Mengers v. Route 66 RVS Inc et al

Filing 61

OPINION AND ORDER GRANTING 29 MOTION to Compel Arbitration by United Service Protection Corp; DENYING AS MOOT 31 MOTION for Discovery by Patricia G Mengers. Plaintiff Patricia Mengers' Complaint is DISMISSED WITHOUT PREJUDICE as it relates t o Defendant United Service Protection Corp. Parties ORDERED to proceed to arbitration pursuant to the Arbitration Agreement. Plaintiff's suit will continue against Defendants Route 66 RV's Inc and Gulf Stream Coach Inc. Signed by Senior Judge James T Moody on 9/30/15. (cc: Christopher Riley). (cer)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
PATRICIA MENGERS,
Plaintiff,
v.
GULF STREAM COACH INC., et al.,
Defendants.

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No. 3:14 CV 1737

OPINION AND ORDER
Defendant United Service Protection Corp. (“USPC” or “defendant”) has moved
to dismiss plaintiff Patricia Mengers’s claims against it. (DE # 29.) Defendant also seeks
an order directing plaintiff to submit her claims against it to arbitration. (Id.) Plaintiff
has filed a response (DE # 30), and defendant has filed a reply (DE # 39.) For the
following reasons defendant’s motion is granted.
I.

Legal Standard
Defendant has moved to dismiss plaintiff’s complaint and compel arbitration

under section 4 of the Federal Arbitration Act (“FAA”). (DE # 29.) The Federal
Arbitration Act (“FAA”) “was originally enacted ‘to reverse the longstanding judicial
hostility to arbitration agreements that had existed at English common law and had
been adopted by American courts, and to place arbitration agreements upon the same
footing as other contracts.’” Kawasaki Heavy Indus. v. Bombardier Rec. Prods., 660 F.3d 988,
995 (7th Cir. 2011) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)).
Furthermore, the FAA demonstrates that Congress supports “a liberal federal policy

favoring arbitration agreements.” Moses H. Cone Mem. Hosp. v. Mercury Contr. Corp., 460
U.S. 1, 24 (1983).
Section 4 of the FAA allows a party to a written arbitration agreement to request
an order from a federal district court compelling the parties to arbitrate. See 9 U.S.C. § 4.
The court may look beyond the pleadings when reviewing a motion to compel
arbitration. Armbrister v. Pushpin Holdings, LLC, 896 F. Supp. 2d 746, 753 n. 3 (N.D. Ill.
2012).
II.

Background and Facts
The court need not delve too deeply into the factual background supporting

plaintiff’s claims, as defendant’s current motion does not concern the merits of those
claims. In November of 2010, plaintiff bought an RV, which she was told was a new
2011 Gulf Stream Yellowstone Motorhome, from Route 66, an RV dealership in
Oklahoma. (DE # 2 at 15.) Plaintiff also purchased an extended service warranty
contract, which was administered by defendant USPC. (See DE # 30-1 at 1.) To complete
her purchase, plaintiff was required to sign numerous documents, but was not given
the opportunity to read them. (DE # 2 at 15.) After plaintiff purchased the RV, it
routinely had problems that often left plaintiff stranded. (Id.)
Plaintiff brought this suit in Oklahoma state court against several defendants,
including USPC, alleging a host of claims, including breach of warranty and breach of
contract. (DE # 2 at 16-21.) Defendants then removed the case to an Oklahoma federal
district court. (DE # 2 at 1.) Because one of the contracts plaintiff signed with defendant

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Gulf Stream included a forum selection clause identifying Indiana as the forum for any
dispute, the Oklahoma district court judge transferred the case to the Northern District
of Indiana. (DE # 34.)
Defendant USPC now contends that plaintiff agreed to arbitrate any claims
against it. (DE # 29.) Defendant, therefore, argues that plaintiff’s case must be dismissed
and that plaintiff must be compelled to arbitrate her claims against USPC. (Id.) In
support of its argument, defendant has provided the court with a copy of the signed
warranty agreement and accompanying documents that defendant contends outlines
the arbitration agreement plaintiff agreed to. (DE # 29-1 at 1.) In response, plaintiff
argues that she never agreed to the arbitration agreement because she was only
provided with the “Service Agreement Declaration Page” and was never provided with
the accompanying “Coverage Booklet” that actually contained the arbitration
agreement. (DE # 30 at 2; DE # 30-2 at 1.)
The Service Agreement Declaration Page, which plaintiff signed, contains the
following language:
The Administrator of this Service Agreement is United Service Protection
Corp.
. . . . The entity obligated to perform under this Service
Agreement, which is referred to as “We”, “Us” and “Our” throughout the
Service Agreement Coverage Booklet, is United Service Protection Corp.
....
***
Purchase of this Service Agreement is not required in order to purchase or
obtain financing for a Motor Home, Travel Trailer or Camper. This Service
Agreement is not valid unless this Declaration Page is completed and
attached to the Service Agreement Coverage Booklet. This Declaration
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Page shall be the basis upon which the Service Agreement is issued. Your
signature indicates that You have read the information set forth herein and
agreed that it is true and correct and that you accept the terms and
provisions of this Service Agreement and agree to be bound by the terms
thereof.
(DE # 30-1 at 1 (emphasis in original).)
The Service Agreement Coverage Booklet contains the arbitration provision,
which states, in part:
Any and all claims, disputes, or controversies of any nature whatsoever
(whether in contract, tort or otherwise, including statutory, common law,
fraud (whether by misrepresentation or by omission) or other intentional
tort, property, or equitable claims) arising out of, relating to, or in connection
with (1) this Service Agreement or any prior Service Agreement, and the
purchase thereof; and (2) the validity, scope, interpretation, or enforceability
of this Provision or of the entire Service Agreement (“Claim”), shall be
resolved by binding arbitration before a single arbitrator.
(DE # 29-1 at 7.)
III.

Analysis
“Under the Federal Arbitration Act, arbitration may be compelled if the

following three elements are shown: a written agreement to arbitrate, a dispute within
the scope of the arbitration agreement, and a refusal to arbitrate.” Zurich Am. Ins. Co. v.
Watts Indus., 417 F.3d 682, 690 (7th Cir. 2005). The second and third elements are not at
issue in this case. The agreement itself is quite broad (see DE # 29-1 at 7), and plaintiff
does not appear to contend that her claims are not covered by the terms of the
agreement. Instead, plaintiff’s argument is that she never agreed to an arbitration
provision (DE # 30 at 2), and the court will therefore confine its analysis to that issue.

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Before addressing whether an agreement was reached, however, the court must
first address defendant’s argument that this issue should be decided by the arbitrator,
and not the court. (DE # 39 at 4.) “In Prima Paint Corp. v. Flood & Conklin Manufacturing
Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the Supreme Court announced
that, when faced with motions to stay suits or order arbitration, courts should evaluate
only the validity of the arbitration agreement; challenges to the validity of the entire
contract—e.g., fraud in the inducement—should be left to the arbitrator.” Janiga v.
Questar Capital Corp., 615 F.3d 735, 741 (7th Cir. 2010). Defendant argues that this entire
dispute must be submitted to an arbitrator because plaintiff is challenging the formation
of the Service Agreement as a whole, citing Prima Paint. (DE # 39 at 4.)
As the Supreme Court and the Seventh Circuit have made clear, however, when
a party disputes whether a contract was formed at all, it is a matter for the court to
decide. Janiga, 615 F.3d at 741-42. Plaintiff appears to be contending that no agreement
was ever reached between the parties regarding the Service Agreement Coverage
Booklet, which contains the arbitration agreement and which plaintiff claims she never
received. (DE # 30 at 2, 7.) The court, therefore, will address this issue.
Federal courts rely on state contract law to determine whether an arbitration
agreement constitutes a valid contract. See Faulkenberg v. CB Tax Franchise Systems, LP,
637 F.3d 801, 809 (7th Cir. 2011). Defendant is the only party that identifies the law it
believes is applicable to this case – Oklahoma law. (DE # 39 at 2.) Defendant’s position
is that Oklahoma law applies because plaintiff purchased the Service Agreement in

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Oklahoma. (Id.) Plaintiff has failed to identify which state’s law she thinks applies to
this case, and, indeed, fails to cite any state law cases in her brief. (DE # 30.) Plaintiff has
therefore waived the issue, and the court will apply Oklahoma law. McCoy v. Iberdrola
Renewables, Inc., 760 F.3d 674, 684 (7th Cir.) reh’g denied, 769 F.3d 535 (7th Cir. 2014)
But regardless of whether the court applies Indiana or Oklahoma law in this case,
the result would be the same. Plaintiff’s argument to avoid arbitration is essentially that
because she was never given the Service Agreement Coverage Booklet, which contained
the arbitration clause, she cannot be compelled to arbitrate her claims against USPC.
(DE # 30 at 2, 6, 7.) The problem with this argument, as defendant correctly points out
in its reply brief (DE # 39 at 10-12), is that plaintiff has brought claims against USPC
under the Service Agreement Coverage Booklet. Plaintiff is suing USPC for breach of the
Service Agreement (DE # 2 at 14), and nothing in the Declaration Page, the one page
plaintiff concedes to signing, would give plaintiff any cause of action against USPC
because it does not actually contain the terms of the agreement. (DE # 30-1 at 1.) The
actual terms of the agreement are found in the Coverage Booklet. (DE # 29-1 at 2.)
Because plaintiff is suing USPC for breach of contract and breach of warranty,
and because the only possible basis for these claims is the Coverage Booklet, plaintiff is
seeking to reap the benefits of the Coverage Booklet. Plaintiff cannot sue USPC under
the Coverage Booklet and also avoid the arbitration provision contained in that same
document. S & O Liquidating P’ship v. C.I.R., 291 F.3d 454, 459 (7th Cir. 2002) (“A party
who has accepted the benefits of a contract cannot ‘have it both ways’ by subsequently

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attempting to avoid its burdens.”); Hughes Masonry Co. v. Greater Clark Cnty. Sch. Bldg.
Corp., 659 F.2d 836, 839 (7th Cir. 1981) (“In short, (plaintiff) cannot have it both ways. (It)
cannot rely on the contract when it works to its advantage, and repudiate it when it
works to (its) disadvantage.” (citations and quotations omitted)); Phoenix Ins. Co. v.
Tomlinson, 125 Ind. 84, 25 N.E. 126, 127-28 (1890) (“When the company accepted
payment of the entire premium it waived all right to forfeit the policy, for, as the
insured can get back no part of the premium paid, neither can the company escape the
performance of its part of the contract. It cannot have the benefit, and escape the
burden.”); Walton v. Estate of Swisher, 3 N.E.3d 1088 (Ind. Ct. App. 2014) (unpublished)
(“A plaintiff may not enjoy the benefits of a contract without also accepting its
burdens.”); Local Fed. Sav. & Loan Ass’n v. Burkhalter, 1987 OK CIV APP 23, 735 P.2d
1202, 1205 (“We are constrained to point out that it is fundamental that one who accepts
the benefits of a contract must assume the detriments.”).
“The party opposing arbitration must identify a triable issue of fact concerning
the existence of the agreement in order to obtain a trial on the merits of the contract.”
Tinder v. Pinkerton Security, 305 F.3d 728, 735 (7th Cir. 2002). “Just as in summary
judgment proceedings, a party cannot avoid compelled arbitration by generally
denying the facts upon which the right to arbitration rests; the party must identify
specific evidence in the record demonstrating a material factual dispute for trial.” Id. “In
deciding whether the party opposing summary judgment (and by analogy compelled
arbitration) has identified a genuine issue of material fact for trial, the evidence of the

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non-movant is to be believed and all justifiable inferences are to be drawn in his favor.”
Id. (citations and quotations omitted).
Because plaintiff seeks to benefit from the Service Agreement, she cannot avoid
its arbitration clause, and has failed to create a triable issue of fact with regard to the
arbitration agreement. Defendant’s motion will therefore be granted, and plaintiff will
be ordered to arbitrate her claims against USPC.
Plaintiff’s arguments to the contrary are not persuasive. First, plaintiff argues
that the Declaration Page and Coverage Booklet are hearsay. (DE # 30 at 5.) “Statements
that constitute verbal acts (e.g., words of contract or slander) are not hearsay because
they are not offered for their truth.” Schindler v. Seiler, 474 F.3d 1008, 1010 (7th Cir.
2007). This argument therefore fails.
Next, plaintiff argues that defendant has not properly authenticated the
Declaration Page and Coverage Booklet under Federal Rule of Evidence 901. (DE # 30 at
5-6.) In its reply brief, defendant has included an affidavit of a Route 66 sales manager
authenticating those documents. (DE # 39-1.) This argument therefore fails.*
Next, plaintiff argues that the evidence of the arbitration agreement must be
excluded under Federal Rule of Evidence 403 because its probative value is
substantially outweighed by its unfair prejudice and risk that it will confuse the issues.
(DE # 30 at 5.) The court disagrees. This evidence is clearly probative. And, considering

Additionally, as the court explained earlier, plaintiff relies on these documents
in her claims against defendant.
*

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that plaintiff relies on other provisions in the Coverage Booklet in her claims against
defendant, plaintiff’s argument on this point has no merit.
Finally, plaintiff argues that there is a question of fact regarding the arbitration
provision because when she previously made claims for repairs under the Coverage
Booklet, USPC denied her claims for repairs and told plaintiff that it had no record of
plaintiff having ever purchased the Service Agreement. (DE # 30 at 2.) As noted above,
however, plaintiff is bringing her claims against defendant under that Service
Agreement. This argument therefore fails.
IV.

Conclusion
For the foregoing reasons, defendant United Service Protection Corp.’s motion to

compel arbitration and dismiss plaintiff Patricia Mengers’s suit against it is GRANTED.
(DE # 29.) Plaintiff’s complaint is DISMISSED WITHOUT PREJUDICE as it relates to
defendant USPC, and the parties are ordered to proceed to arbitration pursuant to the
arbitration agreement. Plaintiff’s motion for additional discovery regarding the
arbitration agreement is DENIED AS MOOT. (DE # 31.) Plaintiff’s suit will continue in
this court against defendants Route 66 RV’s, Inc. and Gulf Stream Coach Inc..
SO ORDERED.
Date: September 30, 2015
s/James T. Moody
JUDGE JAMES T. MOODY
UNITED STATES DISTRICT COURT