PAGE v. N.A.R., INC.
Filing
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OPINION. Signed by Judge Katharine S. Hayden on 3/26/19. (cm, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
DWAYNE PAGE, on behalf of himself and all
others similarly situated,
Civil No.: 18-cv-2200 (KSH) (CLW)
Plaintiff,
v.
N.A.R. INC.,
OPINION
Defendant.
Katharine S. Hayden, U.S.D.J.
I.
Introduction
In this putative class action, plaintiff Dwayne Page (“Page”) asserts that defendant
N.A.R. Inc. (“NAR”), a debt collector, violated the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692 et seq., by sending him a collection letter with an amount due and
stating that because of “interest or other charges that may vary from day to day,” the amount due
could be higher on the date of payment. Page asserts that the statement was false because no
interest or other charges were or could be added to his debt. NAR has moved to stay the action
and to compel arbitration on an individual basis (D.E. 5), relying on an arbitration provision in
the agreement between Page and the original creditor. Page argues that NAR cannot invoke that
provision. The motion is fully briefed, and the Court decides it without oral argument. See L.
Civ. R. 78.1.
II.
Background
Page’s complaint alleges as follows. At some point before June 1, 2016, Page incurred a
debt to Crest Financial Services, LLC (“Crest”) for a furniture lease. (D.E. 1, Compl. ¶ 14.) Page
fell behind on repaying the debt, which was past due and in default when it was placed with
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NAR for collection. (Id. ¶¶ 19, 21.) On or about February 16, 2017, NAR mailed Page a letter
that listed Crest as the creditor. (Id. ¶¶ 23-24, 33 & Ex. A.) It stated:
As of the date of this letter, this is the amount due. Because of interest or other
charges that may vary from day to day, the amount due on the day you pay may
be greater.
(Id. ¶ 34 & Ex. A.) But neither Crest nor NAR ever added interest or other charges onto the
balance after Crest placed the debt with NAR for collection, and according to the complaint, they
could not have legally or contractually done so. (Id. ¶¶ 35-45.) Page alleges that NAR’s letter is
a computer-generated form that NAR had sent to hundreds of New Jersey consumers over the
previous year, and that it is NAR’s “policy and practice” to send letters in that form to collect
consumer debts which “falsely threaten consumers that interest and other charges may be added
to the balance due on their debt.” (Id. ¶¶ 48-51.)
On February 15, 2018, Page filed a putative class action complaint on behalf of himself
and all other individuals with a New Jersey address who were sent a letter from NAR between
February 15, 2017 and March 7, 2018, that was “materially identical or substantially similar” to
what he received. (Id. ¶ 63.) The complaint asserts one count for violation of the FDCPA, 15
U.S.C. § 1692e, which prohibits debt collectors from using “any false, deceptive, or misleading
representation or means in connection with the collection of any debt,” including false
representations of the “character, amount, or legal status of any debt,” threats to take action that
“cannot legally be taken or that is not intended to be taken,” and using false representations or
deceptive means to “collect or attempt to collect any debt or to obtain information concerning a
consumer.” 15 U.S.C. § 1692e(2)(A), (5), and (10). (See id. ¶¶ 52-61.) Page alleges NAR’s
statement in the February 16, 2017 letter that interest or other charges may increase the balance
of the debt was false, deceptive, and misleading under the “least sophisticated consumer”
standard. (Id. ¶¶ 55-58.)
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In response, NAR has moved to stay the case and compel arbitration of Page’s claims on
an individual basis under the Federal Arbitration Act, 9 U.S.C. §§ 3 and 4, and to strike Page’s
class action claims with prejudice under Fed. R. Civ. P. 12(f). NAR argues that Page signed a
lease agreement regarding his Crest account that (1) requires all claims related to that account to
be submitted to binding arbitration, and (2) waives his right to bring class action claims. (D.E. 6,
Moving Br. 6.)
NAR has attached the lease agreement to its motion. (D.E. 6-1, Lease Agreement.) The
agreement provides that “Unless prohibited by applicable law and unless you reject the
Arbitration Provision in accordance with subsection (a)(ii) below, you and we agree that either
party may elect to arbitrate or require arbitration of any Claim under this Arbitration
Provision.” (Lease Agreement § 16(a)(i) (emphasis added).) The agreement defines, for
purposes of the agreement generally, “we,” “our,” and “us” to mean “Crest Financial Services,
LLC and its successors and assigns.” (Id. § 1.) The arbitration provision also contains
definitions specific to it, including a definition that expands the meaning of “we,” “us,” and
“our” beyond only Crest and its successors and assigns to also encompass “Related Parties”:
(b) Certain Definitions. As used in this Arbitration Provision, the following terms
have the following meanings:
(i) References to “we,” “us” and “our” include our “Related Parties” – all our
parent companies, subsidiaries and affiliates, and our and their employees,
directors, officers, shareholders, governors, managers and members. Our
“Related Parties” also include third parties that you bring a Claim against at the
same time you bring a Claim against us or any other Related Party, including,
without limitation, the merchant who sold us the Property we then leased to you.
(Id. § 16(b)(i).) In its moving brief, NAR relied on the “Related Parties” language for its
purported entitlement to enforce the arbitration provision against Page. (Moving Br. 11, 21-22.)
In opposition, Page does not dispute that he signed the agreement or challenge its
authenticity, but contends that its plain language does not allow NAR, a non-party to the
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agreement and one that does not meet the definition of a “Related Party,” to compel arbitration.
Page also notes that there had been no “successor or assignee” of Crest, given that the debt “is
still allegedly owed to” Crest. (D.E. 8, Opp. Br. 11 n.1.) Page further contends that the dispute
between Page and NAR is outside the scope of the arbitration provision in the agreement
between Page and Crest, and that the class waiver language in the agreement cannot be enforced
by NAR.
Then, with its reply brief, NAR produced an assignment agreement between it and Crest,
and now argues that it is entitled to enforce the arbitration provision and class waiver in the lease
agreement because Crest assigned its rights to Page’s account to NAR. (See D.E. 10, Reply Br.
4; D.E. 10-1, Murray Decl., Ex. A.) NAR also asserts that, alternatively, it is a “Related Party”
based on the assignment, claiming that renders it an “affiliate” of Crest. (Id. at 8.) In response,
Page has sought leave to file a sur-reply, and attached a proposed brief in which he objects to the
newly-introduced assignment and requests that the Court either disregard it or order discovery.
(D.E. 11, Sur-Reply.)
III.
Discussion
“[U]pon being satisfied that the making of the agreement for arbitration or the failure to
comply therewith is not in issue, the court shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4. A court may compel
arbitration if (1) there is an agreement to arbitrate, and (2) the dispute is within the agreement’s
scope. Century Indem. Co. v. Certain Underwriters at Lloyd’s, 584 F.3d 513, 523 (3d Cir. 2009).
The crux of the parties’ dispute is the first requirement: that an agreement to arbitrate
exists. NAR’s other arguments – including whether the dispute falls within the scope of the
agreement and whether Page waived his right to bring a class action – depend on a favorable
ruling on the first requirement.
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It is undisputed that NAR was not a party to the lease agreement containing the
arbitration provision. Fundamentally, arbitration is a “‘matter of contract between the parties.’”
Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 771 (3d Cir. 2013) (quoting
Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)). The
presumption favoring arbitration does not apply to non-signatories to the agreement; “it applies
only when both parties have consented to and are bound by the arbitration clause.” Griswold v.
Coventry First LLC, 762 F.3d 264, 271 (3d Cir. 2014). Still, there are circumstances under state
contract law in which a non-signatory may enforce or be bound to an arbitration agreement. See
id.; see also White v. Sunoco, Inc., 870 F.3d 257, 262 (3d Cir. 2017) (“‘[T]raditional principles’
of state law allow a contract to be enforced by or against nonparties through ‘assumption,
piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories,
waiver and estoppel.’” (quoting Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009)).1
NAR initially argued that it is entitled to enforce the arbitration provision because it falls
within the definition of “Related Parties” as that term appears in § 16(b)(i), but offered no
evidence or factual allegations that would permit such a conclusion. Instead, NAR appears to
have conflated the issue of what claims are subject to arbitration with the issue of what entity
may compel arbitration. See White, 870 F.3d at 267 (movant’s argument failed “because it
confuses the nature of the claims covered by the arbitration clause with the question of who can
compel arbitration”).
When Page challenged NAR’s argument, NAR produced a declaration from an
operations department manager, Jameson Murray, that attached a purported assignment from
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The existence of an agreement to arbitrate is determined by application of ordinary state-law
principles governing contract formation. Century Indem. Co., 584 F.3d at 524. If a valid
agreement to arbitrate is found, whether the dispute is within the agreement’s scope is a matter of
federal law. Id.
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Crest to NAR. The assignment, which is undated and unsigned by NAR, states that Crest will
“periodically assign” accounts to NAR for collection, and that Crest assigns its “claims and
demands against all debtors assigned together with all of [Crest’s] rights, title and interest therein
. . . .” (Murray Decl., Ex. A at ¶ 1.) The document also provides that assignments will be made
by “forwarding collection accounts to NAR,” and “[e]ach time NAR receives accounts from
[Crest], NAR will send [Crest] an Acknowledgment Report. Appearance of an account on the
Acknowledgment Report or appearance of the account on a Statement or Status Report shall
evidence that the account has been validly assigned . . . pursuant to the terms of this Agreement.”
(Id. ¶ 2.) The assignment also gives NAR “the absolute right to reject or otherwise refuse to
accept the assignment of any account and/or cancel back to [Crest] any Assigned Account.” (Id.
¶ 13.) The assignment touches on a variety of other topics, including representations and
warranties, indemnification, reimbursement, commission, and dispute resolution. A number of
paragraphs are redacted.
As the language recited above makes clear, the assignment agreement is not specific to
Page’s debt. No “acknowledgement report,” statement, or status report is provided, and there is
no indication that NAR actually accepted an assignment of Page’s debt. Instead, the purported
connection between Page’s debt and the assignment is offered via Murray’s declaration, which
states that “Plaintiff’s Crest Account is subject to the Assignment Agreement.” (Murray Decl.
¶ 8.)
Although the Court may apply the Rule 12(b)(6) standard to a motion to compel
arbitration when the affirmative defense of arbitrability is apparent on the face of the complaint
or the documents relied on in it, that standard is inappropriate when the complaint either does not
clearly establish the parties’ agreement to arbitrate or the opposing party has “come forth with
reliable evidence” amounting to more than a “‘naked assertion . . . that it did not intend to be
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bound’ by the arbitration agreement.” Guidotti, 716 F.3d at 773-74 (alteration in original;
citation omitted). In that event, the motion must be evaluated under the summary judgment
standard in Fed. R. Civ. P. 56, following a “restricted inquiry into factual issues” to allow
evaluation of whether a meeting of the minds existed on the arbitration agreement. Id. at 774.
The Court is thus required to allow the non-movant to conduct “limited discovery” on the
“narrow issue” of the validity of the arbitration agreement when there is no clearly established
agreement to arbitrate on the face of the complaint. Id. (citations omitted).
The Court is satisfied that the Rule 56 standard applies, and Page must be given the
opportunity to conduct limited discovery into whether Crest validly assigned its rights to NAR
and thereby enabled NAR to invoke the arbitration provision. Although the complaint relies on
the lease agreement insofar as it is the source of the debt upon which NAR is collecting (Compl.
¶¶ 14, 16), that agreement is not the source of NAR’s claim of standing to invoke arbitration.
For the first time on reply, NAR has clearly articulated that the purported assignment from Crest
is the basis upon which it claims authority to enforce the arbitration provision against Page.2
(See Lease Agreement § 1 (“we” means Crest “and its successors and assigns” (emphasis
added).) The assignment appears nowhere in the complaint, attached to it, or anywhere else
within the universe of documents a court may consider on a motion to dismiss. Cf. Sanford v.
2
NAR’s suggestion that Page would not be prejudiced by this approach because the case is in its
“very early stages” (Reply Br. 5 n.1) ignores the well-established rule that new arguments are not
to be made in reply. See, e.g., Bayer AG & Bayer Corp. v. Schein Pharm., 129 F. Supp. 2d 705,
716 (D.N.J. 2001) (Brown, J.) (striking portions of reply), aff’d, 301 F.3d 1306 (Fed. Cir. 2002);
see also Fancaster, Inc. v. Comcast Corp., 832 F. Supp. 2d 380, 424 (D.N.J. 2011) (Debevoise,
J.) (noting that the “rules of basic fairness and professionalism require that a moving party give
the opposition the opportunity to fully and fairly respond to its arguments”). Instead of striking
NAR’s reply in whole or in part, the Court will consider both NAR’s reply and Page’s proposed
sur-reply (D.E. 11). Accordingly, the Court grants Page’s request to file that sur-reply, and
deems it filed. L. Civ. R. 7.1(d)(6).
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Bracewell & Guiliani, LLP, 618 F. App’x 114, 117-18 (3d Cir. 2015) (where plaintiff sued for
breach of agreement that included arbitration clause, affirmative defense of arbitrability was
“apparent from the face of the complaint and the documents relied upon therein” and Rule
12(b)(6) standard was proper). Instead, it was attached to NAR’s reply, and Page has had no
opportunity for discovery into the assignment or the declaration introducing it. Third Circuit
precedent requires that opportunity, see Guidotti, 716 F.3d 764, and, following conclusion of
targeted discovery on the issue of whether a valid agreement to arbitrate has been formed
between Page and NAR, NAR may file a renewed motion. That motion will be evaluated under
the Rule 56 standard.3 See id. at 776.
Resolution of the remaining issues, including whether Page’s asserted claim is within the
scope of the arbitration provision and whether he must pursue that claim on an individual basis,
cannot be resolved absent an adequate record sufficient for the Court to conclude that a valid
agreement to arbitrate exists between Page and NAR.4
3
In any such renewed motion practice, the Court expects the parties to address which state’s law
should govern resolution of whether a valid agreement to arbitrate was reached, and how that law
would resolve the question. See White, 870 F.3d at 263-65.
4
NAR offered Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019), as
supplemental authority. (D.E. 12.) In Henry Schein, the Supreme Court of the United States
reiterated that whether a court or an arbitrator decides arbitrability is a matter of contract. But the
relevance of this decision to NAR’s motion is unclear, as NAR does not argue that the Court
cannot or should not decide arbitrability here or even address the language in § 16(b)(ii), which
states that “disputes about the validity, enforceability, coverage or scope” of the arbitration
provision are “for a court and not an arbitrator to decide.”
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IV.
Conclusion
For the reasons set forth above, NAR’s motion will be denied without prejudice. The
parties are directed to proceed promptly to limited discovery under the supervision of Magistrate
Judge Waldor to resolve the threshold issue of whether a valid agreement to arbitrate exists. An
appropriate order will issue.
/s/ Katharine S. Hayden
Katharine S. Hayden, U.S.D.J.
Date: March 26, 2019
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