Cummings v. Consumer Budget Counseling, Inc.

Filing 6

ORDER granting 5 Motion to Stay. SO ORDERED that deft's motion is granted and this litigation is stayed pending a final decision of a mediator in accordance with Paragraph 10 of the DMP agreement. The Clerk of the Court shall administratively close tills action, with leave to reopen on ten (10) days notice within thirty (30) days after a final decision is rendered by a mediator pursuant to Paragraph 10 of the parties' DMP agreement. A failure to move to reopen this proceeding within thirty (30) days after a final decision is rendered by a mediator shall result in this action being dismissed in its entirety with prejudice. Ordered by Judge Sandra J. Feuerstein on 9/19/2012. (Florio, Lisa)

FILED
IN CLERK'S OFFICE
U S DISTRICT COURT E D N Y

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

------------------------~X
RICHARD CUMMINGS,

*

S~?

19 2012

*

LONG ISLANL) OFFICE

Plaintiff,

OPINION & ORDER
CV -ll-3989(SJF)(ETB)

-againstCONSUMER BUDGET COUNSELING, INC.,
Defendant.

==~~--------------------------X
FEUERSTEIN, J.
On August 17, 20 I I, Richard Cummings ("plaintiff') commenced this action against
defendant Consumer Budget Counseling, Inc. ("defendant"), pursuant to this Court's diversity
jurisdiction under 28 U.S. C. § 1332(a), alleging that defendant was negligent "in its efforts to
consolidate Plaintiffs credit card accounts and make payment on Plaintiffs behalf" (Com pl., 'If
24). Defendant now moves pursuant to the Federal Arbitration Act ("the Act"), 9 U.S.C. §§ I, et
seq., to stay this action pending arbitration. For the reasons set forth herein, defendant's motion is
granted.

I.

BACKGROUND
A.

Factual Background'

In late December 2009, plaintiff contacted Advance Step Solutions ("Advance"), which he
alleges is an agent of defendant, (Compl., '1['1[3, 8), about the possibility of consolidating his credit
card debt and lowering the interest he was paying on that debt. (Compl., 'If 5). At that time,
1 The factual allegations in the complaint, though disputed by defendant~, are accepted to be
true for purposes of this motion only and do not constitute findings of fact by this court.

I

plaintiff had three (3) credit card accounts with Bank of America (the "BofA accounts") and one
(I) credit card account each with Citibank ("the Citibank account") and American Express ("the

AmEx account"). (Compl.,

~

6).

On January 5, 2010, plaintiff entered into a Debt Management Program ("DMP")
agreement with defendant, pursuant to which, inter alia, defendant agreed to "negotiate with
creditors to establish a repayment plan," the acceptance of which was "at the sole discretion of the
creditors;" plaintiff agreed to "deposit a specified sum into [defendant's] Trust Account on a
monthly basis;" and defendant agreed to make timely disbursements to plaintiff's creditors from
the Trust Account. (Declaration of Paul Principato ["Principato Dec!."], Ex. A). Pursuant to
Paragraph 10 of the DMP agreement, the parties agreed: (I) that "[i]n the event of a dispute
between the parties to th[ e] agreement, said dispute shall be submitted to mediation and resolved in
accordance with the laws of the State of Florida," (Principato Dec!., Ex. A); and (2) "to abide by
the decision of the mediator." (!d.)
Plaintiff alleges that by letter dated February 3, 2012, defendant informed him that it had
sent repayment proposals to each of his creditors for approval; that his initial payment under the
DMP agreement would be two hundred eighty dollars ($280.00); and that his subsequent monthly
payments under the DMP agreement would be two hundred thirty-one dollars ($231.00). (Compl.,
~

12).
According to plaintiff, by letter dated February 8, 2010, American Express informed him

that it could not consider defendant's repayment proposal because it "does not accept [DMP]
proposals from [defendant]," (Compl., ~ 14), and at that time he had already ceased making
payments to American Express at defendant's instruction. (Compl.,

2

~

15). In March 2012,

American Express canceled plaintiff's AmEx account on the basis that it was past due. (Comp1., cr
II
16).

Plaintiff alleges that Bank of America required that an application be submitted for each of
his BofA accounts before it accepted the payment plan proposed by defendant; that defendant
"mistakenly" submitted an application for only two (2) of his three (3) BofA accounts; that as a
result, Bank of America rejected the applications and twice deemed plaintiff's payments on each of
the three (3) BofA accounts to be late; and that Bank of America reported the late payments to a
credit agency, adversely affecting plaintiff's credit score. (Compl., ~~ 18, 19). According to
plaintiff, in late February 20 I 0, he received a letter from JP Morgan Chase informing him that his
home equity line of credit had been suspended "because of damaging information in his credit
report." (Compl., ~ 20). Plaintiff alleges that after he informed defendant of its mistake relating to
the BofA accounts, he received a letter from defendant, dated March 8, 2010, admitting that its
error had been "through no fault of[plaintiff]." (Compl.,

~

21).

Plaintiff alleges that pursuant to the DMP agreement, he authorized defendant to make a
monthly withdrawal of two hundred thirty-one dollars ($231.00) from his bank account at Chase
bank, but that on February I, 20 I 0 and March I, 2012, defendant withdrew four hundred twentynine dollars ($429.00) from that account, and between April I, 20 I 0 and December 31, 20 I 0,
defendant made monthly withdrawals of two hundred forty-seven dollars ($247.00) from that
account. (Compl., ~~ 10, 13, 17, 22).

B.

Procedural History

On August 17, 20 II, plaintiff commenced this action against defendant, pursuant to this

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Court's diversity jurisdiction under 28 U.S.C. § 1332(a), alleging that defendant was negligent "in
its efforts to consolidate Plaintiffs credit card accounts and make payment on Plaintiffs behalf."
(Compl., '1]24). Defendant now moves pursuant to 9 U.S.C. § 3 to stay this action pending
arbitration.

II.

DISCUSSION
"[A]rbitration is a matter of contract," Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct.

2772, 2776, 177 L. Ed. 2d 403 (20 I 0), and, as such, courts are required to enforce agreements to
arbitrate "according to their terms." !d.; see also AT&T Mobilitv LLC v. Concepcion, 131 S. Ct.
1740,1745-46,1748, 179L. Ed. 2d 742 (2011).
The Federal Arbitration Act, 9 U.S.C. §I, et seq., is the substantive law applicable to any
arbitration agreement within the coverage of the Act, see Vaden v. Discover Bank, 556 U.S. 49,
59, 129 S. Ct. 1262, 173 L. Ed. 2d 206 (2009); Securitv Ins. Co. of Hartford v. TIG Ins. Co., 360
F.3d 322, 325 (2d Cir. 2004) (quotations and citation omitted), and "was designed to promote
arbitration." Concepcion, 131 S. Ct. at 1749; see also McDonnell Douglas Finance Corn. v.
Pennsylvania Power & Light Co., 858 F.2d 825, 830 (2d Cir. 1988) (holding that the Act "reflects
a congressional recognition of the desirability of arbitration as an alternative to the complications
of litigation." (quotations, alterations and citations omitted)). The Act "requires courts to enforce
the bargain of the parties to arbitrate

* * * [and] reflects an emphatic federal policy in favor of

arbitral dispute resolution." Marmet Health Care Center, Inc. v. Brown, 132 S. Ct. 1201, 1203,
182 L. Ed. 2d 42 (2012) (quotations and citations omitted); see also KPMG LLP v. Cocchi, 132 S.
Ct. 23, 25, 181 L. Ed. 2d 323 (2011). Any doubts concerning "the scope of arbitrable issues"

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should be resolved "in favor of arbitration." Green Tree Financial Com. v. Bazzle, 539 U.S. 444,
452, 123 S. Ct. 2402, !56 L. Ed. 2d 414 (2003) (quotations and citations

omitted);~

also AT&T

Technologies. Inc. v. Communications Workers of America, 475 U.S. 643,650, 106 S. Ct. 1415,
89 L. Ed. 2d 648 (1986).
9 U.S.C. § 2 provides, in relevant part, as follows:
"A written provision in any* * *contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such
contract or transaction, * * * shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract."
Thus, any arbitration agreement affecting interstate commerce is subject to the Act. Oldroyd v.
Elmira Sav. Bank, FSB, 134 F. 3d 72, 76 (2d Cir. 1998).
The only issue presented on this motion is whether the parties agreed to arbitrate their
disputes under the DMP agreement. Plaintiff's contention that the parties did not agree to arbitrate
their disputes under the DMP agreement because Paragraph I 0 thereunder requires only that the
parties mediate, as opposed to arbitrate, their disputes is without merit. Although the Act does not
define "arbitration," the Second Circuit, and most other courts that have decided this issue, have
held that agreements that "manifest[] an intention by the parties to submit certain disputes to a
specified third party for binding resolution," McDonnell Douglas, 858 F.2d at 830, constitute
"arbitration agreements" within the meaning of the Act, notwithstanding the nomenclature used by
the parties to the agreement. See id. ("It is * * * irrelevant that the contract language in question
does not employ the word 'arbitration' as such. Rather, what is important is that the parties clearly
intended to submit some disputes to their chosen instrument for the definitive settlement of certain
grievances under the Agreement.

* * * Similarly, it is not dispositive that the Agreements fail to

term the independent [third party's] conclusions 'final' or 'binding' [so long as] the parties' intent
5

in that regard [is] clear from the language of their contract." (quotations, alterations and citations
omitted)); see also Advanced Bodycare Solutions, LLC v. Thione International. Inc., 524 F .3d
1235, 1239 (ll'h Cir. 2008); Salt Lake Tribune Publishing Co .. LLC v. Management Planning, Inc.,
390 F.3d 684,689-90 (lO'h Cir. 2004); Fit Tech, Inc. v. Bally Total Fitness Holding Com., 374
F.3d l, 7 (l" Cir. 2004); Harrison v. Nissan Motor Com. in U.S.A., Ill F.3d 343,350-51 (3d Cir.
1997); Bakoss v. Certain Underwriters at Lloyds of London Issuing Certificate No. 0510135, No.
10-CV-1455, 2011 WL 4529668, at* 6 (E.D.N.Y. Sept. 27, 2011); AMF Inc. v. Brunswick Corp.,
621 F. Supp. 456, 460 (E.D.N.Y. 1985).
By agreeing to "abide by the decision of the mediator" under Paragraph l 0 of the DMP
agreement, the parties manifested an intent to submit any disputes arising thereunder to "a specified
third party for binding resolution." McDonnell Douglas, 858 F .2d at 830. Moreover, the DMP
agreement provides for an "award," in the form of a "decision of the mediator" declaring the
parties' rights, which may be confirmed in accordance with the procedures set forth in the Act.

IT

Advanced Bodycare, 524 F.3d at 1240 (finding that an agreement requiring "mediation or nonhinging arbitration" did not fall within the Act's scope because "[m]ediation, as that term is
commonly understood, is a method of nonbinding dispute resolution involving a neutral third party
who tries to help the disputing parties reach a mutually agreeable solution * * * or a process in
which a mediator facilitates communication and negotiation between parties to assist them in
reaching a voluntary agreement regarding their dispute *

* *. [It] does not resolve a dispute, it

merely helps the parties do so. In contrast, the [Act] presumes that the arbitration process itself
will produce a resolution independent of the parties' acquiescence- an award which declares the
parties' rights and which may be confirmed with the force of a judgment. That a typical mediation

6

produces no award is highly probative evidence that an agreement to mediate a dispute is not 'an
agreement to settle by arbitration a controversy.' 9 U.S.C. § 2. Parties to a mediation contract have
not agreed to submit a dispute for decision by a third party * • * because the third party makes no
decision. (quotations and citations omitted))'. Since the binding mediation clause in Paragraph 10
of the DMP agreement "manifests the parties' intent to provide an alternative method to 'settle'
controversies arising [there]under * * • ," CB Richard Ellis. Inc. v. American Environmental Waste
Management, No. 98-cv-4183, 1998 WL 903495, at* 2 (E.D.N.Y. Dec. 4, 1998), it constitutes an
agreement to "settle by arbitration" within the meaning of the Act.
9 U.S. C. § 3, provides, in relevant part, as follows:
"If any suit or proceeding be brought in any of the courts of the
United States upon any issue referable to arbitration under an
agreement in writing for such arbitration, the court in which such
suit is pending, upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under such an agreement
shall on application of one of the parties stay the trial of the action
until such arbitration has been had in accordance with the terms of
the agreement * * *."
(emphasis added). Thus, the Act "requires a federal court to enforce arbitration agreements and to
stay litigation that contravenes them*** [and] affords no latitude for discretion." Burns v. New
York Life Ins. Co., 202 F.3d 616,620 (2d Cir. 2000); see also WorldCrisa Com. v. Armstrong,
129 F.3d 71, 74 (2d Cir. 1997); McDonnell Douglas, 858 F.2d at 830. Accordingly, defendant's
motion is granted and this litigation is hereby stayed pending a final decision of a mediator in
accordance with Paragraph 10 of the DMP agreement. This action shall be administratively closed,

2

The Eleventh Circuit recognized, however, that "if an agreement specifies in detail a
dispute resolution procedure which it calls 'mediation' (or anything else) but which is, in
substance,*** 'arbitration' [within the meaning of the Act], substance controls over title."
Advanced Bodycare, 524 F.3d at 1240 n. 4.

7

with leave to reopen on ten (I 0) days notice within thirty (30) days after a final decision is
rendered by a mediator pursuant to Paragraph 10 of the parties' DMP agreement. A failure
to move to reopen this proceeding within thirty (30) days after a final decision is rendered by a
mediator shall result in this action being dismissed in its entirety with prejudice.

Ill.

CONCLUSION
For the reasons set forth above, defendant's motion is granted and this litigation is stayed

pending a final decision of a mediator in accordance with Paragraph 10 of the DMP agreement.
The Clerk of the Court shall administratively close tills action, with leave to reopen on ten (I 0)
days notice within thirty (30) days after a final decision is rendered by a mediator pursuant to
Paragraph 10 of the parties' DMP agreement. A failure to move to reopen this proceeding within
thirty (30) days after a final decision is rendered by a mediator shall result in this action being
dismissed in its entirety with prejudice.

SO ORDERED.

s/ Sandra J. Feuerstein
SANDRA J. FEUERSTEIN
United States District Judge
Dated: September 19,2012
Central Islip, New York

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