Opinion
Case No. 05cv2039 DMS (RBB).
April 4, 2006
ORDER GRANTING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS [Doc. No. 16]
Defendants J.A. Cambece Law Office, P.C. ("Cambece"), Scott Lowery Law Office, P.C. ("Lowrey"), and CACV of Colorado, LLC ("CACV") (collectively "Defendants") have filed a motion to compel Plaintiff William Haas ("Haas") to arbitration and to stay the proceedings. The Court finds this matter suitable for submission without oral argument pursuant to Local Civil Rule 7.1.d.1. For the reasons discussed below, Defendants' motion to compel arbitration and to stay the proceedings is granted.
I. FACTUAL AND PROCEDURAL BACKGROUND
On October 21, 2000, Haas, a California resident, acquired a credit card from MBNA America Bank, N.A. ("MBNA"), a national bank located in Delaware. (Defendants' Motion to Compel at 2; Plummer Affidavit at ¶ 3.) Defendants contend that after Haas received the credit card, MBNA sent him a copy of its "Credit Card Agreement", which is provided to all of its members pursuant to company policy. (Plummer Affidavit at ¶ 4.) The agreement contained the following arbitration clause:
Arbitration: Any claim or dispute ("Claim") by either you or us against the other, or against the employees, agents or assigns of the other, arising from or relating in any way to this Agreement or any prior Agreement or your account (whether under a statute, in contract, tort, or otherwise and whether for money damages, penalties or declaratory or equitable relief), including Claims regarding the applicability of this Arbitration Section or the validity of the entire Agreement or any prior Agreement, shall be resolved by binding arbitration.
. . .
This Arbitration Section shall survive the termination of your account with us as well as any voluntary payment of the debt in full by you, any bankruptcy by you or sale of the debt by us.
. . .
For the purposes of this Arbitration Section, "we" and "us" means MBNA America Bank, N.A., its parent, subsidiaries, affiliates, licensees, predecessors, successors, assigns, and any purchaser of your account, and all of their officers, directors, employees, agents and assigns or any and all of them. Additionally, "we" or "us" shall mean any third party providing benefits, services, or products in connection in the account (including but not limited to credit bureaus, merchants that accept any credit device issued under the account, rewards or enrollment services, credit insurance companies, debt collectors and all of their officers, directors, employees and agents) if, and only if, such a third party is named by you as a co-defendant in any Claim you assert against us.
( See MBNA's Credit Card Agreement at 7-9.) In addition, the agreement contains a provision which provides that "[w]hen you accept or use the account, you agree to the terms of this Agreement." ( Id. at 1.)
According to Defendants, after Haas began using the credit card, he stopped making payments on the account. MBNA's records indicate that as of June 3, 2002, the balance on Haas's account was $11,673.89. (Plummer Affidavit at ¶ 2.) MBNA subsequently assigned Haas's account to CACV, which proceeded with collection on the account.
On October 31, 2005, Haas filed his Complaint in this Court, alleging causes of action against Defendants for violations of the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692, et. seq. and the California Rosenthal Fair Debt Collection Practices Act ("CRFDPA"), CAL. CIV. CODE § 1788, et. seq. In his Complaint, Haas alleges Defendants violated the FDCPA and CRFDPA by engaging in illegal conduct in connection with the attempted collection of his debt.
On January 30, 2006, Defendants filed this instant motion to compel Haas to arbitration, based on the arbitration clause contained in the agreement. Haas filed an Opposition to Defendants' motion on February 17, 2006, and thereafter, Defendants filed a Reply.
II. LEGAL STANDARD
The Federal Arbitration Act ("FAA") governs arbitration agreements in contracts involving transactions in interstate commerce. 9 U.S.C. § 1; Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Congress intended courts to construe commerce as broadly as possible. Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir. 1999). Pursuant to Section 2 of the FAA, arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. In determining whether to compel a party to arbitration, a district court may not review the merits of the dispute; rather, the court must limit its inquiry to: (1) whether a valid agreement to arbitrate exists, and, if it does (2) whether the agreement encompasses the dispute at issue. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). A court interpreting an arbitration agreement must give due regard to the federal policy favoring arbitration; ambiguities as to the scope of the arbitration clause are resolved in favor of arbitration. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995); AT T Techs. Inc. v. Comm. Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) ("in the absence of any express provision excluding a particular grievance from arbitration . . . only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail.")
III. DISCUSSION
Defendants contend Haas is bound by the terms of the arbitration clause contained in MBNA's credit card agreement, and therefore, this Court is not the proper forum to adjudicate his claims. Haas responds by arguing that the arbitration clause is not enforceable against him because no agreement to arbitrate exists and, even if an agreement does exist, his claims fall outside the scope of the arbitration agreement.
A. Choice of Law
The threshold issue in this case is whether Delaware or California law applies in determining the validity of the arbitration agreement. MBNA's Credit Card Agreement provides that "[the] Agreement is made in Delaware. It is governed by the laws of the State of Delaware, without regard to its conflict of laws principles, and by any applicable federal laws." ( See MBNA's Credit Card Agreement at 7.) Defendants argue that under the choice of law provision contained in the arbitration agreement, Delaware law controls. Haas, on the other hand, contends that "because this action is brought within the State of California, and Plaintiff resides in California, California law controls the issues presented to the Court on this motion." ( See Haas's Opposition at 4.)
Choice of law provisions are analyzed under the forum's state choice of law rules. Paracor Fin., Inc. V. General Electric Capital Corp., 96 F.3d 1151, 1164 (9th Cir. 1996). Here, the forum state is California. Under California law, the enforcement of contractual choice-of-law provisions, including those in "consumer adhesion contracts," is governed by section 187, subdivision (2) of the Restatement Second of Conflict of Laws. See Discover Bank v. Superior Court, 134 Cal.App.4th 886, 890 (2005). "[T]he proper approach under Restatement section 187, subdivision (2) is for the court first to determine either: (1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties' choice of law. If neither of these tests is met, that is the end of the inquiry, and the court need not enforce the parties' choice of law. If, however, either test is met, the court must next determine whether the chosen state's law is contrary to a fundamental policy of California. If there is no such conflict, the court shall enforce the parties' choice of law." See Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 466 (1992) (footnotes omitted).
With respect to the first step in the choice of law analysis, the Court finds that Delaware has a substantial relationship to the parties involved in the present dispute. MBNA is incorporated and maintains its principal place of business in Delaware. Moreover, MBNA is a credit card corporation that transacts with individuals throughout the United States. As such, MBNA has an interest in the uniform interpretation of its credit card accounts. MBNA presumably elected to locate in Delaware in part for its laws regarding credit card accounts. Delaware, therefore, has an interest in its laws being applied to contracts such as those between MBNA and Haas. See Edelist v. MBNA America Bank, 790 A.2d 1249, 1256 (Del.Sup.Ct. 2001).
Turning to the second step in the choice of law analysis, the issue is whether application of Delaware law to this case would be "contrary to a fundamental policy of California." See Nedlloyd, 3 Cal.4th at 466. Under Delaware law, representation that an arbitration agreement was sent to a consumer is sufficient to notify a party of the terms of an arbitration agreement, even where the party resisting arbitration specifically represents that he did not receive the actual terms of arbitration. See Edelist, 790 A.2d 1260. The rule in California appears to be consistent. In California, a party can be bound by an arbitration clause even if he failed to read or understand it. See Bolanos v. Khalatian, 231 Cal.App.3d 1586 (1991); Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, 710 (1976) ("one who assents to a contract is bound by its provisions and cannot complain of unfamiliarity with the language of the instrument."). Accordingly, as Delaware's law is not contrary to "the fundamental policy of California," the Court applies Delaware law to this dispute.
B. Existence of a Valid Arbitration Agreement
Haas argues he cannot be compelled to arbitration because "Defendants offer no documentary evidence that [he] was offered the alleged agreement that contains the arbitration clause, or that he accepted the terms of the alleged agreement." ( See Haas's Opposition at 6) (emphasis in original). In other words, Haas contends no agreement to arbitrate exists because Defendants fail to show that he received or assented to the terms contained in the arbitration agreement.
Defendants, however, as evidence of the existence of a valid arbitration agreement, submit the affidavit of Joseph Plummer, a Senior Personal Banking Officer of MBNA. Mr. Plummer states that "at the time MBNA acquired the account, it was the general policy of MBNA to provide the Credit Card Agreement to all of its cardmembers. Consistent with this policy, and to the best of my knowledge, cardmember WILLIAM HAAS received this Credit Card Agreement." ( See Plummer Affidavit at ¶ 4) (emphasis in original). "[A] defendant need only prove that it properly mailed the arbitration notice to its card members. . . . Proof of mailing may be accomplished by presenting circumstantial evidence, including evidence of customary mailing practices used in the sender's business." Marsh v. First USA Bank, N.A., 103 F.Supp.2d 909, 918 (N.D. Tex. 2000) (citation omitted). Under such circumstances, a presumption arises that the party resisting arbitration received notification of the terms of the arbitration agreement and "it becomes incumbent upon [him] to negate the presumption of receipt." Id. at 919. Moreover, as stated, under Delaware law a representation that an arbitration agreement was sent to a consumer is sufficient to notify a party of the terms of the agreement, even when the party resisting arbitration affirmatively represents that he did not receive the actual terms of arbitration. See Edelist, 790 A.2d 1260.
Notably, Haas does not dispute that he received or saw the terms of the arbitration agreement. Haas also does not attempt to negate the "presumption of receipt" of the arbitration agreement. See Marsh, 103 F.Supp.2d at 919. Nor does he provide any evidence corroborating any denial of receipt of the agreement. It is also undisputed that Haas used the subject credit card, thus assenting to the terms of the agreement. ( See Plummer Affidavit at ¶ 2; MBNA Credit Card Agreement at 1 ("When you accept or use the account, you agree to the terms of this Agreement.")) Accordingly, Haas is bound by the arbitration agreement.
In his Opposition, Haas also argues that he cannot be compelled to arbitrate his claims against Cambece or Lowery because they are not parties to the agreement. ( See Opposition at 5.) MBNA's arbitration clause, however, specifically references "all agents or assigns" of the Company, as well as any "debt collectors and all of their officers, directors, employees and agents." ( See Credit Card Agreement at 7-9.) Because Cambece and Lowery are agents within the meaning of the agreement, they are properly included in these proceedings.
C. Scope of the Arbitration Agreement
Haas also contends the arbitration clause is not enforceable against him because "[t]he alleged agreement between [Haas] and MBNA applies only to claims `arising from or relating in any way to this Agreement.'" (Opposition at 7.) In essence, Haas argues he is not bound by the arbitration clause because his claims for unlawful debt collection practices under the FDCPA and CRFDPA do not arise from or relate to the agreement with MBNA.
"The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." See Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). As such, the general rule is that arbitration will be ordered "unless it can be said with assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." AT T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986).
Here, the scope the arbitration clause is extremely broad: "Any claim or dispute . . . arising from or relating in any way to this Agreement or . . . or your account (whether . . . in contract, tort, or otherwise . . . shall be resolved by binding arbitration." ( See MBNA's Credit Card Agreement at 7-8) (emphasis added). Where an arbitration clause contains such broad language, "only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail." AT T Technologies, 475 U.S. at 650.
Haas brings statutory claims under the FDCPA and CRFDPA against Defendants for allegedly engaging in unlawful debt practices. Haas, however, fails to cite any relevant authority for the proposition that such statutory claims are not subject to the foregoing arbitration provision. Indeed, such claims logically "arise from" Defendants' handling of Haas's "account" and the credit agreement itself. Moreover, the Ninth Circuit has specifically held that claims filed under consumer protection statutes, including the Federal Truth-In-Lending Act, may be enforced by valid arbitration agreements. See Johnson v. West Suburban Bank, 225 F.3d 366, 371 (9th Cir. 1982) ("There is nothing in either the text or the legislative history of the TILA to indicate that Congress intended to allow plaintiffs to avoid binding arbitration clauses."). Defendants have therefore established that Haas's claims under the FDCPA and CRFDPA fall within the arbitration agreement.
IV. CONCLUSION
For these reasons, Defendants' motion to compel arbitration and to stay the action is GRANTED. Because this Court may not proceed with this case in the normal course, and in the interest of judicial efficiency, the Court finds this case should be administratively closed until the completion of the arbitration process. Thereafter, upon proper application by either party, the Court may reopen this case.
The Clerk of the Court is instructed to close this case.
IT IS SO ORDERED.