Bakon v. Rushmore Service Center, LLC
ORDER granting 10 Motion to Compel Arbitration and stay the case pending the outcome of arbitration. Ordered by Judge I. Leo Glasser on 6/2/2017. (Weitzer, Iliza)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
MEMORANDUM AND ORDER
- against –
RUSHMORE SERVICE CENTER, LLC
GLASSER, Senior United States District Judge:
Plaintiff Michael Bakon (“Bakon” or “Plaintiff”) brings claims against defendant
Rushmore Service Center, LLC (“Rushmore” or “Defendant”) for violations of the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692e. Before the Court is Rushmore’s
motion to enforce an arbitration agreement between Plaintiff and a third party, First Premier
Bank (“Premier”), which issued a credit card to Plaintiff in October 2014. For the reasons
indicated below, the motion is GRANTED and this case is stayed pending the outcome of
Plaintiff Bakon opened a credit card account (the “Account”) with Premier on October
23, 2014 via a telephone call. ECF 19-1, Gilson Declaration (“Gilson Dec.”), at ¶ 6. 1 Following
the call, Premier directed its vendor to send the new credit card to Bakon, and in accordance with
Defendant Rushmore initially submitted the declaration of Julie K. Gilson, an employee of
Premier, in support of its motion. ECF 10-2. Rushmore submitted a supplemental declaration by
Gilson with its Reply papers, which provided additional, relevant information. ECF 19-1. The
supplemental declaration was timely filed in accordance with the briefing schedule endorsed by
the Court, and is appropriately considered by the Court on this motion.
its general custom, to include in the mailing a copy of Premier’s terms and conditions which
would govern the Account (the “Agreement”). Id. at ¶ 7. Bakon claims that he never received
the Agreement, but does not dispute that he received his credit card. ECF 14-1, Bakon Affidavit,
at ¶ 3.
The Agreement contains a section clearly labeled with the heading “ARBITRATION
AND LITIGATION.” ECF 19-1 at pp. 7-9. It states that the “[a]ny claim arising out of or
relating to this Contract, or the breach of this Contract or your Credit Account, shall be resolved
and settled exclusively and finally by binding arbitration, in accordance with this provision.” Id.
p. 7. The Agreement states that it is intended to apply to “employees, parents, subsidiaries,
affiliates, beneficiaries, agents and assigns of you and us.” Id. It also prohibits class arbitration.
Bakon used his credit card at least once during the subsequent two months. Rushmore
submits account statements for the Account from that time period, which indicate that he
incurred two charges: the first on October 28, 2014 was for $175 and represented the account’s
annual fee, and the second on December 25, 2014 was for $270.25 spent at Goldbergs
Supermarket Brooklyn. Id. at pp. 10-21.
At some unspecified time thereafter, Bakon failed to make payments, and Premier
“authorized and retained” Rushmore to collect on the Account. Gilson Dec. at ¶ 5. In a letter to
Bakon dated May 18, 2016, Rushmore sought to collect $924.21 in outstanding debt on the
Account. ECF 1-2. Bakon filed a complaint in this Court, on behalf of himself and others
similarly situated, alleging that the letter violated his rights under the FDCPA because it used
false representation or deceptive means to collect a debt and misrepresented the amount of debt
Plaintiff owed. ECF 1, Complaint, at ¶ 68. On February 8, 2017, Rushmore moved this court to
compel arbitration of Bakon’s claims on an individual basis and to stay this case. ECF 10.
It is well-established that federal public policy strongly favors arbitration. See e.g.
Holick v. Cellular Sales of N.Y., LLC, 802 F.3d 391, 395 (2d Cir. 2015). To that end, the
Federal Arbitration Act (“FAA”) requires a federal court to enforce an arbitration agreement and
to stay litigation that contravenes it. 9 U.S.C. § 2. The FAA “leaves no place for the exercise of
discretion by a district court, but instead mandates that district courts shall direct the parties to
proceed to arbitration on issues as to which an arbitration agreement has been signed.” Genesco,
Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 844 (2d Cir. 1987) (citations and quotations omitted).
To determine whether arbitration should be compelled, the court must determine
(1) whether the parties agreed to arbitrate; (2) whether the asserted claims fall within the scope of
the arbitration agreement; (3) if federal statutory claims are at issue, whether Congress intended
such claims to be non-arbitrable; and (4) if only some of the claims are arbitrable, whether to
stay the balance of the proceedings pending arbitration. Id.; see also Bynum v. Maplebear Inc.,
15-CV-6263, 2016 WL 5373643 at *5 (E.D.N.Y. Sep. 19, 2016).
Plaintiff’s arguments center on the first factor of this inquiry—whether the parties agreed
to arbitrate. Arbitration is a matter of contract, and as with all contracts, an arbitration agreement
is not enforceable if “grounds exist at law or in equity for the revocation of any contract.”
9 U.S.C. § 2. Therefore, “courts must place arbitration on an equal footing with other contracts,
and enforce them according to their terms.” AT&T Mobility LLC v. Concepcion, 131 S.Ct.
1740, 1746 (2011)). “The party seeking to compel arbitration has the burden of demonstrating
by a preponderance of the evidence the existence of an agreement to arbitrate.” Tellium, Inc. v.
Corning Inc., No. 03–CV–8487, 2004 WL 307238, *5 (S.D.N.Y. 2004). The Court looks to state
contract law to determine the enforceability of an arbitration agreement. Cap Gemini Ernst &
Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 365 (2d Cir. 2003). 2
Bakon argues that he never entered into the Agreement, and thus cannot be compelled to
arbitrate pursuant to it. He says that he never received the Agreement in the mail, and complains
that Rushmore has only submitted an “exemplar” of the Agreement that is neither signed nor
dated. ECF 14, Opposition, at p. 4. First, actual receipt of an arbitration agreement need not be
proven to enforce it. Under both New York and South Dakota law, “regular use of a credit card
constitutes sufficient evidence of the card user's consent to the terms of the agreement governing
the account,” McCormick, 2016 WL 107911, at *4 (citing cases and statutes), and “[p]roof of
mailing may be accomplished by presenting circumstantial evidence, including evidence of
customary mailing practices used in the sender's business.” Kurz v. Chase Manhattan Bank
USA, N.A., 319 F.Supp.2d 457, 463 (S.D.N.Y. 2004); see also Edwards v. Macy's Inc., No. 14CV-8616, 2015 WL 4104718, at *6 (S.D.N.Y. June 30, 2015). Rushmore offers uncontested
evidence that Bakon used the credit card on December 25, 2014, and testimony that it was
Premier’s custom to direct its vendor to mail the Agreement with each new credit card when an
account was opened, and that it directed its vendor to do so in this case. Gilson Dec. at ¶¶ 7-8.
This is sufficient unrebutted evidence to entitle Rushmore to a presumption that Bakon received
the Agreement and agreed to its terms.
The Agreement stipulates that the substantive law of South Dakota should apply to any disputes
between the parties. ECF 19-1, Agreement, at p. 8. There is no conflict between the relevant
substantive law of New York and South Dakota, and so the Court need not conduct a choice of
law analysis. McCormick v. Citibank, NA, No. 15-CV-46, 2016 WL 107911, at *4 (W.D.N.Y.
Jan. 8, 2016) (collecting cases).
Second, that Rushmore submits only an “exemplar” of the Agreement is of no
consequence. While the FAA mandates that arbitration agreements be in writing, it does not
require that they be signed. Genesco, 815 F.2d at 846. Here, Julie K. Gilson, an employee of
Premier with knowledge of its records and the Account, states that the Agreement attached to her
declaration “contain[s] the terms and conditions governing the Account at the time of opening
through the entire duration of the Account, which have not been changed or amended.” Gilson
Dec. at ¶ 7. Further, the Agreement displays a “05/14” notation at the bottom, and Gilson
explains that the Agreement sent to Bakon “would have been the May 2014 version as that was
the last updated version of the agreement prior to October 2014.” Id. at n. 2. The Court is
satisfied that the agreement Rushmore has offered is a true copy of the actual Agreement that
was sent to Bakon in October 2014, to which he agreed. Compare to In re Currency Conversion
Fee Antitrust Litig., 265 F. Supp. 2d 385, 428 (S.D.N.Y. 2003).
Finally, Plaintiff argues that the Gilson Declaration is impermissible hearsay because it
does not satisfy the business records exception under Fed. R. Evid. § 803(6). Bakon complains
that the declaration itself was not made in the ordinary course of business and that Gilson was
not personally involved in creating the business records she relies upon and offers as evidence.
ECF 14, Opposition, at pp. 11-14. To adopt Plaintiff’s reasoning would require the Court to
strike almost every affidavit of a corporate record keeper filed in any case. This is clearly
absurd. Indeed, there is nothing improper about Gilson’s declaration. She states that she is an
employee of Premier, that the information she provides is based on her personal knowledge or
the knowledge of individuals working under her direction and supervision, that she has “personal
knowledge of the general practices of Premier with respect to its credit card accounts,” and has
“access to the business records relating to the credit card accounts,” including Bakon’s Account.
Gilson Dec. at ¶¶ 1-3. She also swears that the exhibits attached to her declaration, namely the
Agreement and the Account statements, are “all true and correct copies of business records
created and maintained by Premier or its affiliates in the course of regularly conducted business
activity, and as part of the regular practice of Premier to create and maintain such records, and
also were made at the time of the act, transaction, occurrence or event, or within a reasonable
time thereafter.” Id. at ¶ 5. Plaintiff offers no rational reason to doubt the trustworthiness of the
Gilson Declaration or the records it relies upon, and the Court is satisfied that it is admissible and
may be considered on this motion.
Having addressed Plaintiff’s arguments, the Court must determine whether Rushmore
may invoke the arbitration agreement between Bakon and Premier and compel arbitration of this
case. In certain circumstances, “a non-signatory to an arbitration agreement may compel a
signatory to that agreement to arbitrate a dispute. . .” JLM Indus., Inc. v. Stolt-Nielsen SA, 387
F.3d 163, 177 (2d Cir. 2004). Here, the Agreement identifies a class of parties who are covered
by the Agreement in addition to the bank and cardholder, namely the “employees, parents,
subsidiaries, affiliates, beneficiaries, agents and assigns of you and us.” ECF 19-1 at p. 7. That
Premier, a signatory to the Agreement, “authorized or retained” Rushmore to collect on Bakon’s
account makes Rushmore, a minimum, an “affiliate” of Premier expressly contemplated by the
Agreement. Rushmore, as a member of this class, was intended as a third party beneficiary who
may enforce the Agreement. See e.g. Fedotov v. Peter Roach and Assoc., P.C., No. 03-CV8823, 2006 WL 692002 (S.D.N.Y. Mar. 16, 2006); Lucy v. Bay Area Credit Svc LLC, 792
F.Supp. 2d 320, 324 (D. Conn. 2011) (“Because the arbitration agreement delineates which nonsignatories may compel arbitration, [plaintiff] cannot fairly be considered to have consented to
arbitration with any other entities.”). The Court holds that Plaintiff entered into a valid and
enforceable arbitration agreement with Premier, which Rushmore may invoke.
We now turn to the remaining factors to consider on a motion to compel arbitration. This
dispute is squarely within the scope of the Agreement, which requires arbitration of all claims
related to the Account. ECF 19-1 at p. 7. The presumption of arbitrability “is only overcome if
it may be said with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.” Holick, 802 F.3d at 395 (internal quotations
omitted). Bakon’s FDCPA claim is based on a letter seeking to recover unpaid debt on his credit
card account, and therefore clearly relates to that account. Further, Plaintiff’s sole cause of
action claims a violation of the FDCPA, claims under which are arbitrable. Fedotov, 2006 WL
692002 at *3 (collecting cases).
Having considered the relevant factors, the Court holds that the Agreement binds the
parties and compels individual arbitration of this case. See Concepcion, 131 S.Ct. at 1748.
Defendant’s motion is hereby granted and this case is stayed pending the outcome of arbitration.
Katz v. Cellco Partnership, 794 F.3d 341, 345 (2d Cir. 2015).
Brooklyn, New York
June 2, 2017
I. Leo Glasser
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