Cage et al v. Cach LLC et al

Filing 74

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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1 2 3 4 5 6 7 8 9 10 11 12 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE _______________________________________ ) DENISE MARIE CAGE, et al., ) ) Plaintiffs, ) v. ) ) CACH, LLC, et al., ) ) ) Defendants. ) ) _______________________________________) No. C13-01741RSL ORDER COMPELLING ARBITRATION 13 This matter comes before the Court on “Defendants CACH, LLC, Squaretwo Financial 14 Corporation and Squaretwo Financial Commercial Funding Corporation’s Motion to Compel 15 Arbitration.” Dkt. # 40. Defendants seek to enforce the arbitration provisions in credit card 16 agreements with plaintiffs. Plaintiffs do not dispute that their claims are within the scope of the 17 relevant arbitration clauses. They instead oppose arbitration on two grounds: (1) that defendants 18 waived the arbitration provisions by initiating lawsuits to collect debts against plaintiffs and 19 participating in this action and (2) that defendants have not adequately demonstrated through 20 admissible evidence that the arbitration clauses bind these plaintiffs and defendants. Having 21 reviewed the parties’ memoranda, declarations, and exhibits, the Court finds as follows: 22 Plaintiff Denise Cage’s credit card account with Bank of America (FIA Card Services) 23 includes a provision that states: “Any claim or dispute (‘Claim’) by either you or us against the 24 other, or against the employees, agents or assigns of the other, arising from or relating in any 25 way to this Agreement . . . shall, upon election by either you or us, be resolved by binding 26 ORDER COMPELLING ARBITRATION 1 arbitration.” Decl. of Christie Coston (Dkt. # 41-2), Ex. 4 at 52. “We” and “us” is defined to 2 include the successors, assigns, purchasers, and their agents. Id. at 54. Plaintiff Ryan King’s 3 credit card agreement with Citibank states: “All Claims relating to your account . . . are subject 4 to arbitration . . . .” Decl. of Christie Coston (Dkt. # 41-4), Ex. 8 at 48. Regarding whose claims 5 are subject to arbitration, the agreement states: “Not only ours and yours, but also Claims made 6 by or against anyone connected with us or you . . such as . . . [a] successor . . . [or] [an] 7 assignee . . . .” Id. 8 9 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 10 revocation of any contract.” 9 U.S.C. § 2. Although the right to arbitration can be waived, 11 “waiver of the right to arbitration is disfavored because it is a contractual right.” United States v. 12 Park Place Assocs., 563 F.3d 907, 921 (9th Cir. 2009) (internal quotations and citations omitted). 13 The party seeking to prove a waiver of arbitration “bears a heavy burden of proof” and must 14 demonstrate: “(1) knowledge of an existing right to compel arbitration; (2) acts inconsistent with 15 that existing right; and (3) prejudice to the party opposing arbitration resulting from such 16 inconsistent acts.” Id. (internal quotations and citations omitted). 17 Plaintiffs argue that defendants have taken two sets of actions that are inconsistent with 18 their right to arbitrate. First, plaintiffs assert that defendants acted inconsistently with their right 19 to arbitrate by filing debt collection lawsuits against plaintiffs, therefore electing “to litigate 20 instead of arbitrate.” Response (Dkt. # 53) at 9-10. However, plaintiffs misquote the law and rely 21 on authority that is not applicable in this case. See Response (Dkt. # 53) at 9. Although the 22 decision to file a suit, participate in litigation, and later seek to compel arbitration may constitute 23 a waiver, this case does not involve the party that initiated the lawsuit later seeking to compel 24 25 26 ORDER COMPELLING ARBITRATION -2- 1 arbitration in the same matter.1 Rather, plaintiffs initiated this separate lawsuit against 2 defendants, and defendants responded by invoking the arbitration agreements. Nor do 3 defendants’ earlier debt collection suits against plaintiffs suggest that they initiated litigation that 4 they now seek to abandon in favor of arbitration. Defendants’ previous collection actions are 5 separate from the suit plaintiffs now bring against defendants. Bringing a lawsuit for debt 6 collection may result in defendants’ waiver of arbitration for that case, but it does not bar 7 plaintiffs from compelling arbitration in that action or bar defendants from invoking arbitration 8 in all future separate causes of action that plaintiffs assert against them. See Schwartz v. CACH, 9 LLC, 2014 WL 298107, at *3 (D.Mass. 2014) (finding “CACH’s decision not to invoke 10 arbitration in the earlier state-court collection actions is not relevant” to determining whether 11 defendants waived the right to arbitrate in plaintiffs’ subsequent consumer protection suit). 12 Second, plaintiffs point out that defendants “have engaged in discovery and motions 13 practice in this case,” which plaintiffs assert constitutes a waiver. However, defendants’ 14 participation in this litigation is not inconsistent with the right to arbitrate. The only “motions 15 practice” that defendants have engaged in before moving to compel arbitration involves an 16 unopposed motion for an extension of time, see Dkt. # 10, and answering or responding to 17 plaintiffs, see Dkts. # 11, 14, 25, 32. Although defendants did respond to discovery requests, 18 their communications explicitly reserved the right to arbitrate and notified plaintiffs of their 19 intent to compel arbitration if plaintiffs did not dismiss their claims. See Decl. of Brad Fisher 20 21 22 23 24 25 26 1 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 -3- 1 (Dkt. # 60), Ex. A. Defendant Kirkland Law Group did cooperate with discovery and participate 2 in the plaintiffs’ Fed. R. Civ. P. 30(b)(6) deposition, but only with an express denial of a waiver 3 of arbitration and notification of their request to join the motion to compel arbitration. See Decl. 4 of Claire Been (Dkt. # 62), Ex. A at 5-6. Because defendants’ acts that plaintiffs claim are 5 inconsistent with the right to arbitrate were taken with defendants’ express reservation and 6 communication of such rights, defendants did not waive their right to enforce the arbitration 7 agreement. 8 9 Plaintiffs also challenge the arbitration agreement by asserting that defendants cannot demonstrate through admissible evidence that plaintiffs’ credit card accounts were assigned to 10 defendants. Defendants offer multiple exhibits supported by the declaration of Christie Coston, a 11 records custodian of defendant CACH, to prove the assignment of plaintiff Cage’s account from 12 FIA Card Services, N.A. directly to CACH and plaintiff King’s account from Citibank South 13 Dakota, N.A. directly to CACH. See Decl. of Christie Coston (Dkt. # 41). Plaintiffs claim the 14 declaration is hearsay and the business records lack sufficient indicia of trustworthiness to 15 qualify for the business records exception to the rule against hearsay. 16 Under the business records hearsay exception, a business’s records custodian or other 17 qualified witness may authenticate documents from transactions in which the business was 18 involved, even if that witness did not personally witness the transaction. See Fed. R. Evid. 19 803(6). Where business records involve a chain of multiple assignments, each transaction 20 requires supporting testimony from a qualified witness with knowledge of the assignee’s record 21 keeping procedures in order to qualify for the hearsay exception. See Webb v. Midland Credit 22 Mgmt., Inc., No. 11-C-5111, 2012 WL 2022013 (N.D. Ill. May 31, 2012) (cardmember 23 agreement was transferred four times; records custodian for final assignee could authenticate 24 final assignment, but could not lay the foundation for the previous three assignments). Here, in 25 contrast, FIA and Citibank assigned the respective plaintiffs’ accounts directly to CACH without 26 any intervening transactions. See Decl. of Coston (Dkt. # 41), Ex. 2 (agreement conveying ORDER COMPELLING ARBITRATION -4- 1 ownership of plaintiff Cage’s account from FIA to CACH), Ex. 6 (agreement conveying 2 ownership of plaintiff King’s account from Citibank South Dakota, N.A. to CACH). 3 The Court finds that the exhibits showing the assignment of plaintiffs’ accounts to 4 defendants qualify as business records because Coston’s declaration provides an adequate 5 foundation for the records. Coston asserts that she is an agent of CACH and was appointed as a 6 records custodian by the manager. She is familiar with the CACH’s recordkeeping systems, has 7 reviewed CACH’s business records relating to these transactions, and asserts that the records 8 represented in Exhibits 2-9 were created from information transmitted by a person with 9 knowledge near the time of the event and kept in defendant CACH’s regular course of business. 10 Decl. of Coston (Dkt. # 41), at 2. Plaintiffs provide no specific reason to doubt the 11 trustworthiness or reliability of the records other than the fact that they were adopted from 12 another business. Although some of the records were originally created by businesses other than 13 CACH, “records a business receives from others are admissible under Federal Rule of Evidence 14 803(6) when those records are kept in the regular course of business, relied upon by that 15 business, and where that business has a substantial interest in the accuracy of the records.” MRT 16 Construction Inc. v. Hardrives, 158 F.3d 478, 483 (9th Cir. 1998) (citing United States v. Childs, 17 5 F.3d at 1333-34, 1334 n.3 (9th Cir. 1993)). Coston confirms that the documents originally 18 created by other businesses “have been incorporated into the business records of CACH, and are 19 relied upon by CACH in conducting its business.” Decl. of Coston (Dkt. # 41), at 2. In addition, 20 CACH’s decision to file debt collection actions against plaintiffs for the outstanding balance on 21 these accounts indicates that defendants trusted and relied upon the accuracy of the records that 22 it incorporated into its own course of business upon assignment of the accounts. 23 Finally, plaintiffs summarily assert that the arbitration provision does not bind plaintiffs 24 because defendants have failed to submit authenticated credit card agreements containing the 25 arbitration provisions. Response (Dkt. # 53) at 13. However, as the Court has discussed, 26 defendants have sufficiently authenticated the business records that defendant CACH ORDER COMPELLING ARBITRATION -5- 1 incorporated into its own records through the assignment of plaintiffs’ accounts. These records 2 include the credit card agreements that plaintiffs entered into with FIA and Citibank South 3 Dakota, N.A., respectively. Decl. of Coston (Dkt. # 41), at 3, 5. Although plaintiffs have not 4 signed the credit card agreements, their signatures are not necessary to bind plaintiffs to the 5 agreements. Use of a credit card and the failure to invoke an opt out provision is sufficient to 6 bind plaintiffs to those agreements. Stinger v. Chase Bank, USA, NA, 265 F.App’x 224, 227 7 (5th Cir. 2008) (“By using the cards, [plaintiff] demonstrated an intent to be bound by the terms 8 of the [cardmember agreements] and thus agreed to the arbitration provisions in the 9 [cardmember agreements]”); see also Guerrero v. Equifax Credit Info. Servs., Inc., CV 11-6555 10 PSG PLAX, 2012 WL 7683512 (C.D. Cal. Feb. 24, 2012) (plaintiff’s use of the credit card and 11 decision not to opt out after the terms changed to add a binding arbitration provision bound 12 plaintiff to a valid arbitration provision). Plaintiffs do not dispute defendants’ claims that 13 plaintiffs were issued and used the credit cards. Therefore, defendants may invoke the arbitration 14 provisions in the credit card agreements with plaintiffs. 15 16 For all of the foregoing reasons, the motion to compel arbitration is GRANTED. 17 Plaintiff’s claims are hereby DISMISSED. The pending “Motion for Class Certification” (Dkt. 18 # 44) and “Motion to Stay Motion for Class Certification” (Dkt. # 50) are DENIED as moot. The 19 Clerk of Court is directed to enter judgment in the above-captioned matter. 20 21 Dated this 22nd day of May, 2014. 22 A 23 Robert S. Lasnik United States District Judge 24 25 26 ORDER COMPELLING ARBITRATION -6-

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