
The parties shall submit their disputes to the American Arbitration
Association or JAMS.
4.
The parties are DIRECTED to jointly notify the Court of the status of the
arbitration proceedings on Tuesday, August 23, 2016, and every
ninety (90) days thereafter. The parties are further DIRECTED to
immediately notify the Court upon conclusion of the arbitral proceedings.
5.
The Clerk is DIRECTED to administratively close the file.
DONE AND ORDERED in Chambers in Orlando, Florida, on May 26, 2016.
5
As a final matter, the Court finds that the case is due to be stayed pending
arbitration. “Upon finding that a claim is subject to an arbitration agreement, the court
should order that the action be stayed pending arbitration,” not dismissed. Bender v.
A.G. Edwards & Sons, Inc., 971 F.2d 698, 699 (11th Cir. 1992). Absent binding authority
mandating dismissal, the Court rejects Defendants’ request for dismissal of Plaintiff’s
claims in lieu of a stay. (See Doc. 15, pp. 22–23.)
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Copies:
Counsel of Record
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