Cage et al v. Cach LLC et al
Filing
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ORDER granting dfts' 40 Motion to Compel; denying as moot 44 Motion to Certify Class; denying as moot 50 Motion to stay motion for class certification by Judge Robert S. Lasnik.(RS)
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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
_______________________________________
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DENISE MARIE CAGE, et al.,
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Plaintiffs,
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v.
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CACH, LLC, et al.,
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Defendants.
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_______________________________________)
No. C13-01741RSL
ORDER COMPELLING
ARBITRATION
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This matter comes before the Court on “Defendants CACH, LLC, Squaretwo Financial
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Corporation and Squaretwo Financial Commercial Funding Corporation’s Motion to Compel
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Arbitration.” Dkt. # 40. Defendants seek to enforce the arbitration provisions in credit card
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agreements with plaintiffs. Plaintiffs do not dispute that their claims are within the scope of the
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relevant arbitration clauses. They instead oppose arbitration on two grounds: (1) that defendants
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waived the arbitration provisions by initiating lawsuits to collect debts against plaintiffs and
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participating in this action and (2) that defendants have not adequately demonstrated through
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admissible evidence that the arbitration clauses bind these plaintiffs and defendants. Having
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reviewed the parties’ memoranda, declarations, and exhibits, the Court finds as follows:
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Plaintiff Denise Cage’s credit card account with Bank of America (FIA Card Services)
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includes a provision that states: “Any claim or dispute (‘Claim’) by either you or us against the
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other, or against the employees, agents or assigns of the other, arising from or relating in any
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way to this Agreement . . . shall, upon election by either you or us, be resolved by binding
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ORDER COMPELLING ARBITRATION
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arbitration.” Decl. of Christie Coston (Dkt. # 41-2), Ex. 4 at 52. “We” and “us” is defined to
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include the successors, assigns, purchasers, and their agents. Id. at 54. Plaintiff Ryan King’s
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credit card agreement with Citibank states: “All Claims relating to your account . . . are subject
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to arbitration . . . .” Decl. of Christie Coston (Dkt. # 41-4), Ex. 8 at 48. Regarding whose claims
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are subject to arbitration, the agreement states: “Not only ours and yours, but also Claims made
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by or against anyone connected with us or you . . such as . . . [a] successor . . . [or] [an]
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assignee . . . .” Id.
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Pursuant to the Federal Arbitration Act, a written agreement to arbitrate a dispute “shall
be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
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revocation of any contract.” 9 U.S.C. § 2. Although the right to arbitration can be waived,
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“waiver of the right to arbitration is disfavored because it is a contractual right.” United States v.
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Park Place Assocs., 563 F.3d 907, 921 (9th Cir. 2009) (internal quotations and citations omitted).
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The party seeking to prove a waiver of arbitration “bears a heavy burden of proof” and must
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demonstrate: “(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with
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that existing right; and (3) prejudice to the party opposing arbitration resulting from such
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inconsistent acts.” Id. (internal quotations and citations omitted).
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Plaintiffs argue that defendants have taken two sets of actions that are inconsistent with
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their right to arbitrate. First, plaintiffs assert that defendants acted inconsistently with their right
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to arbitrate by filing debt collection lawsuits against plaintiffs, therefore electing “to litigate
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instead of arbitrate.” Response (Dkt. # 53) at 9-10. However, plaintiffs misquote the law and rely
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on authority that is not applicable in this case. See Response (Dkt. # 53) at 9. Although the
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decision to file a suit, participate in litigation, and later seek to compel arbitration may constitute
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a waiver, this case does not involve the party that initiated the lawsuit later seeking to compel
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ORDER COMPELLING ARBITRATION
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arbitration in the same matter.1 Rather, plaintiffs initiated this separate lawsuit against
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defendants, and defendants responded by invoking the arbitration agreements. Nor do
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defendants’ earlier debt collection suits against plaintiffs suggest that they initiated litigation that
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they now seek to abandon in favor of arbitration. Defendants’ previous collection actions are
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separate from the suit plaintiffs now bring against defendants. Bringing a lawsuit for debt
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collection may result in defendants’ waiver of arbitration for that case, but it does not bar
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plaintiffs from compelling arbitration in that action or bar defendants from invoking arbitration
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in all future separate causes of action that plaintiffs assert against them. See Schwartz v. CACH,
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LLC, 2014 WL 298107, at *3 (D.Mass. 2014) (finding “CACH’s decision not to invoke
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arbitration in the earlier state-court collection actions is not relevant” to determining whether
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defendants waived the right to arbitrate in plaintiffs’ subsequent consumer protection suit).
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Second, plaintiffs point out that defendants “have engaged in discovery and motions
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practice in this case,” which plaintiffs assert constitutes a waiver. However, defendants’
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participation in this litigation is not inconsistent with the right to arbitrate. The only “motions
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practice” that defendants have engaged in before moving to compel arbitration involves an
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unopposed motion for an extension of time, see Dkt. # 10, and answering or responding to
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plaintiffs, see Dkts. # 11, 14, 25, 32. Although defendants did respond to discovery requests,
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their communications explicitly reserved the right to arbitrate and notified plaintiffs of their
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intent to compel arbitration if plaintiffs did not dismiss their claims. See Decl. of Brad Fisher
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Cf. Louisiana Stadium & Exposition Dist. v. Merrill Lynch Pierce, Fenner & Smith, Inc.,
626 F.3d 156 (2d Cir. 2010) (plaintiff filed a lawsuit, litigated it at length, and then sought to
compel arbitration); Nicholas v. KBR, Inc., 565 F.3d 904 (5th Cir. 2009) (plaintiff attempted to
compel arbitration after the lawsuit she had filed in state court was removed to federal court);
Riverside Publishing Co. v. Mercer Publishing LLC, 829 F. Supp. 2d 1017, 1020-21 (W.D.
Wash. 2011) (citing United Computer Sys., Inc. v. AT & T Corp., 298 F.3d 756, 765 (9th Cir.
2002)) (plaintiff’s initiation of a lawsuit requesting an injunction, actual damages, and a jury trial
without mention of arbitration satisfied the first two prongs of a waiver of arbitration on those
issues).
ORDER COMPELLING ARBITRATION
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(Dkt. # 60), Ex. A. Defendant Kirkland Law Group did cooperate with discovery and participate
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in the plaintiffs’ Fed. R. Civ. P. 30(b)(6) deposition, but only with an express denial of a waiver
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of arbitration and notification of their request to join the motion to compel arbitration. See Decl.
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of Claire Been (Dkt. # 62), Ex. A at 5-6. Because defendants’ acts that plaintiffs claim are
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inconsistent with the right to arbitrate were taken with defendants’ express reservation and
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communication of such rights, defendants did not waive their right to enforce the arbitration
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agreement.
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Plaintiffs also challenge the arbitration agreement by asserting that defendants cannot
demonstrate through admissible evidence that plaintiffs’ credit card accounts were assigned to
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defendants. Defendants offer multiple exhibits supported by the declaration of Christie Coston, a
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records custodian of defendant CACH, to prove the assignment of plaintiff Cage’s account from
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FIA Card Services, N.A. directly to CACH and plaintiff King’s account from Citibank South
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Dakota, N.A. directly to CACH. See Decl. of Christie Coston (Dkt. # 41). Plaintiffs claim the
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declaration is hearsay and the business records lack sufficient indicia of trustworthiness to
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qualify for the business records exception to the rule against hearsay.
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Under the business records hearsay exception, a business’s records custodian or other
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qualified witness may authenticate documents from transactions in which the business was
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involved, even if that witness did not personally witness the transaction. See Fed. R. Evid.
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803(6). Where business records involve a chain of multiple assignments, each transaction
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requires supporting testimony from a qualified witness with knowledge of the assignee’s record
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keeping procedures in order to qualify for the hearsay exception. See Webb v. Midland Credit
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Mgmt., Inc., No. 11-C-5111, 2012 WL 2022013 (N.D. Ill. May 31, 2012) (cardmember
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agreement was transferred four times; records custodian for final assignee could authenticate
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final assignment, but could not lay the foundation for the previous three assignments). Here, in
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contrast, FIA and Citibank assigned the respective plaintiffs’ accounts directly to CACH without
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any intervening transactions. See Decl. of Coston (Dkt. # 41), Ex. 2 (agreement conveying
ORDER COMPELLING ARBITRATION
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ownership of plaintiff Cage’s account from FIA to CACH), Ex. 6 (agreement conveying
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ownership of plaintiff King’s account from Citibank South Dakota, N.A. to CACH).
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The Court finds that the exhibits showing the assignment of plaintiffs’ accounts to
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defendants qualify as business records because Coston’s declaration provides an adequate
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foundation for the records. Coston asserts that she is an agent of CACH and was appointed as a
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records custodian by the manager. She is familiar with the CACH’s recordkeeping systems, has
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reviewed CACH’s business records relating to these transactions, and asserts that the records
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represented in Exhibits 2-9 were created from information transmitted by a person with
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knowledge near the time of the event and kept in defendant CACH’s regular course of business.
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Decl. of Coston (Dkt. # 41), at 2. Plaintiffs provide no specific reason to doubt the
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trustworthiness or reliability of the records other than the fact that they were adopted from
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another business. Although some of the records were originally created by businesses other than
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CACH, “records a business receives from others are admissible under Federal Rule of Evidence
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803(6) when those records are kept in the regular course of business, relied upon by that
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business, and where that business has a substantial interest in the accuracy of the records.” MRT
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Construction Inc. v. Hardrives, 158 F.3d 478, 483 (9th Cir. 1998) (citing United States v. Childs,
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5 F.3d at 1333-34, 1334 n.3 (9th Cir. 1993)). Coston confirms that the documents originally
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created by other businesses “have been incorporated into the business records of CACH, and are
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relied upon by CACH in conducting its business.” Decl. of Coston (Dkt. # 41), at 2. In addition,
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CACH’s decision to file debt collection actions against plaintiffs for the outstanding balance on
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these accounts indicates that defendants trusted and relied upon the accuracy of the records that
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it incorporated into its own course of business upon assignment of the accounts.
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Finally, plaintiffs summarily assert that the arbitration provision does not bind plaintiffs
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because defendants have failed to submit authenticated credit card agreements containing the
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arbitration provisions. Response (Dkt. # 53) at 13. However, as the Court has discussed,
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defendants have sufficiently authenticated the business records that defendant CACH
ORDER COMPELLING ARBITRATION
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incorporated into its own records through the assignment of plaintiffs’ accounts. These records
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include the credit card agreements that plaintiffs entered into with FIA and Citibank South
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Dakota, N.A., respectively. Decl. of Coston (Dkt. # 41), at 3, 5. Although plaintiffs have not
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signed the credit card agreements, their signatures are not necessary to bind plaintiffs to the
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agreements. Use of a credit card and the failure to invoke an opt out provision is sufficient to
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bind plaintiffs to those agreements. Stinger v. Chase Bank, USA, NA, 265 F.App’x 224, 227
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(5th Cir. 2008) (“By using the cards, [plaintiff] demonstrated an intent to be bound by the terms
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of the [cardmember agreements] and thus agreed to the arbitration provisions in the
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[cardmember agreements]”); see also Guerrero v. Equifax Credit Info. Servs., Inc., CV 11-6555
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PSG PLAX, 2012 WL 7683512 (C.D. Cal. Feb. 24, 2012) (plaintiff’s use of the credit card and
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decision not to opt out after the terms changed to add a binding arbitration provision bound
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plaintiff to a valid arbitration provision). Plaintiffs do not dispute defendants’ claims that
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plaintiffs were issued and used the credit cards. Therefore, defendants may invoke the arbitration
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provisions in the credit card agreements with plaintiffs.
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For all of the foregoing reasons, the motion to compel arbitration is GRANTED.
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Plaintiff’s claims are hereby DISMISSED. The pending “Motion for Class Certification” (Dkt.
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# 44) and “Motion to Stay Motion for Class Certification” (Dkt. # 50) are DENIED as moot. The
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Clerk of Court is directed to enter judgment in the above-captioned matter.
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Dated this 22nd day of May, 2014.
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A
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Robert S. Lasnik
United States District Judge
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ORDER COMPELLING ARBITRATION
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