Pacanowski v. United Recovery Systems, LP

Filing 31

MEMORANDUM (Order to follow as separate docket entry) re 21 MOTION to Compel Arbitration, or Alternatively, Motion to Stay Pending Arbitration filed by Alltran Financial, LP. Signed by Magistrate Judge Karoline Mehalchick on 9/19/2017. (cw)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
FRANCIS PACANOWSKI,
Plaintiff

CIVIL ACTION NO. 3:16-CV-1778

v.
(MEHALCHICK, M.J.)
ALLTRAN FINANCIAL, LP,
Defendant
MEMORANDUM OPINION
Before the Court is the motion of Defendant, Alltran Financial LP (hereinafter
“Alltran,” formerly known as “United Recovery Systems”), to dismiss and to compel
arbitration, or alternatively stay proceedings pending arbitration. (Doc. 21). This matter having
been fully briefed, it is ripe for disposition. For the following reasons, the Court will DENY
Defendant’s motion.
I.

BACKGROUND AND PROCEDURAL HISTORY
At some point prior to 2003, Plaintiff, Francis Pacanowski (“Pacanowski”) opened a

new Home Depot credit card account (“the Account”) (Doc. 21-1 at 1). Citibank, (South
Dakota) N.A. (“Citibank”) eventually purchased the Account. (Doc. 21-2 at ¶ 4). Pacanowski
submits that the identity of the original creditor, and the terms of the original subject agreement
are unknown. Pacanowski currently has a delinquent balance on his account in excess of
$6,600.00, which is the subject of this lawsuit. While the Account was active, Citibank mailed
to Pacanowski multiple documents, each of which purported to replace the prior terms of the
Account. (Doc. 21-2 at ¶¶6-13). The last of these documents was sent in May 2011. (Doc. 1 at
¶11; Doc. 21-2 at ¶11). This document contains an arbitration provision. (Doc. 23-1 at 6). The

May 2011 document advised Pacanowski that Citibank was changing the terms of the
agreement, including the applicable arbitration provision, and provided Pacanowski with an
opportunity to opt out of the 2011 Notice. Pacanowski did not opt out of the 2011 Notice.
This lawsuit was instituted by Pacanowski on July 20, 2016 against Alltran, in which
Pacanowski alleges that Alltran, acting as a debt collector for Citibank, sent him a form letter
on or around July 21, 2015, attempting to collect the outstanding account balance, and claiming
that the letter violates the Fair Debt Collection Practices Act. (Doc. 1 at ¶ 12). Pacanowski
alleges that the letter violates the FDCPA by failing to include a disclosure as to when the
amount due was calculated or if the debt would continue to grow. (Doc. 1 at ¶¶ 12-14).
Alltran has moved the Court dismiss the case and to compel arbitration, or in the
alternative, to stay this matter pending individual arbitration of Pacanowski’s claims. Alltran
submits that the Pacanowski’s FDCPA claims against Alltran clearly relate to Pacanowski’s
account, and that the allegations establish that Alltran is connected with Citibank or was acting
as Citibank’s agent or representative when it contacted Pacanowski. Alltran further submits that
Pacanowski alleges that Alltran attempted to collect a debt on behalf of Citibank, and the letter
that Pacanowski allegedly received from Alltran identifies Citibank as Alltran’s client. As such,
Alltran submits that Pacanowski’s claims fall squarely within the express terms of the
arbitration provision of Pacanowski’s Card Agreement, and that the arbitration agreement is
valid and binding.
Pacanowski submits that he is not bound by the arbitration provision because (1) the
cardmember agreement is a contract of adhesion; (2) Alltran has not presented any evidence
regarding the initial terms of the contract with Citibank’s predecessor; (3) Pacanowski’s claim is
not included within the provision’s scope because it is not a “Claim” as defined in the

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agreement; (4) Alltran’s alternative estoppel argument fails; (5) Alltran is not a third party
beneficiary because it was not named in the cardmember agreement; and (6) that this Court
should decide the gateway issue of arbitrability.
The Court addresses each of these arguments below.
II.

DISCUSSION
A. THIS COURT SHOULD DECIDE THE GATEWAY ISSUE OF ARBITRABILITY.
The initial question of arbitrability—i.e., whether or not the parties validly agreed to

arbitrate—is presumed to be a question for the court unless the parties clearly and unmistakably
indicate otherwise. Guidotti v. Legal Helpers Debt Resolution, L.L.C., 716 F.3d 764, 773 (3d Cir.
2013); Briggs v. Macy's Inc., No. CV 3:16-0902, 2017 WL 590274, at *2–3 (M.D. Pa. Feb. 14,
2017). In Guidotti, the Third Circuit Court of Appeals clarified the appropriate standard of
review to be applied to a motion to compel arbitration filed before the completion of discovery.
This clarification was needed due to conflicting precedent using the standard under Federal
Rule of Civil Procedure 12(b)(6) applied to motions to dismiss as compared to precedent using
the standard under Federal Rule of Civil Procedure 56 applied to motions for summary
judgment. Guidotti, 716 F.3d at 771. The Third Circuit determined that this conflict was
premised on the competing purposes of the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et
seq., governing arbitration versus the values underlying contract interpretation more generally.
Guidotti, 716 F.3d at 773. While the FAA “calls for a summary and speedy resolution of
motions or petitions to enforce arbitration clauses,” enforcement of the private agreement
between the parties is also an important consideration. Guidotti, 716 F.3d at 773 (quoting Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 29 (1983)). “Accordingly, ‘[b]efore a
party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there

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should be express, unequivocal agreement to that effect.’” Guidotti, 716 F.3d at 773 (quoting
Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54 (3d Cir. 1980)) (alteration in
original).
The Third Circuit in Guidotti held that where the affirmative defense of arbitrability is
apparent on the face of the complaint or those documents relied upon in the complaint, the
standard under Rule 12(b)(6) should be applied. Guidotti, 716 F.3d at 773-74. In those cases,
the FAA would favor speedy resolution without the delay of discovery. Guidotti, 716 F.3d at
773-74. “[A] more deliberate pace is required” when either (1) the complaint and documents
referenced therein do not establish with “requisite clarity” that the parties agreed to arbitrate or
(2) “the opposing party has come forth with reliable evidence that is more than a ‘naked
assertion ... that it did not intend to be bound,’ even though on the face of the pleadings it
appears that it did.” Guidotti, 716 F.3d at 774 (quoting Somerset Consulting, LLC v. United Capital
Lenders, LLC, 832 F. Supp.2d 474, 479 (E.D. Pa. 2011) and Par-Knit Mills, 636 F.2d at 55).
When the issue of arbitrability is not apparent on the fact of the complaint, “the motion
to compel arbitration must be denied pending further development of the factual record.”
Guidotti, 716 F.3d at 774 (emphasis added). When the issue of arbitrability is apparent on the
face of the complaint but the non-moving party has come forward with evidence to place the
question in issue, the motion should be resolved according to the standard provided in Rule 56.
Guidotti, 716 F.3d at 774. “Under either of those scenarios, a restricted inquiry into the factual
issues will be necessary to properly evaluate whether there was a meeting of the minds on the
agreement to arbitrate, and the non-movant must be given the opportunity to conduct limited
discovery on the narrow issue concerning the validity of the arbitration agreement.” Guidotti,
716 F.3d at 774 (emphasis added) (internal citations and quotations omitted).

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In this case, the parties exchanged limited initial discovery in anticipation of this motion,
and therefore the Court has a complete factual record before it with regard to the issue of
arbitrability, and will decide this motion based on a motion for summary judgment standard.
B. THE ARBITRATION AGREEMENT IS VALID.
To compel arbitration, Courts must determine (1) the validity of the arbitration
agreement and (2) whether the dispute is encompassed by the scope of that agreement. Trippe
Mfg. Co. v. Niles Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005). Accordingly, a court must
initially inquire into whether a valid agreement to arbitrate exists. Bey v. Citi Health Card, No.
CV 15-6533, 2017 WL 2880581, at *4–5 (E.D. Pa. July 6, 2017); Trippe, 401 F.3d at 532. Courts
look to ordinary state law principles of contract formation to make this determination. Alexander
v. Anthony Int’l, L.P., 341 F.3d 256, 264 (3d Cir. 2003). The Card Agreement in dispute contains
a choice-of-law provision, which states that “Federal law and the law of South Dakota, where
we [Citibank] are located, govern the terms and enforcement of this Agreement.” (Doc. 23-1 at
7). Therefore, South Dakota state law principles of contract formation apply here. Under South
Dakota law, the elements necessary for contract formation are: (1) parties capable of
contracting; (2) their consent; (3) a lawful object; and (4) sufficient consideration. American
Prairie Constr. Co. v. Hoich, 594 F.3d 1015, 1023 (8th Cir. 2010) (citing S.D. Codified Laws § 531-2). To form a contract, there must be an objective manifestation of mutual assent. Jacobsen v.
Gulbransen, 623 N.W.2d 80, 90 (S.D. 2001). Regarding consumer credit cards, South Dakota
defines the use of a credit card as acceptance of a credit card agreement. See S.D. Codified Laws
§ 54-11-9 (establishing that “[t]he use of an accepted credit card ... creates a binding contract
between the card holder and the card issuer.”).

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Here, all of the requisite elements for contract formation exist. First, Pacanowski and
Citibank are both parties capable of contracting. Second, both provided their consent in
contracting. In the May 2011 document, Citibank included a “Notice of Change in Terms [to
the Account], Right to Opt Out and Information Update” in its periodic billing statement to
Pacanowski. (Doc. 23-1 at 4-7). The updated Card Agreement contained an arbitration
provision, and indicated that to opt out of the changes the consumer “must call or write
[Citibank] within 25 [twenty-five] days of 07/23/2011.” (Doc. 23-1 at 4). Further, the Card
Agreement explicitly stated that it was the contract that governed the Account and would apply
to the consumer’s use of the Account. (Doc. 23-1 at 4). Moreover, shortly after the May 2011
document was issued, Pacanowski used the credit card to make a purchase in the amount of
$741.24 on May 25, 2011. (Doc. 22-1 at 46). Third, there was a lawful object to the contract,
that is, the creation of a credit card account. Finally, there was consideration – Citibank
exchanged a credit line for Pacanowski’s promise to pay off charges made to the credit account
with interest. Most notably, Pacanowski does not challenge the existence of the May 2011 Card
Agreement that was mailed while the Account was active. (Doc. 23 at 5). Because all elements
of a valid contract are present, a valid agreement to arbitrate existed between Pacanowski and
Citibank. 1

1

Pacanowski additionally argues that because the Account’s original contract terms
have not been produced, any modifications made by Citibank are unfounded because there is
no evidence that Citibank’s predecessor reserved the right to amend the contract. In reliance,
Pacanowski cites to S.D. Codified Laws §54-11-9 regarding modifications of credit card
agreements, which has since been repealed. Neither Alltran nor Pacanowski has provided the
original contract with Citibank’s predecessor, and the Court will not speculate as to its terms.
However, the Court declines to address this issue further as the subsequent arguments are
dispositive.

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Pacanowski submits that the Card Agreement in the May 2011 document is a contract of
adhesion, and therefore the doctrine of contra proferentem should apply. Under South Dakota
Law, contracts of adhesion are “imposed and drafted by [a] party of superior bargaining
strength, relegat[ing] to the subscribing party only the opportunity to adhere to the contract or
reject it.” Johnson v. Rapid City Softball Ass'n, 514 N.W.2d 693, 704 (S.D. 1994); (citing 17 C.J.S.
Contracts §10 (1963); see Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241, 243-44
(S.D.1984) (establishing a disparity of bargaining power tends to lead to a contract of adhesion).
Not all contracts offered on a “take it or leave it basis” are contracts of adhesion. Schwalm v.
TCF Nat'l Bank, 226 F. Supp. 3d 937, 943 (D.S.D. 2016). In Baker v. Sci. Applications Int’l. Corp.,
the District Court of South Dakota considered whether an arbitration agreement was a contract
of adhesion when it was a condition of Plaintiff’s employment with the Defendant. Baker v. Sci.
Applications Int'l Corp., No. CIV. 06-4096, 2006 WL 2708546, at *1 (D.S.D. Sept. 21, 2006),
aff'd, 273 F. App'x 577 (8th Cir. 2008). There, the court reasoned that even though the Plaintiff
was required to agree to the arbitration agreement if he desired employment, it was not an
invalid contract of adhesion because the Plaintiff did not lack bargaining power, could have
obtained employment elsewhere, and was not compelled to only work for the Defendant’s
company. Baker, 273 F. App'x at 579. Here, Pacanowski avers that the contract is one of
adhesion because there was “little choice about the terms of the contract,” and that he “would
lose access to the account” by rejecting its provisions. (Doc. 23 at 7). However, Pacanowski was
under no obligation to open a credit card with Citibank, and he had a meaningful choice in his
acceptance or rejection of its provisions. Further, Pacanowski was not required to agree to the
updated terms of the Card Agreement, and could have opted out of the provisions as provided

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under the contract or stopped utilizing the Account. Accordingly, this Court finds that the Card
Agreement containing the Arbitration Provision was not an invalid contract of adhesion. 2
Based on the foregoing, the Court finds that the arbitration agreement within the Credit
Card Agreement is valid.
C. ALLTRAN MAY NOT COMPEL ARBITRATION BECAUSE IT IS NOT A SIGNATORY TO
THE ORIGINAL AGREEMENT.
Alltran argues that it is entitled to compel arbitration of Pacanowski’s FDCPA claim
under the contract as Citibank’s agent or representative. (Doc. 21-1 at 9). Pacanowski avers in
the Complaint that Alltran is “engaged in the business of collecting debts” that are “asserted to
be due another.” (Doc. 1 at ¶¶5-8). In its letter to Pacanowski dated July 21, 2015 (“the
Collection Letter”), Alltran attempted to recover the amount due on the Account. (Doc. 1 at
¶11). The Collection Letter states that Alltran’s “client” requested they “negotiate with
[Pacanowski] to resolve this debt” and identified the account’s creditor as “Citibank, N.A.,
THE HOME DEPOT.” (Doc. 1 at 17). Alltran filed a Motion to Compel Arbitration based on
the terms of the written Arbitration Agreement, which states the Card Agreement is enforceable
not only as to claims between Pacanowski and Citibank, but also as to claims involving anyone
“connected with” them, including “an employee, agent, representative, affiliated company,
predecessor or successor, heir, assignee, or trustee in bankruptcy.” (Doc. 23-1 at 6). In support
of its Motion, Alltran argues that it acted as Citibank’s agent or representative when it

2

Absent a finding of a contract of adhesion, the Court finds it unnecessary to address
Pacanowski’s argument regarding contra proferentem. However, even if a contract of adhesion
was found to exist, Pacanowski has notably not advanced any arguments detailing ambiguity in
the Card Agreement that would move the Court to consider the application of contra proferentem.

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attempted to recover the balance due on the Account, and is thus entitled to enforce the
Arbitration Provision. (Doc. 21-1 at 10).
Recently, the Third Circuit Court of Appeals addressed the same arbitration provision as
in the present case. See White v. Sunoco Inc., No. 16-2808, 2017 WL 3864616, at *7 (3d Cir. Sept.
5, 2017). In White, the Plaintiff sued the Defendant for fraud and misrepresentation when it
failed to apply promotional discounts through the use of Plaintiff’s credit card at Defendant’s
gasoline stations. White, 2017 WL 3864616, at *1. The Defendant moved to compel arbitration
under the terms of the Plaintiff’s credit card agreement with Citibank, to which the Defendant
was not a party. White, 2017 WL 3864616, at *3. The Court, applying South Dakota law in its
interpretation of the contract, reasoned that even if the Defendant was “connected with
Citibank” it did not give a non-signatory the right to compel arbitration under the unequivocal
terms of the agreement. White, 2017 WL 3864616, at *7. Looking to the express language of the
agreement to arbitrate, the court in White found the contract explicitly stated that “either you or
we may, without the other’s consent, elect mandatory, binding arbitration for any claim,
dispute, or controversy between you and us (called ‘Claims’).” White, 2017 WL 3864616, at *7
(emphasis added). Further, the arbitration clause provided “at any time you or we may ask an
appropriate court to compel arbitration of Claims…” White, 2017 WL 3864616, at *7 (emphasis
added). Under the contract’s definitions, “we” and “us” referred to Citibank (South Dakota),
N.A. and “you” referred to the account holder. White, 2017 WL 3864616, at *7. Thus, the
Court held that this language, which is identical to the Arbitration Provision in the case at bar,
did not allow a third party to compel arbitration and consequently denied the Defendant’s
motion. White, 2017 WL 3864616, at *7. Accordingly, because the plain language of the Card

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Agreement does not provide for non-signatories to initiate arbitration proceedings, Alltran
cannot compel arbitration against Pacanowski in the instant case.
Further, based on the language of the Collection Letter, there is no evidence that
Citibank formally assigned Pacanowski’s debt to Alltran when retained for collection purposes.
Under the arbitration clause of the Card Agreement, a sub-heading titled “what about debt
collections” provides “we and anyone to whom we assign your debt will not initiate an arbitration
proceeding to collect a debt from you unless you assert a Claim against us or our assignee. We
and any assignee may seek arbitration on an individual basis of any Claim asserted by you, whether in
arbitration or any proceeding, including in a proceeding to collect a debt.” (Doc. 23-1 at 6)
(emphasis added). The express terms of the agreement thus contemplate claims by or against a
non-party when it has specifically been assigned the debt to collect. It is undisputed that
Citibank did not assign the Card Agreement to Alltran. (Doc. 28 at 3). Further, Alltran has not
posited that Citibank specifically assigned Pacanowski’s debt to Alltran, nor does the language
of the Collection Letter indicate as much. (Doc. 1 at 17). Thus, Alltran is not contemplated
under the express terms of the contract as a non-signatory to the arbitration agreement.
Even if the Arbitration Provision at issue can be invoked by non-signatories, Alltran’s
relationship with Citibank is insufficient to warrant coverage under the contract. As previously
indicated, Alltran submits that they acted as Citibank’s “agent” in the collection of
Pacanowski’s debt. (Doc. 21-1 at 10). In support of its position, Alltran relies on a case from the
Supreme Court of South Dakota, Nattymac Capital LLC v. Pesek, 784 N.W.2d 156, 160 & 161 n.5
(S.D. 2010). Alltran avers that NattyMac is guiding because it “observed that debt collectors are
agents of the debt owner.” (Doc. 22 at 10). However, NattyMac is readily distinguishable from
the dispute presently before this Court. In NattyMac, the court found that an agency relationship

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existed between a loan servicer and mortgage loan purchaser based upon the express terms of
their service contract. NattyMac, 784 N.W.2d at 161. The agreement defining the scope of the
contractual relationship was undisputed, and while the loan servicer may have been an
independent contractor in some regards, the contract expressly authorized the servicer to act as
an “agent for the purposes of collecting loan payments.” NattyMac, 784 N.W.2d at 161. Unlike
in NattyMac, here there is no express contract that defines the scope of Alltran’s relationship
with Citibank. Indeed, the Collection Letter is the only evidence of Alltran’s connection to
Citibank, and merely indicates that Cititbank is its “client” and the Account’s creditor. (Doc. 1
at 17). Alltran has not provided evidence of such a collection agreement with Citibank that
would indicate it was engaged to act as Citibank’s designated agent. Alleging that it was acting
as Citibank’s designated agent, the language in the Collection Letter is insufficient to establish
the existence of such an agency relationship. See, e.g., Simms v. Navient Sols., Inc., 157 F. Supp.
3d 870, 878 (D. Nev. 2016) (debt collector did not prove an agency relationship when there was
no evidence of a contract or agreement establishing the existence or scope of its authority).
Moreoever, Alltran has not alleged that is bears any “significant relationship” to Citibank. See
Carlyle Inv. Mgmt. LLC v. Moonmouth Co. SA, 779 F.3d 214, 219 (3d Cir.2015) (“In determining
whether a non-signatory is closely related to a contract, courts consider the non-signatory's
ownership of the signatory, its involvement in the negotiations, the relationship between the
two parties and whether the non-signatory received a direct benefit from the agreement”). For
the foregoing reasons, Alltran cannot be bound to the contract as a non-signatory, and is not
sufficiently connected with Citibank to be encompassed under the arbitration Agreement.

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D. ALLTRAN

IS NOT ENTITLED TO COMPEL ARBITRATION AS A NON-SIGNATORY
UNDER ALTERNATIVE ESTOPPEL OR THIRD PARTY BENEFICIARY THEORIES.

Alternatively, Alltran argues that it can compel arbitration as a non-signatory based
upon federal arbitration law and state contract law. (Doc. 22 at 12). There are several theories
of state law upon which non-signatories can be bound to a contract: (1) assumption; (2) veilpiercing/alter ego; (3) incorporation by reference; (4) third-party beneficiary theories; (5)
waiver; and (6) estoppel. Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (quoting 21 R.
Lord, Williston on Contracts §57:19 (4th ed. 2001)). Alltran submits that it is entitled to invoke
the arbitration provision under either alternative estoppel or third-party beneficiary theories. 3
Under the theory of equitable estoppel, South Dakota Law 4 allows a non-signatory to
compel arbitration against a signatory when either of two circumstances are met: (1) “all the
claims against the non-signatory defendant[] are based on alleged substantially interdependent
and concerted misconduct by both the non-signatories and one or more of the signatories to the
contract;” and (2) the signatory asserts “claims arising out of agreements against nonsignatories to those agreements without allowing those [defendants] [also to] invoke the
arbitration clause contained in the agreements.” White, 2016 WL 2988976, at *4 (citing Rossi

3

Pacanowski submits that the Court need not apply a choice of law analysis to Alltran’s
third-party beneficiary argument, as whether a non-signatory may be bound to an arbitration
agreement against a signatory is subject to the same analysis under Pennsylvania and South
Dakota law. (Doc. 23 at 21)(See White, 2016 WL 2988976, at *5).
4

Alltran cites to the alternative estoppel “test” set forth in E.I. Dupont De Nemours & Co.
v. Rhone Poulenc Fiber & Resin Intermediates, S.A.S, 269 F.3d 187 (3d Cir. 2001), as relied upon by
the trial court in White v. Sunoco, 189 F.Supp.3d 486, 491 (E.D. Pa. 2016). (Doc. 21-1 at 12).
However, on appeal the Third Circuit clarified that Dupont did not adopt or reject a federal
standard regarding alternative estoppel. White, 2016 WL 2988976, at *3. Therefore, the relevant
state law of South Dakota, which adopts the principle of equitable estoppel, will apply to the
Court’s analysis of Alltran’s argument.

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Fine Jewelers, Inc. v. Gunderson, 648 N.W.2d 812, 816 (S.D. 2002); MS Dealer Serv. v. Franklin,
177 F.3d 942, 947 (11thCir.1999); A.L. Williams & Assoc., Inc. v. McMahon, 697 F.Supp. 488, 494
(N.D.Ga.1988)). Here, the Court finds that Alltran does not meet either of these two
circumstances.
First, Pacanowski did not base his statutory claim on allegations of concerted
misconduct between Alltran and Citibank. In his Complaint, Pacanowski avers that [Alltran’s]
communications did not comport with the requirements of the FDCPA. (Doc. 1 at 11). Further,
Pacanowski does not reference Citibank, the Card Agreement, or any wrongdoing other than
Alltran’s alleged violation of the FDCPA. (Doc. 1). See, e.g., Donaldson Co. v. Burroughs Diesel,
Inc., 581 F.3d 726, 734 (8th Cir. 2009) (“…Cases applying the concerted-misconduct test
establish that the plaintiff must specifically allege coordinated behavior between a signatory and a
non-signatory”)(emphasis added). While Citibank may have retained Alltran as a debt
collector, there is no evidence that Citibank participated in preparing the Collection Letter that
lent itself to Pacanowski’s claim. (Doc.1 at 17). Accordingly, the Court finds that there is no
alleged interdependent misconduct with Citibank that would bind Alltran to the contract as a
non-signatory.
Second, Pacanowski does not rely on the terms of the Card Agreement to bring his claim
against Alltran. Alltran argues that Pacanowski’s claims are related to the Card Agreement
because it “created the debt Alltran was seeking to collect in the first instance and which
governs the addition of any interest or fees to the Debt…” (Doc. 22 at 13). Pacanowski does not
contest the debt that arose under the contract, but rather Alltran’s representations in attempting
to collect the debt under the FDCPA. (Doc. 1 at 9-11). While Pacanowski’s debt may have been
created by his use of the Account, Pacanowski’s claim against Alltran is not based upon any

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underlying obligation in the contract with Citibank. See Mims v. Glob. Credit & Collection Corp.,
803 F. Supp. 2d 1349, 1358 (S.D. Fla. 2011) (holding plaintiff’s FDCPA claims were not
sufficiently intertwined with a credit card agreement because “although [they] presume[d] the
existence of the Agreement, they d[id] so purely for the purpose of noting there [was] an
underlying debt”); see also Pagan v. Integrity Sol. Servs., Inc., 42 F. Supp. 3d 932, 935 (E.D. Wis.
2014) (determining it was not inequitable to avoid arbitration invoked by debt collector when
Plaintiff’s FDCPA claim arose from debt accrued under contract with the signatory). For these
reasons, Pacanowski cannot be compelled to arbitrate under the principle of equitable estoppel.
Non-signatories may also compel arbitration when they are third party beneficiaries of
the underlying contract. White v. Sunoco Inc., 189 F. Supp. 3d 486, 493 (E.D. Pa. 2016). A party
asserting the third-party beneficiary theory must show “that the contract was entered into by the
parties directly and primarily for his benefit.” See, e.g., Masad v. Weber, 772 N.W.2d 144, 154
(S.D.2009). A mere showing of an incidental benefit is insufficient. Masad, 772 N.W.2d at 154.
Here, the Court cannot agree that Citibank clearly intended to benefit Alltran under the
Card Agreement, as there is no evidence that Alltran received any benefit from the underlying
contract that contained the arbitration provision. Further, Alltran bases its argument on the
proposition that it was acting as an agent of Citibank, which, as discussed supra, is an argument
with which the Court does not agree. (Doc. 22 at 13). Thus, Alltran cannot be bound to the
Card Agreement as a non-signatory under equitable estoppel or third-party beneficiary theories
of state contract law.
E. THE DISPUTE DOES NOT FALL WITHIN
AGREEMENT.

THE

SCOPE

OF THE

ARBITRATION

If a valid arbitration agreement is deemed to exist, courts must then determine whether
the dispute at issue is within the scope of the arbitration agreement. Trippe, 401 F.3d at 532. As

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noted in the preceding section, the terms of the contract cover “all Claims relating to your account,
a prior related account, or our relationship…no matter what legal theory they are based
on…includ[ing] Claims based on contract, tort (including intentional tort), fraud, agency, you
or our negligence, statutory or regulatory provisions, or any other sources of law.” (Doc. 23-1 at 6).
The arbitration agreement further references debt collection under “claims covered,” and
provides “we and any assignee may seek arbitration on an individual basis of any Claim
asserted by you, including in a proceeding to collect a debt.” (Doc. 23-1 at 6). This provision,
however, does not expressly provide for claims that arise from a non-assignee debt collector’s
conduct. Here, Pacanowski’s claims are based on alleged violations of the FDCPA that
occurred while Alltran attempted to collect on the Account. (Doc. 1 at 9). While the FDCPA
does not explicitly address the arbitrability of claims that fall under its purview, many Courts
have held that such claims are “not categorically exempt from the FAA’s reach.” Brown, 2014
WL 5803135, at *12; See, e.g., Hodson v. Javitch, Block & Rathbone, LLP, 531 F.Supp.2d 827, 831
(N.D.Ohio 2008) (“Congress did not intend FDCPA claims to be non-arbitrable. Courts
routinely permit arbitration of such claims.”). Nevertheless, the Court is of the opinion that
while FDCPA claims may be subject to arbitration generally, for the aforementioned reasons
the Card Agreement as it stands does not cover Pacanowski’s claim against Alltran under the
contract. Thus, the arbitration provision is inapplicable to Pacanowski’s FDCPA claim.5
Further, because Alltran is incapable of implementing arbitration as a non-signatory, it cannot

5

Notably, Pacanowski objects to the scope of the contract with respect to which parties
can compel a “Claim” to arbitration, and not whether his FDCPA claim is within the scope of
the arbitration agreement. (Doc. 23 at 11). While the Court ultimately accepts Pacanowski’s
stance, a determination of whether the FDCPA claim is encompassed under the arbitration
provision remains necessary to its analysis.

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compel these claims to arbitration. See McGinnis, 2012 WL 604430, at *4 (“the FDCPA claim is
only subject to arbitration at the election of a party who holds the right to compel arbitration
under the card agreement”). Moreover, as there is no evidence that Alltran has been assigned
the debt under the express language of the contract, Alltran is not entitled to invoke the
arbitration provision. Thus, Alltran’s Motion to Compel Arbitration will be denied.
III.

CONCLUSION
For the foregoing reasons, the motion (Doc. 21) of Defendant, Alltran Financial, L.P., is

DENIED.
An appropriate Order will follow.

s/ Karoline Mehalchick

Dated: September 19, 2017

KAROLINE MEHALCHICK
United States Magistrate Judge

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