Credit Acceptance Corporation v. Ledbetter

Filing 14

ORDER denying 8 Motion to Compel. Signed by Magistrate Judge David A. Sanders on 9/7/2016. (rrz)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF MISSISSIPPI
ABERDEEN DIVISION

CREDIT ACCEPTANCE CORPORATION

PLAINTIFF

VS.

CIVIL ACTION NO: 1:16CV70-DAS

LAURA LEDBETTER

DEFENDANT

ORDER
This matter is before the court on plaintiff Credit Acceptance Corporation’s motion [# 8]
to compel arbitration. Having considered the motion, the court finds that it should be denied for
the reasons that follow.
I. BACKGROUND
This action stems from a transaction between Laura Ledbetter and Global Auto Sales &
Brokers, Inc. (“Global”) on September 8th, 2015. On that date, Ledbetter purchased a 2009
Chevrolet Impala and allegedly entered into a retail installment contract for the purchase price of
the vehicle with Global. Shortly after the purchase was consummated, Global assigned the retail
installment contract to the plaintiff in this action, Credit Acceptance Corporation (“Credit
Acceptance”).
Under the terms of the contract, Ledbetter was required to make forty-five monthly
payments in the amount of $293.28, beginning on October 8th, 2015. Ledbetter made four
monthly payments on the vehicle; however, one of those payments was ultimately reversed for
insufficient funds. Shortly after her fourth payment, Ledbetter defaulted and filed suit against
Global and Credit Acceptance in the Circuit Court of Alcorn County, Mississippi. In her
complaint, Ledbetter alleged, among other things, that: 1) Global misrepresented the quality,
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mileage and condition of the Impala; 2) she did not sign the retail installment contract or agree to
any of the terms listed therein; and 3) Global negligently, intentionally and/or maliciously
created and imposed a credit liability upon her without her knowledge or consent.
In response to her state court action, Credit Acceptance initiated this suit pursuant to the
Federal Arbitration Act on April 26th, 2016. Subsequently, Credit Acceptance filed the motion
presently before the court, which seeks to enforce an arbitration provision within the retail
installment contract. Although Ledbetter alleges never to have signed the retail installment
contract, and her physical signature does not appear anywhere on the document, Credit
Acceptance notes that her electronic signature appears in several places on the contract. Credit
Acceptance also attached a document titled “Declaration Acknowledging Electronic Signature
Process” to its motion. On this document, a wet signature bearing Ledbetter’s name appears
below the following language:
By signing below, I, LAURA LEDBETTER…hereby state that:
1. I read, understood, and agreed to the eSign Consent form and consented to use
electronic signatures to sign all documents necessary to process a retail
installment transaction with the Seller named above.
2. I was given the opportunity to review a paper version of the retail installment
contract I was being asked to sign prior to using electronic signatures to
electronically sign the documents.
3. I was in physical control of the key board, mouse or other device to click a button,
signature box, or initial box that applied my e-signature to the documents with the
Intent to sign the documents as if I provided my handwritten signature on the
documents.
4. I received a fully executed copy of the retail installment contract.
Doc. 8-2. In an affidavit attached to her answer, however, Ledbetter reiterates that she did not
sign this document and states the signature is not genuine.

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In her response to the motion to compel arbitration, Ledbetter does not address the
substantive arguments made by Credit Acceptance. Rather, she attached a signed order from the
Alcorn County Circuit Court dismissing her state court action without prejudice. In light of the
dismissal, Ledbetter argues the motion to compel arbitration is now moot. However, because
Ledbetter’s state court action was dismissed without prejudice, Credit Acceptance argues that its
motion is not moot. Because Ledbetter is free to refile the claims she has recently dismissed,
Credit Acceptance argues that an Article III controversy persists.
II. DISCUSSION
The central issue is whether the retail installment contract’s arbitration clause applies to
Ledbetter’s claims. Crucial to this question is whether she did, in fact, sign the Declaration
Acknowledging Electronic Signature Process form (“declaration form”) and the retail installment
contract. However, the court must first determine whether Credit Acceptance’s motion to
compel arbitration is now moot in light of Ledbetter voluntarily dismissing her state court action.
A. Mootness
Mootness “is a jurisdictional issue because it implicates Article III’s requirement for a
live case or controversy.” United States v. Lares-Meraz, 452 F.3d 352, 355 (5th Cir. 2006). “A
moot case presents no Article III case or controversy, and a court has no constitutional
jurisdiction to resolve the issues it presents.” Id. at 354-55 (internal quotation marks omitted).
However, “[a]s long as the parties have a concrete interest, however small, in the outcome of the
litigation, the case is not moot.” Knox v. Service Employees Intern. Union, Local 1000, 132 S.
Ct. 2277, 2287 (2012), (citing Ellis v. Railway Clerks, 466 U.S. 435, 442 (1984)). Moreover,
“[t]he voluntary cessation of challenged conduct does not ordinarily render a case moot because
a dismissal for mootness would permit a resumption of the challenged conduct as soon as the

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case is dismissed.” Id. at 2287. Therefore, “[d]efendant-induced mootness is viewed with
caution,” Fontenot v. McCraw, 777 F.3d 741, 747 (5th Cir. 2015) (internal quotation marks
omitted), and the defendant “bears the formidable burden of showing that it is absolutely clear
the allegedly wrongful behavior could not reasonably be expected to occur.” Friend of the
Earth, Inc. v. Laidlaw Envtl. Servs. (TOC) Inc., 528 U.S. 167, 190 (2000).
The challenged conduct in this case is Ledbetter’s alleged violation of an agreement to
arbitrate by filing suit in the Circuit Court of Alcorn County. Although that action has since
been dismissed and no claims are currently pending against it, Credit Acceptance correctly points
out that nothing bars Ledbetter from refiling her claims because the action was dismissed without
prejudice. Furthermore, Credit Acceptance presumably filed the instant action for reasons other
than merely seeking protection from future state court proceedings. Ledbetter is allegedly in
arrears with her car payments to Credit Acceptance. Therefore, the court finds that an Article III
controversy has survived Ledbetter’s voluntary dismissal.
B. Arbitration Clause
The court must now determine whether it should enforce the arbitration provision in the
retail installment contract. In deciding whether a motion to compel arbitration should be granted,
courts are first required to determine whether the parties agreed to arbitrate the dispute in
question. American Heritage Life Ins. Co. v. Lang, 321 F.3d 533, 537 (5th Cir. 2003). This
determination involves two considerations: “(1) whether there is a valid agreement to arbitrate
between the parties; and (2) whether the dispute in question falls within the scope of that
arbitration agreement.” Id. These determinations are made according to state contract law. Banc
One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). Notwithstanding the strong
federal policy favoring arbitration, “this federal policy favoring arbitration does not apply to the

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determination of whether there is a valid agreement to arbitrate between the parties…”
Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002).
Although not raised in Ledbetter’s response, which focused solely on the issue of
mootness, other filings call into question whether the parties agreed to arbitrate the disputes in
question. As proof of the agreement, Credit Acceptance attached a Declaration Acknowledging
Electronic Signature Process form. The declaration form bears a wet signature in Ledbetter’s
name. Credit Acceptance also attached a retail installment contract that Ledbetter purportedly
signed electronically, which contains the arbitration provision. However, in an affidavit attached
to her answer, Ledbetter claims she did not sign either document. She also specifically states
that the wet signature on the declaration form is not her signature. In support of this contention,
Ledbetter attached a document with her real signature—an Application for Certificate of Title—
to prove the signature on the declaration form is not genuine.
Credit Acceptance, however, argues that Ledbetter’s claims regarding the authenticity of
the signatures relate to the validity of the underlying transaction as a whole, rather than to the
arbitration provision specifically. Therefore, pursuant to the Supreme Court’s holding in Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), it contends the arbitrability of
her claims and defenses must be resolved through arbitration. However, Credit Acceptance’s
reliance on Prima Paint is misplaced because the parties in that case did not challenge the
existence of an agreement. Rather, the party opposing arbitration was seeking to void an existing
agreement, and incidentally, the arbitration provision therein, on the grounds of fraudulent
inducement. Id. at 404.
Where, as in the present case, “the very existence of an agreement is challenged, ordering
arbitration could result in an arbitrator deciding that no agreement was ever formed. Such an

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outcome would be a statement that the arbitrator never had any authority to decide the issue.”
Will-Drill Resources, Inc. v. Samson Resources Co., 352 F.3d 211, 219 (5th Cir. 2003) (emphasis
in original). Therefore, the court rejects Credit Acceptance’s argument that an arbitrator should
decide the authenticity of the signatures on the declaration form and the retail installment
contract. See Jolley v. Welch, 904 F.3d 988, 993-94 (5th Cir. 1990) (rejecting the argument that a
forgery should have been presented to an arbitrator). Accordingly, the court finds that Ledbetter
has met the threshold burden of establishing that the agreement to arbitrate is in issue: (1) she
unequivocally denied signing the document containing the arbitration provision, (2) produced an
affidavit providing as much, and (3) provided evidence of her genuine signature to prove the
signature on the declaration form was not her own. See Chester v. DirecTV, L.L.C., 607 Fed.
App’x 362, 364-65 (5th Cir. 2015) (upholding district court’s determination to summarily
proceed to trial where plaintiff unequivocally denied signing arbitration agreement and produced
his affidavit providing as such); see also Prevost v. Burns Int’l Sec. Servs. Corp., 126 F. Supp. 2d
439, 441-42 (S.D. Tex. 2000) (finding sufficient factual issue under 9 U.S.C. § 4 where there
was a combination of plaintiff’s sworn affidavit and evidence of two distinct signature types).
III. CONCLUSION
The Federal Arbitration Act directs that “[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. If no jury trial be demanded by the party alleged to be in default, …the court
shall hear and determine such issue. 9 U.S.C. § 4. Where a jury trial has not been demanded, a
district court may satisfy its duty under § 4 by holding an evidentiary hearing. See Chester, 607
Fed. App’x at 365. As discussed above, the very existence of an agreement has been placed in
issue by Ledbetter’s claim that she did not sign the retail installment contract or declaration form.

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Because neither party has specifically requested a jury trial under 9 U.S.C. § 4, the court finds
that an evidentiary hearing shall be conducted to determine the validity of signatures on the retail
installment contract and declaration form.
IT IS, THEREFORE, ORDERED that Credit Acceptance Corporation’s motion to
compel arbitration is denied without prejudice to renew following an evidentiary hearing on
whether Ledbetter signed the retail installment contract or Declaration Acknowledging
Electronic Signature Process form. The evidentiary hearing will be set by a separate notice.
SO ORDERED this, the 7th day of September, 2016.
/s/ David A. Sanders
UNITED STATES MAGISTRATE JUDGE

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