Carter v. Rent-A-Center, Inc.

Filing 26

ORDER Granting 9 Motion to Compel Arbitration. IT IS FURTHER ORDERED that 7 Motion to Dismiss is Granted. According, Plaintiff's complaint is dismissed without prejudice. IT IS FURTHER ORDERED that 8 Motion to Strike is denied as moot. Signed by Chief Judge Gloria M. Navarro on 8/13/15. (Copies have been distributed pursuant to the NEF - PS)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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CHAD CARTER,
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Plaintiff,

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vs.

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RENT-A-CENTER, INC.,
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Defendant.

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Case No.: 2:15-cv-00178-GMN-CWH
ORDER

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Pending before the Court is the Motion to Dismiss (ECF No. 7), Motion to Strike (ECF

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No. 8), and Motion to Compel (ECF No. 9) filed by Defendant Rent-A-Center, Inc.

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I.

BACKGROUND
On August 14, 2014, Plaintiff and Defendant entered into a lease-purchase agreement

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-Purchase Agreement ). The Lease-Purchase Agreement incorporates an arbitration

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agreement

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Compel, ECF No. 9). Pursuant to the Arbitration Agreement,

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event of any dispute or claim between us, either [Plaintiff] or [Defendant] may elect to have

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that dispute or claim resolved by binding arbitration on an individual basis in accordance with

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relating in any way to any Consumer Contract entered into between [Plaintiff] and [Defendant]

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(Id.

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lease, rental-purchase agreement, or retail installment contract between the Consumers and

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Id.).

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On January 30, 2015, Plaintiff filed the instant action in this Court, alleging that the

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Agreement is void because it was a high-interest loan agreement and Defendant did not have

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the required license under NRS 604A. (Compl. ¶¶ 14 27, ECF No. 1). Accordingly, Plaintiff

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asserted a claim of willful violations of NRS 604A.400 and consumer fraud. (Id. ¶¶ 42 49).

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Shortly thereafter, Defendant filed the instant motions. (ECF Nos. 7 9).

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II.

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LEGAL STANDARD
Section 2 of Title 9 of the United States Code provides:

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A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by arbitration
a controversy thereafter arising out of such contract or transaction, or
the refusal to perform the whole or any part thereof, or an agreement
in writing to submit to arbitration an existing controversy arising out
of such a contract, transaction, or refusal, shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity
for the revocation of any contract.

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9 U.S.C. § 2. This statute has been ruled constitutional as it applies to contracts in interstate

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commerce and admiralty. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395,

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404 05 (1967). A federal court may adjudicate claims related to the enforceability of an

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arbitration clause, but once it is satisfied that the arbitration clause itself is valid and that the

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dispute between the parties is covered by the arbitration clause, the court must compel

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arbitration:

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Under § 4, with respect to a matter within the jurisdiction of the
federal courts save for the existence of an arbitration clause, the
federal court is instructed to order arbitration to proceed once it is

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Accordingly, if the claim is fraud in the inducement of the
arbitration clause itself an issue which goes to the making' of the
agreement to arbitrate the federal court may proceed to adjudicate

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it. But the statutory language does not permit the federal court to
consider claims of fraud in the inducement of the contract generally.

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Id. at 403 04 (citing 9 U.S.C. § 4) (footnotes omitted).
In 1991, the Ninth Circuit limited the Prima Paint

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avoid or rescind a contract

not to challenges going to the very existence of a contract that a

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party claims never

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Inc., 925 F.2d 1136, 1140 (9th Cir. 1991). In other words, for a time in the Ninth Circuit, an

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arbitration clause was not binding if a party could demonstrate that the contract never existed

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and was void as a whole (e.g., for forgery, lack of agency, or fraud in the factum), whereas a

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contract that was merely voidable (e.g., for infancy, fraud in the inducement, mistake, duress,

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or breach of warranty) had to be attacked based on the voidability of the arbitration clause

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itself, if a party wished to avoid arbitration. See id.

Three Valleys Mun. Water Dist. v. E.F. Hutton & Co.,

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Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 446 (2006).

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The Supreme Court specifically rejected the argument that a court must first determine whether

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any contract exists, and that to do this it must examine whether the purported contract is void

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ab initio under state law. Id. at 447 48. The Cou
Id. at 448. Thus,

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validity of the contract as a whole, and not specifically to the arbitration clause, must go to the
Id. at 449. The Supreme Court reaffirmed that rule in Rent A Center, West, Inc. v.

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Jackson, 130 S. Ct. 2772 (2010).

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III.

DISCUSSION

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A. Motion to Compel Arbitration

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Plaintiff does not dispute that the Arbitration Agreement, which is incorporated into the

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Lease-Purchase Agreement, does not cover the claims at issue. Rather, Plaintiff contends that

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the Agreement is void under NRS 604A.900(1), and because the Agreement

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no agreement between [Defendant] and [Plaintiff], which in turn means that there is no

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9:2 9, ECF No. 19). However, this argument is unavailing in light of Supreme Court law. As

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of whether the challenge is

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brought in federal or state court, a challenge to the validity of the contract as a whole, and not

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specifically to the arbitration clause, must go to the arbitrator. Buckeye, 546 U.S. at 449.

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Agreement. Rather, Plaintiff challenges the invalidity of the Lease-Purchase Agreement based

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on

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must go to the arbitrator.

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B. Motion to Dismiss

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Having concluded that Plaintiff has not met its burden of demonstrating that the

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Arbitration Agreement, which is incorporated into the Lease-Purchase Agreement, is

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unenforceable, the Court must now decide whether to dismiss this action or stay it for the

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pendency of the arbitration. Failure to exhaust non-judicial remedies, such as the failure to

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arbitrate under an

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a Rule 12(b) motion to dismiss. See Inlandboatmens Union of Pacific v. Dutra Group, 279 F.3d

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1075, 1078 n. 2, 1083 84 (9th Cir. 2002). Therefore, because Plaintiff has failed to exhaust

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arbitration here, dismissal without prejudice is appropriate.

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IV.

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CONCLUSION
IT IS HEREBY ORDERED that

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IT IS FURTHER ORDERED

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GRANTED.
IT IS FURTHER ORDERED
DENIED as moot.
DATED this 13th day of August, 2015.

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___________________________________
Gloria M. Navarro, Chief Judge
United States District Judge

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