United States District Court, S.D. Indiana, Indianapolis Division
LUCINDA COX, MARTY MILLS, DEVIN HARLEY, and ROBERT BROWN, individually and on behalf of others similarly situated, Plaintiffs,
CA HOLDING INC., KRG CAPITAL MANAGEMENT LP, CACH LLC, CACH OF N.J. LLC, SQUARE TWO FINANCIAL CORPORATION, PHILLIP SCOTT LOWERY, PAUL A. LARKINS, L. HEATH SAMPSON, BRIAN W. TUITE, JAMES B. RICHARDSON, JR., THOMAS S. GOOD, MARK M. KING, CHRISTOPHER J. LANE, DAMON S. JUDD, and JOHN DOES 1-50, Defendants.
JANE MAGNUS-STINSON, District Judge.
Presently pending before the Court is a Joint Motion to Compel Arbitration and Stay Proceedings Pending the Completion of Arbitration, filed by Defendants CA Holding Inc. ("CA"), KRG Capital Management LP ("KRG"), CACH LLC ("CACH"), CACH of N.J. LLC ("CACH NJ"), Phillip Scott Lowery, Paul A. Larkins, and Christopher J. Lane. [Filing No. 34.] The motion applies to all claims brought by Plaintiffs Lucinda Cox, Marty Mills, Devin Hartley,  and Robert Brown.
STANDARD OF REVIEW
The Federal Arbitration Act, 9 U.S.C. § 1, et seq. ("FAA") provides that arbitration provisions in commercial contracts "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. "[F]ederal law places arbitration clauses on equal footing with other contracts, not above them." Janiga v. Questar Capital Corp., 615 F.3d 735, 740 (7th Cir. 2010). While parties seeking to compel arbitration often cite a federal "policy" in favor of arbitration, any preference for arbitration is "reserved for the interpretation of the scope of a valid arbitration clause." Id.
"An agreement to arbitrate is treated like any other contract." Gibson v. Neighborhood Health Clinics, Inc., 121 F.3d 1126, 1130 (7th Cir. 1997) (citing Kresock v. Bankers Trust Co., 21 F.3d 176, 178 (7th Cir. 1994)). Arbitration will only be compelled where there is a contract providing so. Matthews v. Rollins Hudig Hall Co., 72 F.3d 50, 53 (7th Cir. 1995). "[T]he first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." Mitsubishi Motors Corp. v. Soler Chrylser-Plymouth, Inc., 473 U.S. 614, 626 (1985); see also General Ass'n of Regular Baptist Churches v. Scott, 549 Fed.Appx. 531, 533 (7th Cir. 2013).
In order to determine whether a valid arbitration agreement exists, a federal court looks to the state law governing the formation of the contract. Baumann v. Finish Line, Inc., 421 Fed.Appx. 632, 634 (7th Cir. 2011) ("An agreement to arbitrate is treated like any other contract, and we look to the state law that governs the formation of contracts to determine if there was a valid agreement") (citing Tinder v. Pinkerton Security, 305 F.3d 728, 733 (7th Cir. 2002)); Gibson, 121 F.3d at 1130; First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995). Because it appears that the parties agree regarding the application of Indiana law to Ms. Cox's and Mr. Brown's arbitration provisions,  and of Utah law to Mr. Mills' and Mr. Hartley's arbitration provisions,  the Court will apply those laws accordingly. Massachusetts Bay Ins. Co. v. Vic Koenig Leasing, Inc., 136 F.3d 1116, 1120 (7th Cir. 1998); Wood v. Mid-Valley Inc., 942 F.2d 425, 426-27 (7th Cir. 1991) ("The operative rule is that when neither party raises a conflict of law issue in a diversity case, the federal court simply applies the law of the state in which the federal court sits.... Courts do not worry about conflict of laws unless the parties disagree on which state's law applies. We are busy enough without creating issues that are unlikely to affect the outcome of the case (if they were likely to affect the outcome the parties would be likely to contest them)") (emphasis added). Under both Indiana and Utah law, the burden of demonstrating the existence of an enforceable arbitration agreement is on the party seeking to compel arbitration. Wilson Fertilizer & Grain, Inc. v. ADM Mill. Co., 654 N.E.2d 848, 849 (Ind.Ct.App. 1995); McCoy v. Blue Cross and Blue Shield of Utah, 20 P.3d 901, 904 (Utah 2001) (party seeking to compel arbitration has the burden of showing the existence of an agreement to arbitrate).
Once it is established that there is a valid arbitration agreement, the party opposing arbitration must "identify a triable issue of fact concerning the existence of the agreement in order to obtain a trial on the merits of the contract." Tinder, 305 F.3d at 735. Similar to opposing summary judgment, the party opposing arbitration "cannot avoid compelled arbitration by generally denying the facts upon which the right to arbitration rests; the party must identify specific evidence in the record demonstrating a material factual dispute for trial." Id. In deciding whether the party opposing compelled arbitration has identified a genuine issue of material fact, "the evidence of the non-movant is to be believed and all justifiable inferences are to be drawn in his favor." Id. (citations and quotations omitted). The ultimate issue is whether the plaintiff has "produced sufficient evidence to raise a factual issue concerning whether [plaintiff and defendant] are bound by a contract to arbitrate." Id. "[I]f the parties have an arbitration agreement and the asserted claims are within its scope, the motion to compel cannot be denied." Sharif v. Wellness Intern. Network, Ltd., 376 F.3d 720, 726 (7th Cir. 2004) (citing Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909 (7th Cir. 1999)).
A. The Plaintiffs' Accounts, Governing Documents, and Defendants' Involvement
Both sides have submitted significant documentary evidence to support their positions, and a detailed summary of those documents, and Defendants' involvement with each of the Plaintiff's accounts, is required to determine whether Defendants are entitled to arbitrate each Plaintiff's claim.
1. Lucinda Cox
a. Credit Agreement Documents
On October 16, 2002, Ms. Cox signed a one-page document titled "Kittle's Furniture Card Program" (the "Cox Application"). [Filing No. 48-6 at 37.] The Cox Application states:
By completing and signing this application, you request a Card issued to you by us which will allow you to make purchases under this Account. By a) signing, using or permitting others to use this Card; b) signing or permitting others to sign sales slips; c) making or permitting others to make purchases by telephone, internet, or any other means, you agree to the terms and conditions of this Cardholder Agreement and Disclosure Statement.... (which includes an arbitration provision) stated on both sides of this combined application and Cardholder Agreement and Disclosure Statement, which are incorporated herein by reference. You have read and received a copy of your Agreement before making any purchase under this Account. Terms are attached.
[Filing No. 48-6 at 37.] The Cox Application identifies Household Bank (SB), N.A. ("Household") as the company issuing the credit card. [Filing No. 48-6 at 37.]
b. Chain of Ownership Documents
A Purchase Agreement between HSBC Bank Nevada, N.A. ("HSBC Nevada") and HSBC Receivables Acquisition Corporation (USA) IV as the sellers, and CACH as the purchaser (the "HSBC Purchase Agreement") governs the purchase of "certain credit card accounts and receivable balances... for the term of this Agreement... outstanding under Cardholder Accounts that constitute Charged-Off Receivables... together with all amounts that may thereafter become due under Cardholder Accounts with respect to such balances as additional interest, late fees, rights to recover collection expenses or other charges; and including all rights of Seller to receive or benefit from payments or proceeds from credit life insurance in which such Cardholder has an interest...." [Filing No. 48-6 at 2.] HSBC Nevada is formerly known as Household. [ See Filing No. 81-7 at 2 (Federal Deposit Insurance Corporation document reflecting that Household changed its name to HSBC Nevada on March 1, 2005).]
The HSBC Purchase Agreement provides that the sellers agree to "sell, convey, transfer and assign to Purchaser and Purchaser agrees to purchase from Seller... all right, title, and interest of Seller in and to Purchased Accounts and Purchased Receivables." [Filing No. 48-6 at 4.] The HSBC Purchase Agreement contains an exhibit listing Ms. Cox's account as one covered by the HSBC Purchase Agreement. [Filing No. 48-6 at 32.] The HSBC Purchase Agreement is binding on the parties and their "respective successors and permitted assigns." [Filing No. 48-6 at 20.]
c. Ms. Cox's Allegations
Ms. Cox alleges that HSBC Nevada sent her collection letters and called her "regarding an alleged debt purchased by Defendants from [HSBC Nevada], " and that "[d]espite her numerous written and telephonic requests for validation of the Defendants' ownership of an alleged debt, Defendants were unable to produce any documentation showing Defendants' purchase of the alleged debt, but continued to contact [her]." [Filing No. 1 at 5.]
2. Marty Mills
a. Credit Agreement Documents
In support of their motion, Defendants submitted a GE Capital Retail Bank Credit Card Account Agreement (the "Mills Agreement"), which is unsigned and undated, and provides that:
Upon demand, and except as otherwise provided below, you and we must arbitrate individually any dispute or claim between you, any joint cardholder and/or any additional cardholder, on the one hand; and us, our affiliates, agents and/or dealers/merchants/retailers or participating professionals, on the other hand, if the dispute or claim arises from or relates to your account. However, 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) any claim by us that only involves our effort to collect money you owe us. However, if you respond to a collection lawsuit by claiming that we engaged in any wrongdoing, we may require you to arbitrate.
[Filing No. 48-5 at 49.]
b. Chain of Ownership Documents
A Forward Flow Receivables Purchase Agreement dated October 8, 2010 between General Electric Capital Corporation ("GECC") and GE Money Bank as the sellers, and CACH as the purchaser (the "GE Purchase Agreement") covers the sale of "delinquent credit card receivables." [Filing No. 48-5 at 3.] It provides that "[o]n each Funding Date, Seller shall sell and Buyer shall buy all right, title and interest in and to the Receivables with respect to which Buyer has received a Notification File, without recourse and without warranty of any kind... except as specifically set forth herein...." [Filing No. 48-5 at 5.] The GE Purchase Agreement contains an exhibit which lists Mr. Mills' account as one covered by the GE Purchase Agreement. [Filing No. 48-5 at 35.]
A Second Amendment to the GE Purchase Agreement (the "Second Amendment") added several parties as sellers, including GE Capital Retail Bank, but does not list GE Money Bank - the party to the Mills Agreement - as a seller. [Filing No. 73-3 at 32-37.] The Second Amendment is dated December 20, 2011. [Filing No. 73-3 at 32.]
c. Mr. Mills' Allegations
Mr. Mills alleges that Defendants "used a non-licensed collection agent law firm to file a Complaint in Johnson County based on [his] former address, " that he "had no knowledge of the Defendants, nor the Complaint, until the Default Judgment and Complaint were mailed to his actual address in Marion County, " and that "[t]he alleged ownership of a GE Money Retail Bank credit card is supported by only a fill-in-the-blank, robo-signed affidavit signed by an alleged authorized representative' of CACH with no knowledge of GE Money Retail Bank's business records." [Filing No. 1 at 5-6.]
3. Devin Hartley
a. Credit Agreement Documents
A GE Money Bank Credit Card Agreement (the "Hartley Agreement"), which is undated and signed only by a GE Money Bank representative, provides that "any past, present or future legal dispute or claim of any kind, including statutory and common law claims and claims for equitable relief, that relates in any way to your account, card or your relationship with us... will be resolved by binding arbitration if either you or we elect to arbitrate." [Filing No. 48-3 at 46.] The Hartley Agreement contains a Utah choice of law provision. [Filing No. 48-3 at 43.] The Hartley Agreement is effective the date that an approved account application is submitted, or the date that the card user (or someone authorized) uses the account, whichever is earlier. [Filing No. 48-3 at 44.]
b. Chain of Ownership Documents
The Defendants submit the GE Purchase Agreement in support of their argument that they are entitled to enforce the arbitration provision in the Hartley Agreement. [Filing No. 48-3 at 2-42.] The GE Purchase Agreement contains an exhibit listing Mr. Hartley's account as an ...