Atkinson et al v. Harpeth Financial Services, LLC et al

Filing 24

MEMORANDUM signed by District Judge Aleta A. Trauger on 5/22/2017. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(hb)

UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
WENDY ATKINSON, individually and on
behalf of other members of the general public
similarly situated,
Plaintiff,
v.

HARPETH FINANCIAL SERVICES, LLC,
MICHAEL HODGES, and TINA HODGES,
Defendants.

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Civil No. 3:17-cv-504
Judge Aleta A. Trauger

MEMORANDUM
The defendants have filed a Petition to Compel Arbitration and Dismiss Plaintiffs’
Complaint or, in the Alternative, Stay the Action Pending Resolution of Arbitration (the
“Petition”) (Docket No. 11), to which the plaintiff has filed a Response in Opposition (Docket
No. 15), and the defendants have filed a Reply (Docket No. 20). For the reasons stated herein,
the Petition will be granted.
PROCEDURAL & FACTUAL BACKGROUND
Harpeth Financial Services, LLC (“Harpeth Financial”) is a Tennessee limited liability
company that does business under the name Advance Financial and provides short-term loans to
consumers. (Docket No. 1 ¶¶ 8, 10.) The plaintiff, Wendy Atkinson, alleges that Harpeth
Financial and its co-owners – Michael and Tina Hodges – engaged in an extortionate scheme
whereby they refused to service their customers’ existing loans and, by threatening default on
those loans, forced their customers to take out additional “FLEX” loans with far more onerous
terms. (Id. ¶¶ 10–13.) Ms. Atkinson brings claims against Harpeth Financial for breach of

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contract and against the Hodges for violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq., on behalf of herself and “[a]ll Advance
Financial customers who entered into a short-term loan agreement, and subsequently transferred
the balance of the short-term loan to a FLEX loan, after Advance Financial stopped servicing its
short-term loan products.” (Id. ¶¶ 48–87.) The defendants now seek an order compelling
arbitration of Ms. Atkinson’s claims and dismissal of this action or, in the alternative, a stay of
the matter pending resolution of the arbitration. (Docket No. 11.)
I.

The Petition
On April 6, 2017, the defendants filed the Petition (Docket No. 11), accompanied by a

Memorandum in Support (Docket No. 12) and the Affidavit of Michael Hodges (the “First
Hodges Affidavit”), which attaches two loan agreements between Ms. Atkinson and Advance
Financial (Docket No. 13). 1 The first of these attached agreements demonstrates that, on
May 15, 2015, Ms. Atkinson took out a short-term loan for $1025 from Harpeth Financial at an
annual percentage rate of 104.63%, to be repaid in installments. (Docket No. 13-2.) The
instrument memorializing this loan (the “Installment Agreement”) contains an arbitration clause
that provides, in part, that:
Any Dispute by either [the plaintiff] or [Advance Financial] against the other, or
against the employees, agents, or assigns of the other, will, upon election by either
[the plaintiff] or [Harpeth Financial], be resolved by binding arbitration, including
the applicability of this arbitration provision or the validity of the entire
[Agreement].
(Id. at p. 2.) This arbitration clause defines the term “Dispute” broadly, to include, “without
limitation, any claim, dispute or controversy arising from or relating, directly or indirectly, to this
1

The First Hodges Affidavit also attaches agreements relating to loans made by Harpeth
Financial to Sylvia Cooksey, who was initially included as a plaintiff in this action but has
voluntarily dismissed her claims against the defendants. (Docket No. 14.)
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[Agreement].” (Id.) Ms. Atkinson’s signature appears at the end of this arbitration clause and
again at the end of the Installment Agreement. (Id. at p. 3.)
The second of the agreements attached to the First Hodges Affidavit demonstrates that,
on May 29, 2015, Ms. Atkinson converted the remaining balance on her installment loan into a
flexible loan – called a FLEX loan – with a credit limit of $1450 at an annual percentage rate of
279.50%. (Docket No. 13-5.) The instrument memorializing this loan (the “FLEX Agreement”)
contains an arbitration clause providing that the parties will resolve all “Dispute[s]” through
arbitration, with the term “Dispute” defined as follows:
In this Clause, the word “Disputes” has the broadest possible meaning. This
Clause governs all “Disputes” involving the parties. This includes all claims even
indirectly related to your application and agreements with us. This includes
claims related to information you previously gave us. It includes all past
agreements. It includes extensions, renewals, refinancings, or payment plans. It
includes all claims related to collections, privacy, and customer information. It
includes claims related to setting aside this Clause. It includes claims about the
Clause’s validity and scope. It includes claims about whether to arbitrate.
(Id. at p. 4.) The FLEX Agreement also provides a 60-day period during which a customer can
inform Advance Financial in writing that she chooses to opt out of the arbitration clause. (Id. at
p. 5.) At the end of the Flex Agreement is a statement indicating that it was electronically signed
by Ms. Atkinson. (Docket No. 13-5, p. 6.)
On March 27, 2017 – shortly after Ms. Atkinson filed this action – the defendants
initiated arbitration of her claims. (Docket No. 12, p. 4.) The defendants then filed the Petition,
requesting that the court compel arbitration of Ms. Atkinson’s claims and dismiss the Complaint
for lack of subject-matter jurisdiction, or – in the alternative – stay this action pending resolution
of the arbitration. (Docket No. 11.) The defendants argue that Ms. Atkinson’s claims are
properly subject to the FLEX Agreement’s arbitration clause, which “[b]y its terms, . . .
supersedes the dispute resolution procedures set forth in ‘all past agreements’ between the
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parties, including [the] prior Installment Agreement[].” (Docket No. 12, pp. 3, 5–6). The
defendants acknowledge that Ms. Atkinson has challenged the application of this arbitration
clause to her claims, but they argue that the “delegation provision” contained in that clause –
which requires the parties to arbitrate “claims related to setting aside [the Clause[,] . . . claims
about the Clause’s validity and scope[,] . . . [and] claims about whether to arbitrate” – requires
that an arbitrator, and not this court, determine the arbitrability of Ms. Atkinson’s claims. (Id. at
p. 7 (quoting Docket No. 13-5, p. 4).) As support for this argument, the defendants cite the
Supreme Court’s decision in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (2010), which
held that, when a party opposing arbitration raises no specific challenge to the enforceability of a
delegation provision in an arbitration clause, the provision is enforceable and threshold questions
concerning the arbitrability of the parties’ claims must be referred to arbitration. (Id. at pp. 7–9.)
Even if the court were to determine that the FLEX Agreement or its arbitration clause
were invalid, the defendants argue that this matter must still be referred to arbitration. (Id. at
pp. 10–11.) If the FLEX Agreement or its arbitration clause are not valid, the defendants
contend, then it cannot supersede the dispute resolution procedures set forth in the parties’
previous Installment Agreement, which also contains an arbitration clause and delegation
provision. (Id.) Moreover, the defendants argue that Ms. Atkinson alleged no basis for setting
aside the arbitration clause or delegation provision found in the Installment Agreement but,
rather, “affirmatively suggest[s] [the contract’s] validity by claiming that the Installment
Agreement[] [is a] ‘valid contract[], supported by good consideration.’” (Id. (quoting Docket
No. 1 ¶ 81).) Accordingly, the defendants argue that, no matter which of the two agreements
currently governs the relationship between the parties, Ms. Atkinson’s claims are subject to a
valid arbitration agreement that requires the delegation of all issues of arbitrability to an

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arbitrator.
Finally, the defendants request that the court dismiss Ms. Atkinson’s claims. The
defendants acknowledge that “the FAA mandates, at a minimum, that this action be stayed
pending the resolution of arbitration.” (Id. at p. 11 (citing 9 U.S.C. § 3).) Arguing that dismissal
may be appropriate when a plaintiff’s claims, “on their face, . . . so clearly fall within the scope
of an arbitration clause that there [is] no question as to their arbitrability,” the defendants contend
that the court should dismiss the Complaint against them, rather than merely staying the case.
(Id. (quoting Dearmon v. Bestway Rent-To-Own, No. 3:14-cv-900, 2014 WL 1961911, at *2
(M.D. Tenn. May 15, 2014)).) According to the defendants, Ms. Atkinson’s claims are “clearly
governed” by the FLEX Agreement’s arbitration clause – or, in the alternative, by the arbitration
clause found in the Installment Agreement – and the entire action, therefore, should be dismissed
rather than stayed. (Id. at pp. 12–15.)
II.

Ms. Atkinson’s Response in Opposition to the Petition
On April 20, 2017, Ms. Atkinson filed a Response in Opposition to the Petition, in which

she argues that the court should deny the Petition because her claims are not subject to any valid
arbitration agreement. (Docket No. 15, p. 1.) Ms. Atkinson argues that the current dispute is not
a “typical arbitrability dispute, in which the parties concede they entered into the arbitration
agreement but dispute its scope” and, therefore, “mechanical resort to the written terms on the
page” is inappropriate. (Id. at p. 4.) Ms. Atkinson’s arguments pertain solely to the FLEX
Agreement, which she argues superseded the Installment Agreement and rendered the dispute
resolution procedures contained in that prior agreement unenforceable. (Id. at p. 14.) Based on
the factual allegations of the Complaint, Ms. Atkinson argues that she is “entitled to the benefit
of the state law contract defenses of unconscionability and economic duress to invalidate the

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FLEX [Agreement]’s arbitration provision and the delegation provision contained therein.” (Id.
at p. 4.)
As additional support for her defenses of unconscionability and economic duress,
Ms. Atkinson has submitted a declaration detailing the circumstances surrounding the formation
of the FLEX Agreement. (Docket No. 16.) In her declaration, Ms. Atkinson states that, in
spring of 2015, she took out an installment loan with Advance Financial for $1025. (Id. ¶ 1.) On
May 29, 2015, she went to an Advance Financial location to make a scheduled payment on this
loan but, when she attempted to make the payment, an Advance Financial employee informed
her that the company no longer serviced “those kinds of loans” because the company’s computer
system no longer supported the payments. 2 (Id. ¶¶ 2–3.) The employee insisted that she pay the
full balance on her installment loan immediately or take out a FLEX loan to cover that balance.
(Id.) According to Ms. Atkinson, she asked the Advance Financial employee about the terms of
the FLEX loan, and he told her that “it should be about the same as the terms on [her] installment
loan.” (Id. ¶ 4.) Ms. Atkinson did not, at the time, have enough money to pay the balance on her
previous loan and, therefore, “believed that [she] had no choice but to sign up for” a FLEX loan.
(Id. ¶ 5.)
According to Ms. Atkinson, once she agreed to take out the new loan, the Advance
Financial employee handed her an electronic tablet that “took [her] through some prompt
questions.” (Id. ¶ 6.) Ms. Atkinson found this process to be “hurried and confusing,” with the
employee speaking to her and hurrying her through the prompts as she tried to read them. (Id.
¶ 9.) Ms. Atkinson recalls one of the last prompts being whether she agreed to the terms and
conditions of the FLEX loan, but she does not recall those terms and conditions ever appearing
2

This tactic, if true, reveals either incompetence or sharp practice of the most serious

sort.
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on the tablet. (Id. ¶ 7.) She further does not recall arbitration being mentioned in the electronic
prompts, nor does she recall the Advance Financial employee mentioning arbitration at any point
in the process. (Id. ¶ 11.) Ms. Atkinson states that she believed the terms of the FLEX loan to
be those that were represented to her by Advance Financial’s employee – namely, similar to the
terms of her installment loan – and she electronically signed the agreement by checking a box on
the tablet. (Id. ¶¶ 7–8.) Only after she had electronically signed the agreement was she given a
printed copy of the FLEX Agreement. (Id. ¶ 12.)
Based on these facts, Ms. Atkinson argues that the FLEX Agreement’s arbitration clause,
including the delegation provision contained therein, is unenforceable under Tennessee law.
(Docket No. 15, pp. 6–13.) First, Ms. Atkinson argues that the arbitration clause is
unconscionable because it is contained in a contract of adhesion that was offered on a “take it or
leave it” basis, with Ms. Atkinson never being given the opportunity to review its terms. (Id. at
pp. 7–9.) She further argues that the clause is unconscionable because she had no way of
knowing, or even considering, the terms of the arbitration clause prior to signing it, and the
defendants cannot demonstrate that the clause was “reasonable” under the circumstances. (Id.)
Second, Ms. Atkinson argues that the arbitration clause is unenforceable because she entered into
the FLEX Agreement under financial duress. (Id. at pp. 14–16.) According to Ms. Atkinson, the
defendants took advantage of her financial weakness when they confronted her with an unlawful
acceleration of the outstanding loan balance on her loan, a “fine distinction of law” that she
lacked the “knowledge and sophistication” to understand. (Id. at pp. 11–13.) Accordingly, she
requests that the court deny the Petition or, should the court determine that the matter must be
referred to the arbitrator, merely stay the case, rather than dismiss her claims. (Id. at p. 15.)

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III.

The Defendants’ Reply in Support of the Petition
On May 10, 2017, the defendants filed a Reply in support of the Petition (Docket No. 20),

accompanied by a second affidavit from Mr. Hodges (the “Second Hodges Affidavit”) (Docket
No. 21). In the Reply, the defendants argue that the “logical consequence” of Ms. Atkinson’s
arguments regarding the invalidity and unenforceability of the FLEX Agreement and its
arbitration clause is that the Installment Agreement – and the arbitration clause and delegation
provision contained therein – remain in effect. (Docket No. 20, pp. 2–3.) After all, if the FLEX
Agreement’s arbitration clause and all provisions contained therein are invalid, as Ms. Atkinson
argues they are, then the provision within that clause superseding all past agreements between
the parties is invalid. (Id.) Ms. Atkinson has not challenged the validity of the Installment
Agreement’s arbitration clause and delegation provision, and so, even if the court were to
conclude that the FLEX Agreement’s arbitration clause is invalid, the Installment Agreement
would still require that this matter be referred to the arbitrator. (Id.)
Should the court consider Ms. Atkinson’s defenses to the FLEX Agreement’s arbitration
clause, however, the defendants argue that they must be rejected because Ms. Atkinson has failed
to direct any of her challenges specifically to the delegation provision, as the Supreme Court’s
decision in Rent-A-Center, 561 U.S. 63, requires her to do. (Id. at pp. 4–7.) According to the
defendants, Ms. Atkinson’s only challenge to the delegation provision is its inclusion in an
allegedly invalid arbitration clause, which is not a defense that is sufficiently specific or unique
to the delegation provision to allow the court to disregard the provision and determine the
arbitrability of her claims. (Id.) Moreover, the defendants argue, Ms. Atkinson fails to present
any sufficiently specific or unique challenge to the FLEX Agreement’s arbitration clause,
because her defenses of unconscionability and economic duress are premised on “alleged flaws

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in the formation of the FLEX [Agreement] as a whole.” (Id. at p. 7.) Ms. Atkinson’s arguments,
therefore, are “two levels removed from a targeted challenge to the FLEX Delegation Provision,”
which the defendants argue is sufficient – on its own – to require the enforcement of the dispute
resolution procedures outlined in the FLEX Agreement, including the delegation of issues of
arbitrability to the arbitrator. (Id. (citing Rent-A-Center, 561 U.S. 63.)
Even if the court were to entertain Ms. Atkinson’s unconscionability and economic
duress defenses, the defendants argue, the defenses fail on their merits. (Id. at pp. 7–10.)
Through the Second Hodges Affidavit, the defendants present documentary evidence that the
tablet process used at all Advance Financial locations presents customers with the terms of the
FLEX Agreement before they are asked to electronically sign the agreement, which contradicts a
key contrary assertion made by Ms. Atkinson in her declaration. (Id. (citing Docket No. 21).)
Moreover, even if the court were to credit Ms. Atkinson’s statements regarding the
circumstances surrounding the formation of the FLEX Agreement, the defendants argue that her
defenses fail as a matter of law. (Id. at pp. 8–10.) According to the defendants, Ms. Atkinson
has failed to demonstrate that any portion of the arbitration clause – including the delegation
provision – is substantively unconscionable, and they further argue that her defenses are
“nullified” by the generous 60-day opt-out provision contained in the FLEX Agreement’s
arbitration clause, a physical copy of which Ms. Atkinson concedes having received immediately
after signing the agreement. (Id. (citing Docket No. 16 ¶ 12).) Accordingly, the defendants
argue, Ms. Atkinson has failed to establish a viable contract defense to the dispute resolution
procedures established in the FLEX and Installment Agreements, and the court, therefore, must
refer the matter to arbitration. (Id. at p. 10.)

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LEGAL STANDARD
Under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–16, where a litigant
establishes the existence of a valid agreement to arbitrate the dispute at issue, the district court
must grant the litigant’s motion to compel arbitration and stay or dismiss proceedings until the
completion of arbitration. Glazer v. Lehman Bros., Inc., 394 F.3d 444, 451 (6th Cir. 2005)
(citing 9 U.S.C. §§ 3–4). There is a strong presumption in favor of arbitration under the FAA,
O.J. Distrib., Inc. v. Hornell Brewing Co., Inc., 340 F.3d 345, 355 (6th Cir. 2003), as a result of
which any doubts regarding arbitrability must be resolved in favor of arbitration, Fazio v.
Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003) (citing Moses H. Cone Mem’l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)).
On a motion to compel arbitration, the party opposing arbitration has the burden to prove
that there is a “genuine issue of material fact as to the validity of the agreement to arbitrate.”
Brubaker v. Barrett, 801 F. Supp. 2d 743, 750 (E.D. Tenn. 2011) (quoting Great Earth Cos., Inc.
v. Simons, 288 F.3d 878, 889 (6th Cir. 2002)). The FAA permits arbitration agreements to be
declared unenforceable “upon such grounds as exist at law or in equity for the revocation of any
contract.” AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (citing 9 U.S.C. § 2).
Thus, arbitration agreements may be invalidated by “generally applicable contract defenses, such
as fraud, duress, or unconscionability.” Id. (quoting Doctor’s Associates, Inc. v. Casarotto,
517 U.S. 681, 687 (1996)). Federal courts apply state law to determine whether contract
defenses invalidate an agreement to arbitrate. See Doctor’s Associates, Inc., 517 U.S. at 687.
ANALYSIS
In the Petition, the defendants seek to enforce the arbitration clause contained in the
FLEX Agreement or, in the alternative, in the parties’ earlier Installment Agreement. As the

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Sixth Circuit has noted, it is generally within the province of the federal courts to “determine
whether the parties have agreed to arbitrate the dispute at issue.” Great Earth Cos, 288 F.3d at
889 (quoting Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)). The defendants,
however, maintain that, not only are Ms. Atkinson’s claims subject to a valid arbitration
agreement, but also that the parties have delegated to the arbitrator all threshold issues
concerning the applicability of the relevant arbitration clause to her claims. (Docket No. 12,
pp. 6–15.) This delegation provision, the defendants argue, requires that an arbitrator, and not
the court, determine the arbitrability of Ms. Atkinson’s claims, and the court, therefore, must
refer the matter to arbitration. (Id.)
I.

The Delegation Provision Requires Referral of This Matter to the Arbitrator.
Whether a court or an arbitrator decides the validity of an arbitration agreement with a

delegation provision is governed by the Supreme Court’s decision in Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. 63 (2010). In Rent-A-Center, the Supreme Court stated that “parties can agree
to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to
arbitrate or whether their agreement covers a particular controversy.” Id. at 68–69. Like the
arbitration clauses contained in the FLEX and Installment Agreements, the Rent-A-Center
arbitration agreement provided that it was for an arbitrator, not any other forum, to decide “any
dispute relating to the interpretation, applicability, enforceability or formation of th[e]
Agreement, including . . . any claim that all or any part of this Agreement is void or voidable.”
Id. at 66. The Supreme Court further held that a delegation provision is a separately enforceable
provision because, under the FAA, “an arbitration provision is severable from the remainder of
the contract.” Id. at 70–71 (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
445 (6th Cir. 2006)). Put differently, “a party’s challenge to another provision of the contract, or

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to the contract as a whole, does not prevent a court from enforcing a specific agreement to
arbitrate.” Id. at 70. This severability rule applies even if the delegation provision is contained
within the arbitration agreement. Id. at 72; Danley v. Encore Capital Grp., Inc., -- F. App’x -- ,
2017 WL 710470, at *3 (6th Cir. Feb 22, 2017).
The Rent-A-Center decision does not mean, however, that a district court must
automatically grant a motion to compel arbitration in any situation in which the agreement
underlying the dispute contains a delegation provision, because the party seeking to avoid
arbitration may still raise defenses to the delegation provision itself. Danley, 2017 WL 710470,
at *3. The party opposing arbitration must “challenge[] the delegation provision specifically,”
and its failure to do so requires the court to enforce the delegation provision as written. Id.
(quoting Rent-A-Center, 561 U.S. at 72); accord Milan Express Co. v. Applied Underwriters
Captive Risk Assurance Co., Inc., 590 F. App’x 482, 485–86 (6th Cir. 2014). In her Response,
Ms. Atkinson opposes the Petition on the grounds that the arbitration clause and delegation
provision contained in the FLEX Agreement are invalid, because she entered into the agreement
to arbitrate under economic duress and because they are unconscionable. (Docket No. 15, pp. 6–
14.) Ms. Atkinson has, however, failed to advance any challenge to the parties’ agreement to
delegate questions of arbitrability that is specific and unique to the delegation provision, and she
has failed, therefore, to meet her burden in her opposition to the Petition.
A.

Economic Duress

Ms. Atkinson argues that the facts she has presented to the court demonstrate that, “when
agreeing to arbitration” in this matter, she acted under economic duress, thereby invalidating the
arbitration clause and the delegation provision contained therein. (Docket No. 15, p. 12.) In
support of this contractual defense, Ms. Atkinson argues that the defendants’ threat of default on

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her previous loan after they refused to continue to service the Installment Agreement “amounted
to an unlawful acceleration of the outstanding loan balance, [but she] lacked both the knowledge
and sophistication to understand this fine distinction of law.” (Id.) As a result of this “fraud and
bad faith” on the part of the defendants, Ms. Atkinson argues, she was forced to agree to take out
a FLEX loan “with more onerous terms [than her prior loan], including an arbitration
agreement.” (Id. at pp. 12–13.) “Accordingly,” Ms. Atkinson states, “because the arbitration
clause in the FLEX Contract was secured by means of economic duress, the arbitration provision
contained therein is unenforceable.” (Id. at p. 13.)
This argument, however, is not sufficiently specific or unique to the delegation provision
to effectively contest the defendants’ argument that the provision is enforceable, and thereby
allow the court to adjudicate the validity of the arbitration clause. See Rent-A-Center, 561 U.S.
at 86 (Stevens, J., dissenting) (“A claim that an entire arbitration agreement is invalid will not go
to the court unless the party challenges the particular sentences that delegate such claims to the
arbitrator, on some contract ground that is particular and unique to those sentences.”).
Ms. Atkinson attempts to frame her proof as demonstrating that the arbitration clause was
secured by means of economic duress, but a mere challenge to the arbitration clause is not
sufficient to demonstrate that the delegation provision contained therein is also invalid, because a
delegation provision is severable from an arbitration clause even when it is contained within that
clause. Id. at 72. Moreover, federal courts have routinely refused to disregard delegation
provisions when the party opposing arbitration raises a defense to the provision that is no
different than her defense to the contract as a whole, or to the arbitration clause in general. See,
e.g., Patton v. Volkswagen Grp. of Am. Chattanooga Ops., LLC, No. 1:16-cv-327, 2017 WL
1288677, at *7 (E.D. Tenn. Apr. 6, 2017); Carey v. Uber Techs., Inc., No. 1:16-cv-1058,

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2017 WL 1133936, at *6 (N.D. Ohio Mar. 27, 2017); Flint v. Bank of Am., N.A., No. 15-13006,
2016 WL 1444505, at *6–7 (E.D. Mich. Apr. 13, 2016).
Moreover, even if the court could invalidate the delegation provision on the grounds that
it was included in an arbitration clause that was procured as a result of duress, it is not clear that
Ms. Atkinson’s economic duress defense to the FLEX Agreement’s arbitration clause is
sufficiently particular and unique to that clause to effectively contest the clause’s enforceability.
Ms. Atkinson’s duress defense to the arbitration clause essentially boils down to the argument
that, because she only agreed to the FLEX Agreement because she was under duress, it
necessarily follows that she only agreed to the arbitration clause contained in that agreement
because she was under duress. As the defendants have noted, Ms. Atkinson “does not argue that
she was extorted and coerced into executing an arbitration agreement; she claims that she was
coerced into executing a higher interest FLEX [Agreement] that happened to contain an
arbitration clause.” (Docket No. 20, p. 5.) As the court has already noted, a challenge to the
validity of a contract as a whole is not sufficient to effectively contest the enforceability of an
arbitration clause contained within that contract. 3
B.

Unconscionability

Ms. Atkinson also argues that the facts she has presented to the court demonstrate that the
FLEX Agreement’s arbitration clause is unconscionable, because it was presented in a contract
of adhesion, which gave her no meaningful opportunity to bargain over its form, and because
there was unequal bargaining power between her and Advance Financial, which gave her no real
3

Ms. Atkinson herself appears to acknowledge that her contractual defenses are not
specific to the agreement to arbitrate or to the delegation provision when she acknowledges that
ruling on her defenses will require the court to make findings of fact that “go [to] the underlying
merits of [her] claims that [the] [d]efendants used coercion, threats, misrepresentation, bad faith,
and power to force her into an extortionate credit transaction.” (Docket No. 15, p. 13.)
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choice other than to “immediately acquiesce” to the FLEX Agreement. (Docket No. 15, pp. 7–
11.) Again, however, Ms. Atkinson has advanced a contractual defense that fails to challenge
the validity of the delegation provision specifically, a failure that is underscored by
Ms. Atkinson’s faulty assertion that her “unconscionability argument invalidates the entire
arbitration clause, including the delegation provision contained within it.” (Id. at p. 10 n.3).
Pursuant to Rent-A-Center, 561 U.S. 63, a delegation provision is severable from the arbitration
clause of which it is a part and, as many federal courts have recognized, a defense to the
arbitration clause in general is not sufficient to contest a defendant’s argument that the delegation
provision contained therein is enforceable. See, e.g., Flint, 2016 WL 1444505, at *6–7.
Moreover, even if the court could invalidate the delegation provision on the grounds that
it was included in an invalid arbitration clause, it is not clear that Ms. Atkinson’s
unconscionability defense to the arbitration clause in the FLEX Agreement is sufficiently
specific and unique to constitute a valid challenge. Her arguments regarding the
unconscionability of the arbitration clause all rest on her allegations regarding the formation of
the FLEX Agreement itself, including that she did not see the terms of the FLEX Agreement
before she signed it (id. at p. 7) and that she was threatened with default on her installment loan
if she did not agree to take out a FLEX loan (id. at p. 15).
Accordingly, because Ms. Atkinson has failed to challenge the delegation provision
specifically, the defendants’ argument that the delegation provision is enforceable remains
uncontested, and the court cannot reach the merits of her duress and unconscionability
arguments. In light of the strong presumption in favor of arbitration under the FAA – under
which any doubts regarding arbitrability must be resolved in favor of arbitration – the court
concludes that it must treat the FLEX Agreement’s delegation provision as valid and enforce the

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provision. The court must leave any challenge to the validity of the FLEX Agreement’s
arbitration clause to the arbitrator and, therefore, will refer the matter to arbitration.
II.

The Court Will Stay the Matter Pending Resolution of the Arbitration.
In the event that the court compels arbitration, the defendants have requested that the

court dismiss Ms. Atkinson’s claims or, in the alternative, stay the current proceedings pending
resolution of the arbitration. (Docket No. 11.) The FAA instructs that, “upon being satisfied that
the issue involved in such suit or proceeding is referable to arbitration,” the court “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.” 9 U.S.C. § 3. Ms. Atkinson has requested that the
court stay this matter, rather than dismiss it. (Docket No. 15, p. 14.) Nevertheless, the
defendants argue, the court should dismiss Ms. Atkinson’s claims, because dismissal is
appropriate when a plaintiff’s claims, “on their face, . . . so clearly fall within the scope of an
arbitration clause that there [is] no question as to their arbitrability.” (Docket No. 12, p. 11
(quoting Dearmon, 2014 WL 1961911, at *2).)
It is true that, when a court issues an order compelling arbitration, it may choose to
dismiss the suit, rather than stay it, where all of the issues involved in the suit are subject to
arbitration. See Green v. Ameritech Corp., 200 F.3d 967, 973 (6th Cir. 2000) (quoting Alford v.
Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir. 1992)). Dismissal is not warranted in the
present case, however, because the court has not determined that that Ms. Atkinson’s claims
“clearly fall” within the scope of the arbitration clause, nor that there is “no question as to their
arbitrabilty.” Dearmon, 2014 WL 1961911, at *2. Rather, the court’s decision to refer
Ms. Atkinson’s claims to arbitration rests on its determination that, pursuant to the FLEX
Agreement’s delegation provision, the arbitrator is entitled to determine the arbitrability of

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matter. The court finds it appropriate, therefore, to stay this action pending resolution of the
arbitration. See, e.g., Howard v. Rent-A-Center, Inc., No. 1:10-cv-103, 2010 WL 3009515, at *6
(E.D. Tenn. July 28, 2010) (concluding that a stay was appropriate, rather than dismissal of the
plaintiff’s claims, when the parties had agreed to delegate questions of arbitrability to an
arbitrator, and the court had not determined whether all of the plaintiff’s claims were covered by
the arbitration agreement).
CONCLUSION
For the reasons discussed herein, the Petition (Docket No. 11) will be granted. The court
will refer the matter to arbitration and stay these proceedings pending resolution of that
arbitration.
An appropriate order will enter.

___________________________
ALETA A. TRAUGER
United States District Judge

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