Madden v. Ally Financial Inc.
Filing
27
MEMORANDUM OPINION & ORDER: (1) 18 Motion to Compel Arbitration is GRANTED. (2) Parties shall proceed to arbitration in accordance w the terms of the arbitration clause contained in the contract. (3) Action is DISMISSED WITHOUT PREJUDICE and this Court retains jurisdiction to enforce any arbitration award, if necessary. Signed by Judge Joseph M. Hood on 6/2/2017.(SCD)cc: COR,D,JC
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON
DAWN MADDEN,
Plaintiff,
v.
ALLY FINANCIAL INC.,
Defendant.
)
)
)
)
)
)
)
)
)
)
Civil Case No. 16-cv-172-JMH
MEMORANDUM OPINION AND ORDER
***
This matter is before the Court upon Defendant Ally Financial
Inc.’s (“Ally’s”) Motion to Compel Arbitration [DE 18]. For the
reasons stated herein, Defendant’s motion will be GRANTED.
Facts and Procedural Background
This case arises from a dispute over Defendant’s attempts to
collect a debt from Plaintiff.
On June 1, 2016, Plaintiff filed
a Complaint alleging Defendant called her cell phone repeatedly,
after she revoked her consent to be contacted, and that these calls
violated the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C.
§ 227 [DE 1].
Defendant filed an Answer on July 8, 2016 [DE 9].
Regarding jurisdiction and venue, Plaintiff alleged:
2. Jurisdiction of this court arises under 47 U.S.C. §
227.
3. Venue is proper pursuant to 28 U.S.C. 1391(b)(2), in
that a substantial part of the events or omissions
giving rise to the claim occurred in this District.
4. Defendant
transacts
business
here,
therefore,
personal jurisdiction is established.
[DE 1, Complaint, ¶¶ 2-4].
1
In
response
to
the
allegations
in
the
Complaint
as
to
Jurisdiction and Venue, the defendant answered:
2. The allegations set forth in Paragraph 2
are legal conclusions, which are not
subject to denial or admission. To the
extent a response is required, and to the
extent the allegations are contrary to the
law, they are denied.
3. The allegations set forth in Paragraph 3
are legal conclusions, which are not
subject to denial or admission. To the
extent a response is required, and to the
extent the allegations are contrary to the
law, they are denied.
4. The allegations set forth in Paragraph 4
are legal conclusions, which are not
subject to denial or admission. To the
extent a response is required, and to the
extent the allegations are contrary to the
law, they are denied.
[DE 9, Answer, ¶¶ 2-4].
The defendant also asserted the following
affirmative defenses in its Answer:
1. The Complaint fails to state a plausible
claim for which relief can be granted and
should be dismissed pursuant to Fed. R. Civ.
P. 12. See Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007); Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949 (2009). Ally reserves
the right to file a Motion for Judgment on
the Pleadings or other dispositive motion
seeking
dismissal
of
all
Plaintiff’s
claims.
2. Ally avers that some or all of the claims
made in the Complaint may be barred because
Plaintiff lacks standing to the extent he
has suffered no injury-in-fact.
3. Ally denies that Plaintiff sustained any
damages and denies that it proximately
caused any of the damages claimed by
Plaintiff.
2
4. Plaintiff cannot recover from Ally to the
extent that any damages that Plaintiff may
have suffered, which Ally continues to
deny, directly and proximately resulted
from Plaintiff’s acts and/or omissions.
5. Plaintiff cannot recover from Ally to the
extent that any damages Plaintiff may have
or will suffer as alleged in the Complaint,
which Ally continues to deny, have been
and/or will be proximately caused, in whole
or in part, by the negligent, willful, or
tortious acts and/or omissions of persons
or entities over whom Ally had no control,
and
for
whose
conduct
Ally
is
not
responsible, which bars or diminishes any
recovery by Plaintiff against Ally.
6. Plaintiff’s claims fail to the extent Ally
had the prior express consent of the owner
and/or subscriber of the telephone number
in question to place the alleged telephone
calls at issue.
7. Plaintiff’s claims fail to the extent
Ally’s actions were authorized by the terms
of the underlying agreements creating the
debt.
8. Plaintiff’s claims are barred or diminished
by
Allys’s
[sic]
rights
of
setoff,
recoupment, and/or restitution.
9. Ally
reserves
the
right
to
assert
additional
defenses
(affirmative
and
otherwise) as this action progresses, and
reserves the right to rely upon any and all
defenses (affirmative and otherwise) as may
become known through discovery or at trial.
[DE 9, Answer, Affirmative Defenses ¶¶ 1-9].
On August 10, 2016,
the parties jointly filed a Report of Rule 26(f) meeting [DE 13].
On November 3, 2016, nearly four months after filing an Answer,
Defendant filed the instant Motion to Compel Arbitration and
Supporting Memorandum [DE 18 and 19].
3
Plaintiff responded [DE **]
and Defendant replied [DE **], thus the motion is ripe for a
ruling.
Applicable Law
The parties appear to agree, and this Court holds, that
federal law governs whether a party waives its right to compel
arbitration.
See Francis v. Nami Resources Co., LLC, No. 04-510-
KKC, 2007 WL 3046061, *4 (E.D.Ky. October 16, 2007).
“[A]n
agreement to arbitrate may be waived by the actions of a party
which are completely inconsistent with any reliance thereon.”
Gen’l Star Nat. Ins. Co. v. Administratia Asigurarilor de Stat,
289 F.3d 434, 438 (6th Cir. 2002)(quoting Germany v. River Terminal
Ry. Co., 477 F.2d 546, 547 (6th Cir. 1973)(per curiam)).
The
Federal Arbitration Act, 9 U.S.C. §§ 1–16 (“FAA”) governs the
arbitration agreement at issue. The Sixth Circuit Court of Appeals
has explained the preference for enforcing arbitration agreements
pursuant to the FAA:
It is well established that any doubts
regarding arbitrability must be resolved in
favor of arbitration. . . . An agreement to
arbitration may be ‘waived by the actions of
a party which are completely inconsistent with
any reliance thereon.’ Gen. Star Nat'l Ins.
Co. v. Administratia Asigurarilor de Stat, 289
F.3d 434, 438 (6th Cir.2002) (quoting Germany
v. River Terminal Ry. Co., 477 F.2d 546, 547
(6th Cir.1973)). There is a strong presumption
in favor of arbitration under the FAA. O.J.
Distrib., Inc. v. Hornell Brewing Co., 340
F.3d 345, 355 (6th Cir.2003). Because of the
strong presumption in favor of arbitration,
4
waiver of the right to arbitration is not to
be lightly inferred. Id.
Highlands Wellmont Health Network, Inc. v. John Deere Health Plan,
Inc., 350 F.3d 568, 573 (6th Cir. 2003).
Analysis
Plaintiff argues Defendant waived its right to arbitrate this
dispute by answering the Complaint and failing to raise arbitration
as an affirmative defense, or raise arbitration at all, until
several months after the initiation of this lawsuit.
The Court
agrees that ideally the party seeking to enforce an arbitration
agreement would raise that issue in the pleadings at the outset of
the case.
However, the FAA and controlling Sixth Circuit case law
require finding in favor of arbitration of this matter.
As noted above, waiver of an arbitration clause is “not to be
lightly inferred” because the FAA includes a “strong presumption
in favor of arbitration.”
Id.; Glazer v. Lehman Bros., Inc., 394
F.3d 444, 450 (6th Cir. 2005).
Parties may waive an arbitration
clause by “(1) taking actions that are completely inconsistent
with any reliance on an arbitration agreement; and (2) delaying
its assertion to such an extent that the opposing party incurs
actual prejudice.”
Johnson Assocs. Corp. v. HL Operating Corp.,
680 F.3d 713, 717 (6th Cir. 2012) (quotation marks omitted).
Neither is the case here.
The only action Defendant took which
could be considered inconsistent with reliance on the arbitration
5
agreement was filing an Answer that did not include the arbitration
agreement as a specific affirmative defense.
The defendant did,
however, generically deny jurisdiction and venue in its Answer [DE
9, Answer ¶¶ 2-4].
The Court finds that failing to assert the
arbitration agreement as an affirmative defense in the Answer, but
moving
to
arbitration
compel
arbitration
clause,
is
not
soon
“completely
after
discovering
inconsistent”
with
the
an
intent to rely on the arbitration clause.
Additionally, Plaintiff’s response to the motion does not
demonstrate any prejudice to her as a result of Defendant’s delay
in asserting reliance on the arbitration clause.
“Prejudice can
be substantive, such as when a party loses a motion on the merits
and then attempts, in effect, to relitigate the issue by invoking
arbitration, or it can be found when a party too long postpones
his invocation of his contractual right to arbitration, and thereby
causes his adversary to incur unnecessary delay or expense.”
Johnson Assoc. Corp. v. HL Operating Corp., 680 F.3d 713, 719-20
(6th Cir. 2012) (quoting Kramer v. Hammond, 943 F.2d 176, 179 (2nd
Cir. 1991)).
It appears, at most, Defendant’s delay in moving to
compel arbitration caused Plaintiff to incur legal fees for the
preparation
of
a
case
propounded on Defendant.
Plaintiff
argues
management
plan
and
written
discovery
[DE 9 and 17].
the
arbitration
clause
should
enforced because it is procedurally unconscionable.
6
not
be
Plaintiff
supports this argument with two unreported district court cases
from other districts which held that arbitration clauses without
opt-out
provisions
were
unconscionable.
The
undersigned
is
unaware of any binding law which states a contract of adhesion
that does not include an “opt-out” provision for the arbitration
clause is automatically unconscionable. Under Kentucky contract
law, the doctrine of unconscionability “forbids only one-sided,
oppressive, and unfairly surprising contracts, and not mere bad
bargains.”
Forsythe v. Bancboston Mortgage Corp., 135 F.3d 1069,
1074 (6th Cir. 1997)(citing Louisville Bear Safety Service, Inc.
v. South Central Bell Tel. Co., 571 S.W.2d 438, 439 (Ky.Ct.App.
1978)).
Essentially, “[a]n unconscionable contract is a contract
which no man in his senses, not under delusion, would make, on the
one hand, and which no fair and honest man would accept, on the
other.” Id.(citations omitted). The mere absence of an arbitration
opt-out, or the fact that it was a contract of adhesion, does not
make the arbitration clause unconscionable.
Because the parties’ agreement requires the Court to refer
all of plaintiff’s claims to arbitration, the Court will dismiss
this action without prejudice and retain jurisdiction to enforce
any arbitration award.
Accordingly, and for the reasons stated
herein, IT IS ORDERED:
(1)
That the Motion to Compel Arbitration is GRANTED;
7
(2)
That the parties shall proceed to arbitration in
accordance with the terms of the arbitration clause
contained in the contract; and
(3)
That this action is DISMISSED WITHOUT PREJUDICE and
this Court retains jurisdiction to enforce any
arbitration award, if necessary.
This 2nd day of June, 2017.
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?