Schmidt v. Wine et al

Filing 28

MEMORANDUM AND ORDER granting 15 Motion to Compel Arbitration and 15 to Stay Fruther Proceedings relating to Defendant Wells Fargo Bank, N.A. Signed by Magistrate Judge Kenneth G. Gale on 8/5/2013. Mailed to pro se party Ricky Schmidt by certified mail. (df)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
RICKY L. SCHMIDT,

)
)
Plaintiff,
)
)
v.
)
)
TAYLOR WINE, et al.,
)
)
Defendants. )
___________________________________ )

Case No. 13-1237-MLB-KGG

MEMORANDUM AND ORDER
Before the Court is the “Motion to Compel Arbitration and to Stay Further
Proceedings” filed by Defendant Wells Fargo Bank, N.A. (Doc. 15) and supporting
Memorandum (Doc. 16). Plaintiff failed to file a response pursuant to D. Kan.
Rule 6.1(d)(1) and the time to do so has expired. Defendant’s motion is, therefore,
GRANTED as uncontested pursuant to D. Kan. Rule. 7.4. Even so, the Court will
address the substantive aspects of Defendant’s motion.
FACTUAL BACKGROUND
Plaintiff, representing himself pro se, filed his federal court Complaint on
June 18, 2013, alleging violations of his Constitutional rights resulting from
“actions of defendants creating a probable cause when there was none so as to
bring a worthless check charge against Plaintiff.” (Doc. 1, at 2.) Defendant

specifically alleges that Defendant Wells Fargo Bank, N.A. (hereinafter
“Defendant Bank”) “was negligent in apparently accepting a counterfeit payment
order and processing it as if it were a legitimate check and then unlawfully
reversing the payment order.” (Id., at 2-3.)
Defendant Bank filed the present motion (Doc. 15) on July 15, 2013. The
motion seeks an Order compelling arbitration and staying further proceedings
pursuant to the dispute resolution program portion of the “Consumer Account
Agreement” (Doc. 16-2) relating to Plaintiff’s checking account with Defendant
Bank (hereinafter “the Agreement”).
On July 29, 2013, Defendant Taylor Wine filed a Motion to Dismiss. (Doc.
20.) This motion is currently pending before the District Court.
On July 30, 2013, the District Judge assigned to this case entered an Order
(Doc. 22) on Plaintiff’s “Consent Withheld to Proceed Before a Magistrate Judge”
(Doc. 10.) Therein, the District Court instructed the undersigned Magistrate Judge
to consider “whether to issue an order to show cause whether some or all of
plaintiff’s complaint should be dismissed pursuant to 28 U.S.C. § 1915 (e)(2)(B).”
(Doc. 22, at 1.) The Order continued that “[i]f the magistrate judge issues an order
to show cause, [the District Court] suggests, but does not order, that discovery and

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other customary preliminary proceedings be held in abeyance pending final
outcome of the order to show cause.” (Id., at 2.)
Subsequently, a Motion to Dismiss was filed on behalf of Defendants
Brenda Cherry, Brandon Jones, Randy Rogers, and Douglas Witteman. (Doc. 23.)
This motion is pending before the District Court. These Defendants
contemporaneously filed a Motion to Stay Discovery (Doc. 25), which is pending
before the undersigned Magistrate Judge. A Motion to Dismiss was also filed by
Defendant Bryan Stert, which is pending before the District Court.1 (Doc. 26.)
MAGISTRATE’S AUTHORITY TO STAY
PROCEEDINGS AND COMPEL ARBITRATION
A federal magistrate judge may rule on non-dispositive matters. See 28
U.S.C. § 636(b)(1)(A). The District Courts that have considered the nature of an
order to stay proceedings pending arbitration and to compel arbitration have
concluded that these are non-dispositive orders. Torrance v. Aames Funding
Corp., 242 F.Supp. 2d. 862, 865 (D. Or. 2002); Herko v. Metro. Life Ins. Co., 978
F.Supp. 141, 142 n.1 (W.D.N.Y. 1997); see also Touton, S.A. v. M.V. Rizcun

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With all of the above-referenced Motions to Dismiss currently pending before
the District Court, the undersigned Magistrate finds it unnecessary to now issue a “show
cause” Order.
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Trader, 30 F.Supp. 2d 508, 509 (E.D. Pa. 1998) (staying proceedings pending
arbitration is not injunctive relief under 28 U.S.C. § 636(b)(1)(A)).
In Herko, the court discussed the matter in detail and concluded that
§ 9 of the FAA requires that the parties to arbitration
must apply to the court for an order confirming an
arbitration award, which shall be granted unless the
award is vacated, modified or corrected in accordance
with 9 U.S.C. §§ 10 and 11. Section 10 provides federal
district courts with authority to make an order vacating
an arbitration award, while § 11 permits modification of
the same. Thus, as enacted, the FAA2 provides that there
is no final exercise of Article III power until after
arbitration is complete and the arbitrator's decision is
either affirmed, modified, or vacated by the district court
judge where the actions remain lodged.
978 F.Supp. at n. 1. The Court, therefore, concludes that a motion to compel
arbitration is non-dispositive.
The Tenth Circuit has taken a somewhat different approach concerning § 9
of the FFA, holding that judicial confirmation of an arbitration award is not
“required.” In P&P Industries, Inc. v. Sutter Corp., the Tenth Circuit held that “a
district court has no power to confirm an arbitration award under § 9 of the FAA
unless the parties have agreed, explicitly or implicitly, that any eventual arbitration
award shall be subject to judicial confirmation.” 179 F.3d 861, 866 (citing

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The Federal Arbitration Act.
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Oklahoma City Assocs. v. Wal-Mart Stores, Inc., 923 F.2d 791, 794-95 (10th Cir.
1991)).
The Agreement at issue does not explicitly anticipate judicial review of an
arbitration award. (See Doc. 16-2, at 7-8.) The Agreement does, however, state
that it and any resulting arbitration “are governed by the provisions of the Federal
Arbitration Act (Title 9 of the U.S. Code)....” (Id., at 7.) The Tenth Circuit has
held that such language amounts to an implicit agreement that any eventual
arbitration award shall be subject to judicial confirmation. P&P Industries, Inc. v.
Sutter Corp., 179 F.3d at 866-68. Accordingly, because an Article III judge will
ultimately be required to confirm, modify, or vacate any arbitration award, the
order to stay proceedings and compel arbitration is non-dispositive and is within
the magistrate’s authority.
STANDARD FOR DECIDING THIS MOTION
In deciding a motion to stay proceedings and a motion to compel arbitration,
the Court follows a procedure similar to that used in ruling on a motion for
summary judgment. Phox v. Atriums Mgmt. Co., 230 F.Supp. 2d 1279, 1282 (D.
Kan. 2002); Klocek v. Gateway, Inc., 104 F.Supp. 2d 1332, 1336 (D. Kan. 2000).
As the parties seeking to compel arbitration, Defendants bear the initial burden of
showing that they are entitled to arbitration. Phox, 230 F.Supp. 2d at 1282. If they
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satisfy this requirement, the burden then shifts to Plaintiff to show a genuine issue
for trial, as provided under 9 U.S.C. § 4. See id.
Although § 4 of the FAA calls for a hearing (and perhaps a jury trial) when
the parties disagree over whether there is an agreement to arbitrate, or whether one
party has failed to comply with the agreement,3 courts interpreting this language
have adhered to traditional requirements for hearings and juries. Hence, a court
need not hold a hearing when the issues presented pose questions of law only.
Cincinnati Gas & Elec. Co. v. Benjamin F. Shaw Co., 706 F.2d 155, 159 (6th Cir.
1983); International Union of Operating Eng’rs, Local Union No. 139 v. Carl A.
Morse, Inc., 529 F.2d 574, 581 (7th Cir. 1976). Similarly, the party opposing
arbitration cannot obtain a jury trial without producing some evidence upon which
a jury could find for him. See Dillard v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 961 F.2d 1148, 1154 (5th Cir. 1992). Because Kansas considers the
interpretation of unambiguous contract terms to be a question of law, Reimer v.

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Section 4 of the FAA states, “[i]f the making of the arbitration agreement
or the failure, neglect, or refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof.” 9 U.S.C. §4. Here, neither party disputes
making the arbitration agreement. Rather, they dispute whether Plaintiff has failed
to comply with the arbitration provision based on differing interpretations of the
scope of the Agreement. (Doc. 5 at 2; Doc. 8 at 1.). Accordingly, they disagree on
the “failure, neglect, or refusal to perform the same.” 9 U.S.C. § 4; Saturday
Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir. 1987).
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Waldinger Corp., 265 Kan. 212, 214, 959 P.2d 914, 916 (1998), a hearing will
only be required if Plaintiff raises genuine issues of material fact regarding whether
the parties agreed to arbitrate the claims Plaintiff raises in this suit. Because
Plaintiff has failed to respond to Defendant Bank’s motion, no genuine issues of
material fact are before the Court.
ENFORCEABLE AGREEMENT TO ARBITRATE
In order to be enforceable, any agreement to arbitrate must be in writing. 9
U.S.C. § 2. The Court finds that the Agreement at issue constitutes a written
agreement between the parties to arbitrate their disputes. The FAA does not
require that agreements to arbitrate be signed. Thus, the Court finds the existence
of a written agreement to arbitrate disputes arising under or related to the
Agreement in the matter before the Court. Furthermore, there is nothing in the
arbitration clause of the Agreement that would otherwise render it unenforceable.
See Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1234 (10th Cir.
1999); Cole v. Burns Intern. Sec. Services, 105 F.3d 1465, 1482 (D.C. Cir. 1997).
SCOPE OF ARBITRATION
In order to complete the inquiry under sections 3 and 4 of the FAA, the
Court must determine whether the disputes at issue fall within the scope of the
arbitration provision. See 9 U.S.C. §§ 3-4. Because federal policy favors
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arbitration, any ambiguities regarding the scope of the agreement to arbitrate
should be resolved in favor of arbitration. Mastrobuono v. Shearson Lehman
Hutton, Inc. 514 U.S. 52, 62, 112 S. Ct. 1212, 1218, 131 L. Ed. 2d 76 (1995);
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.
Ct. 927, 941, 74 L. Ed. 2d 765 (1983); Williams v. Imhoff, 203 F.3d 758, 764 (10th
Cir. 2000). Moreover, disputes concerning “whether an arbitration clause in a
concededly binding contract applies to a particular type of controversy is for the
court” to decide. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123
S.Ct. 588, 592, 154 L.Ed.2d 491 (2002).
The arbitration clause at issue has a broad scope, defining “dispute” as
any unresolved disagreement between you and the Bank.
It includes any disagreement relating in any way to
services, accounts or matters; to your use of any of the
Bank's banking locations or facilities; or to any means
you may use to access your account(s). It includes
claims based on broken promises or contracts, torts, or
other wrongful actions. It also includes statutory,
common law, and equitable claims.
‘Disputes’ include disagreements about the
meaning, application or enforceability of this arbitration
agreement.
(Doc. 16-2, at 7.) Accordingly, any causes of action resulting from or related to
the Agreement would fall within the scope of the arbitration clause. See P & P

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Industries, Inc., 179 F.3d at 871 (citing Prima Paint Corp. v. Flood & Conklin
Mfg. Co., 388 U.S. 395, 398, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)).
Because the Agreement is facially valid – and Plaintiff has failed to object to
the enforcement of the Agreement or otherwise respond to Defendant’s motion –
Defendant Bank’s “Motion to Compel Arbitration and to Stay Further
Proceedings” (Doc. 15) is GRANTED. This Order shall apply to any proceedings
relating to Defendant Bank. The Court will address the Motion to Stay Discovery
(Doc. 25) filed on behalf of other Defendants when that motion becomes ripe.

IT IS THEREFORE ORDERED that Defendant’s Motion to Compel
Arbitration and Stay Further Proceedings (Doc. 15) is GRANTED, and all
proceedings in this matter relating to Defendant Wells Fargo Bank, N.A. shall be
STAYED pending arbitration of the claims presently asserted by Plaintiff.
IT IS FURTHER ORDERED that the Plaintiff and Defendant Wells Fargo
Bank, N.A. shall proceed to arbitration in accordance with the provisions of the
arbitration clause.
IT IS FURTHER ORDERED that the District Court shall retain
jurisdiction to review, modify, or vacate any arbitration awards, should Plaintiff

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and/or Defendant Wells Fargo Bank, N.A. choose to seek such action as permitted
by the Federal Arbitration Act.
IT IS FURTHER ORDERED that Plaintiff and Defendant Wells Fargo
Bank, N.A. shall file a joint status report, not less than once every six (6) months
(to begin six months from the date of this Order), regarding the progress of the
arbitration.
IT IS SO ORDERED.
Dated at Wichita, Kansas, this 5th day of August, 2013.

S/ KENNETH G. GALE

KENNETH G. GALE
U.S. MAGISTRATE JUDGE

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