Untershine v. Advanced Call Center Technologies LLC
Filing
20
DECISION AND ORDER signed by Magistrate Judge Nancy Joseph on 6/18/2018 denying 11 Motion to Dismiss or Stay and Compel Arbitration, or Alternatively to Strike the Class Action Allegations from the Complaint. (cc: all counsel) (llc)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
WENDY UNTERSHINE, on behalf of
herself and all others similarly situated,
Plaintiff,
v.
Case No. 18-CV-77
ADVANCED CALL CENTER
TECHNOLOGIES, LLC,
Defendant.
DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS OR
STAY AND COMPEL ARBITRATION, OR ALTERNATIVELY TO STRIKE THE
CLASS ACTION ALLEGATIONS FROM THE COMPLAINT
Wendy Untershine filed a class action complaint against Advanced Call Center
Technologies, LLC (“ACCT”), alleging violations of the Fair Debt Collection Practices Act
(“FDCPA”) and the Wisconsin Consumer Act (“WCA”) based on actions taken by ACCT
in the course of collecting a debt allegedly owed to Synchrony Bank for purchases and other
charged incurred as a result of the use of her Walmart branded credit card. (Docket # 1.)
ACCT has filed a motion to compel Untershine to arbitrate the dispute pursuant to a
provision in the Cardholder Agreement between Untershine and Synchrony Bank. (Docket
# 11.) Alternatively, ACCT moves to strike the class action allegations from the complaint.
For the reasons that follow, the defendant’s motion to dismiss or to stay and compel
arbitration, or alternatively to strike the class action allegations from the complaint, is
denied.
BACKGROUND
On or around December 12, 2015, Synchrony issued a Walmart branded credit card
account in the name of Wendy M. Untershine bearing an account ending in 4316.
(Declaration of Joline White (“White Decl.”) ¶ 4, Docket # 13.) A credit card bearing the
account number and a copy of the credit card agreement that governed the account were
mailed to Untershine at the address of record for the account. (Id.) Subsequent changes were
made to the agreement and were included with the account’s billing statements. (Id.)
Purchases were posted to the account from December 12, 2015 through January 27, 2017,
with the last payment posting on June 3, 2017. (Id. ¶ 6.) ACCT collects debts on behalf of
Synchrony and Synchrony assigns credit card accounts to ACCT for collection.
(Declaration of Marc Keller (“Keller Decl.”) ¶¶ 2-3, Docket # 14.) Synchrony assigned
Untershine’s Walmart branded credit card account to ACCT for collection purposes on or
about November 1, 2017 due to non-payment. (Keller Decl. ¶ 7, White Decl. ¶ 6.)
Untershine alleges in her complaint that she incurred a consumer debt to Synchrony
Bank for purchases and other charges incurred as a result of the use of her Walmart branded
credit card. (Compl. ¶¶ 4-5, 11.) Untershine alleges that on or about August 17, 2017, she
received a credit card account statement from Synchrony that stated her “new balance” was
$1,833.19, with a “payment due date” of September 9, 2017, an “amount past due” of
$131.00 and a “total minimum payment due” of $224.00. (Id. ¶¶ 12-13.) On or about August
20, 2017, Synchrony mailed Untershine a debt collection letter stating that the “amount
now due” was $131.00 and that she could return her account to a current status by paying
the “amount now due” by September 4, 2017. (Id. ¶¶ 15-17.)
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On or about October 17, 2017, Synchrony mailed Untershine a statement with a
“new balance” of $1,985.08, an “amount past due” of $317.00, a “total minimum payment
due” of $416.00,” and a “payment due date” of November 9, 2017. (Id. ¶ 22.) On or about
November 1, 2017, ACCT mailed Untershine a debt collection letter regarding Untershine’s
alleged Walmart credit card. (Id. ¶ 23.) ACCT is engaged in the business of collecting debts
originally owed to others. (Id. ¶ 8.) The letter states that, as of November 1, 2017, the
alleged debt had a “total account balance” of $1,985.08 and an “amount now due” of
$416.00. (Id. ¶ 30.)
Untershine alleges that ACCT’s letter is false, deceptive, misleading, and confusing
to the unsophisticated consumer as the unsophisticated consumer had previously received
letters from the creditor that indicated the “amount now due” was the same as the “amount
past due.” (Id. ¶¶ 31-32.) Untershine further alleges that the “amount now due” in ACCT’s
letter is the “total minimum payment due” found in a previous letter. (Id. ¶ 33.) Untershine
alleges that she was confused by ACCT’s letter and ACCT’s letter violated the FDCPA and
the WCA. (Id. ¶¶ 40, 64-79.)
The credit card agreement contains a class action waiver and arbitration provision
that states as follows, in pertinent part:
RESOLVING A DISPUTE WITH ARBITRATION
PLEASE READ THIS SECTION CAREFULLY. IF YOU DO NOT
REJECT IT, THIS SECTION WILL APPLY TO YOUR ACCOUNT,
AND MOST DISPUTES BETWEEN YOU AND US WILL BE SUBJECT
TO INDIVIDUAL ARBITRATION. THIS MEANS THAT: (1) NEITHER
A COURT NOR A JURY WILL RESOLVE ANY SUCH DISPUTE; (2)
YOU WILL NOT BE ABLE TO PARTICIPATE IN A CLASS ACTION
OR SIMILAR PROCEEDING; (3) LESS INFORMATION WILL BE
AVAILABLE; AND (4) APPEAL RIGHTS WILL BE LIMITED.
• What claims are subject to arbitration
3
1.
If either you or we make a demand for arbitration, you and we must
arbitrate any dispute or claim between you or any other user of your
account, and us, our affiliates, agents and/or Wal-mart Stores, Inc. if it
relates to your account, except as noted below.
2.
We will not require you to arbitrate: (1) any individual case in small
claims court or your state’s equivalent court, so long as it remains an
individual case in that court; or (2) a case we file to collect money you
owe us. However, if you respond to the collection lawsuit by claiming
any wrongdoing, we may require you to arbitrate.
3.
Notwithstanding any other language in this section, only a court, not
an arbitrator, will decide disputes about the validity, enforceability,
coverage or scope of this section or any part thereof (including,
without limitation, the next paragraph of this section and/or this
sentence). However, any dispute or argument that concerns the
validity or enforceability of the Agreement as a whole is for the
arbitrator, not a court, to decide.
• No Class Actions
YOU AGREE NOT TO PARTICIPATE IN A
CLASS,
REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL ACTION
AGAINST US IN COURT OR ARBITRATION. ALSO, YOU MAY
NOT BRING CLAIMS AGAINST US ON BEHALF OF ANY
ACCOUNTHOLDER WHO IS NOT AN ACCOUNTHOLDER ON
YOUR
ACCOUNT,
AND
YOU
AGREE
THAT
ONLY
ACCOUNTHOLDERS ON YOUR ACCOUNT MAY BE JOINED IN A
SINGLE ARBITRATION WITH ANY CLAIM YOU HAVE.
***
• Governing Law for Arbitration
This Arbitration section of your Agreement is governed by the Federal
Arbitration Act (FAA). Utah law shall apply to the extent state law is relevant
under the FAA. The arbitrator’s decision will be final and binding, except for
any appeal right under the FAA. Any court with jurisdiction may enter
judgment upon the arbitrator’s award.
• How to reject this section
You may reject this Arbitration section of your Agreement. If you do that,
only a court may be used to resolve any dispute or claim. To reject this
section, you must send us a notice within 60 days after you open your
account or we first provided you with your right to reject this section. The
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notice must include your name, address and account number, and must be
mailed to Synchrony Bank, P.O. Box 965012, Orlando, FL 32896-5012.
This is the only way you can reject this section.
(White Decl. ¶ 4, Exh. A, Docket # 13-1 at 4-5.) ACCT alleges that Untershine did not
exercise her right to reject the arbitration provision in the credit card agreement. (Id. ¶ 7.)
ACCT now moves to compel Untershine to submit her claims to arbitration, or alternatively
to strike the class action allegations from her complaint.
APPLICABLE RULE
The Federal Arbitration Act generally requires a court to order arbitration when it
finds: (1) a written agreement to arbitrate; (2) a dispute within the scope of the arbitration
agreement; and (3) a refusal by the opposing party to proceed to arbitration. Zurich Am. Ins.
Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005). Whether the parties entered into a
written agreement to arbitrate is a matter of state contract law. Hawkins v. Aid Ass’n for
Lutherans, 338 F.3d 801, 806 (7th Cir. 2003). The parties do not dispute that, pursuant to the
credit card agreement, Utah law governs. Because a motion to compel arbitration is treated
as an assertion that the court lacks subject-matter jurisdiction, the court may also consider
background information in the form of exhibits and affidavits. Fox v. Nationwide Credit, Inc.,
No. 09-CV-7111, 2010 U.S. Dist. LEXIS 88654, at *5-6 (N.D. Ill. Aug. 25, 2010). The
defendant bears the burden of demonstrating that an agreement requires arbitration. Id.
ANALYSIS
Untershine does not dispute that a valid arbitration agreement and class action
waiver exists between Untershine and Synchrony. (Pl.’s Resp. Br. at 5, Docket # 15.)
Untershine argues, however, that under Utah law, ACCT cannot enforce the arbitration and
class waiver provisions for its own benefit, even if ACCT is Synchrony’s agent. (Id.) ACCT
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argues that because Untershine’s claims arise out of the credit card agreement and ACCT
was acting as Synchrony’s agent and assignee when it was attempting to collect the debt, it
may invoke the arbitration provision to compel Untershine to arbitrate. (Def.’s Br. at 7-8,
Docket # 12.)
Again, the parties do not dispute that Utah law governs this case. When applying a
state’s substantive law, the court must use its “own best judgment to estimate how the
[Utah] Supreme Court would rule.” Jackson v. Bank of Am. Corp., 711 F.3d 788, 791 (7th Cir.
2013) (internal quotation and citation omitted). When the state’s supreme court has not
spoken directly to an issue, the court may give “proper regard” to the state’s lower courts.
Id. Thus, the issue before me is whether, under Utah law, a nonsignatory (ACCT) can
invoke an arbitration agreement to compel a signatory (Untershine) to arbitrate.
The Utah state courts have not addressed the precise issue of whether a nonsignatory
debt collector can compel the alleged signatory debtor to arbitrate a claim arising under the
FDCPA based on an arbitration provision in a credit agreement between the debtor and the
creditor. However, the parties seem to agree that the two primary Utah Supreme Court
cases at issue are Fericks v. Lucy Ann Soffe Trust, 2004 UT 85, 100 P.3d 1200 and Ellsworth v.
American Arbitration Ass’n, 2006 UT 77, 148 P.3d 983. In Fericks, the Utah Supreme Court
held that “as a general rule, only parties to the contract may enforce the rights and
obligations created by the contract.” 2004 UT 85, ¶ 24 (citation omitted). However, in
Ellsworth, the court stated that “under certain circumstances, a nonsignatory to an
arbitration agreement can enforce or be bound by an agreement between other parties.”
Ellsworth, 2006 UT 77, ¶ 19. Those circumstances fall into five groups: “(1) incorporation by
reference; (2) assumption; (3) agency; (4) veil-piercing/alter-ego; and (5) estoppel.” Id. ¶ 19
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n.11. ACCT argues that it can enforce the arbitration agreement between Untershine and
Synchrony under principles of either agency or estoppel. (Def.’s Reply Br. at 9, Docket #
17.) I will address each argument in turn.
Agency Theory
ACCT argues that as Synchrony’s agent and assignee, it is permitted to enforce the
arbitration agreement against Untershine. Untershine argues that even if ACCT is
Synchrony’s agent, Utah law does not permit an agent to invoke a provision of a contract
between the agent’s principal and a third party for the agent’s own benefit, relying on Belnap
v. Iasis Healthcare, 844 F.3d 1272 (10th Cir. 2017), Taylor v. Advanced Call Ctr. Techs., LLC,
No. 17 C 1805, 2017 U.S. Dist. LEXIS 208888 (N.D. Ill. Dec. 20, 2017), and Fericks for
support.
The Utah Supreme Court in Fericks addressed the issue of agency. In Fericks,
prospective real estate buyers appealed from the dismissal of their claims against the sellers’
agents, as well as the award of attorney’s fees to those agents. In reversing the dismissal of
the plaintiffs’ claims, the Utah Supreme Court addressed the attorney’s fees issue to provide
guidance to the district court. The defendants argued that as agents of the sellers, they were
entitled to enforce an attorney’s fee provision in the purchase contract that the sellers had
signed. The plaintiffs argued that because the agents were not parties to the contract, they
could not recover fees under that provision.
The Utah Supreme Court held that the defendants were not entitled to attorney’s
fees, even though they were agents of the sellers, because “an agency relationship with a
principal to a contract does not give the agent the authority to enforce a contractual term for
the agent’s own benefit.” 2004 UT 85, ¶ 24.
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Two years later in Ellsworth, a signatory plaintiff attempted to compel a nonsignatory
defendant to arbitrate under agency theory. In Ellsworth, a construction company filed an
arbitration demand against Ellsworth and his ex-wife for claims involving a contract that
only she had signed. The court found Ellsworth was not bound to the arbitration agreement
through the nonsignatory theory of agency because there was no evidence that Ellsworth’s
ex-wife had the authority to act as an agent for Ellsworth. 2006 UT 77, ¶ 21.
The Tenth Circuit addressed both Fericks and Ellsworth in Belnap v. Iasis Healthcare,
844 F.3d 1272 (10th Cir. 2017). In Belnap, the plaintiff, a surgeon, entered into an agreement
with the Salt Lake Regional Medical Center (“SLRMC”) to provide consulting services. The
agreement contained an arbitration provision. The plaintiff brought various claims against
SLRMC, its parent company, and several of its individual employees; however, the
arbitration agreement was only between the plaintiff and SLRMC. The defendants moved
to compel arbitration on the basis of the arbitration provision in the agreement. The Belnap
court was presented with the issue of whether the nonsignatory defendants could compel the
signatory plaintiff to arbitrate based on the arbitration provision of the agreement.
Applying Utah law, the Belnap court found that the defendants had not asserted a
theory under which the nonsignatory defendants could compel the plaintiff to arbitrate. The
nonsignatory defendants argued that as principals and agents of SLRMC, they too are
entitled to the protection of the agreement’s arbitration provision. The plaintiff argued that
under Fericks, a nonsignatory agent cannot enforce a contract for his or her own benefit. The
defendant argued that Ellsworth provided an exception to that general rule. The Belnap court
disagreed, finding that:
Ellsworth left unscathed Fericks’s express statement that “an agency
relationship with a principal to a contract does not give the agent the
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authority to enforce a contractual term for the agent’s own benefit.” Fericks,
100 P.3d at 1206. Ellsworth and Fericks dealt with fundamentally different
issues and do not conflict. In Ellsworth, the alleged agent—the nonsignatory
defendant Mr. Ellsworth—never attempted to enforce contractual terms for
his own benefit. Instead, the signatory plaintiff did, and so the (alleged) agent
sought to avoid the enforcement of contractual terms against himself. As a
result, the Utah Supreme Court never addressed in Ellsworth whether an agent
can enforce a contractual term for the agent’s own benefit; indeed, the
Ellsworth opinion did not even mention Fericks. Thus, we remain bound by
Fericks’s express statement that an agent acting for its own benefit cannot
enforce such a term. As applied here, because Defendants do not dispute that
they seek to enforce the Agreement’s arbitration provision for their own
benefit, we conclude that they cannot compel Dr. Belnap to arbitrate.
Id. at 1298. Following Belnap, a district court in this circuit recently found that a
nonsignatory defendant could not compel the signatory plaintiff to arbitrate based on agency
theory. In Taylor v. Advanced Call Ctr. Techs., LLC, No. 17 C 1805, 2017 U.S. Dist. LEXIS
208888 (N.D. Ill. Dec. 20, 2017), the plaintiff alleged that ACCT (the defendant in this case)
violated the FDCPA when it failed to inform her that her account balances may vary based
on the application of interest. The cardholder agreement between the plaintiff and GE
Capital Reserve Bank (the predecessor-in-interest to Synchrony Bank), contained an
arbitration provision. As in this case, the plaintiff argued that ACCT, as a nonsignatory,
cannot enforce the arbitration provision against her. ACCT argued that it enjoyed the
benefits of the arbitration provision as Synchrony’s agent.
The court found that ACCT’s position was “untenable in light of Fericks and Belnap.”
Id. at *6. The court stated that “Utah Supreme Court precedent as interpreted by the Tenth
Circuit makes clear that a nonsignatory’s agency relationship with a principal does not
authorize the agent to enforce a contractual term, such as an arbitration clause, for the
agent’s own benefit.” Id. at *8. The court found that ACCT was seeking to enforce the
arbitration clause in the cardholder agreement for its own benefit by attempting to compel
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the plaintiff to arbitrate. Id. Because the court found that Fericks and Belnap did not permit
this, it denied ACCT’s motion to compel arbitration.
ACCT argues that the Belnap court’s statement that “the Utah Supreme Court never
addressed in Ellsworth whether an agent can enforce a contractual term for the agent’s own
benefit” was incorrect. (Def.’s Reply Br. at 4.) ACCT argues that what the Ellsworth court
ruled was that “under certain circumstances, a nonsignatory to an arbitration agreement can
enforce or be bound by an agreement between other parties.” (Id.) ACCT further argues:
The distinction drawn by the Belnap court makes no sense. Why would a
nonsignatory choose to “enforce” an arbitration agreement unless it was “for
[its] own benefit?” Furthermore, the Ellsworth decision does not differentiate
between “nonsignatory plaintiffs” and “nonsignatory defendants,” or even
suggest that they should be treated differently. That distinction was created
out of whole cloth by the Court of Appeals for the Tenth Circuit in Belnap.
(Id.) For these reasons, ACCT argues that I should not follow Belnap. I do not believe that
the Belnap court’s statement, as cited by ACCT, was incorrect. While the Ellsworth court
made the general statement that under certain circumstances, a nonsignatory to an
arbitration agreement can enforce or be bound by an agreement between other parties,
Ellsworth, 2006 UT 77, ¶ 19, the Ellsworth court did not, in fact, address whether an agent
can enforce a contractual term for the agent’s own benefit. This is because the court
determined that Ellsworth was not bound to the arbitration agreement through the
nonsignatory theory of agency because there was no evidence that Ellsworth’s ex-wife had
the authority to act as an agent for Ellsworth. Id. ¶ 21. Thus, the Ellsworth court did not
analyze agency theory.
While ACCT questions why a nonsignatory would ever choose to enforce an
arbitration agreement unless it was for his own benefit, ACCT is truly challenging the
Fericks court’s conclusion, not the Belnap court’s conclusion. ACCT is correct, however, that
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the difference between a nonsignatory plaintiff and nonsignatory defendant does not matter
in terms of agency theory. ACCT is incorrect, though, in stating that the Ellsworth decision
did not differentiate between nonsignatory plaintiffs and nonsignatory defendants. As will
be further explained below, this difference matters for nonsignatory estoppel theory and
Ellsworth was analyzing this theory.
The District of Utah addressed the interplay between Fericks and Ellsworth in Nueterra
Healthcare Mgmt., LLC v. Parry, 835 F. Supp. 2d 1156, 1161 (D. Utah 2011). In Nueterra, the
defendants, who were nonsignatory third parties to an arbitration agreement, sought to
enforce an arbitration agreement under Utah law as agents of a signatory. The plaintiffs
argued, pursuant to Fericks, that the nonsignatory defendants cannot benefit from the
contract by virtue of their agency relationship. The court found that:
At first blush, the Fericks case would seem to be in direct contravention to the
Utah Supreme Court’s later holding in Ellsworth. However, these cases can be
read in harmony if they are interpreted to stand for the proposition that the
five theories for binding a nonsignatory to an arbitration agreement are
exceptions to the general rule stated in Fericks. The Court is persuaded that
this is the appropriate reading of these cases. “[T]o hold otherwise would
make it ‘too easy to circumvent [arbitration] agreements by naming
individuals as defendants instead of the [signatory] entity [itself].’”
Id. at 1162 (internal citation omitted).
ACCT argues that a more reasonable interpretation of Fericks and Ellsworth was
reached by the district courts in Lagrone v. Advanced Call Ctr. Techs., LLC, No. C13-2136JLR,
2014 WL 4966738 (W.D. Wash. Oct. 2, 2014) and St. Pierre v. Advanced Call Ctr. Techs., LLC,
No. 215CV02415JADNJK, 2016 WL 6905377 (D. Nev. Nov. 22, 2016). Lagrone, like
Nueterra, interprets Ellsworth as an exception to Fericks. In Lagrone, 2014 WL 4966738 at *1,
the plaintiff sued ACCT for alleged violations of the FDCPA. ACCT moved to compel the
plaintiff to arbitrate her claims based on an arbitration provision found in the plaintiff’s
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credit card agreement. The court was faced with the question of whether, under Utah law,
ACCT could compel the plaintiff to arbitrate under theories of agency or assignment. The
Lagrone court found that the Utah Supreme Court’s pronouncement in Ellsworth that “under
certain circumstances, a nonsignatory to an arbitration agreement can enforce or be bound
by an agreement between other parties,” and the Ellsworth court’s statement that one of the
five recognized theories for binding a nonsignatory to an arbitration agreement includes
agency, created an exception to Fericks’ general rule that agents cannot enforce provisions of
their principals’ contracts. Id. at *5.
While the Lagrone court predicted that the Utah Supreme Court would permit a
nonsignatory agent to enforce an arbitration provision in its principal’s contract, its rationale
is unpersuasive. First, the court found that Ellsworth’s language that “under certain
circumstances, a nonsignatory to an arbitration agreement can enforce or be bound by an
agreement between other parties” was broad enough to encompass situations in which a
nonsignatory seeks to enforce an arbitration agreement. Id. (quoting Ellsworth, 148 P.3d at
989) (emphasis in original). The court also relied on one Utah Court of Appeals case and
two District of Utah cases that the Lagrone court stated interpreted Ellsworth as permitting
nonsignatories to enforce arbitration provisions. Id. The Lagrone court cites to Educators Mut.
Ins. Ass’n v. Evans, 258 P.3d 598, 614 (Utah Ct. App. 2011), CollegeAmerica Servs., Inc. v. W.
Ben. Solutions, LLC, No. 2:11 CV01208 DS, 2012 WL 1559745, at *2–3 (D. Utah May 2,
2012), and NAFEP Mgmt. Co. v. Binkele, No. 2:06–CV–369 TS, 2007 WL 1726435 (D. Utah
June 12, 2007).
These cases, however, are not helpful to the analysis. In Binkele, the court made no
decision on either nonsignatory estoppel or agency theory; rather, the court found that it
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was first necessary to conduct a trial on the issue of whether there was even an agreement to
arbitrate. 2007 WL 1726435, at *1-2. CollegeAmerica addressed estoppel, not agency theory.
2012 WL 1559745, at *2.
And while Evans addressed agency, the arbitration provision at issue included the
alleged agent in the agreement. More specifically, in Evans, the administrator of Salt Lake
City’s disability benefits (Educators Mutual Insurance Association) sued Evans for breach of
contract and seeking reimbursement of alleged overpayment of disability benefits. Evans
counterclaimed for breach of contract and brought a third-party claim against the City. The
City moved for summary judgment on the ground that Evans had failed to arbitrate his
claim pursuant to an arbitration clause in the Group Long-Term Disability Plan. Evans
argued that the arbitration clause was unenforceable. Specifically, that Educators acted as
the City’s agent and by pursuing litigation, Educators waived not only its own right to
arbitrate, but the City’s.
The court agreed with Evans that Educators, as the City’s agent, waived the City’s
right to arbitrate. However, the arbitration clause in the Plan specifically stated that “[t]he
covered employee may initiate arbitration proceedings by giving written notice to
Educators, on behalf of the City, of the election to proceed with binding arbitration.” 2011
UT App 171, ¶ 68. The Plan also stated that “[t]he arbitration shall be conducted by a single
arbitrator selected by mutual agreement of the covered employee and Educators, on behalf
of the City.” Id. Thus, the court found that the Plan’s arbitration clause was binding on the
City as well as on Educators and Educators’ waiver of the right to compel arbitration in lieu
of litigation also waived that right for the City. Id. The Evans court does not address
Ellsworth.
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In St. Pierre v. Advanced Call Ctr. Techs., LLC, No. 215CV02415JADNJK, 2016 WL
6905377 (D. Nev. Nov. 22, 2016), the plaintiff alleged that ACCT violated the FDCPA in
collecting a debt she owed to Synchrony. ACCT sought to compel the plaintiff to arbitrate
based on an arbitration provision in the credit agreement between plaintiff and Synchrony.
ACCT argued, under Utah law, it should be permitted to compel the plaintiff to arbitrate
based on agency theory. The court found Ellsworth unhelpful because Ellsworth suggested
that agency theory for compelling arbitration could be used when an agent is sued for
breaching a contract; whereas, this case involved plaintiff suing ACCT for violating the
FDCPA. Because the court found no useful Utah law, it considered the law of other
jurisdictions.
The St. Pierre court found that the weight of authority across the nation indicated that
an agent could avail itself of its principal’s arbitration powers under a contract so long as the
claim against the agent relates to that contract. Id. at *3. The court stated that “[t]hese cases
suggest a common-sense principle: where two parties to an agreement contemplate that a
principal’s alleged wrongdoing would be subject to arbitration, it makes little sense to treat
that principal’s agent any differently—regardless of whether the claim directly arises from
the contract’s terms. After all, entities can only act through employees or agents, ‘and an
arbitration agreement would be of little value if it did not extend to [agents].’” Id. at *4
(internal citation omitted). The court concluded that it was “persuaded that the majority of
courts have it right and that Utah courts would agree: agents can use their principal’s
arbitration rights if the claim against the agent relates to the principal’s agreement and
would be subject to arbitration had it been brought against the principal in the first place.”
Id.
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Having found that ACCT, as the nonsignatory agent, could use Synchrony’s
arbitration rights if the plaintiff’s claim related to the parties’ agreement, the court addressed
whether the plaintiff’s FDCPA claim was sufficiently related to the credit agreement
containing the arbitration clause. The court found that although the plaintiff’s FDCPA
claims did not directly depend on the terms of the agreement, the claims related to ACCT’s
attempts to enforce Synchrony’s rights under the agreement. Id. The court further noted that
the agreement required arbitration of any claim relating to the plaintiff’s account generally,
which would include claims relating to attempts to collect on that account. Id. at *4 n.32.
Interestingly, the District of Utah recently considered this same issue and seemingly
conflicted with Belnap. In Inception Mining, Inc. v. Danzig, Ltd., No. 17-CV-944, 2018 WL
1940883, at *1 (D. Utah Apr. 23, 2018), the plaintiff filed a declaratory judgment action
relating to an arbitration proceeding pending in Salt Lake City, Utah and Boston,
Massachusetts. The plaintiffs argued that two individual plaintiffs were not proper parties to
the arbitrations because they did not execute the agreement that contained the arbitration
clause. The defendants agreed that the individual plaintiffs were not signatories to the
agreement, but argued they were nonetheless bound by the agreement based on agency and
estoppel theories. Thus, this was a situation where the signatory defendants were attempting
to compel arbitration on the nonsignatory plaintiffs. The court determined that Utah law
applied to the question of whether the individual plaintiffs were bound by the agreement’s
arbitration clause through agency. However, the court then cited Fifth Circuit law and
found that under agency theory, “‘it matters whether the party resisting arbitration is a
signatory or not.’” Id. at *6 (quoting DK Joint Venture 1 v. Weyand, 649 F.3d 310, 316 (5th
Cir. 2011)). The court noted that there is a distinction between situations “in which a
15
nonsignatory is resisting, rather than seeking to enforce arbitration.” Id. at *8 (emphasis in
original). The court found that “[n]onsignatory agents may compel, but may not be
compelled. They may adopt the protection contracted by their principal, but may not be
forced to arbitrate against their will.” Id.
Courts such as Lagrone and Nueterra attempted to harmonize Fericks and Ellsworth by
finding that because Fericks did not involve an arbitration agreement and Ellsworth did,
Ellsworth is an exception to Fericks’ statement that an agent cannot enforce a contractual
term for the agent’s own benefit. I do not agree with this analysis. Whether parties agree to
arbitrate is a matter of state contract law. Hawkins, 338 F.3d at 806. And Ellsworth certainly
makes no indication that it means to treat arbitration agreements differently than any other
contract. Thus, I agree with the Belnap court’s analysis that Ellsworth did not specifically
address agency theory in the context of a nonsignatory defendant compelling a signatory
plaintiff to arbitrate. Fericks express statement is that an agent cannot enforce a contractual
term for the agent’s own benefit. Thus, ACCT, a nonsignatory to the arbitration agreement,
cannot compel Untershine to arbitrate under agency theory.
Estoppel Theory
ACCT also argues that it seeks to enforce the arbitration agreement under the
doctrine of estoppel. (Def.’s Reply Br. at 9.) The Ellsworth court recognized three categories
of nonsignatory estoppel. The first category is when a nonsignatory has sued a signatory on
the contract to his benefit, but sought to avoid the arbitration provision of the same contract.
2006 UT 77, ¶ 20. The second category is when a nonsignatory sues a signatory on the
agreement after receiving a direct benefit from the contract that contains the arbitration
clause, but seeks to avoid arbitration. Id. A third variety is that enforced by a nonsignatory
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when the signatory plaintiff sues a nonsignatory defendant on the contract but seeks to
avoid the arbitration provision in the contract by relying on the fact that the defendant is a
nonsignatory. Id. ¶ 20 n.12.
In this case, ACCT (as the nonsignatory defendant) is attempting to compel
Untershine (as the signatory plaintiff) to arbitrate her FDCPA and WCA claims. Untershine
seeks to avoid arbitration by relying on the fact that ACCT is a nonsignatory. Thus, only the
third category is potentially applicable in this case. In Belnap, although the court
acknowledged that the only conceivable category implicated by the facts was this third
category, the defendants did not seek relief under that theory of nonsignatory estoppel.
Thus, the court did not address it. Untershine seems to acknowledge that the third category
of equitable estoppel could apply in this case; however, she argues that she is not suing the
defendant “on the contract.” (Pl.’s Resp. Br. at 20.) Rather, the FDCPA and WCA claims
arise from the debt collector’s conduct, not the terms of the original agreement. (Id.)
The Ellsworth court stated that for the third category of nonsignatory estoppel to
apply, it must be that a signatory plaintiff sues a nonsignatory defendant on the contract but
seeks to avoid the contract’s arbitration provision by relying on the fact the defendant is a
nonsignatory. 2006 UT 77, ¶ 20 n.12 (emphasis added). Untershine argues that its FDCPA
and WCA claims are not claims “on the contract.” The arbitration provision contains the
following language regarding the scope of disputes:
If either you or we make a demand for arbitration, you and we must
arbitrate any dispute or claim between you or any other user of your
account, and us, our affiliates, agents and/or Wal-mart Stores, Inc. if it
relates to your account, except as noted below.
17
(Docket # 13-1 at 4.) Again, the Utah courts have not specifically spoken on this issue and
the courts that have addressed whether FDCPA claims fall under similarly broad arbitration
clauses divide on the issue.
As stated above, in St. Pierre, 2016 WL 6905377, the court found that although the
plaintiff’s FDCPA claims did not directly depend on the terms of the agreement, the claims
related to ACCT’s attempts to enforce Synchrony’s rights under the agreement. Id. at *4.
The court further noted that the agreement required arbitration of any claim relating to the
plaintiff’s account generally, which would include claims relating to attempts to collect on
that account. Id. at *4 n.32; see also Reisinger v. Jefferson Capital Systems, LLC, No. 15-CV-474
(E.D. Wis. Sept. 22, 2015) (assuming, without deciding, that an FDCPA claim would fall
under arbitration agreement that defined claim as “any claim, dispute, or controversy . . .
arising out of or relating in any way to this Contract”).
Similarly in Johnson v. Discover Bank, No. 17-CV-412, 2018 U.S. Dist. LEXIS 23145
(W.D. Wis. Feb. 12, 2018), the plaintiffs sued the defendant under the FDCPA, arguing
that the defendant violated the statute by impermissibly publishing their credit scores by
attaching billing statements to pleadings in their bankruptcy cases without redacting the
credit scores. The defendant moved to compel arbitration based on a provision of the credit
card agreement in which the parties agreed to arbitrate “a dispute between [the cardholder]
and [Discover] arising under or relating to this Account.” Id. at *3-4. The court found that
the plaintiffs’ FDCPA claim fell under the broad language of this provision. The court found
that the plaintiffs were “challenging defendants’ decision to publish information in plaintiffs’
account statements by attaching those statements to pleadings in which Discover was seeking
18
to recover amounts past due on plaintiffs’ accounts. Under any reasonable reading, plaintiffs’
claims ‘relat[e] to’ their account with Discover.” Id. at *5.
In Fox v. Nationwide Credit, Inc., No. 09-CV-7111, 2010 U.S. Dist. LEXIS 88654
(N.D. Ill. Aug. 25, 2010), the court found that the plaintiff’s claim was not based on the
terms of her cardholder agreement. The court stated that the plaintiff alleged that the
defendant violated the FDCPA by leaving messages without identifying itself and without
indicating that the calls were being made in an effort to collect a debt. Id. at *16-17. The
court found that the mere existence of a debt did not justify extending the arbitration
agreement to include alleged conduct prohibited by a debt collection statute by an excluded
non-signatory entity. Id. at *17.
Similarly, in Smith v. GC Servs., L.P., No. 16-CV-1897, 2018 U.S. Dist. LEXIS 19142
(S.D. Ind. Feb. 6, 2018), the plaintiffs filed a putative class action alleging that they were
sent a debt collection letter that violated various provisions of the FDCPA. The credit card
agreement contained an arbitration dispute that stated the claims subject to arbitration
included “any dispute or claim between you and any other user of your account, and us, our
affiliates, agents and/or Sam’s Club if it relates to your account.” Id. at *3. Relying on Fox,
the court found the defendant could not compel arbitration under the doctrine of equitable
estoppel because the plaintiffs’ claims were not based on the terms of the credit card
agreement; rather, the claims were that the defendant violated the FDCPA by informing her
that any dispute of the debt must be in writing. Id. at *8.
I am more persuaded by the courts that have found that the plaintiff’s FDCPA claim
does not fall under the terms of the arbitration agreement. The FDCPA serves the specific
purpose of prohibiting certain conduct by debt collectors, expressly excluding creditors
19
collecting debts on their own behalf. Fox, 2010 U.S. Dist. LEXIS 88654 at *17. Untershine’s
FDCPA and WCA claims arise from ACCT’s conduct as a non-signatory debt collector—
not from the terms of the credit card agreement. Thus, because Untershine did not sue
ACCT “on the contract,” ACCT cannot use equitable estoppel to compel Untershine to
arbitrate. For these reasons, ACCT’s motion to compel arbitration is denied.
ACCT also moves to strike Untershine’s class action allegations in her complaint
pursuant to the class action waiver contained in the credit card agreement. (Pl.’s Resp. Br. at
12.) However, for the same reasons ACCT cannot invoke the agreement’s arbitration
provision, it cannot invoke the class waiver provision.
CONCLUSION
ACCT, a nonsignatory to a credit card agreement entered into between Untershine
and Synchrony, seeks to compel Untershine to arbitrate her FDCPA and WCA claims
against it pursuant to an arbitration clause contained in the agreement. Utah law applies,
and ACCT argues that under either principles of agency or equitable estoppel, it can compel
arbitration. I am not persuaded that ACCT can compel arbitration under either theory.
Thus, ACCT’s motion to compel arbitration is denied. ACCT further moves to strike the
class action allegations from Untershine’s complaint. However, for the same reasons ACCT
cannot invoke the agreement’s arbitration provision, it cannot invoke the class waiver
provision.
ORDER
NOW, THEREFORE, IT IS HEREBY ORDERED that the defendant’s motion to
dismiss or stay and compel arbitration, or alternatively to strike the class action allegations
from the complaint (Docket # 11) is DENIED.
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Dated at Milwaukee, Wisconsin this 18th day of June, 2018.
BY THE COURT
s/Nancy Joseph_____________
NANCY JOSEPH
United States Magistrate Judge
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