Bow v. Ad Astra Recovery Services Inc
Filing
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Memorandum Opinion and Order granting 12 Motion to Dismiss, Motion to Stay, Motion to Compel. The parties shall proceed to arbitration for resolution of their dispute, and this action is STAYED pending the outcome of that arbitration proceeding. (Ordered by Senior Judge A. Joe Fish on 7/18/2018) (ykp)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
SHARI BOW,
Plaintiff,
VS.
AD ASTRA RECOVERY SERVICES,
INC.,
Defendant.
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CIVIL ACTION NO.
3:18-CV-0510-G
MEMORANDUM OPINION AND ORDER
Before the court is the motion of the defendant Ad Astra Recovery Services,
Inc. (“Ad Astra”) to dismiss or stay the instant proceedings and to compel arbitration
(docket entry 12). For the reasons set forth below, the defendant’s motion is
granted.
I. BACKGROUND
On January 18, 2016, the plaintiff, Shari Bow (“Bow”), entered into a loan
agreement with two companies, Integrity Texas Funding, LLC and SCIL Texas, LLC
(“Speedy Cash”). See Defendant’s Memorandum in Support of Its Motion to
Dismiss or Stay Proceedings and Compel Arbitration (“Ad Astra’s Brief”) ¶ 6 (docket
entry 13). After executing the necessary loan documents, Speedy Cash provided Bow
with $850. Id. ¶ 7. But shortly after finalizing the loan, on February 2, 2017,
Speedy Cash sent Bow’s account to Ad Astra for collection. Id.
According to Bow’s complaint, from approximately March 2017 to May 2017,
Ad Astra repeatedly called Bow on her cellular telephone using an automatic dialing
system. Plaintiff’s Original Complaint for Damages and Injunctive Relief
(“Complaint”) ¶ 19 (docket entry 1). Ad Astra, however, contends that Bow failed
to pay the debt. Ad Astra’s Brief ¶ 7. In response, Bow avers that before receiving
the calls, she had already settled the debt. Complaint ¶ 21. And according to Bow,
though she asked Ad Astra numerous times in April 2017 to stop calling, the calls
persisted. Id. ¶¶ 41-42.
In light of this alleged conduct, Bow now asserts that Ad Astra’s collection
efforts violated the Telephone Consumer Protection Act, the Texas Fair Debt
Collection Practices Act, and the Fair Debt Collection Practices Act. Id. ¶ 1. Ad
Astra seeks to compel arbitration of Bow’s claims pursuant to the arbitration
agreement in the parties’ loan documents. Ad Astra’s Brief ¶ 1.
On March 5, 2018, Bow filed suit in this court. Complaint. Shortly
thereafter, on April 13, 2018, Ad Astra filed a motion to compel arbitration,
Defendant’s Motion to Dismiss or Stay Proceedings and Compel Arbitration, and an
appendix in support of the motion. Appendix to Defendant’s Motion to Dismiss or
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Stay Proceedings and Compel Arbitration (“Ad Astra’s Appendix”) (docket entry 14).
On May 4, 2018, Bow filed a response. Bow’s Response to Defendant’s Motion to
Dismiss (“Bow’s Response”) (docket entry 15). And on May 18, 2018, Ad Astra filed
a reply to Bow’s response. Defendant’s Reply to Plaintiff’s Response to Defendant’s
Motion to Dismiss (“Ad Astra’s Reply”) (docket entry 16). The defendant’s motion
is now ripe for decision.
II. ANALYSIS
A. Legal Standard
In considering whether a dispute is subject to binding arbitration, the court
must determine whether there is a valid agreement to arbitrate and whether the
dispute in question falls within the scope of the arbitration agreement. Dealer
Computer Services, Inc. v. Old Colony Motors, Inc., 588 F.3d 884, 886 (5th Cir. 2009).
In general, this determination is made “by applying the ‘federal substantive law of
arbitrability, applicable to any arbitration agreement within the coverage of the
[Federal Arbitration] Act.’” Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 626 (1985) (quoting Moses H. Cone Memorial Hospital v. Mercury
Construction Corporation, 460 U.S. 1, 24 (1983)).
Federal law strongly favors arbitration. Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440, 443 (2006); see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514
U.S. 52, 56 (1995) (the Federal Arbitration Act (“FAA”) “declared a national policy
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favoring arbitration . . . .”) (quoting Southland Corporation v. Keating, 465 U.S. 1, 10
(1984)); Moses H. Cone Memorial Hospital, 460 U.S. at 24-25 (“The Arbitration Act
establishes that, as a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the problem at
hand is the construction of the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability.”).
Accordingly, the FAA, by its terms, “leaves no place for the exercise of
discretion by a district court, but instead mandates that district courts shall direct the
parties to proceed to arbitration on issues as to which an arbitration agreement has
been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis
in original).
While there is a strong federal policy favoring arbitration, the court does not
yield to this policy when making the initial threshold determination about the
existence of an agreement to arbitrate. Sherer v. Green Tree Servicing LLC, 548 F.3d
379, 381 (5th Cir. 2008) (internal citations omitted); Will-Drill Resources, Inc. v.
Samson Resources Company, 352 F.3d 211, 214 (5th Cir. 2003). However, once an
arbitration clause’s validity has been established, the court must observe the strong
federal policy favoring arbitration and resolve all ambiguities in favor of arbitration.
Primerica Life Insurance Company v. Brown, 304 F.3d 469, 471 (5th Cir. 2002).
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To decide whether parties should be compelled to arbitrate their dispute, the
Fifth Circuit has developed a two-step inquiry. OPE International LP v. Chet Morrison
Contractors, Inc., 258 F.3d 443, 445 (5th Cir. 2001) (per curiam). First, the court
must determine “whether the parties agreed to arbitrate their dispute.” Id. Two
considerations guide the court in making this determination: (1) whether a valid
agreement to arbitrate exists between the parties; and (2) if the court finds that the
parties agreed to arbitrate, whether the dispute in question is within the scope of the
arbitration agreement. Id. “The party seeking to compel arbitration need only prove
the existence of an agreement to arbitrate by a preponderance of the evidence.”
Grant v. Houser, 469 Fed. App’x 310, 315 (5th Cir. 2012) (per curiam).
Second, the court must ensure that no legal constraints external to the
agreement have foreclosed arbitration of the disputed claims. OPE International, 258
F.3d at 446. All doubts concerning the scope of an arbitration clause should be
resolved in favor of arbitration. See United Steelworkers of America v. Warrior & Gulf
Navigation Company, 363 U.S. 574, 583 (1960). If the court finds that this two-step
inquiry is satisfied, arbitration must be ordered. Mitsubishi Motors, 473 U.S. at 628.
B. Application
1. The presence of a valid arbitration agreement
This case turns on whether a valid arbitration agreement exists between Bow
and Ad Astra. Put differently, the court is asked to determine whether Bow agreed to
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arbitration of her claims against Ad Astra, a nonsignatory. “Who is actually bound
by an arbitration agreement is a function of the intent of the parties, as expressed in
the terms of the agreement.” Bridas S.A.P.I.C. v. Government of Turkmenistan, 345 F.3d
347, 355 (5th Cir. 2003), cert. denied, 541 U.S. 937 (2004).
Bow asserts that Ad Astra cannot meet the requirements of equitable estoppel
to enforce the arbitration agreement. Bow’s Response at 13. In a case from the Fifth
Circuit, Sherer v. Green Tree Servicing LLC, 548 F.3d 379 (5th Cir. 2008), the court
declined to resort to theories such as estoppel to determine whether a nonsignatory
defendant may invoke arbitration. Id. at 382. It noted that because “[n]one of the
agreements that we have considered in our opinions involving nonsignatories
expressly addressed whether a nonsignatory may compel a signatory to arbitrate a
claim,” the court “frequently relied on theories such as equitable estoppel to
determine whether the nonsignatory may invoke arbitration.” Id. However, the
court in Sherer found that the district court erred when it held that it must apply
equitable estoppel to determine a nonsignatory’s rights and duties under an
arbitration clause. Id.
In its evaluation, the Fifth Circuit found that the nonsignatory defendant may
compel arbitration because the terms of the relevant loan agreement clearly identified
when the plaintiff may be compelled to arbitrate with a nonsignatory. Id. Such is
the case here. Under the broad terms of the arbitration agreement, Bow agreed to
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arbitrate “all claims asserted by [her] individually against [Speedy Cash], the Lender,
and/or any of . . . its employees, agents, . . . or affiliated entities (hereinafter
collectively referred to as ‘related third parties’).” Ad Astra’s Appendix at 7. Ad
Astra is an affiliate entity because it contracts with Speedy Cash for collection of
delinquent accounts. Id. at 27. Additionally, the Credit Access Services Agreement
Form explicitly mentions Ad Astra as a “related party.” Id. Specifically, the provision
entitled “Agreements for Resolving Disputes; Certain Definitions,” contains the
following language:
The Pre-Dispute Resolution Procedure, Arbitration
Provision and Jury Trial Waiver set forth below
govern ‘Claims’ you assert against us or any ‘related
party’ of ours and ‘Claims’ we or any related party
assert against you. For purposes of this Agreement,
our ‘related parties’ include all parent companies,
subsidiaries, and affiliates of ours (including Ad
Astra Recovery Services, Inc.), and our and their
employees . . . .
Id. at 43. Because Speedy Cash specifically mentioned Ad Astra as a “related
part[y],” the court concludes that there exists a valid and enforceable arbitration
agreement between the parties in this case.
2. The scope of the arbitration clause
Given the presence of a valid arbitration clause, the court next addresses
whether the text of the arbitration agreement covers Bow’s claims. When addressing
questions of arbitrability, all doubts concerning the scope of the arbitration clause in
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a contract should resolved in favor of arbitration. See United Steelworkers of America v.
Warrior & Gulf Navigation Company, 363 U.S. 574, 583 (1960). Here, Bow’s claims
fall within the agreement’s scope, as Bow’s federal law claims are explicitly covered by
the language of the Loan Application. Ad Astra’s Appendix at 7. Indeed, the
arbitration agreement extends to “all federal or state law claims, disputes or
controversies, arising from or relating directly or indirectly to this Application.” Id.
3. Evidentiary objections
Bow also contends that the court should not consider the loan documents Ad
Astra submitted in support of its motion because those documents do not meet the
requirements for authentication under Federal Rule of Evidence 901(a) and, further,
they do not qualify as business records under the business record exception to the
hearsay rule. Bow’s Response at 9-11.
As a preliminary matter, it is well-settled that “[s]igned instruments such as
. . . contracts . . . are writings that have independent legal significance, and are
nonhearsay.” Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 540 (5th
Cir.) (footnotes, citations, and internal quotation marks omitted), cert. denied, 513
U.S. 820 (1994); see also Everest Indemnity Insurance Company v. Allied International
Emergency LLC, No. 4:08-CV-678-Y, 2009 WL 2030421, at *2 (N.D. Tex. July 14,
2009) (Means, J.) (“A contract is not hearsay and, consequently, need only be
authenticated in order to be admissible.”). Therefore, because some of the loan
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documents containing the arbitration provision appear to have independent legal
significance, e.g., the promissory note, and contain the plaintiff’s electronic signature - see, e.g., Ad Astra’s Appendix at 14 -- those documents are themselves not hearsay
and the only remaining question is whether they have been properly authenticated
under Rule 901(a).
The standard for determining the admissibility of evidence provided by a party
seeking to compel arbitration “is akin to the one applied when deciding a summary
judgment motion, including the requirement that evidence in a declaration [must
comply with the Federal Rules of Evidence] and[, accordingly, must be] based on
personal knowledge.” Galitski v. Samsung Telecommunications America, LLC, No. 3:12CV-4782-D, 2013 WL 6330645, at *1 n.1 (N.D. Tex. Dec. 5, 2013) (Fitzwater,
Chief J.). Federal Rule of Evidence 901(a) provides that the requirement of
authentication or identification as a condition precedent to admissibility is satisfied
by evidence sufficient to support a finding that the matter in question is what its
proponent claims. In United States v. Arce, 997 F.2d 1123 (5th Cir. 1993), the Fifth
Circuit explained that Rule 901(a) “does not require conclusive proof of
authenticity,” but instead “merely requires some evidence which is sufficient to
support a finding that the evidence in question is what its proponent claims it to be.”
Id. at 1128.
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In this case, Ad Astra has submitted two sworn declarations as proof of the
loan documents’ authenticity. Ad Astra’s Appendix at 3-5, 26-28. Both declarants
have stated, under oath, that they reviewed Speedy Cash’s records pertaining to Bow.
Id. at 4, 27. And further, in light of the clarifications provided by Ad Astra in its
reply with respect to the nature of the declarants’ line of work, the court is satisfied
as to the basis for their review of the documents. See Ad Astra’s Reply at 2-4.
As Ad Astra points out, it appears that Bow even admits -- though perhaps
unintentionally -- to the loan documents’ authenticity in her response. Id. at 2, 3.
Specifically, on page five of her response, Bow states the following: “[t]he payday
loan document containing the arbitration provision is one of among four documents.
Ad Astra is not a party to any of the documents. Bow is a party to all the
documents.” Bow’s Response at 5. Accordingly, the court concludes that Ad Astra
has met its burden and has established that the loan documents are what it purports
them to be. See Arce, 997 F.2d at 1128.
III. CONCLUSION
For the reasons stated above, the defendant’s motion is GRANTED. The FAA
directs federal district courts to stay proceedings until the arbitration process is
completed. See 9 U.S.C. § 3. Accordingly, the parties shall proceed to arbitration for
resolution of their dispute, and this action is STAYED pending the outcome of that
arbitration proceeding.
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SO ORDERED.
July 18, 2018.
___________________________________
A. JOE FISH
Senior United States District Judge
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