FLEENOR v. LEGAL HELPERS DEBT RESOLUTION LLC et al
Filing
31
ORDER granting 24 Motion to Dismiss; granting 27 Motion to Dismiss ComplaintOrdered by Judge Clay D. Land on 10/07/2013 (bsh)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
COLUMBUS DIVISION
BARBARA FLEENOR and VERLINE
WILLIAMS, on behalf of
themselves and for all others
similarly situated,
*
*
*
Plaintiffs,
*
vs.
CASE NO. 4:12-CV-338 (CDL)
*
LEGAL HELPERS DEBT RESOLUTION,
LLC; THOMAS G. MACEY; JEFFREY
J. ALEMAN; JEFFREY HYSLIP;
JASON E. SEARNS; and
CHRISTOPHER TANG,
*
*
*
Defendants.
O R D E R
Plaintiffs Barbara Fleenor (“Fleenor”) and Verline Williams
(“Williams”)
filed
this
putative
class
action
on
behalf
of
themselves and other similarly situated potential class members.
They allege that Defendants Legal Helpers Debt Resolution, LLC
(“Legal Helpers”), Thomas G. Macey (“Macey”), Jeffrey J. Aleman
(“Aleman”),
Jeffrey
Hyslip
(“Hyslip”),
Jason
E.
Searns
(“Searns”) and Christopher Tang (“Tang”) violated Georgia’s Debt
Adjustment
Act”).
Act,
O.C.G.A.
§ 18-5-1
et
seq.
(“Debt
Adjustment
Plaintiffs assert no claims arising under federal law.
They allege subject matter jurisdiction pursuant to the Class
Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2, 119
Stat. 4 (codified in scattered sections of 28 U.S.C.) and 28
U.S.C. § 1332(d).
Defendants
Federal
Rules
seek
of
dismissal
Civil
of
this
Procedure
action
12(b)(1)
pursuant
and
to
12(b)(6),
contending that the Court lacks subject matter jurisdiction over
Plaintiffs’ claims because Plaintiffs are parties to mandatory
arbitration agreements and that the Complaint fails to state a
claim upon which relief may be granted.
Plaintiffs respond that
the arbitration agreements are unenforceable and to the extent
that they are enforceable, Defendants have waived their right to
insist
upon
Plaintiffs,
mandatory
subject
arbitration.
matter
Therefore,
jurisdiction
according
exists
over
to
these
claims, which Plaintiffs argue are clearly stated claims upon
which relief may be granted.
The Court finds that Williams’s
claims are subject to an enforceable arbitration agreement and
therefore the Court does not have subject matter jurisdiction
over
those
claims.
Defendants
have
Fleenor’s
claims,
The
waived
Court
their
Fleenor
further
right
is
not
to
finds
demand
similarly
that
even
if
arbitration
of
situated
with
proposed class members because the Second Amended Complaint does
not allege that Defendants waived their right to insist upon
mandatory arbitration of claims asserted by other putative class
members.
matter
Accordingly, CAFA cannot provide a basis for subject
jurisdiction,
and
since
2
Plaintiffs
have
not
alleged
sufficient
facts
to
establish
federal
subject
matter
jurisdiction over Fleenor’s individual claim, that claim also
must be dismissed.
SUBJECT MATTER JURISDICTION
Attacks on subject matter jurisdiction can be facial or
factual.
See Carmichael v. Kellogg, Brown & Root Servs., Inc.,
572 F.3d 1271, 1279 (11th Cir. 2009) (discussing the two types
of Rule 12(b)(1) motions to dismiss for lack of subject matter
jurisdiction).
In a facial attack, the court focuses on the
factual allegations contained in the complaint, which are taken
as true.
Id.
If those allegations do not establish subject
matter jurisdiction, the complaint must be dismissed.
factual
attack,
matters
outside
of
the
complaint
In a
may
be
considered, and the court must decide any disputed facts upon
which subject matter jurisdiction is based.
See Odyssey Marine
Exploration, Inc. v. Unidentified Shipwrecked Vessel, 657 F.3d
1159, 1169 (11th Cir. 2011) (explaining that when evaluating a
12(b)(1) motion to dismiss
on factual grounds the court
may
weigh extrinsic evidence and is not constrained to view evidence
in
the
light
most
favorable
to
the
non-movant).
Here,
Defendants asserted a facial attack relying upon the arbitration
clauses
in
the
agreements
between
the
parties
which
were
attached to Plaintiffs’ complaint and relied upon by Plaintiffs
for the relief they seek.
In response to Defendants’ argument
3
that
their
claims
are
subject
to
mandatory
arbitration,
Plaintiffs rely upon evidence outside of the pleadings which
they contend demonstrates that Defendants have waived the right
to demand arbitration.
While reliance upon evidence beyond the
pleadings converts this jurisdictional issue from a facial one
to a factual one, the distinction does not matter here because
the
evidence
following
relied
discussion
upon
is
is
essentially
based
upon
undisputed.
the
facts
The
alleged
in
Plaintiffs’ Second Amended Complaint and the undisputed evidence
regarding
Plaintiffs’
waiver
dismisses
this
based
action
jurisdiction,
it
argument
that
Plaintiffs’
state
claim
a
discussion
is
is
under
not
upon
a
necessary
Second
Rule
limited
argument.
lack
to
those
of
that
are
Court
matter
Defendants’
Complaint
Therefore,
facts
the
subject
address
Amended
12(b)(6).
to
Because
the
fails
to
Court’s
relevant
to
subject matter jurisdiction.
DISCUSSION
I.
Enforceability of the Arbitration Agreements
The Attorney Retainer Agreements entered into by Plaintiffs
and
Defendants
clause:
contain
the
following
mandatory
arbitration
“In the event of any claim or dispute between Client
and [Legal Helpers] related to the Agreement or related to any
performance
of
any
services
related
to
this
Agreement,
such
claim or dispute shall be submitted to binding arbitration upon
4
the request of either party . . . .”
2d Am. Compl. Ex A,
Attorney Retainer Agreement ¶ XVIII, ECF No. 23-1 [hereinafter
Retainer Agreement].
This arbitration clause clearly covers the
claims asserted in this action, and the federal courts have made
it
abundantly
absent
some
Mobility
clear
that
legitimate
LLC
v.
such
basis
Concepcion,
agreements
for
131
shall
ignoring
S.Ct.
be
them.
1740,
enforced
See
1745-46
AT&T
(2011)
(describing the Federal Arbitration Act as embodying a “liberal
federal policy” in favor of arbitration); KPMG LLP v. Cocchi,
132 S.Ct. 23, 25 (2011) (describing the Federal Arbitration Act
as
reflecting
an
“emphatic
federal
policy
in
favor
of”
arbitration); see also Cruz v. Cingular Wireless, LLC, 648 F.3d
1205,
1210
(11th
Cir.
2011)
(explaining
that
arbitration
agreements must be “rigorously enforce[d]” according to their
terms because of the liberal policy favoring arbitration).
Plaintiffs contend that the arbitration agreement should
not
be
enforced
efficiently
“because
resolve
Debt Adjustment
private
the
purpose
disputes,”
of
arbitration
and
violations
the
Resp. in Opp’n to Defs.’ Mot. to
Dismiss 9, ECF No. 29 [hereinafter Resp.].
merit.
of
to
Act are not wholly private disputes but are
crimes against the state.
without
is
“Generally,
a
court
This argument is
should
enforce
an
arbitration agreement according to its terms, and no exception
exists for a cause of action founded on statutory rights.”
5
See
Davis v. S. Energy Homes, Inc., 305 F.3d 1268, 1273 (11th Cir.
2002) (holding that the Magnuson-Moss Warranty-Trade Commission
Act
permits
the
agreements).
arbitration
enforcement
“[T]he
FAA’s
agreements
are
of
valid
plain
language
enforceable
grounds for ordinary revocation.”
binding
except
is
arbitration
clear
for
that
state-law
Caley v. Gulfstream Aerospace
Corp., 428 F.3d 1359, 1372 (11th Cir. 2005).
This is because
“by ‘agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only
submits
to
their
resolution
judicial, forum.’”
in
an
arbitral,
rather
than
a
Cunningham v. Fleetwood Homes of Ga., Inc.,
253 F.3d 611, 617 (11th Cir. 2001) (quoting Mitsubishi Motors
Corp.
v.
Soler
Chrysler-Plymouth,
Inc.,
473
U.S.
614,
628
(1985)).
Plaintiffs
next
contend
that
the
arbitration
provision
should not be enforced because it is unconscionable and violates
public
policy.
Resp.
9.
“‘[G]enerally
applicable
contract
defenses, such as fraud, duress, or unconscionability, may be
applied to invalidate arbitration agreements.’”
Dale v. Comcast
Corp., 498 F.3d 1216, 1219 (11th Cir. 2007) (quoting Doctor’s
Assocs.,
Inc.
v.
Casarotto,
517
U.S.
681,
686-87
(1996)).
Plaintiffs have not alleged sufficient facts to support claims
of unconscionability or public policy violations.
make
conclusory
allegations
that
6
the
arbitration
Plaintiffs
agreement
“reflects a vast disparity in knowledge, bargaining power and
economic
sophistication
“unreasonably
between
one-sided,”
but
the
they
parties”
provide
an
and
is
insufficient
factual basis for declaring the agreements to be unconscionable.
Resp. 9.
An unconscionable contract has been described as one
“no sane man not acting under a delusion would make and that no
honest man would take advantage of.” See Caley, 428 F.3d at 1378
(internal quotation marks omitted) (applying Georgia law).
The
present record simply does not support a conclusion that the
arbitration agreements are unconscionable.
The Court finds that
the arbitration clause contained in the Plaintiffs’ agreements
is enforceable to the extent Defendants have not waived their
right to insist upon arbitration.
II.
Waiver of Arbitration
Plaintiffs contend that even if the arbitration agreements
are valid and binding, Defendants have waived their right to
have them enforced.
Resp. 10-11.
Typically, waiver is alleged
when a party attempts to invoke arbitration rights after it has
engaged
in
substantial
litigation.
For
this
scenario,
the
Eleventh Circuit uses a two-part test to determine whether a
party’s conduct establishes a waiver of its right to insist upon
arbitration.
Garcia v. Wachovia Corp., 699 F.3d 1273, 1277
(11th Cir. 2012).
a
party
acted
At the first step, the Court decides whether
inconsistently
with
7
the
arbitration
right
by
substantially
invoking
demanding arbitration.
the
Id.
litigation
machinery
prior
to
The Court then must decide whether
that inconsistent action prejudiced the other party, considering
“the length of delay in demanding arbitration and the expense
incurred
by
[the
litigation process.”
other
party]
from
participating
in
the
Id.
Although Plaintiffs summarily argue that Defendants have
waived
their
right
to
insist
upon
arbitration
as
to
both
Plaintiffs, Plaintiffs point to no conduct relating to Williams
to demonstrate waiver.
When this action was first filed on
behalf of Williams, Defendants moved to dismiss the action based
upon
lack
agreement.
of
waived
their
arising
from
the
See Mot. to Dismiss, ECF No. 18.
consistently
litigation.
jurisdiction
maintained
this
position
arbitration
Defendants have
throughout
this
Therefore, the Court finds that Defendants have not
right
to
insist
upon
arbitration
of
Williams’s
claim.
Fleenor’s situation is different from that of both Williams
and the putative class members Fleenor seeks to represent.
The
record demonstrates that Fleenor sought to arbitrate her claim
before filing the present action, but the arbitration proceeding
was dismissed because Defendants failed to participate.
After
the dismissal of the arbitration proceeding, Fleenor filed the
present action.
Although these circumstances do not represent
8
the typical waiver scenario, a strong argument could be made
that Defendants’ conduct forced Fleenor to invoke litigation and
that she has been prejudiced by having to incur the expense of
filing this action and participating in this litigation because
Defendants failed to participate in the arbitration proceeding.
Such conduct may support a finding that Defendants have waived
their right to insist upon arbitration of Fleenor’s claim.
Court, however, does not need to decide that issue.
The
Even if
Defendants have waived their right to arbitrate Fleenor’s claim,
this Court still does not have subject matter jurisdiction over
Fleenor’s claim.
It is clear that Fleenor’s claim, standing alone, does not
support federal subject matter jurisdiction.
Her allegations do
not support complete diversity of citizenship or the requisite
jurisdictional amount.
Accordingly, the Court has no subject
matter jurisdiction over Fleenor’s individual claim.
clear that Fleenor
It is also
cannot rely upon CAFA to support subject
matter jurisdiction.
The present record establishes that she
signed a valid arbitration agreement, and the only reason she
does not have to arbitrate her claims is because of the unique
factual
circumstances
that
support
the
conclusion
Defendants waived their right to arbitrate her claim.
that
There is
no allegation that the putative class members share these unique
circumstances
regarding
waiver.
9
Accordingly,
Fleenor
is
not
similarly situated to these putative class members as it relates
to pursuing claims in federal court, and thus she cannot rely
upon CAFA to establish subject matter jurisdiction.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss
(ECF Nos. 24 & 27) is granted.
IT IS SO ORDERED, this 7th day of October, 2013.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE
10
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