Olstad, Teresa et al v. Chase Auto Finance Corporation et al

Filing 35

OPINION AND ORDER granting 25 Defendants' motion to dismiss or stay this action and compel arbitration. Plaintiffs shall have 90 days to initiate arbitration proceedings of their claims in this case, including the arbitrability of their conversion claim. This case is STAYED pending further proceedings in arbitration. Signed by District Judge William M. Conley on 1/22/18. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
TERESA OLSTAD and RONALD OLSTAD,

Plaintiffs,

OPINION AND ORDER

v.
17-cv-236-wmc
CHASE AUTO FINANCE CORPORATION,
TRI STATE RECOVERY, INC., and
PRIMERITUS FINANCIAL SERVICES,
INCORPORATED,
Defendants.
Plaintiffs Teresa and Ronald Olstad assert claims under the Fair Debt Collection
Practices Act (“FDCPA”), 15 U.S.C. § 1692, and Wisconsin state law claims based on
defendants Chase Auto Finance Corporation, Tri State Recovery, Inc., and Primeritus
Financial Services Incorporated’s alleged illegal repossession of the Olstads’ vehicle.
Before the court is defendants’ motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(3) or to stay this action and compel arbitration. (Dkt. #25.) For the
reasons that follow, the court will grant the motion, require plaintiffs to arbitrate their
claims, and dismiss this complaint without prejudice to any party filing a new lawsuit to
seek confirmation of or challenge the arbitrators’ decision.

ALLEGATIONS OF FACT1
A. Terms of Car Loan
On or about April 23, 2014, the Olstads purchased a 2004 Ford Explorer. The
Olstads financed the purchase in the amount of $9,147.95 with defendant Chase Auto.
In support of its motion, defendants provide the Retail Installment Contract between
Chase and the Olstads that is referenced in the complaint (the “Contract”). (Kirsling
Decl., Ex. A (dkt. #26).)2
Material to the present motion, that contract contains the following Arbitration
Clause in pertinent part:
AGREEMENT TO ARBITRATE DISPUTES
The following Arbitration Agreement can significantly
affect your rights in any dispute with us. Please read it
carefully before signing this Contract:
1. IF EITHER OF US CHOOSES, ANY CLAIM OR
DISPUTE BETWEEN US (AS DEFINED BELOW)
WILL BE DECIDED BY ARBITRATION AND NOT IN
COURT OR BY A JURY TRIAL.
...
Any claim or dispute, whether in contract, tort, statute or
otherwise (including the interpretation and scope of this
clause and the arbitrability of the claim or dispute), between
you and us or our employees, agents, successors or assigns,
which arise out of or relate to your credit application, this
In resolving a 12(b)(3) motion, “the district court assumes the truth of the allegations in the
plaintiff’s complaint, unless contradicted by the defendant’s affidavits.” Deb v. SIRVA, Inc., 832
F.3d 800, 809 (7th Cir. 2016).
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The court may consider the contract because it is referenced in the complaint and central to
plaintiffs’ allegations. See Brownmark Films, LLC v. Comedy Partners, 682 F.3d 687, 690 (7th Cir.
2012); see also Deb, 832 F.3d at 809 (“Rule 12(b)(3) is a somewhat unique context of dismissal in
that the court may look beyond the mere allegations of a complaint, and need not view the
allegations of the complaint as the exclusive basis for its decision.”).
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Contract or any resulting transaction or relationship
(including any such relationship with third parties who do
not sign this Contract) shall, at your or our election, be
resolved by neutral, binding arbitration and not be a court
action.
(Id. at p.3.)

B. Repossession of Car
On or about June 2014 (two months after the vehicle purchase), the Olstads fell
behind on their payments to Chase Auto.

Despite payment issues, Chase Auto

eventually agreed in March 2016 to accept $6,000 to satisfy the remainder of the loan.
By May 2, the Olstads had sent a check in that amount to Chase Auto, which it
acknowledged receiving as final settlement payment on May 5.

“At the time the

payment was accepted,” plaintiffs allege the contract between the Olstads and Chase
Auto was “completed.” (Am. Compl. (dkt. #24) ¶ 32.)

Moreover, on May 19, the

Olstads received a letter from Chase Auto stating that the lien for the vehicle had been
released electronically, and that the title would be sent to the Olstads from the
Wisconsin Department of Transportation. Instead, Chase Auto apparently proceeded to
retain the services of defendant Primeritus, who, in turn, retained the services of Tri State
in order to repossess the Olstads’ vehicle.
On May 26, 2016, Tri State repossessed plaintiffs’ vehicle, although the vehicle
was returned three days later. Plaintiffs allege that both Tri State and Primeritus were
acting as Chase Auto’s agents in repossessing the vehicle. (Am. Compl. (dkt. #24) ¶¶ 2225.) Plaintiffs allege a variety of injuries as a result of the repossession.

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C. Claims Asserted
In their first amended complaint, plaintiffs allege claims for: (1) violation of the
FDCPA, 15 U.S.C. § 1692f(6), against defendants Tri State and Primeritus for illegally
taking the vehicle; (2) violations of the Wisconsin Consumer Act, Wis. Stat. § 245.206,
against all three defendants for committing a breach of the peace in wrongfully
repossessing the car; (3) violations of the Wisconsin Consumer Act, Wis. Stat.
§ 427.104, against all three defendants for repossessing a vehicle for which they had no
right; and (4) for wrongful conversion of a vehicle against all three defendants.

OPINION
Defendants contend that this court should enforce the Retail Installment
Contract’s Arbitration Clause and either (1) dismiss this case for improper venue
pursuant to Federal Rule of Civil Procedure 12(b)(3) or (2) at minimum, stay the case
pending its completion. See, e.g., Jackson v. Payday Fin., LLC, 764 F.3d 765, 773 (7th Cir.
2014) (“An agreement to arbitrate is a type of forum selection clause.”); Faulkenberg v. CB
Tax Franchise Sys., LP, 637 F.3d 801, 807 (7th Cir. 2011) (explaining that a motion to
compel arbitration is properly raised under Rule 12(b)(3)).
The Federal Arbitration Act, 9 U.S.C. § 1, et seq., governs the arbitration provision
in the Contract. Specifically, the Act provides that a written agreement to arbitrate a
dispute arising out of a contract “shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. §
2; see also Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909 (7th Cir. 1999)
(“The Supreme Court has explained that the FAA ‘establishes that, as a matter of federal

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law, any doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration.’” (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 2425 (1983))).
In response to defendants’ motion to compel arbitration, plaintiffs’ sole argument
is that their conversion claim is not covered by the arbitration clause. In particular,
plaintiffs contend that the conversion claim does not “arise [out of] or relate” to their
credit application, the Contract, or the resulting transactions or relationships (including
any such relationship with third parties who do not sign this Contract). (Pls.’ Opp’n
(dkt. #27) 3.) Plaintiffs further contend that this court should, therefore, retain the
entire case “in the interests of judicial economy,” or, in the alternative, bifurcate the
claims, allowing the conversion claim to continue in this court, while compelling
arbitration with respect to the other claims. (Id. at 4.)
In light of the breadth of the arbitration provision, specifically that it covers
events post-termination of the contract, and the fact that all of the claims turn on
whether defendants had a right to repossess the vehicle under the Contract, plaintiffs’
argument that the conversion claim is not covered by the contract appears to be without
merit.3 The court, however, need not resolve this issue, because as defendants point out

While the Contract is solely between Chase Auto and the Olstads, The arbitration provision
applies to “third-parties who do not sign this Contract.” See In re Oil Spill v. the Amoco Cadiz, 659
F.2d 789, 796 (7th Cir. 1981) (holding that nonsignatories to the arbitration agreement were
bound by it as it would “advance neither judicial economy nor the purposes of the federal
arbitration act to . . . allow it to disavow the relationship for purposes of arbitration, or to allow
[plaintiff] to defeat the effect of an arbitration agreement by joining a non-signatory”). As
already noted, the Olstads allege that Primeritus and Tri State were acting as Chase Auto’s agents
in repossessing their vehicle. Regardless, plaintiffs effectively concede this point by offering no
response in their opposition to defendants’ contention that plaintiffs’ claims against Primeritus
and Tri State are also subject to arbitration.
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in their reply, plaintiffs have conceded that the Arbitration Clause is enforceable as to the
parties’ claims, save one. Moreover, the Arbitration Clause states that the arbitrator will
decide the “gateway” issue of arbitrability.

(Kirsling Decl., Ex. A (dkt. #26-1) p.3

(providing that any claim or dispute including “the scope of this clause and arbitrability
of the claim or dispute” is for the arbitrator).

As a result, even plaintiffs’ basis for

opposing arbitration -- the arbitrability of their conversation claim -- is in the first
instance for the arbitrator See Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69
(2010) (holding that parties can agree to arbitrate “gateway” questions of arbitrability);
Grasty v. Colo. Tech. Univ., 599 Fed. Appx. 596, 598 (7th Cir. 2015) (“[W]e must enforce
the parties’ agreement to arbitrate ‘gateway’ questions about arbitrability of claims and
the scope of the arbitration agreement.” (citation omitted)).
Since arbitration is required, the only remaining question is whether the court
should stay this action pending resolution of arbitration or dismiss it, without prejudice
to plaintiffs refiling. The Federal Arbitration Act instructs a court to stay trial of an
action “until such arbitration has been had in accordance with the terms of the
agreement.” 9 U.S.C. § 3 (2012). For this reason, the Seventh Circuit also generally
counsels to “stay the proceedings rather than to dismiss outright.” Halim v. Great Gatsby's
Auction Gallery, Inc., 516 F.3d 557, 561 (7th Cir. 2008) (citations omitted). When all of
the claims raised in a lawsuit are subject to arbitration, however, courts have recognized
an exception to this general rule. See Employers Ins. of Wausau v. Cont’l Cas. Co., No. 15CV-226-WMC, 2016 WL 632642, at *3 (W.D. Wis. Feb. 17, 2016) (citing cases). “In
that event, a dismissal is appropriate because there is nothing ‘for the court to decide

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unless and until a party seeks confirmation of or challenges the arbitrators’ award.’” Id.
(quoting Bryant v. Fulgham, No. 12-C-823, 2012 WL 1802150, *7 (N.D. Ill. May 17,
2012)). This case is something of a hybrid, since it is possible, if unlikely, that the
arbitrator may find that plaintiffs’ conversation claim is not arbitrable. Accordingly, the
court will stay this lawsuit pending further ruling in arbitration. Of course, nothing in
this opinion is intended to bind the arbitrator’s independent judgment as to the
arbitratibility of all claims, much less the merits of plaintiffs’ claims as a whole,
particularly given the curious case of a three-day repossession.

ORDER
IT IS ORDERED that:
1) Defendants’ motion to dismiss or stay this action and compel arbitration (dkt.
#25) is GRANTED.
2) Plaintiffs shall have 90 days to initiate arbitration proceedings of their claims
in this case, including the arbitrability of their conversion claim.
3) This case is STAYED pending further proceedings in arbitration.
Entered this 22nd day of January, 2018.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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