Schardan v. Allied Interstate, LLC
OPINION MEMORANDUM AND ORDER IT IS HEREBY ORDERED that Defendants Motion to Compel Arbitration and Stay Proceedings, [Doc No. 19], is granted. IT IS FURTHER ORDERED that Plaintiffs Motion for Partial Summary Judgment, [Doc. No. 21], is denied, withou t prejudice. IT IS FURTHER ORDERED that Defendants Motion to Stay Proceedings regarding Plaintiffs Motion for Summary Judgment, [Doc. No. 29], is denied, as moot. 21 29 19 Signed by District Judge Henry Edward Autrey on 2/8/17. (CLA)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
ALLIED INTERSTATE, LLC,
No. 4:15CV1613 HEA
OPINION, MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Motion to Compel
Arbitration and Stay Proceedings Pending the Completion of Arbitration [Doc 19],
Plaintiff’s Motion for Partial Summary Judgment, [Doc. No. 21], and Defendant’s
Motion to Stay Proceedings regarding Plaintiff’s Motion for Summary Judgment,
[Doc. No. 29]. For the reasons set forth below, the Motion to Compel Arbitration
Plaintiff (Schardan) filed this action against Defendant (Allied) for
violations of the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C.
227 et seq.; the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. 1692 et
seq.; and invasion of privacy. Plaintiff opened a J.C. Penny credit card on August
29, 2010 (the “J.C. Penny Account”) and a Walmart credit card (the “Walmart
Account”) on June 8, 2014 (together the “Accounts). Both cards were issued by
GE Capital Retail Bank, now Synchrony Bank, which is headquartered in Utah.
The agreements of the Accounts (the “Agreements”) are identical, except for the
names of each retail store.
Defendant asserts it contacted Plaintiff only after being contracted by
Synchrony Bank to collect an outstanding debt Plaintiff owed for defaulting on her
credit cards. Defendant asserts that the contract signed between Plaintiff and
Synchrony provides that all disputes arising from the contract must be settled
through arbitration. On May 23, 2017, Defendant filed a Motion to Compel
Arbitration and Stay Proceedings Pending the Completion of Arbitration. In
response, Plaintiff argues that the Agreements are not arbitrable and, in the
alternative, that Defendant has waived the right to arbitration through its
participation in litigation.
Considerations to Compel Arbitration
Before compelling arbitration, a district court must determine (1) whether
there is a valid arbitration agreement and (2) whether the particular dispute falls
within the terms of that agreement. Robinson v. EOR-ARK, LLC, 841 F.3d 781,
783 (8th Cir. 2016). Any doubts raised in construing contract language on
arbitrability should be resolved in favor of arbitration. CD Partners, LLC v.
Grizzle, 424 F.3d 795, 795 (8th Cir. 2005).
Under Section 2 of the Federal Arbitration Act (FAA), “written arbitration
agreements [are] valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of a contract.” Anderson v. Carlisle, 129
S.Ct. 1896, 1901 (2009). Section 2 “creates substantive federal law regarding the
enforceability of arbitration agreements, requiring courts to place such agreements
upon the same footing as other contracts.” Id. (quotations omitted). “Section 3, in
turn, allows litigants already in federal court to invoke agreements made
enforceable by Section 2.” Id. “That provision requires the court, on application of
one of the parties, to stay the action if it involves an issue referable to arbitration
under an agreement in writing.” Id.
A. A valid arbitration agreement between Plaintiff and Synchrony Bank exists.
State contract law governs whether the parties have entered into a valid
arbitration agreement. Robinson, 841 F.3d at 784. Relevant to the Court’s
determination as to whether a valid agreement exists are the actual terms of the
agreement. Id. The Agreements between Plaintiff and Synchrony state:
“This Agreement. This is an Agreement between you
and GE Capital Bank, 170 Election Road, Suite 125,
Draper, UT 84020, for your credit card account shown
above. By opening or using this account, you agree to the
terms of the entire Agreement. The entire Agreement
includes the four sections of this document, the
application you submitted in connection with the
account. These documents replace any other agreements
relating to your account that you or we made earlier or at
the same time.”
“Governing Law: Except as provided in the Resolving a
Dispute with Arbitration section, this Agreement and
your account are governed by federal law, and to the
extent state law applies, the laws of Utah without regard
to its conflicts of laws principles. This agreement has
been accepted by us in Utah.”
“Resolving a Dispute with Arbitration: Please read this
section carefully. If you do not reject it, this section will
apply to your account, and most disputes between you
and us will be subject to individual arbitration. . . .”
“What Claims are Subject to Arbitration:
1. If either you or we made a demand for arbitration, you
and we must arbitrate any dispute or claim between you
or any other user of your account, and us, our affiliates,
agents and/or (Wal-Mart Stores Inc./ J.C. Penny) if it
relates to your account as noted below.
2. We will not require you to arbitrate: (1) any individual
case in small claims court or your state’s equivalent, so
long as it remains an individual case in that court; or (2) a
case we file to collect money you owe us. However, if
you respond to the collection lawsuit by claiming any
wrongdoing, we may require you to arbitrate.”
“Governing Law for Arbitration: This Arbitration
section of your agreement is governed by the Federal
Arbitration Act (FAA). Utah law shall apply to the extent
state law is relevant under the FAA. The arbitrator’s
decision will be final and binding, except for any appeal
right under the FAA. Any court with jurisdiction may
enter judgment upon the arbitrator’s award.”
“How to reject this section. You may reject this
arbitration section of your Agreement. If you do that,
only a court may be used to resolve any dispute or claim.
To reject this section, you must send us a notice within
60 days after you open your account or we first provided
you with your right to reject this section. The notice must
include your name, address and account number, and
must be mailed to GE Capital Retail Bank, PO Box
965012, Orlando, FL 32896-5012. This is the only way
you can reject this section.”
Utah contract law governs the Agreements. Pursuant to the Utah Statute of
Frauds, “A credit card agreement is binding and enforceable without any signature
by the party to be charged if:
The debtor is provided with a written copy of the terms of the
The agreement provides that any use of the credit offered shall
constitute the acceptance of those terms;
After the debtor received the agreement, the debtor, or a person
authorized by the debtor, requests funds pursuant to the credit
agreement or otherwise used the credit offered.”
Utah Code Ann §25-5-4(2)(e), MBNA America Bank, N.A. v. Goodman, 140 P.3d
589, 592 (Utah App. 2006).
Plaintiff does not dispute receiving written copies of the terms of the
Agreements, either when she opened each line of credit, or in the mail, in her
Complaint. Nor does she attest to not receiving them in her Affidavit. Rather, she
admits that Defendant was attempting to collect a debt stemming from these
Agreements. Further, she requests that this Court release her from the debt.
Plaintiff agreed to the terms of the Agreements by using her credit card.
Though it was her right, Plaintiff did not reject the Arbitration Agreement in her
Agreements by sending a notice within 60 days of opening her account, or 60 days
after Synchrony provided her with an updated Agreement. Both Arbitration
Agreements between Plaintiff and Synchrony are valid.
B. The dispute between Plaintiff and Defendant falls within the terms of the
It is an elementary contract law is that, as a general rule, only parties to the
contract may enforce the rights and obligations created by the contract. Robinson,
841 F.3d at 783. Only if the written contract’s clear intent is to confer rights upon
a third party may that third party enforce rights and obligations of the contract. Id.
A litigant who was not a party to an arbitration agreement may invoke the Federal
Arbitration Act (FAA) if the relevant state contact law allows the non-litigant to
enforce the agreement. Anderson v. Carlisle, 129 S.Ct. 1896, 1903 (2009). As
established under the terms of the Agreements, Utah state contract law is
The existence of a third party beneficiary status is determined by examining
a written contract. Wagner v. Clifton, 62 P.3d 440, 442 (Utah 2002). The written
contract must show that the contracting parties clearly intended to confer a separate
and distinct benefit upon the third party. Id. If the language within the four corners
of the contract is unambiguous, the parties’ intentions are determined from the
plain meaning of the contractual language, and the contract may be interpreted as a
matter of law. Id. Whether the contract itself is ambiguous is also a question of
law. Id. An ambiguity exists if the contract provision is susceptible to more than
one reasonable interpretation. Id
Here, the Agreements are unambiguous regarding third parties.
“Consent to Communications: You consent to us
contacting you using all channels of communication and
for all purposes. We will use the contact information you
provide to us. You also consent to us and any other
owner or servicer of your account contacting you using
any communication channel. This may include text
messages, automatic telephone dialing systems and/or an
artificial or prerecorded voice. This consent even applies
if you are charged for the call under your phone plan.
You are responsible for any charges that may be billed to
you by your communications carrier when we contact
“Assignment: We may sell, assign or transfer any or all
of our rights or duties under this Agreement or your
account, including our rights to payments. We do not
have to give you prior notice of such action. You may not
sell, assign or transfer any of your rights or duties under
this Agreement or your account.”
In both the “Consent to Communications” and “Assignment” the
Agreements clearly demonstrate that Synchrony Bank anticipated its use of
contracted debt collectors upon default of borrowers. The Agreements also clearly
show the intentions of Synchrony to assert its right to sell, assign, or transfer any or
all of their rights to a third party, which would be provided with all of the contact
information provided by Plaintiff to Synchrony upon opening her account. Here,
the Defendant is that third party. Upon Plaintiff’s default on the Agreements,
Synchrony asserted its rights to contract Defendant for the collection of the
overdue balance. Plaintiff agreed to be contacted by Synchrony or its agents under
the terms of the Agreements.
The Arbitration Agreements are “valid, irrevocable, and enforceable” under
the FAA. The dispute between Plaintiff and Defendant falls within the terms of
those Agreements. The dispute must go to arbitration for the claims.
Waiver of Right to Arbitrate
Plaintiff argues that, in the event this Court grants Defendant’s Motion to
Compel Arbitration, this Court should find that Defendant has waived its right to
arbitration through its participation in pre-trial litigation.
Waiver of a contractual right occurs when a party to a contract intentionally
acts in a manner inconsistent with its contractual rights, and, as a result, prejudice
accrues to the opposing party or parties to the contract. ASC Utah, Inc. v. Wolf
Mountain Resorts, 245 P.3d 184, 193 (Utah 2010). In the context of arbitration,
this amounts to a two-part test, known as the Chandler test, to determine if a party
has waived its contractual right: (1) whether the party seeking to assert the right
has participated in litigation to the point inconsistent with the intent to arbitrate,
and (2) whether the opposing party has been prejudiced as a result. Id. at 194.
In order to determine whether a party substantially participated in litigation,
as required to waive its right to arbitration, the Court must consider the actions of
the party seeking arbitration, and whether those actions evidence intent to submit
to the jurisdiction of the court and pursue redress through litigation. Id. Factors to
be considered include whether the party seeking arbitration ever asserted its right
to do so, whether the party participated in extensive motions before the court,
participated in extensive discovery, or allowed a considerable amount of time to
pass before invoking its right to arbitration. Id.
Here, in its Answer to Plaintiff’s First Amended Complaint, Defendant
stated, “Upon information and belief, plaintiff may be contractually obligated to
arbitrate any dispute, claim or controversy which arises out of the subject matter
set forth in the instant litigation,” on December 4, 2015. Defendant filed the
Motion to Compel Arbitration and Stay Proceedings on May, 23, 2016. Between
Defendant’s answer and the motion before the Court today, Plaintiff and Defendant
filed a Joint Scheduling Plan on February 18, 2016 by order of the Court, and the
case was set for trial on March 13, 2017. Plaintiff also filed a Motion to Compel
the Production of Documents by Defendant on May 4, 2016, and Defendant filed
its Response in Opposition on May 11, 2016. Defendant filed this Motion to
Compel Arbitration on May 23, 2016. On the same day, but after the filing of
Defendant’s motion here, the Plaintiff filed a Motion for Partial Summary
Judgment and included in her filing discovery documents.
Despite Plaintiff’s assertion that Defendant participated in extensive pre-trial
litigation, the record simply does not support such a conclusion. Defendant
asserted its right to arbitration in its Answer to the Amended Complaint by
Plaintiff. The Joint Scheduling Plan was ordered by the Court. Upon Plaintiff’s
Motion to Compel Production of Documents, Defendant filed a response in
opposition 7 days later and its Motion to Compel Arbitration 12 days after that.
There has been no extensive pre-trial litigation.
Defendant has not waived its right to arbitration by participating in extensive
pre-trial litigation. Therefore, it is unnecessary for the Court to continue to the
second step of the Chandler test. Plaintiff has not been prejudiced as there has been
no participation in litigation to the point inconsistent with the intent to arbitrate by
Based on the foregoing, the Court concludes Defendant, as a third party,
may invoke the Arbitration Agreements between Plaintiff and Synchrony Bank,
and that Defendant has not waived its right to arbitration. The Motion to Compel
Arbitration and Stay Proceedings will be granted.
IT IS HEREBY ORDERED that Defendant’s Motion to Compel
Arbitration and Stay Proceedings, [Doc No. 19], is granted.
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IT IS FURTHER ORDERED that Plaintiff’s Motion for Partial Summary
Judgment, [Doc. No. 21], is denied, without prejudice.
IT IS FURTHER ORDERED that Defendant’s Motion to Stay
Proceedings regarding Plaintiff’s Motion for Summary Judgment, [Doc. No. 29], is
denied, as moot.
Dated this 8th day of February, 2017.
HENRY EDWARD AUTREY
UNITED STATES DISTRICT JUDGE
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