Wise v. Zwicker & Associates, PC et al
Filing
21
Memorandum Opinion and Order denying defendants' motion to compel arbitration and stay proceedings. (Related Doc # 17 ). Judge Sara Lioi on 3/22/2013. (P,J)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
DAWSON W. WISE,
)
)
PLAINTIFF,
)
)
vs.
)
)
)
)
ZWICKER & ASSOCIATES, PC, et al., )
)
DEFENDANTS.
)
CASE NO. 5:12-CV-01653
JUDGE SARA LIOI
MEMORANDUM OPINION AND
ORDER
This matter is before the Court on the motion (ECF No. 17) of defendants
Zwicker & Associates, PC; Derek Scranton; and Anne Smith to dismiss or stay
proceedings and compel arbitration.1 Plaintiff Dawson W. Wise has filed a response in
opposition (ECF No. 18), and defendants have submitted a brief in reply (ECF No. 19).
The matter is ripe for determination. For the following reasons, defendants’ motion is
DENIED.
I. FACTUAL AND PROCEDURAL BACKGROUND
Defendant Zwicker & Associates, PC (“Zwicker”), is a Massachusetts
corporation registered in Ohio and specializing in debt collection on behalf of various
creditors. (ECF Nos. 1, 13 at ¶ 5.) Defendants Derek Scranton (“Scranton”) and Anne
Smith (“Smith”) are Zwicker attorneys licensed to practice in Ohio. (Id.)
1
Although their motion is titled “Motion of All Defendants to Compel Arbitration and Stay Proceedings
During Arbitration,” defendants make clear that they seek either a stay or dismissal.
1
On June 27, 2011, as part of their work for Zwicker, Scranton and Smith
filed a complaint on behalf of a client, American Express Centurion Bank (“American
Express”), in the Summit County Court of Common Pleas against plaintiff Dawson W.
Wise (“Wise”). (ECF No. 1–1.) Therein, American Express, c/o Zwicker, alleged that
Wise had a credit account with American Express and failed to make required payments
on that account. (Id. at ¶¶ 4–7.) In the state court suit, American Express sought payment
of approximately forty thousand dollars, plus interest, attorney’s fees, and court costs.
(Id. at 12.)2
As a result of the state court complaint, on June 26, 2012, Wise brought a
putative class-action complaint in this Court, accusing defendants of “deceptive, unfair,
and unconscionable debt collection practices” under the Fair Debt Collection Practices
Act (“FDCPA”) and the Ohio Consumer Sales Practices Act (“OCSPA”). (ECF No. 1
¶ 1.) Wise alleges that defendants have attempted to collect attorney’s fees in connection
with their debt collection efforts in Ohio, fees that, he asserts, are not recoverable by law.
(Id. ¶ 2.)
Along with his complaint, Wise attached a document entitled “Agreement
Between American Express Credit Cardmember and American Express Centurion Bank”
(the “Agreement”), which Wise acknowledges as the operative agreement between him
and American Express (ECF No. 1–2). Defendants do not dispute its validity. The 11page Agreement includes a portion entitled “Arbitration” (the “Arbitration Provision”),
2
References to individual pages in the record are made using the continuous pagination applied by the
electronic docketing system.
2
which contains, among other things, a definition of the claims subject to arbitration under
the Agreement, a definition of the parties that may elect to pursue arbitration, a classaction waiver, and various procedures to be followed in the event of arbitration. (Id. at
15–16.)
On January 7, 2013, defendants brought the subject motion seeking to
dismiss or stay the case and compel arbitration under the terms of the Agreement.
II. LEGAL STANDARD
The Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq., manifests “a
liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983). “To enforce this dictate, [the FAA]
provides for a stay of proceedings when an issue is referable to arbitration and for orders
compelling arbitration when one party has failed or refused to comply with an arbitration
agreement.” Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003) (citing 9
U.S.C. §§ 3, 4). In cases where all claims are referred to arbitration, however, the
litigation may be dismissed rather than merely stayed. Ozormoor v. T-Mobile USA, Inc.,
354 F. App’x 972, 975 (6th Cir. 2009).
The Sixth Circuit applies a four-pronged test to determine whether to grant
motions to dismiss or stay the proceedings and compel arbitration:
(1) The Court must determine whether the parties agreed to arbitrate;
(2) The Court must determine the scope of that agreement;
(3) If federal statutory claims are asserted, the Court must consider
whether Congress intended those claims to be non-arbitrable; and
3
(4) If the Court concludes that some, but not all, of the claims in the
action are subject to arbitration, it must determine whether to stay
the remainder of the proceedings pending arbitration.
Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000).
III. ANALYSIS
A. Choice of Law
At the outset, the Court must determine what law governs the Agreement.
Under the “saving clause” of § 2 of the FAA,3 arbitration agreements can be invalidated
by “generally applicable contract defenses, such as fraud, duress, or unconscionability,
but not by defenses that apply only to arbitration or that derive their meaning from the
fact that an agreement to arbitrate is at issue.” AT&T Mobility LLC v. Concepcion, 131 S.
Ct. 1740, 1746 (2011) (quotation omitted). The source of “generally applicable contract
defenses” remains applicable state law. See First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 944 (1995); Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir.
2007) (“Because arbitration agreements are fundamentally contracts, we review the
enforceability of an arbitration agreement according to the applicable state law of
contract formation.”).
3
FAA § 2 reads:
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.
4
Before the Court can apply state-law principles to determine the validity
of the Arbitration Provision, the Court must determine which state’s laws to apply, using
the choice-of-law rules of the forum state, here, Ohio. See Pokorny v. Quixtar, Inc., 601
F.3d 987, 994 (9th Cir. 2010). Under Ohio law, “the governing law specified in a contract
is applied unless the chosen state lacks a substantial relationship to the parties or the
transaction or unless the application of the law of the chosen state would be contrary to a
fundamental policy of a state with a materially greater interest in the transaction.”
Cincinnati Gas & Elec. Co. v. Westinghouse Elec. Corp., 165 F.3d 26 (table), at *2 (6th
Cir. 1998) (citing Schulke Radio Prods., Ltd. v. Midwestern Broad. Co., 453 N.E.2d 683,
686 (Ohio 1983)).
The Agreement contains a choice of law clause, which invokes Utah law:
This Agreement and your Account, and all questions about their legality,
enforceability and interpretation, are governed by the laws of the State of
Utah (without regard to internal principles of conflicts of law), and by
applicable federal law. We are located in Utah, hold your Account in
Utah, and entered into this Agreement with you in Utah.
(ECF No. 1–2 at 16.) Wise does not argue that Utah lacks a substantial relationship to
the parties or the transaction or that application of Utah law would be contrary to a
fundamental policy of Ohio or any other state. What Wise does argue, however, is that,
“rather than adhering to the contract law principles of any specific state, courts are to
apply ordinary contract principles, in general, under the FAA.” (ECF No. 18 at 109.) As
noted above, this is incorrect: the contract law of the appropriate state governs the
Court’s inquiry into the validity of the Arbitration Provision. See Concepcion, 131 S.Ct.
at 1476; Kaplan, 514 U.S. at 944.
5
Because the Agreement contains a choice of law clause designating Utah
law, and because Ohio law calls for the clause to be applied, the Court will evaluate the
Agreement under Utah law.
B. The Existence of an Agreement to Arbitrate
“[T]he first task of a court asked to compel arbitration of a dispute is to
determine whether the parties agreed to arbitrate that dispute.” Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).4 “[I]n applying general statelaw principles of contract interpretation to the interpretation of an arbitration agreement
within the scope of the [Federal Arbitration] Act, due regard must be given to the federal
policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself
resolved in favor of arbitration.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 475–76 (1989) (internal citation omitted). Nonetheless, “we
do not override the clear intent of the parties, or reach a result inconsistent with the plain
text of the contract, simply because the policy favoring arbitration is implicated.”
E.E.O.C. v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (internal citation omitted).
Under Utah law, “[a]n ambiguity exists in a contract term or provision if it
is capable of more than one reasonable interpretation because of uncertain meanings of
terms, missing terms, or other facial deficiencies.” WebBank v. Am. Gen. Annuity Serv.
4
In defendants’ reply brief, they state that the subject motion is non-dispositive, and, noting the fourteenday period provided in Local Rule 7.1(d) for filing a response in opposition to a non-dispositive motion,
invite the Court to disregard plaintiff’s memorandum in opposition, filed twenty-five days after defendants’
motion, as untimely. To the contrary, a motion to stay, or, alternatively, to dismiss, and compel arbitration
is a dispositive motion in this Court. See Packer, Thomas & Company v. Fed. Ins. Co., 2010 WL 148140, at
*1 n.2 (N.D. Ohio Jan. 12, 2010). Plaintiff’s opposition was timely filed within the thirty-day period
provided by Local Rule 7.1(d) for responding to a dispositive motion.
6
Corp., 54 P.3d 1139, 1145 (Utah 2002) (internal quotation omitted). “A contract term is
not ambiguous simply because one party ascribes a different meaning to it to suit his or
her own interests.” Basic Research, LLC v. Admiral Ins. Co., No. 20110556, __ P.3d __,
2013 WL 563359, at *2 (Utah Feb. 8, 2013). “If the language within the four corners of
the contract is unambiguous, the parties’ intentions are determined from the plain
meaning of the contractual language, and the contract may be interpreted as a matter of
law.” Smargon v. Grand Lodge Partners, LLC, 288 P.3d 1063, 1075 (Utah 2012).
In the instant case, the Arbitration Provision calls for the arbitration of
claims between “you” and “us,” as those terms are defined in the Agreement. The first
paragraph of the Agreement states that the terms “we,” “our,” and “us” refer to
“American Express Centurion Bank.” Two pages later, the Arbitration Provision adds
additional substance to that definition:
For purposes of this Arbitration Provision, ‘you’ and ‘us’ also includes
any corporate parent, or wholly or majority owned subsidiaries, affiliates,
any licensees, predecessors, successors, assigns, any purchaser of any
accounts, all agents, employees, directors and representatives of any of
the foregoing, and other persons referred to below in the definition of
‘Claims.’
Continuing, the Arbitration Provision, in its definition of a “Claim,” introduces entities
that can contingently become part of “us”:
‘Claim’ includes claims of every kind and nature, including but not limited
to, initial claims, counterclaims, cross-claims and third-party claims and
claims based upon contract, tort, fraud and other intentional torts, statutes,
regulations, common law and equity. ‘Claim’ also includes claims by or
against any third party using or providing any product, service or benefit
in connection with any account (including, but not limited to, . . . debt
collectors and all of their agents, employees, directors and representatives)
if and only if, such third party is named as a co-party with you or us (or
7
files a Claim with or against you or us) in connection with a Claim
asserted by you or us against the other.
(ECF No. 17–1 at 90) (emphasis added).
Defendants argue that they are both “agents” and “debt collectors” under
the Agreement with respect to American Express and that they can compel arbitration as
either one. Plaintiff counters that defendants are only properly categorized as “debt
collectors” under the Agreement and that, in any event, they do not meet the definition of
“us” such that they can compel arbitration of plaintiff’s claims.
It is a well-established principle of contract interpretation that specific
terms are given greater weight than general language. TFG-Ill., L.P. v. United Maint. Co.,
829 F. Supp. 2d 1097, 1116 (D. Utah 2011) (citing Cogswell v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 78 F.3d 474, 480–81 (10th Cir. 1996)) (quoting Mutual Life Ins.
Co. of New York v. Hill, 193 U.S. 551, 558 (1904) (“The ordinary rule in respect to the
construction of contracts is this: that where there are two clauses in any respect
conflicting, that which is specially directed to a particular matter controls in respect
thereto over one which is general in its terms, although within its general terms the
particular may be included.”)); Restatement (Second) of Contracts § 203(c). Although
Utah law governs the Court’s analysis, several cases from elsewhere apply this same
principle of interpretation to similar facts, providing useful persuasive authority as to how
the Supreme Court of Utah would interpret the Agreement.
In Karnette v. Wolpoff & Abramson, L.L.P., 444 F. Supp. 2d 640 (E.D. Va.
2006), a court applied this principle to an issue almost identical to the instant case. There,
a law firm represented a bank for the purposes of collecting credit card debts. Id. at 641–
8
42. The firm sought to arbitrate an FDCPA claim under the credit card agreement, which
had an arbitration provision allowing for the arbitration of claims against “agents” of the
bank, regardless of whether the bank was also a party. Id. at 644–45. Another part of the
arbitration provision, however, made clear that claims against “debt collectors” could
only be arbitrated under the agreement if the bank was also named as a co-defendant. Id.
The law firm argued that it was the bank’s “agent” and could therefore arbitrate the
FDCPA claim under the agreement. Id. at 645. However, the court noted that it was also
undisputed that the firm was a “debt collector” under the agreement, and that “[w]hile a
debt collector may function as an agent for the specific purpose of collecting debts, timehonored principles of contract construction require a thing specifically named to be
specifically treated.” Id. Accordingly, because the law firm was a “debt collector” under
the agreement, not an “agent,” and because the arbitration provision did not cover claims
against debt collectors unless the bank was also a co-defendant, there was no agreement
to arbitrate the cardholder’s FDCPA claim against the law firm. Id. at 646.
Other courts have faced the same circumstances and come to the same
conclusion. See Cohen v. Wolpoff & Abramson, LLP, No. 08-1084, 2008 WL 4513569, at
*3–*4 (D.N.J. Oct. 2, 2008) (finding the arbitration provision to be “clear and
unambiguous” and denying a debt collecting law firm’s motion to compel arbitration of
an FDCPA claim against a law firm when the credit card company was not also named in
the suit); Bontempo v. Wolpoff & Abramson, L.L.P., No. Civ.A. 06-745, 2006 WL
3040905, at *7 (W.D. Penn. Oct. 24, 2006) (citing Karnette with approval and holding
same). Predictably, where similar conditions existed, but the credit card issuer was made
9
a party to the case, courts have granted motions to compel arbitration involving a “debt
collector.” See Schiano v. MBNA, No. 05-1711, 2012 WL 4103878, at *9 (D.N.J. Aug.
14, 2012) report and recommendation adopted by 2012 WL 4103877 (D.N.J. Sept. 17,
2012) (distinguishing Karnette, Cohen, and Bontempo and granting debt collection law
firm’s motion to compel arbitration because plaintiffs named the credit card issuer as a
co-defendant in the suit); Coleman v. Assurant, Inc., 508 F. Supp. 2d 862, 869 (D. Nev.
2007).
The instant case is almost identical to Karnette, Cohen, and Bontempo.
Defendants, a law firm and two of its attorneys, working as debt collectors for American
Express, are attempting to arbitrate FDCPA and OCSPA claims brought by an account
holder. The agreement in question allows for arbitration of claims against agents of
certain entities, but claims against third-party debt collectors cannot be arbitrated unless
American Express itself is also a party. That is, in the words of the Arbitration Provision,
claims against third-party debt collectors can be arbitrated “if and only if, such third party
is named as a co-party with you or us (or files a Claim with or against you or us) in
connection with a Claim asserted by you or us against the other.”
The reasoning behind these decisions is sound. As the court explained in
Karnette:
By putting the Arbitration and Litigation section in the credit card
agreement, [the credit card issuer] sought to limit its exposure, and the
exposure of all in its corporate family, to litigation in court. It also foresaw
that plaintiffs might sue third party entities together with [the credit card
issuer]. Therefore, [the credit card issuer] wrote a clause into the
arbitration agreement that required arbitration where [the credit card
issuer] was joined as a co-defendant in a suit against a third party.
However, for obvious reasons, [the credit card issuer] had less reason for
10
concern about suits against third parties where [the credit card issuer] was
not a co-defendant. Thus, given its plain meaning and accorded a common
sense construction, the arbitration clause does not operate here because
[the credit card issuer] is not a co-defendant in this action.
444 F. Supp. 2d at 645. On this basis alone, defendants do not have a right to compel
arbitration.
The contract language in this case presents defendants with an additional
problem not faced by the parties seeking to compel arbitration in Karnette, Cohen, and
Bontempo: even if defendants were recognized as American Express’s “agents” under the
Arbitration Provision, the plain language of the Agreement would not define them as part
of the term “us.” In the first paragraph of the Agreement, “us” is initially defined as
simply American Express, with no reference to agents or any other entity. (ECF No. 17–1
at 88.) Two pages later, in the Arbitration Provision, the definition of “us” is expanded to
“also include[ ] any corporate parent, or wholly or majority owned subsidiaries, affiliates,
any licensees, predecessors, successors, assigns, any purchaser of any accounts, all
agents, employees, directors and representatives of any of the foregoing, and other
persons referred to below in the definition of ‘Claims.’” (Id. at 90) (emphasis added.) The
reference to “all agents . . . of any of the foregoing” refers to the entities specifically
listed in that same paragraph, which do not include American Express itself.
Consequently, while the agents of American Express’s corporate parents are included in
the definition of “us,” the agents of American Express itself are not.5
5
The court in Karnette set forth alternative grounds for denying the motion to compel arbitration that
would also apply in the alternative here. If defendants were “agents” of American Express under the
Agreement, and if “agents” of American Express fell under the definition of “us” such that claims against
them triggered the Arbitration Provision, then an ambiguity would result from the fact that defendants are
also admittedly “debt collectors” under the Agreement, and “debt collectors” cannot force arbitration if
11
Accordingly, the Court finds that the Agreement is unambiguous, that
principles of contract interpretation require defendants to be categorized as “debt
collectors” under the Arbitration Provision, and that defendants do not meet the
Agreement’s definition of the term “us.” Because only claims between “you” and “us”
fall within the scope of the arbitration provision, the Agreement is not an agreement
between plaintiff and defendants to arbitrate plaintiff’s claims, and defendants cannot
compel plaintiff to arbitrate.
C. The Scope of the Arbitration Provision
Alternatively, in addition to not being parties to the Agreement,
defendants’ motion fails because plaintiff’s claims do not fall within the scope of the
Arbitration Provision. Although “Claim” is initially given a broad definition, the
Arbitration Provision carves out claims against debt collectors where American Express
is not also a party: “‘Claim’ also includes claims . . . against . . . debt collectors and all of
their agents . . . if and only if, such third party is named as a co-party with you or us . . . .”
By including the parties that can bring a “Claim” within the definition of a “Claim” itself,
any claim held by a nonparty to the Agreement is, by definition, not a “Claim” within the
scope of the Arbitration Provision.6
American Express is not a party. See Karnette, 444 F. Supp. 2d at 646–47. Although ambiguities in the
scope of an arbitration clause are construed in favor of arbitration, the long-standing rule of contra
preferentum applies elsewhere within an arbitration agreement. Mastrobuono v. Shearson Lehman Hutton,
Inc., 514 U.S. 52, 64 (1995). Under defendants’ proposed construction, as the purported “agents” of
American Express, the drafter of the Agreement, that ambiguity is construed against them, and they may
not compel arbitration of plaintiff’s claims. Karnette, 444 F. Supp. 2d at 647.
6
The alternative grounds recognized in Karnette, 444 F. Supp. 2d at 646–47, based on identifying an
ambiguity with respect to the parties to the Agreement and construing that ambiguity against American
Express, would not apply here, as this deals with the scope of the Arbitration Provision, and “ambiguities
as to the scope of the arbitration clause itself [are] resolved in favor of arbitration.” Volt, 489 U.S. at 475–
76 (1989) (internal citation omitted).
12
D. Non-signatory Theories7
Utah law has recognized five theories whereby a non-signatory can bind a
signatory to an agreement to arbitrate: 1) incorporation by reference; 2) assumption; 3)
agency; 4) veil-piercing/alter-ego; 5) estoppel; and 6) third-party beneficiary. Ellsworth v.
Am. Arbitration Ass’n, 148 P.3d 983, 988–90, 989 n.11–12 (Utah 2006). Defendants
argue here that agency and estoppel theories allow them to enforce the Arbitration
Provision in the Agreement as a non-signatory.8
1. Estoppel
With respect to non-signatory estoppel, defendants argue that plaintiff’s
claims are “intertwined” with the Agreement and therefore arbitrable under Javitch v.
First Union Secs., Inc., 315 F.3d 619 (6th Cir. 2003) and Liedtke v. Frank, 437 F. Supp.
2d 696 (N.D. Ohio 2006). In Javitch, the Sixth Circuit approvingly cited a Second Circuit
case, Thomson-CSF v. Am. Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995), which
identified five theories for binding non-signatories to arbitration agreements, including
agency and estoppel. Javitch, 315 F.3d at 629. Moreover, the court in Javitch noted that
“a signatory . . . may be estopped from avoiding arbitration with a nonsignatory when
the issues the nonsignatory is seeking to resolve in arbitration are intertwined with the
underlying contract.” Id. (citing Thomson-CSF, 64 F.3d at 779). Later, in Liedtke, a court
7
Defendants only raise their non-signatory theories of estoppel and agency in their reply brief, after
plaintiff made note in his opposition that defendants had not done so in their opening brief. (Doc. No. 18 at
109 n.5.) The Court could reject defendants’ arguments on that basis alone. See Scottsdale Ins. Co. v.
Flowers, 513 F.3d 546, 553 (6th Cir. 2008) (issues raised for the first time to the district court in a reply
brief are waived).
8
Because plaintiff’s claims do not fall within the scope of the arbitration provision, defendants’ nonsignatory theories must fail. However, out of an abundance of caution, the Court analyzes and evaluates
them independently.
13
from this district cited Javitch and Thomson-CSF and added additional language from an
Eleventh Circuit case, MS Dealer Serv. Corp. v. Franklin, which stated that:
Existing case law demonstrates that equitable estoppel allows a
nonsignatory to compel arbitration in two different circumstances. First,
equitable estoppel applies when the signatory to a written agreement
containing an arbitration clause “must rely on the terms of the written
agreement in asserting [its] claims” against the nonsignatory. When each
of a signatory's claims against a nonsignatory “makes reference to” or
“presumes the existence of” the written agreement, the signatory’s claims
“arise[ ] out of and relate [ ] directly to the [written] agreement,” and
arbitration is appropriate. Second, “application of equitable estoppel is
warranted . . . when the signatory [to the contract containing the
arbitration clause] raises allegations of . . . substantially interdependent
and concerted misconduct by both the nonsignatory and one or more of the
signatories to the contract.”
437 F. Supp. 2d at 699 (quoting MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947
(11th Cir. 1999)).
Defendants incorrectly utilize federal law rather than Utah law to evaluate
whether an arbitration clause is enforceable by a non-signatory under the FAA. See
Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009). However, the error is
essentially harmless, as the cases cited by the Supreme Court of Utah to establish nonsignatory estoppel also trace back to MS Dealer. See Ellsworth, 148 P.3d 983 at 989 n.12
(Utah 2006) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524 (5th Cir.
2000), which adopted the “intertwined-claims test” from MS Dealer). Additionally, the
court in Grigson added that equitable estoppel “is much more readily applicable when the
case presents both independent bases advanced by the Eleventh Circuit for applying the
intertwined-claims doctrine[,]” that is, both when the signatory “must rely on the terms of
the written agreement in asserting its claims against the nonsignatory” and when the
14
signatory “raises allegations of substantially interdependent and concerted misconduct by
both the nonsignatory and one or more . . . signatories . . . .” Grigson, 210 F.3d at 527–
28.
The rationale behind Grigson for estopping a signatory from avoiding
arbitration against a non-signatory is that a signatory cannot “‘have it both ways’: it
cannot, on the one hand, seek to hold the non-signatory liable pursuant to duties imposed
by the agreement . . . but, on the other hand, deny arbitration’s applicability because the
defendant is a non-signatory.” Id. at 528 (citing MS Dealer, 117 F.3d at 947). “Moreover
. . . it would be especially inequitable where . . . a signatory non-defendant is charged
with interdependent and concerted misconduct with a non-signatory defendant. In such
instances, that signatory, in essence, becomes a party, with resulting loss, inter alia, of
time and money because of its required participation in the proceeding.” Grigson, 210
F.3d at 528. For those reasons, the court determined that “whether to utilize estoppel in
this fashion is within the district court’s discretion . . . .” Id.
The instant case presents none of Grigson’s reasons for estopping plaintiff
from avoiding arbitration. Plaintiff’s claims rely on defendants’ alleged representations,
both in complaints filed against consumers and in verbal and/or written demands made
before and after the filing of complaints. The claims assert that defendants are liable
pursuant to federal and state law, not pursuant to any duties imposed by the Agreement.
See Bontempo, 2006 WL 3040905, at *7 (finding a substantially similar arbitration
provision did not meet Grigson’s first estoppel criterion because the plaintiff “could have
asserted his claim . . . without making any reference to his Agreement”); see also Lenox
15
MacLaren Surgical Corp. v. Medtronic, Inc., 449 F. App’x 704, 710 (10th Cir. 2011)
(“For a plaintiff’s claims to rely on the contract containing the arbitration provision, the
contract must form the legal basis of those claims; it is not enough that the contract is
factually significant to plaintiff’s claims or has a ‘but-for’ relationship with them.”).9 In
addition, plaintiff does not allege any interdependent or concerted misconduct
whatsoever between defendants and American Express. All of his allegations are strictly
confined to defendants. Accordingly, defendants’ belatedly raised non-signatory estoppel
theory is unavailing.
2. Agency
Defendants would also have the Court compel arbitration under a nonsignatory theory of agency. That theory, however, has seen little practice under Utah law.
In the closest case on point, Nueterra Healthcare Mgmt, LLC v. Parry, 835 F. Supp. 2d
1156 (D. Utah 2011), the District of Utah allowed members of the board of managers of a
surgery center to enforce an arbitration agreement as the center’s agents. 835 F. Supp. 2d
at 1161–62. But there, unlike the instant case, agency was undisputed, and the agents
sought to enforce the terms of the very agreement containing the arbitration provision. Id.
As with non-signatory estoppel, fairness concerns underpin non-signatory
agency theory. In Arnold v. Arnold Corp.-Printed Commc’ns for Bus., 920 F.2d 1269,
(6th Cir. 1990) the Sixth Circuit was concerned that a plaintiff “c[ould] avoid the
practical consequences of an agreement to arbitrate by naming nonsignatory parties as
9
The fact that one of the allegedly illegal representations was made via defendants’ attachment of the
Agreement to its state court complaints does not change the fact that plaintiff is not seeking to assert any
rights allegedly imposed by the Agreement.
16
[defendants] in his complaint, or signatory parties in their individual capacities only.” 920
F.2d at 1281 (second alteration in the original). In such an instance, “the rule requiring
arbitration would, in effect, be nullified.” Id. In several circuits, these concerns must be
present; “an agency relationship alone is insufficient to permit a non-signatory to compel
arbitration.” Palmer Ventures LLC v. Deutsche Bank AG, 254 F. App’x 426, 433 (5th Cir.
2007) (collecting cases). Those courts perform an analysis similar to the Grigson tests in
evaluating whether an agent can compel arbitration. Id. (holding that an agent failed to
“satisfy the Grigson analysis”); JLM Indus., Inc. v. Stolt-Nielsen S.A., 387 F.3d 163, 177
(2d Cir. 2004); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 320–
21 (4th Cir. 1988).
The legal relationship between a creditor and debt collection law firm
under Utah law is unclear. Compare Martinez v. Johnson, No. 2:11CV157-DN, 2013 WL
1031363, at *7 (D. Utah Mar. 14, 2013) (quoting Randolph v. IMBS Inc., 368 F.3d 726
(7th Cir. 2004), “[A] debt collector is an independent contractor, not the creditor’s
agent,” and rejecting the argument that a debt collection law firm and its attorneys were
Capital One’s agent in an FDCPA case) with Ditty v. CheckRite, Ltd., 973 F. Supp. 1320,
1335 (D. Utah 1997) (stating that “the terms ‘agent’ and ‘independent contractor’ are not
mutually exclusive” and finding a debt collection law firm to be a creditor’s agent).
Moreover, defendants offer no factual support for their claim that they are
agents of American Express. They did not submit an affidavit or any other documentation
17
with their motion to provide evidence of the relationship.10 In fact, the Agreement itself,
by classifying debt collectors as “third parties” and explicitly removing claims against
them from the Arbitration Provision when American Express is not also party, provides a
strong indication that American Express did not consider defendants to be its agents.
In short, it would be improper to allow defendants to compel arbitration in
this case on a non-signatory theory of agency. First, the Court knows of no case under
Utah law that has applied the theory to entities as far removed as a debt collector from a
credit provider. Indeed, the most recent court to address the issue explicitly held that a
debt collecting law firm is not an agent of a credit provider. See Martinez, 2013 WL
1031363, at *7. Also, none of the fairness concerns at the heart of why courts allow nonsignatories to enforce agreements are present here. Finally, defendants’ argument—again,
citing the wrong source of law and offering no factual evidence in support—is “cursory
and superficial at best, perfunctory and slap-dash at worst.” Associated Gen. Contractors
v. Bd. of Oil, Gas and Mining, 38 P.3d 291, 303 (Utah 2001) (internal quotation omitted).
IV. CONCLUSION
For the foregoing reasons, defendants’ motion to compel arbitration is
DENIED.
IT IS SO ORDERED.
Dated: March 22, 2013
HONORABLE SARA LIOI
UNITED STATES DISTRICT JUDGE
10
Indeed, credit providers often require debt collectors to expressly disavow any principal/agent
relationship in their contracts with each other. See, e.g., Butto v. Collecto Inc., 802 F. Supp. 2d 443, 449
(E.D.N.Y. 2011); Lucy v. Bay Area Credit Svc LLC, 792 F. Supp. 2d 320, 325 (D. Conn. 2011); Mims v.
Global Credit and Collection Corp., 803 F. Supp. 2d 1349, 1355 (S.D. Fla. 2011).
18
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