Smith v. Credit Acceptance Corporation

Filing 9

MEMORANDUM (Order to follow as separate docket entry)For the reasons discussed above, this case will be stayed pending the final outcome of arbitration proceedings. Because the arbitration may resolve all issues between the parties and make any furt her proceedings in this Court unnecessary, the Clerk of Court will be directed to close the case administratively. If arbitration does not resolve all issues, then either party may move the Court to reopen the case. An appropriate Order is filed simultaneously with this action.Signed by Honorable Richard P. Conaboy on 1/11/17. (cc)

UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
LARRY SMITH,

:
:CIVIL ACTION NO. 3:16-CV-1675
Plaintiff,
:
:(JUDGE CONABOY)
v.
:
:
CREDIT ACCEPTANCE
:
CORPORATION,
:
:
Defendant.
:
:
___________________________________________________________________
MEMORANDUM
Here we consider the Motion of Defendant, Credit Acceptance
Corporation, to Compel Arbitration and to Dismiss or, in the
Alternative, to Stay All Proceedings (Doc. 5).

For the reasons

discussed below, the Court concludes the motion to compel is
properly denied and the case will be stayed pending the outcome of
arbitration.
I. Background
Plaintiff filed this action on August 12, 2016, asserting
claims under the Fair Debt Collection Practices Act, 15 U.S.C. §
1692, et seq. (“FDCPA”), and the Telephone Consumer Protection Act,
47 U.S.C. § 227, et seq. (“TCPA”).1

(Doc. 1 at 1.)

Plaintiff

specifically alleges that Defendant began calling him on his
cellular phone in 2014 and, despite his attempts to stop the calls,

1

In Plaintiff’s Memorandum of Law in Opposition to
Defendant’s Motion to Dismiss and Compel Arbitration (Doc. 7),
Plaintiff states that his complaint alleges violations of the TCPA.
(Doc. 7 at 1.)

the calls continued and he received repeated harassing calls on his
cellular phone between August 2015 and August 2016 in Defendant’s
attempt to collect an alleged debt on his auto loan.
3.)

(Doc. 1 at

Plaintiff also alleges that Defendant used an automatic

telephone dialing system and pre-recorded messages and the calls
were not made for emergency purposes.

(Doc. 1 at 4.)

In its supporting brief, Defendant asserts that Plaintiff
entered into a valid agreement to arbitrate with Defendant and
Plaintiff’s claims are within the scope of the Agreement to
Arbitrate.

(Doc. 6 at 6-21.)

Defendant states that Plaintiff

entered into a Retail Installment Contract (“RIC”) with Gaughan
Auto Store for the purchase of a used car in June 2014, Gaughan
assigned the RIC to Defendant, and Plaintiff defaulted soon after
entering into the RIC by failing to make all of the required
monthly payments.

(Doc. 6 at 6.)

Defendant also avers the

following: the first page of the RIC conspicuously emphasizes the
existence of the Agreement to Arbitrate; a notice on the following
page advises the buyer not to sign the contract in blank, that the
buyer is entitled to an exact copy of the contract he signs, and he
should keep it to protect his legal rights; and, below this notice
and Plaintiff’s signature, the following language appears in bold
type: “You agree to the terms of this Contract and acknowledge that
You have received a copy of this Contract with all blanks filled in
and that You have read it and understand it.”

2

(Doc. 6 at 7-8

(citing Dickson-Rekasi Aff., Ex. A [Doc. 6 at 27-30]).)

Defendant

summarized the Agreement to Arbitrate contained in the RIC as
follows:
[T]he Agreement to Arbitrate provides that
Plaintiff or Credit Acceptance may elect to
arbitrate “Disputes” (which “have the
broadest meaning possible”) either before or
after litigation has begun; if and when
arbitration is elected by either Plaintiff or
Credit Acceptance, then there is no right to
pursue Disputes in this (or any) Court; the
RIC evidences a transaction in interstate
commerce; and arbitration is governed by the
Federal Arbitration Act (“FAA”), 9 U.S.C. §§
1-16.
(Doc. 6 at 9 (citing RIC ppg. 4-5 [Doc. 6 at 30]).)

Defendant also

points out several ways in which the Agreement to Arbitrate is
designed to protect consumers, including that “Plaintiff had the
absolute right to reject the Agreement to Arbitrate, with no
consequence to the remaining terms of the RIC.”

(Doc. 6 at 10.)

Specifically, the Right to Reject the Agreement allows the buyer to
reject the Arbitration Clause by mailing a written rejection notice
to a specified address within thirty days of the date of the
Contract.

(Doc. 6 at 10.)

Defendant notes that Plaintiff did not

exercise his right to reject the Agreement to Arbitrate as it did
not receive the required notice from Plaintiff.

(Id.)

In support of its motion, Defendant provides the Affidavit of
Andrea Dickson-Rekasi, a Legal Assistant at Credit Acceptance
Corporation, with the RIC attached as a supporting exhibit.
6 at 24-30.)

(Doc.

Ms. Dickson-Rekasi states that Plaintiff Larry Smith
3

and Elizabeth Smith entered into the RIC on June 24, 2014, with
Gaughan Auto Store for the purchase of a 2005 Jeep Liberty, and
Gaughan Auto Store assigned all right, title, and interest in the
RIC to Credit Acceptance, the RIC contains an Agreement to
Arbitrate, and Credit Acceptance never received a request, written
or otherwise, from Plaintiff to opt out of the Arbitration Clause.
(Doc. 6 at 24-25.)
II. Discussion
As noted above, with this motion, Defendant asserts that
Plaintiff’s claims for improper phone calls are within the scope of
the binding RIC and Agreement to Arbitrate.

(Doc. 6 at 11.)

Plaintiff avers that Defendant’s motion should be denied because he
has stated a claim under the TCPA, Defendant has failed to meet its
burden to establish the existence of a binding and enforceable
arbitration contract, and any existing arbitration contract between
Plaintiff and Defendant is unconscionable.

(Doc. 7 at 1-2.)

Under the Federal Arbitration Act, a “written provision . . .
to settle by arbitration a controversy . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at
law or equity for the revocation of any contract.”

9 U.S.C. § 2;

see also 42 Pa. C.S. § 7301, et seq. (Pennsylvania’s Uniform
Arbitration Act).

Federal and Pennsylvania law strongly favor

enforcement of arbitration provisions.

Howsan v. Dean Witter

Reynolds, Inc., 537 U.S. 79, 82 (2002); Dodds v. Pulte Home Corp.,

4

909 A.2d 348, 351 (Pa. Super. 2006) (“It is hornbook law that
Pennsylvania favors the enforceability of agreements to
arbitrate.”).

The Third Circuit has explained that any doubts

about the arbitrality of a matter should be resolved in favor of
arbitration.

See Brayman Construction Corp. v. Home Insurance

Company, 319 F.3d 622, 625 (3d Cir. 2003).
“To determine whether the parties agreed to arbitrate, we turn
to ‘ordinary principles that govern the formation of contracts.’”
Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d
Cir. 2009) (quoting First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938, 944 (1995)).

Contract formation under Pennsylvania law

requires “(1) a mutual manifestation of an intention to be bound,
(2) terms sufficiently definite to be enforced, and (3)
consideration.”

Id. (citing Blair v. Scott Specialty Gases, 283

F.3d 595, 603 (3d Cir. 2002)).

Under Pennsylvania law, a motion

to compel arbitration can only be granted if the court determines
that “(1) a valid agreement to arbitrate exists, and (2) the
particular dispute falls within the scope of that agreement.”

Id.

(citing Trippe Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d
Cir. 2005); Quiles v. Fin. Exch. Co., 879 A.2d 281, 283 n.3 (Pa.
Super. 2005)).
The Court of Appeals for the Third Circuit clarified the
appropriate standard district courts are to apply when determining
whether an agreement to arbitrate was actually reached in Guidotti
5

v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764 (3d Cir.
2013).

The clarification was necessary because some cases

supported “‘the traditional practice of treating a motion to compel
arbitration as a motion to dismiss for failure to state a claim
upon which relief can be granted,’ under Rule 12(b)(6) of the
Federal Rules of Civil Procedure.”

Guidotti, 716 F.3d at 771

(quoting Palcko v. Airborne Express, Inc., 372 F.3d 588, 597 (3d
Cir. 2004)).

Other cases “said, however, ‘that when considering a

motion to compel arbitration . . . [a district court] should’
employ ‘the standard used . . . in resolving summary judgment
motions pursuant to [Rule 56 of the Federal Rules of Civil
Procedure].’”

Id. (quoting Par-Knit Mills, Inc. v. Stockbridge

Fabrics Co., Ltd., 636 F.2d 51, 54 & n.9 (3d Cir. 1980)
(alternation in Guidotti); citing Kaneff v. Del. Title Loans, Inc.,
587 F.3d 616, 620 (3d Cir. 2009)).

After noting that inconsistent

pronouncements on the applicable standard for evaluating motions to
compel arbitration “are perhaps explained by the FAA [Federal
Arbitration Act], and by the values underlying contract
interpretation,” Guidotti summarized the reconciliation of the
split pronouncements.
[W]hen it is apparent, based on the face of a
complaint, and documents relied upon in the
complaint that certain of a party’s claims
are subject to an enforceable arbitration
clause, a motion to compel arbitration should
be considered under a Rule 12(b)(6) standard
without discovery’s delay. . . . But if the
complaint and its supporting documents are
6

unclear regarding the agreement to arbitrate,
or if the plaintiff has responded to a motion
to compel arbitration with additional facts
sufficient to place the agreement to
arbitrate in issue, then the parties should
be entitled to discovery on the question of
arbitrability before a court entertains
further briefing on the question. . . . After
limited discovery, the court may entertain a
renewed motion to compel arbitration, this
time judging the motion under a summary
judgment standard.
716 F.3d at 776 (internal quotations omitted).
Here the Court has no trouble concluding that a valid
agreement to arbitrate exists and the dispute falls within the
scope of that agreement.

Kirleis, 560 F.3d at 160.

The terms of

the Agreement to Arbitrate in the RIC are broad, evidence presented
by Defendant shows that Plaintiff signed the RIC which contains a
conspicuous Agreement to Arbitrate, and Ms. Dickson-Rekasi’s
Affidavit states that Defendant did not receive a request from
Plaintiff to opt out of the Arbitration Clause.
25, 27-30.)

(Doc. 6 at 8-9,

Plaintiff’s conclusory statements that Defendant has

failed to meet its burden regarding the existence of an arbitration
contract and that any existing arbitration clause is unconscionable
(Doc. 7 at 2, 5, 7, 10) fall far short of meeting his burden of
challenging the Agreement to Arbitrate.

See, e.g.,

Shearson/American Express v. McMahon, 482 U.S. 220, 227 (1987).
Despite the inclusive language of the agreement, Plaintiff
maintains that the terms of the contract are completely separate
and irrelevant to Plaintiff’s TCPA claim.
7

(Doc. 7 at 10.)

He does

so without citation to authority and without providing any argument
or factual support for his conclusive statement.

Therefore,

Plaintiff has presented no meaningful challenge to Defendant’s
argument (supported by the RIC’s plain language) that the Agreement
to Arbitrate is valid and the dispute at issue here falls within
its scope.2
The remaining issue is whether this case should be dismissed
or stayed pending the outcome of arbitration.
Doc. 7 at 10.)

(See Doc. 6 at 20;

Several circuits have held that litigation in which

all claims are referred to arbitration may be dismissed.

Choice

Hotels Intern., Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707,
709-10 (4th Cir. 2001); Green v. Americtech Corp., 200 F.3d 967,

2

Although Plaintiff states that the summary judgment
standard is appropriate in determining arbitrability in a motion to
compel arbitration, Plaintiff does not acknowledge the Guidotti
analysis set out in the text or provide any argument in support of
his assertion. (See Doc. 7 at 4.) The Court concludes a Rule
12(b)(6) standard is appropriate here because the claims set out in
the Complaint arise from a contract between the parties (the RIC)
which contains an enforceable arbitration clause. See Guidotti,
716 F.3d at 776. Although Plaintiff mentions neither in his
Complaint (Doc. 1), the claimed violations of the FDCPA and TCPA
took place because of the contract for the purchase of an
automobile and Plaintiff’s failure to pay monies due thereunder,
and Defendant’s status as a “debt collector” identified in the
Complaint (Doc. 1 ¶ 9) is related to Plaintiff’s failure to abide
by the terms of the contract. Therefore, although Plaintiff has
not stated specific facts acknowledging the RIC and Agreement to
Arbitrate in his Complaint, their existence is sufficiently
apparent for this motion to be considered under the Rule 12(b)(6)
standard without discovery’s delay in the absence of any meaningful
argument from Plaintiff that additional facts place the agreement
to arbitrate in issue. 716 F.3d at 776.
8

973, (6th Cir. 2000); Alford v. Dean Witter Reynolds, Inc., 975 F.2d
1161, 1164 (5th Cir. 1992); Sparling v. Hoffman Const. Co., Inc.,
864 F.2d 635, 638 (9th Cir. 1988).

However, the Third Circuit

decided otherise in Lloyd v. Hovensa, LLC, 369 F.3d 263, 269 (3d
Cir. 2004), concluding that the text of § 3 of the FAA requires a
stay of proceedings if requested by a party.

Section 3 of the FAA

provides:
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, providing that the applicant
for the stay is not in default in proceeding
with such arbitration.
9 U.S.C. § 3.

Lloyd explained that

the plain language of § 3 affords a district
no discretion to dismiss a case where one of
the parties applies for a stay pending
arbitration. The directive that the Court
“shall” enter a stay simply cannot be read to
say that the Court shall enter a stay in all
cases except those in which all claims are
arbitrable and the Court finds dismissal to
be the preferable approach.
369 F.3d at 269.
Here Defendant first asserts that the case should be dismissed
with prejudice and, alternatively, stayed pending the final outcome
of arbitration.

(Doc. 6 at 20.)

Plaintiff contends that the
9

proceedings must be stayed rather than dismissed if the Court finds
the matter should be referred to arbitration.

(Doc. 7 at 10.)

Given the Third Circuit holding in Lloyd, which was reiterated in
Devon Robotics, LLC, v. DeVidema, 798 F.3d 136, 143-44 (3d Cir.
2015), and Plaintiff’s request that the case be stayed, we conclude
staying the matter pending the final outcome of arbitration is the
proper course even though all claims are referred to arbitration.
III. Conclusion
For the reasons discussed above, this case will be stayed
pending the final outcome of arbitration proceedings.

Because the

arbitration may resolve all issues between the parties and make any
further proceedings in this Court unnecessary, the Clerk of Court
will be directed to close the case administratively.

If

arbitration does not resolve all issues, then either party may move
the Court to reopen the case.

An appropriate Order is filed

simultaneously with this action.

S/Richard P. Conaboy
RICHARD P. CONABOY
United States District Judge
DATED: January 11, 2017

10