Garcia v. Weltman Weinberg And Reis Co. of Michigan et al

Filing 16

OPINIOIN and ORDER Granting Defendant Credit Acceptance Corporation's 11 Motion to Compel. Signed by District Judge Gerald E. Rosen. (JOwe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LAURA GARCIA, an individual,
Plaintiff,
No. 2:13-cv-14362
Hon. Gerald E. Rosen

vs.
WELTMAN, WEINBERG & REIS CO.
OF MICHIGAN, a Michigan Corporation,
and CREDIT ACCEPTANCE
CORPORATION, a Michigan Corporation,
Defendants.
___________________________________/

OPINION AND ORDER GRANTING DEFENDANT CREDIT
ACCEPTANCE CORPORATION’S MOTION TO COMPEL
ARBITRATION
I. INTRODUCTION
In this consumer debt collection matter, Defendants have moved to compel
arbitration based on the parties’ underlying car loan agreement. Having reviewed
and considered the parties’ written submissions in support of and opposition to the
motion, as well as the remainder of the record, the Court finds that the pertinent
facts, allegations, and legal issues are sufficiently presented in these materials and
that oral argument would not assist in the resolution of this motion. Accordingly,
the Court will decide the motion “on the briefs.” See Local Rule 7.1(e)(2), U.S.
District Court, Eastern District of Michigan. This opinion and order sets forth the

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Court’s ruling on the motion.
II. FACTUAL BACKGROUND
A.

The Agreement to Arbitrate
On February 17, 2003, Plaintiff Laura Garcia purchased a vehicle from an

automobile dealership in Taylor, Michigan. (Ex. 1 to Def’s Mtn., Dkt. # 11).
Plaintiff financed this purchase by entering into a Retail Installment Contract (RIC)
with the dealership. (Id.). Under the terms of the RIC, the dealership assigned all
of its rights, title, and interest to Defendant Credit Acceptance Corporation for
servicing and collection. (Id.).
As pertinent here, the front page of the RIC sets forth two specific
paragraphs concerning its arbitration provision:
ARBITRATION NOTICE: PLEASE SEE THE REVERSE
SIDE OF THIS AGREEMENT FOR INFORMATION
REGARDING THE ARBITRATION CLAUSE CONTAINED
IN THIS AGREEMENT.
ADDITIONAL TERMS AND CONDITIONS: THE
ADDITIONAL TERMS AND CONDITIONS, INCLUDING
THE ARBITRATION NOTICE SET FORTH ON THE
REVERSE SIDE HEREOF ARE A PART OF THIS
CONTRACT AND ARE INCORPORATED HEREIN BY
REFERENCE.
(Id.). The back page of the RIC then sets forth the “Agreement to Arbitrate,”
which provides in relevant part:
Any dispute, controversy or claim between Buyer, Seller and/or
Seller’s assignee, Credit Acceptance Corporation, or the
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employees, agents or assignees of the other, arising out of or in any
way related to the Agreement, or any default hereunder . . .
whether based on contract, an alleged tort or other legal theory,
shall be fully resolved by binding arbitration.
***
Notwithstanding the foregoing, Seller and Seller’s assignee Credit
Acceptance Corporation retain the right . . . to enforce the
monetary obligation of Buyer under the Agreement through
judicial relief. Such judicial relief may take the form of a lawsuit.
The institution and maintenance of any action for judicial relief or
exercise of self-help remedies shall not constitute a waiver of the
right to submit any controversy or claim to arbitration, including
any counterclaim asserted in any judicial action, and including
those controversies or claims arising from the exercise of any such
judicial relief to the exercise of self-help remedies.
(Id.).
B.

Plaintiff’s Default and Defendants’ Debt Collection Efforts
In April 2007, Defendant Weltman, Weinberg & Reis obtained a judgment

on behalf of Credit Acceptance Corporation against Plaintiff in the 33rd District
Court of Michigan relative to her default under the RIC. (Plf’s Compl., Dkt. #1, at
¶¶ 6-7). Weltman filed various garnishments in an attempt to satisfy this judgment.
(Id. at ¶¶ 8-11). On September 28, 2012, the 33rd District Court suspended the
garnishments and required that Plaintiff make monthly installment payments
beginning in November 2012. (Id. at ¶ 11; Ex. B to Plf’s Resp., Dkt. # 14-3).
Plaintiff mailed the November 2012 payment to Weltman. (Plf’s Compl.,
Dkt. #1, at ¶ 12).

Later on in November, a new firm representing Credit

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Acceptance Corporation, Weber & Olcese, substituted in as counsel for Weltman
in the 33rd District action. (Id. at ¶ 13). Based on this substitution, Plaintiff then
mailed her December 2012 payment to Weber & Olcese. (Id. at ¶ 14). Weber &
Olcese returned Plaintiff’s check, indicating that it had returned her file to Credit
Acceptance Corporation and advising Plaintiff to contact Weltman. (Id. at ¶ 15).
Plaintiff contacted Weltman, which told Plaintiff that it also no longer had her file
and directed her to call Credit Acceptance Corporation. (Id. at ¶ 16). So Plaintiff
called Credit Acceptance Corporation. A representative informed her that “she
couldn’t help her” because Credit Acceptance Corporation “did not know to whom
she should send the payments or to what [law] firm her case was resassigned.” (Id.
at ¶ 17). Based on these calls, Plaintiff stopped making her payments. (Id. at ¶
18). Several months then passed until September 2013, when she received a tax
garnishment dated August 8, 2013 that Weltman filed on behalf of Credit
Acceptance Corporation. (Id. at ¶ 19; Ex. A to Plf’s Resp., Dkt. # 14-2). Plaintiff
called Weltman, and was told “she needed to bring the account current and pay
$1,000.00.” (Plf’s Compl., Dkt. # 1, at ¶ 20).
Plaintiff commenced this instant litigation shortly thereafter. Count I asserts
that Weltman violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C.
§ 1692 et seq., when it “fail[ed] to disclose that it had returned as counsel for
[Credit Acceptance Corporation] and that Plaintiff should tender her checks to it,”

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as well as when it subsequently “default[ed] her on her court ordered payment
plan.” (Id. at ¶ 25). Count II claims that both Defendants violated the Michigan
Regulation of Collection Practices Act (MRCPA), M.C.L. § 445.251 et seq, by
knowingly misinforming Plaintiff as to whom she should remit payment and
garnishing her Michigan tax refund. (Id. at ¶¶ 31-35).
Credit Acceptance Corporation has now moved to compel arbitration based
upon the Agreement to Arbitrate (Def’s Mtn., Dkt. # 11), which Weltman joins.
(Dkt. # 12). Plaintiff argues that arbitration is not appropriate for two reasons: (1)
the copy of the RIC attached by Credit Acceptance Corporation in support of its
motion is illegible; and (2) Credit Acceptance Corporation waived its right to
arbitrate by participating in the underlying action in the 33rd District Court. As set
forth below, Plaintiff’s arguments do not overcome the strong presumption in favor
of arbitrability, and the Court therefore GRANTS Credit Acceptance Corporation’s
Motion.
III. DISCUSSION
A.

Applicable Standards
“The Federal Arbitration Act . . . provides that arbitration clauses in

commercial contracts ‘shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.’” Glazer v.
Lehman Bros., Inc., 394 F.3d 444, 450-51 (6th Cir. 2005) (citing 9 U.S.C. § 2). It

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is well-settled that there is a strong federal policy in favor of arbitration: “When a
contract contains an arbitration clause, there is a general presumption of
arbitrability, and any doubts are to be resolved in favor of arbitration unless it may
be said with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.”

Highlands Wellmont Health

Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568, 576-77 (6th Cir.
2003) (citation omitted). The Sixth Circuit has set forth a four-factor inquiry for
examining a motion to compel arbitration:
[W]hen considering a motion to stay proceedings and compel
arbitration under the [Federal Arbitration] Act, a court has four tasks:
first, it must determine whether the parties agreed to arbitrate; second,
it must determine the scope of that agreement; third, if federal
statutory claims are asserted, it must consider whether Congress
intended those claims to be nonarbitrable; and fourth, if the court
concludes that some, but not all, of the claims in the action are subject
to arbitration, it must determine whether to stay the remainder of the
proceedings pending arbitration.
Glazer, 394 F.3d at 451 (citation omitted).
B.

Arbitration is Appropriate
1.

The parties have a valid arbitration agreement

As an initial matter, the Court easily concludes that the parties have a valid
arbitration agreement. Plaintiff’s sole opposition on this point is that the copy of
the RIC attached to Credit Acceptance Corporation’s Motion was “illegible.”

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(Plf’s Resp., Dkt. # 14, at 7-8).1 In reply, Credit Acceptance Corporation attached
a more legible copy of the RIC, an affidavit by its custodian of records attesting to
the copy’s authenticity, and an email exchange with Plaintiff’s counsel providing
him with an electronic copy of the RIC. (Exs. A-D to Def’s Reply, Dkt. # 15).
Upon review of these documents, the Court is more than satisfied that the RIC
contains a valid arbitration agreement.
2.

The scope of the arbitration agreement covers Plaintiff’s claims

As Plaintiff is resisting arbitration, she “bears the burden of proving that the
claims at issue are unsuitable for arbitration.” Green Tree Fin. Corp.-Alabama v.
Randolf, 531 U.S. 79, 91 (2000). Plaintiff has raised no argument as to why her
claims under the FDCPA and MRCPA are unsuitable for arbitration. Moreover,
given the breadth of the Agreement to Arbitrate, she cannot. It provides that
“[a]ny dispute, controversy or claim between Buyer, Seller and/or Seller’s
assignee, Credit Acceptance Corporation, or the employees, agents or assignees of
the other, arising out of or in any way related to the Agreement, or any default
hereunder . . . whether based on contract, an alleged tort or other legal theory, shall
be fully resolved by binding arbitration.” Accordingly, the Court concludes that
Plaintiff’s FDCPA and MRCPA claims -- which arise out of Plaintiff’s default
under the RIC and Defendants’ subsequent efforts to collect the outstanding debt -                                                            
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She does not, for example, contend that she did not sign the RIC or that other
contractual defenses exist.
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are within the Agreement to Arbitrate’s ambit.

Highlands, 350 F.3d at 577

(“Where the arbitration clause is broad, only an express provision excluding a
specific dispute, or the most forceful evidence of a purpose to exclude the claim
from arbitration, will remove the dispute from consideration by the arbitrators.”)
(citation omitted); Credit Acceptance Corp. v. Davisson, 644 F. Supp. 2d 948, 96061 (N.D. Ohio 2009) (construing arbitration clause in another retail installment
contract matter with Credit Acceptance Corporation -- “any dispute ‘arising out of
or in any way related to this Contract, or any default under this Contract, or the
collection of amounts due under this Contract . . . shall be fully resolved by
binding arbitration’” -- to cover analogous debt collection practice and consumer
protection claims under Ohio law).2
3.

Congress did not intend for FDCPA claims to be nonarbitrable

The Court now turns to the third, and in this case, last factor:3 Whether
Congress intended FDCPA claims to be nonarbitrable. “The burden is on the party
opposing arbitration . . . to show that Congress intended to preclude a waiver of
judicial remedies for the statutory rights at issue.” Shearson/Am. Exp., Inc. v.
McMahon, 482 U.S. 220, 227 (1987). Here, Plaintiff has neither raised the issue of
congressional intent nor presented any evidence that Congress intended FDCPA

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There is no disputing that Plaintiff’s claims against Weltman, an agent of Credit
Acceptance Corporation, also fall within the scope of this agreement.
3
Because all of Plaintiff’s claims are subject to arbitration, there is no need to
examine the fourth factor -- whether a stay is appropriate.
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claims to be nonarbitrable and has therefore not satisfied her burden. See also
Garrett v. Margolis, Pritzker, Epstein & Blatt, P.A., 861 F. Supp. 2d 724, 730
(E.D. Va. 2012) (“[T]here is no reason to believe . . . that Congress meant to
preclude arbitration in the circumstances of the case [involving a FDCPA
claim].”); Hodson v. Javitch, Block & Rathbone, LLP, 531 F. Supp. 2d 827, 831
(S.D. Ohio 2008) (“Congress did not intend FDCPA claims to be non-arbitrable.
Courts routinely permit arbitration of such claims.”).
In sum, the Court finds that Plaintiff’s claims in this instant litigation are
subject to arbitration.
C.

Credit Acceptance Corporation did not waive its right to arbitrate this
matter
Even if claims are clearly subject to arbitration, a party’s conduct may waive

its ability to compel arbitration. “A party may waive an agreement to arbitrate by
engaging in two courses of conduct: (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 Associates Corp. v. HL Operating Corp., 680 F.3d 713, 717 (6th Cir.
2012) (citations and internal quotations omitted).

“[B]ecause of the strong

presumption in favor of arbitration, waiver of the right to arbitration is not to be
lightly inferred.’”

Id. (citation omitted); see also JPD, Inc. v. Chronimed

Holdings, Inc., 539 F.3d 388, 393 (6th Cir. 2008) (“Though we have declined to
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sharply define what conduct suffices [to establish that a party acted inconsistent
with its right to arbitrate], it typically involves a defendant’s failure to timely
invoke arbitration after being sued or its interference with a plaintiff’s prelitigation efforts to arbitrate. The strong presumption in favor of arbitration works
against finding waiver in cases other than those with the most compelling fact
patterns.”) (citation omitted and emphasis added).

Here, Plaintiff claims that

Credit Acceptance Corporation “waived the agreement by filing a lawsuit against
Plaintiff in state court and obtaining the underlying judgment and later litigating
Plaintiff’s objections to collect upon the judgment.” (Plf’s Resp., Dkt. #14, at 8).
The Court disagrees.
1.

Credit Acceptance Corporation did not take any action
completely inconsistent with its right to arbitrate Plaintiff’s claims

At first blush, Plaintiff presents a colorable argument that Credit Acceptance
Corporation’s participation in the prior state litigation was completely inconsistent
with its right to arbitrate Plaintiff’s claims.

This is in large part due to the

Agreement to Arbitrate’s breadth, which covers “[a]ny dispute, controversy or
claim . . . arising out of [the RIC], or any default hereunder.” Credit Acceptance
Corporation’s collection lawsuit against Plaintiff was most certainly a “dispute,
controversy or claim” arising out of her defaulting on her obligations under the
RIC.
The problem with Plaintiff’s argument resides in the details of the
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Agreement to Arbitrate. The very next paragraph -- which Plaintiff conveniently
omits -- expressly permitted Credit Acceptance Corporation to file its state court
collection action without waiving its right to arbitrate:
Notwithstanding the foregoing , . . . Credit Acceptance Corporation
retain[s] the right . . . to enforce the monetary obligation of Buyer
under the Agreement through judicial relief. Such judicial relief may
take the form of a lawsuit. The institution and maintenance of any
action for judicial relief or exercise of self-help remedies shall not
constitute a waiver of the right to submit any controversy or claim to
arbitration, including any counterclaim asserted in any judicial action,
and including those controversies or claims arising from the exercise
of any such judicial relief to the exercise of self-help remedies.
To be sure, the Sixth Circuit has cautioned against a finding that a “no waiver”
clause is outcome-determinative when evaluating whether a party’s conduct
waived its right to contractual arbitration. Johnson, 680 F.3d at 717 (citation
omitted). “This makes sense because to allow the ‘no waiver’ clause to preclude a
finding of waiver would permit parties to waste scarce judicial time and effort and
hamper judges’ authority to control the course of the proceedings and allow parties
to test the water before taking the swim by delaying assertion of their right to
arbitration until the litigation is nearly complete.” Id. at 717 (alterations and
quotations omitted).

Rather, a court must undertake the “ordinary analysis”

discussed above as to whether a party took steps inconsistent with an arbitration
agreement. Id.
It is clear that Credit Acceptance Corporation’s suit against Plaintiff to

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enforce her monetary obligations under the RIC was not clearly inconsistent with
the terms of the Agreement to Arbitrate. First, though not outcome-determinative,
the Agreement to Arbitrate’s express language allowed Credit Acceptance
Corporation to file a debt collection lawsuit without waiving its arbitration rights.
Stated differently, Credit Acceptance Corporation’s acts were consistent with the
terms of the Agreement to Arbitrate. Second, the issues at play in the state court
litigation -- did Plaintiff breach the RIC and was Credit Acceptance Corporation
entitled to enforce a judgment -- are fundamentally different from Plaintiff’s unfair
debt collection practice claims under the FDCPA and MRCPA. Numerous courts
across the country have found that commencing a separate debt collection lawsuit
does not, on its own, waive the right to arbitration. See, e.g., Davisson, 644 F.
Supp. 2d at 957 (Credit Acceptance Corporation’s filing of a debt collection action
in state court under similar arbitration agreement did not waive its right to arbitrate
the debtor’s counterclaims arising under analogous debt collection practice and
consumer protection statutes under Ohio law); see also Hodson, 531 F. Supp. 2d at
831 (rejecting argument that creditor waived its right to arbitrate a debtor’s
FDCPA claim arising out of the creditor’s successful collection actions in state
court and the garnishment of the debtor’s wages); Fidelity Nat. Corp. v. Blakely,
305 F. Supp. 2d 639, 642 (S.D. Miss. 2003) (similar); Schwartz v. CACH, LLC,
2014 WL 298107, at *3 (D. Mass. Jan. 27, 2014) (similar); Morrow v. Soeder,

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2006 WL 2855024, at *3 (E.D. Mo. Oct. 3, 2006) (similar); Fields v. Howe, 2002
WL 418011, at *7-8 (S.D. Ind. March 14, 2002) (similar); cf Kennedy v.
Homecomings Fin. Network, 2006 WL 2983019, at *3 (E.D. La. Oct. 17, 2006) (no
waiver where arbitration agreement expressly carved out the defendant’s ability to
file foreclosure actions).
Plaintiff did not present any authority suggesting that commencing and
participating in a separate state court debt collection action that was expressly
contemplated by an arbitration agreement waived a creditor’s right to arbitrate
unfair debt collection practice claims arising out of the creditor’s allegedly
improper conduct during and subsequent to the state court proceedings.4 Nor could
this Court’s own research locate any such authority, which is not a surprise given
the strong preference towards arbitration. Indeed, holding otherwise would vitiate
the core tenant of the Federal Arbitration Act: “[T]he central or ‘primary’ purpose
of the FAA is to ensure that ‘private agreements to arbitrate are enforced according

4

In addition to citing Johnson, Plaintiff cites to Dean vs. Draughons Junior
College, Inc , 2012 WL 3308370 (M.D. Tenn. Aug. 13, 2012), for the proposition
that “a party can waive the right to arbitrate otherwise arbitrable claims based on
its participation in litigation.” (Plf’s Resp., Dkt. # 14, at 8). Dean is inapposite.
First, it addressed whether the sole act of removing an action to federal court
waives the right to enforce an arbitration agreement. 2012 WL 3308370, at *2-3.
It did not examine the factual scenario presented here. Second, the Dean Court
held that the Defendants did not take any action that was “completely inconsistent”
with the arbitration agreement because they “filed the instant Motion to Compel
Arbitration only one week after removing the action . . . , have not filed an Answer,
participated in discovery, or engaged in court-supervised settlement discussions.”
Id. at *3.
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to their terms.’” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682
(2010) (emphasis added).

Here, Plaintiff filed this instant litigation and

Defendants promptly moved to compel arbitration.

There was no action

inconsistent with the Agreement to Arbitrate in this matter.
2.

Plaintiff has not incurred prejudice

Even if Credit Acceptance Corporation’s actions could be construed as
inconsistent with the Agreement to Arbitrate, Plaintiff cannot show that she
incurred actual prejudice as a result of Credit Acceptance Corporation’s delay in
requesting arbitration.

In Johnson, the Sixth Circuit described the types of

prejudice necessary to not enforce an arbitration agreement:
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.
Prejudice can also be found where a party has gained a strategic
advantage by obtaining something in discovery that would be
unavailable in arbitration.
680 F.3d at 719-20 (internal citations and quotation marks omitted). Plaintiff does
not argue that compelling this matter to arbitration would result in relitigating
issues that Credit Acceptance Corporation lost elsewhere. In fact, she cannot -Credit Acceptance Corporation won against Plaintiff in state court on different
issues.

Nor does Plaintiff claim that Defendants “obtain[ed] something in

discovery” to their advantage. Instead, Plaintiff contends that she “incurred actual
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prejudice in the form of a judgment against her and the garnishment of her funds.”
(Plf’s Resp., Dkt. # 14, at 9).
Plaintiff’s argument fails to recognize that there must be a link between the
failure to move for arbitration and her injuries; she must point to prejudice that was
caused by a delay in moving for arbitration. The injuries to which she points -- a
state court judgment and the resulting garnishments -- were caused not by a failure
to timely move for arbitration, but rather arise out of an independent cause of
action relating to her default. Stated differently, her “injuries” are associated with
the outcome of the debt collection lawsuit and not with proceedings related to her
claims under the FDCPA and the MRCPA. Plaintiff’s alleged “prejudice” falls
well short of those cases finding that a significant delay or expense justified
negating an arbitration agreement. See, e.g., Hurley v. Deutsche Bank Trust Co.
Americas, 610 F.3d 334, 340 (6th Cir. 2010) (“For more than two years before
Defendants attempted to compel arbitration, Plaintiffs incurred the costs of active
litigation in two federal courts. Plaintiffs have employed four attorneys, undergone
extensive discovery, argued four summary judgment motions, and been subjected
to a change in venue at Defendants’ request. . . . Plaintiffs have suffered actual
prejudice as a result of Defendants’ delay.”).
IV. CONCLUSION
For all of the foregoing reasons,

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IT IS HEREBY ORDERED that Credit Acceptance Corporation’s Motion to
Compel Arbitration [Dkt. # 11] is granted.
IT IS FURTHER ORDERED that Plaintiff Laura Garcia and Defendants
Weltman, Weinberg & Reis Company of Michigan and Credit Acceptance
Corporation are directed to proceed with arbitration of Plaintiff’s claims pursuant
to the terms of the Agreement to Arbitrate.
IT IS FURTHER ORDERED that, in lieu of staying the proceedings, this
case is dismissed without prejudice to the parties’ right to move to re-open this
case for entry of an arbitration award or for any other relief to which the parties
may be entitled.
IT IS SO ORDERED.

Dated: April 30, 2014

s/Gerald E. Rosen
Chief Judge, United States District Court

I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on April 30, 2014, by electronic and/or ordinary mail.
s/Julie Owens
Case Manager, [phone]

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