Johnson v. Cach, LLC et al

Filing 27

MEMORANDUM DECISION AND ORDER - IT IS ORDERED:1. Defendants Motion to Dismiss (Dkt. 11 ) is GRANTED in part and all claims are ordered to arbitration. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjs)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

CHRISTOPHER JOHNSON, for himself
and behalf of others all similarly situated,

Case No. 1:16-cv-00383-BLW
MEMORANDUM DECISION AND
ORDER

Plaintiff,
v.
CACH, LLC and MANDARICH LAW
GROUP, LLP,
Defendant.

INTRODUCTION
The Court has before it a Motion to Dismiss (Dkt. 11) filed by defendants CACH,
LLC and Mandarich Law Group, LLP. Alternatively, the Defendants seek to compel
arbitration of the dispute. For the reasons discussed below, the Motion is granted in part,
and the Court will order arbitration for all claims and parties.

MEMORANDUM DECISION AND ORDER - 1

Christopher Johnson originally filed this action in Idaho state court for himself and
on behalf of all others similarly situated. This case was removed to federal court on
August 22, 2016. (Dkt. 1).
On June 30, 2008, Plaintiff entered into a credit card agreement with Bank of
America (the “Agreement”). (Dkt. 13 at 3). Bank of America is, according to Plaintiff, a
corporation incorporated in the state of Delaware. Id. The Agreement contained
language stating that the Agreement was entered into in Delaware and that the credit from
Bank of America to Plaintiff was extended from Delaware. Id. The Agreement also
contained a choice of law provision stating that the Agreement was to be governed by the
laws of Delaware. Id. At the time the Agreement was entered into, Plaintiff resided in
Tennessee. Id.
Plaintiff ultimately charged $8,989.28 to the Bank of America credit card. Id. On
June 30, 2012, Bank of America sent Plaintiff a “final statement of the balance.” Id. No
further charges were made after the final statement. Id. No payments were made on the
credit card after May 3, 2012. Id. at 4. It is apparently undisputed that Plaintiff breached
the Agreement with Bank of America by “failing to make periodic payments.” Id.
On July 24, 2012, Bank of America assigned the right to collect Plaintiff’s debt to
CACH. Id. CACH commenced legal action against Plaintiff to collect the debt on
October 7, 2015 in Idaho state court. Id. The parties settled the original lawsuit, and the
case was dismissed. Id. at 5.

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Plaintiff filed the present action against Defendants alleging general claims for
relief. (Dkt. 1-1 at 5). First, Plaintiff alleges that Defendants violated the Fair Debt
Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692 et seq, because Defendants
allegedly filed the original action outside of the controlling statute of limitations and that
the Defendants “acted with malice or otherwise with willful or reckless disregard for
Plaintiff’s legal rights . . . .” Id. at 7. Plaintiff also alleges a violation of the North
Carolina Debt Collections Act (the “NCDCA”), N.C. Gen. Stat. §§ 75-50, because
proposed class members may have entered into a credit card agreement with Bank of
America that contained a choice of law provision for North Carolina and that the alleged
conduct was coercive, fraudulent, and misleading under the NCDCA. Id. Finally,
Plaintiff brings a claim of “malicious prosecution” for prosecuting outside of the Idaho
statute of limitations. Id.
Defendants argue in the Motion that all claims should be dismissed. (Dkt. 11-1).
Alternatively, Defendants request that if the Court declines to grant Defendants’ Motion
in full that the Court compel arbitration. Id. at 10.
LEGAL STANDARD
Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement
of the claim showing that the pleader is entitled to relief,” in order to “give the defendant
fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964 (2007). While a complaint
attacked by a Rule 12(b)(6) motion to dismiss “does not need detailed factual

MEMORANDUM DECISION AND ORDER - 3

allegations,” it must set forth “more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. at 555. To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
“state a claim to relief that is plausible on its face.” Id. at 570. A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556.
The plausibility standard is not akin to a “probability requirement,” but it asks for more
than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint
pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the
line between possibility and plausibility of ‘entitlement to relief.’ ” Id. at 557.
The Supreme Court identified two “working principles” that underlie Twombly in
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). First, the court need not accept as true, legal
conclusions that are couched as factual allegations. Id. Rule 8 does not “unlock the
doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 67879. Second, to survive a motion to dismiss, a complaint must state a plausible claim for
relief. Id. at 679. “Determining whether a complaint states a plausible claim for relief
will . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id.
Providing too much in the complaint may also be fatal to a plaintiff. Dismissal may
be appropriate when the plaintiff has included sufficient allegations disclosing some
absolute defense or bar to recovery. See Weisbuch v. County of L.A., 119 F.3d 778, 783,

MEMORANDUM DECISION AND ORDER - 4

n. 1 (9th Cir. 1997) (stating that “[i]f the pleadings establish facts compelling a decision
one way, that is as good as if depositions and other . . . evidence on summary judgment
establishes the identical facts”).
A dismissal without leave to amend is improper unless it is beyond doubt that the
complaint “could not be saved by any amendment.” Harris v. Amgen, Inc., 573 F.3d 728,
737 (9th Cir. 2009) (issued 2 months after Iqbal).1 The Ninth Circuit has held that “in
dismissals for failure to state a claim, a district court should grant leave to amend even if
no request to amend the pleading was made, unless it determines that the pleading could
not possibly be cured by the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v.
Northern California Collection Service, Inc., 911 F.2d 242, 247 (9th Cir. 1990). The
issue is not whether plaintiff will prevail but whether he “is entitled to offer evidence to
support the claims.” Diaz v. Int’l Longshore and Warehouse Union, Local 13, 474 F.3d
1202, 1205 (9th Cir. 2007) (citations omitted).
Under Rule 12(b)(6), the Court may consider matters that are subject to judicial
notice. Mullis v. United States Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). The Court
may take judicial notice “of the records of state agencies and other undisputed matters of
public record” without transforming the motions to dismiss into motions for summary
judgment. Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866,
1

The Court has some concern about the continued vitality of the liberal amendment policy adopted in
Harris v. Amgen, based as it is on language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), suggesting
that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim. . ..” Given Twombly and Iqbal’s rejection
of the liberal pleading standards adopted by Conley, it is uncertain whether the language in Harris v.
Amgen has much of a life expectancy.

MEMORANDUM DECISION AND ORDER - 5

n.1 (9th Cir. 2004). The Court may also examine documents referred to in the complaint,
although not attached thereto, without transforming the motion to dismiss into a motion
for summary judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005).
Plaintiff argues that the Rule 56 summary judgment standard should apply in this
motion. Plaintiffs allege that both parties have submitted “matters outside of the
pleadings” but fail to specify which matters exactly were not discussed in the pleadings.
(Dkt. 13 at 2). As discussed above, the court may examine documents referred to in the
complaint even when those documents are not attached to the complaint without applying
the motion for summary judgement standard. The Court can find no matters or
documents discussed in the briefing that was not referred to in the Complaint. As such,
the Rule 12(b)(6) motion to dismiss standard is the proper standard to apply.
ANALYSIS
The Court need not look further than the original credit card agreement between
Plaintiff and Bank of America to determine that the proper forum for this dispute is in
arbitration. The arbitration clause in the Agreement is clearly enforceable against the
Plaintiff and may be invoked by both Defendants. As such, the Court will not discuss or
rule on the remaining issues in the Motion to Dismiss as they are moot.
Enforcement of an arbitration clause is governed by the Federal Arbitration Act. 9
U.S. C. §§ 1 et seq. The Federal Arbitration Act states,
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, or the refusal to perform
the whole or any part thereof, or an agreement in writing to submit
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to arbitration an existing controversy arising out of such a contract,
transaction, or refusal, 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. The Supreme Court noted that the purpose of the FAA is “to ensure the
enforcement of arbitration agreements according to their terms so as to facilitate
streamlined proceedings.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344
(2011). The Supreme Court clearly held that there is a “liberal federal policy favoring
arbitration” and a “fundamental principle that arbitration is a matter of contract.” Id. at
339 (internal citations omitted). The Supreme Court requires that “courts must place
arbitration agreements on an equal footing with other contracts and enforce them
according to their terms.” Id.
Defendants ask the Court to compel arbitration based on the language in the
original credit card agreement between Plaintiff and Bank of America. The Agreement
contained an arbitration clause stating: “Any claim or dispute . . . by either you or us
against the other or against the . . . assigns of the other . . . arising from or relating in any
to this Agreement . . . or your account . . . shall . . . be resolved by binding arbitration.”
(Dkt. 11-2) (emphasis added). It continues to define “we” and “us” as used in the
arbitration clause as Bank of America, “its parent, subsidiaries, affiliates, licenses,
predecessors, successors, assigns, and any purchaser of your account, and all of their
officers, directors, employees, agents and assigns or any and all of them.” Id. (emphasis
added).

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The language of the Agreement clearly contemplates and predicts a similar fact
pattern as the one in this dispute. All parties are explicitly encompassed by the
Agreement, and the claims in this case are related to the Agreement. Here, there is no
dispute that CACH is the assignee of the credit card agreement between Bank of America
and the Plaintiff. (Dkt. 11-3). In executing the assignment, CACH essentially stepped
into Bank of America’s shoes and have the right to enforce all rights under the contract.
Further, Plaintiff, as a signatory to the contract, was aware of the clause stating that Bank
of America had the right to sell or assign the agreement and that “[t]he person or entity to
whom we make any such sale, assignment, or transfer shall be entitled to all of our rights
and/or obligations under this Agreement, to the extent sold, assigned or transferred.”
(Dkt. 11-2).
Plaintiff argues that CACH is a nonsignatory to the credit card agreement and
therefore may not invoke the arbitration clause. Plaintiff also claims that the principle of
equitable estoppel prevents CACH from invoking the benefit of the arbitration clause.
Plaintiff’s arguments are not persuasive. The case law Plaintiff relies on addresses a third
party to a contract (i.e., a nonsignatory to the contract) attempting to either compel
arbitration or to be excluded from arbitration. Here, Plaintiff is a signatory to the
contract, and Plaintiff agreed to be bound by the arbitration clause. CACH acquired the
rights and obligations of a signatory to the contract when CACH was assigned all benefits
and rights of the agreement by Bank of America. Therefore, Plaintiff cannot avoid

MEMORANDUM DECISION AND ORDER - 8

arbitration. He is a party to the contract and CACH has a right to compel arbitration as
an assign of Bank of America.
In the briefing, neither party addressed the claims against Mandarich Law Group,
separately from CACH, and both parties assumed that Mandarich Law Group and CACH
should be treated the same for purposes of invoking the arbitration clause. This was a
mistake. Mandarich Law Group clearly requires a different analysis than CACH because
Mandarich Law Group is not a signatory to the contract. However, the Court is obligated
to address the claims against Mandarich Law Group despite the parties’ failure to brief
this issue. The claims against Mandarich Law Group also will be sent to arbitration.
Even though Mandarich Law Group is not a signatory to the contract, the contract
expressly encompasses the agents of the assigns.
Idaho has clearly held that the “relationship between an attorney and client is one
of agency in which the client is the principal and the attorney is the agent.” Caballero v.
Wikse, 140 Idaho 329, 332, 92 P.3d 1076, 1079 (2004) (internal quotation marks
omitted). Mandarich Law Group was an agent of CACH when filing the initial debt
collection claim against the Plaintiff. The Agreement clearly states that the agents of the
assigns have the same rights under the Agreement as Bank of America would. As such,
Mandarich Law Group is entitled to compel arbitration as an agent of CACH. Therefore,
the claims against Mandarich Law Group must be heard in arbitration, as Plaintiff is
bound by the Agreement he voluntarily entered into.

MEMORANDUM DECISION AND ORDER - 9

Finally, the claims at issue fall within the realm of the arbitration clause. The
Agreement contained a broad arbitration clause, subjecting “any claim . . . arising from or
relating in any way to this Agreement or any prior Agreement or your account (whether
under a statute, in contract, tort . . .)” to arbitration. (Dkt. 11-3). In the Ninth Circuit,
when a valid arbitration clause uses such broad language, “all doubts are to be resolved in
favor of arbitrability.” Simula, Inc. v. Autoliv, Inc, 175 F.3d 716, 721 (9th Cir. 1999).
Further, the Supreme Court has held that statutory claims may be subject to arbitration,
“unless Congress itself has evinced an intention to preclude a waiver of judicial remedies
for the statutory rights at issue.” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
26 (1991).
There is no language in the FDCPA that evidences Congress’s intent to prevent
arbitration of FDCPA claims. The Court finds that FDCPA claims are arbitrable under
the Federal Arbitration Act and are encompassed by the arbitration clause in the
Agreement. The remaining claims under North Carolina law and for malicious
prosecution are also covered by the arbitration clause as being related to the Agreement
because the arbitration clause encompasses tort actions related to the enforcement of the
Agreement.
The terms of the contract and the intent of the contracting parties are very clear,
and the Court is compelled to send all claims and parties in this dispute to arbitration. As
such, the remaining claims discussed in the Motion to Dismiss are deemed moot, and the
Court declines to express any opinion on the merits of the claims.

MEMORANDUM DECISION AND ORDER - 10

ORDER
IT IS ORDERED:
1. Defendants’ Motion to Dismiss (Dkt. 11) is GRANTED in part and all claims
are ordered to arbitration.

DATED: December 16, 2016
_________________________
B. Lynn Winmill
Chief Judge
United States District Court

MEMORANDUM DECISION AND ORDER - 11