Loney v. State Collection Services, Inc. et al

Filing 15

ORDER granting 11 Motion to Stay and denying 13 Motion to Compel and Motion to Stay. Signed by Magistrate Judge William A. Webb on 1/31/2014. Copy of order to plaintiff via US Mail at address on record. (Marsh, K)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No: 7:13-CV-247-BR
JOYCE LONEY,
Plaintiff,
v.
STATE COLLECTION SERVICE,
DOES 1-10, inclusive,
Defendant.
_______________________________________

)
)
)
)
)
)
)
)
)

ORDER

This matter is before the Court upon Defendant SCS’s motion to stay discovery and pretrial
deadlines (DE-11), and Plaintiff’s motion to compel arbitration (DE-13). Defendant has
responded to Plaintiff’s motion, and the time for Plaintiff to respond to Defendant’s motion has
expired. Accordingly, the matter is now ripe for adjudication. For the reasons discussed below,
Defendant’s motion is GRANTED, and Plaintiff’s motion is DENIED.
I.

Plaintiff’s Motion to Compel Arbitration (DE-13)

Plaintiff seeks to compel arbitration with SCS. She asserts that “[t]he parties are bound” by
the contract (“Agreement”) attached to her motion, which includes an arbitration provision.1 DE13 at 1. Defendant contends that, as a non-party, it is not bound by the Agreement. DE-14. Under
the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq., a court must compel arbitration if it
finds: (1) that a valid arbitration agreement exists between the parties, and (2) that the dispute
before it falls within the scope of the agreement. Mitsubishi Motors Corp. v. Soler Chrysler1

The posture of this request is unusual: most frequently, it is the commercial party who seeks to compel an
individual to arbitrate, and the individual who resists, rather than vice versa. See, e.g., DE-14 at 5 (citing cases in
which debt collection companies sought to compel a debtor to arbitrate pursuant to a clause in the debtor’s
agreement with the creditor). Indeed, these consumer agreement arbitration clauses have been routinely decried as
unfair to consumers. See, e.g., Katherine Van Wezel Stone, Rustic Justice: Community and Coercion Under the
Federal Arbitration Act, 77 N.C. L. Rev. 931 (1999).

Plymouth, Inc., 473 US. 614, 626-28 (1985); Glass v. Kidder Peabody & Co., 114 F.3d 446, 453
(4th Cir. 1997). Plaintiff must thus, as a threshold, establish that she and SCS are bound by the
agreement that she has provided. Adkins v Labor Ready Inc., 303 F.3d 496, 500-01 (4th Cir.
2002) (“In the Fourth Circuit, a litigant can compel arbitration under the FAA if he can
demonstrate,” inter alia, that an agreement to arbitrate covers the dispute between the parties); In
re Mercury Const. Corp., 656 F.2d 933, 939 (4th Cir. 1981) (“It is obvious from [the FAA] that
in a case such as this, there are but two facts which a plaintiff seeking arbitration must establish:
(1) The making of the agreement and (2) the breach of the agreement to arbitrate.”).
Plaintiff’s motion must be denied because she has not made even an initial showing that a
valid arbitration agreement exists between her and SCS. In fact, several aspects of the Agreement
attached to her motion undercut her claim. The Agreement sets forth the “Terms and Conditions
for Services and/or Equipment Provided by Windstream” to Plaintiff. DE-13-1 at 1.
Windstream is defined as “the Windstream legal entities providing Services to you and as
identified on your bill.” Id. The Agreement provides for certain resolution procedures, including
arbitration, in the event of any “dispute with Windstream.” Id. at 5. “Dispute” is defined as “any
claim or controversy related in any way to Windstream’s Services, including charges for
Services, Equipment, Service Order(s) or our agreements pursuant to these Terms or any other
agreements.” Id. at 5. Notably, the “provisions [that] apply to arbitration” specifically exempt
debt collection from the arbitration procedures, stating that “[t]his section is intended to resolve
outstanding disputes between us and not to collect a debt owed by you to Windstream.” Id. at 6;
cf. Garrett v. Margolis, Pritzker, Epstein & Blatt, P.A., 861 F. Supp. 2d 724, 728 (E.D.Va. 2012)
(debt collection attorneys could enforce arbitration provision of creditor-debtor agreement where
agreement broadly stated that claims “made by or against anyone connected with us or you or

claiming through us or you, such as . . . an employee, agent, representative, affiliated company,
predecessor or successor….” were subject to arbitration). In addition, paragraph 25 provides that
Windstream may not assign the agreement to another entity without consent of the customer. Id.
at 9.
“A party cannot be required to submit to arbitration any dispute which he has not agreed so to
submit.” American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 92 (4th
Cir. 1996) (quoting United Steelworkers of America v. Warrior & Gulf Navig. Co., 363 U.S. 574,
582 (1960)). Here, Plaintiff has not sued Windstream, the party to the agreement; Plaintiff has
sued SCS. Plaintiff has made no showing or specific assertion that Windstream’s rights under the
Agreement were assigned to SCS, that SCS is an intended third party beneficiary of the
Agreement, or that the Agreement is otherwise enforceable against SCS. See, e.g., Rota-McLarty
v. Santander Consumer USA, Inc., 700 F.3d 690, 700 (2012) (enforcing arbitration where
defendant seeking to compel arbitration was an assignee of the entire agreement between
plaintiff and original contractor). Indeed, the Agreement expressly provides that Windstream
cannot assign its rights without the consumer’s—i.e., Plaintiff’s—consent. DE-13-1 at 9. And
though Windstream is defined as “the Windstream legal entities providing services to you,” there
is no indication that SCS is a Windstream entity or that it has ever provided services to Plaintiff.
Given this thin record and Plaintiff’s failure to make any factual showing other than a bald
assertion that SCS is bound by the Windstream contract, the undersigned declines to compel
arbitration. See Arrants v. Buck, 130 F.3d 636, 640 (4th Cir. 1997) (“[E]ven though arbitration
has a favored place, there still must be an underlying agreement between the parties to
arbitrate.”). Accordingly, Plaintiff’s motion (DE-13) is DENIED.

II.

Defendant’s Motion to Stay (DE-11)

In its motion, Defendant requests that discovery be stayed during the pendency of its motion
to dismiss. Rule 26(c) authorizes a court to issue orders limiting or staying discovery.
Specifically:
A court may properly exercise its discretion under Rule 26(c) to
stay discovery pending resolution of dispositive motions. Tilley v.
United States, 270 F, Supp. 2d 731, 734 (M.D.N.C. 2003), aff’d,
85 F. App’x 333 (4th Cir. Jan. 15, 2004), cert. denied, 543 U.S.
819 (2004). Factors favoring issuance of a stay include the
potential for the dispositive motion to terminate all the claims in
the case or all the claims against particular defendants, strong
support for the dispositive motion on the merits, and irrelevancy of
the discovery at issue to the dispositive motions. See id. at 735;
Simpson v. Specialty Retail Concepts, Inc., 121 F.R.D. 261, 263
(M.D.N.C. 1998). Conversely, discovery ordinarily should not be
stayed when it is necessary to gather facts in defense of the motion.
Tilley, 270 F. Supp. 2d at 734; Simpson, 121 F.R.D. at 263.
Yongo v. Nationwide Affinity Ins. Co. of America, No. 5:07-cv-94, 2008 WL 516744, at *2
(E.D.N.C. Feb. 25, 2008) (footnote omitted). Moreover, a stay of discovery “is an eminently
logical means to prevent wasting the time and effort of all concerned, and to make the most
efficient use of judicial resources.” United States v. A.T. Massey Coal Co., No. 2:07-cv-299,
2007 WL 3051449, at *2 (S.D. W.Va. 2007) (quoting Coastal States Gas Corp. v. Department of
Energy, 84 F.R.D. 278, 282 (D. Del. 1979)).
Defendant alleges that Plaintiff’s Complaint fails to state a claim for relief. (DE-6, 7). As
mentioned above, Plaintiff has not responded in objection to a stay of discovery. Because the
motion to dismiss challenges the sufficiency of the Complaint on its face, it is not necessary for
Plaintiff to gather facts in defense of the motion, and discovery is irrelevant to the motion.
Defendant’s motion to dismiss likewise could terminate all claims in this case. For these
reasons, the undersigned finds that Defendant has demonstrated good cause for its request, and

therefore the instant motion to stay discovery (DE-11) is GRANTED. All discovery—including,
inter alia, the requirements of Rules 26(a) & (f) of the Federal Rules of Civil Procedure—in this
matter is stayed until Defendant’s motion to dismiss (DE-6) is ruled upon. 2 If Defendant’s
motion is denied, the parties shall, within 15 days thereafter, confer regarding a discovery plan
pursuant to Rule 26(f). The parties shall further file a proposed discovery plan and exchange
mandatory initial disclosures within 15 days after this conference.
DONE AND ORDERED in Chambers at Raleigh, North Carolina on Friday, January 31, 2014.

____________________________________
WILLIAM A. WEBB
UNITED STATES MAGISTRATE JUDGE

2

Although the parties have not yet conferred to create a discovery plan, Plaintiff has served several discovery
requests upon Defendant. DE-11 at 1; see also DE-12. “A party may not seek discovery from any source before the
parties have conferred as required by Rule 26(f)” unless otherwise authorized by rule, stipulation, or order. FED. R.
CIV. P. 26(d)(1). Due to the stay and the improper timing of Plaintiff’s discovery requests, Defendant has no
obligation to respond to these requests at this time. Plaintiff is further reminded that, pursuant to E.D.N.C. Local
Rule 26.1(a), discovery materials are not to be filed with the clerk unless by order of the court.