Opinion
3:22-CV-0242-X-BH
02-10-2023
KIMBERLY JOHNSON, Plaintiff, v. SOUTHWEST RECOVERY SERVICES INC., et al. Defendants.
ORDER ACCEPTING FINDINGS, CONCLUSIONS, AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
BRANTLEY STARR, UNITED STATES DISTRICT JUDGE.
Plaintiff Kimberly Johnson sued Experian Information Solutions, Inc. (“Experian”) and other defendants for alleged violations of the Fair Credit Reporting Act, the Fair Debt Collection Act, the Texas Debt Collection Act, and the Deceptive Trade Practices Act. Experian now moves to compel arbitration and stay the proceedings pending arbitration, claiming that Johnson is bound by an arbitration provision in her “Terms of Use” agreement. The United States Magistrate Judge made findings, conclusions, and a recommendation. [Doc. No. 72].
Other defendants are Equifax Information Services LLC, Innovative Ranking Services Inc., Southwest Recovery Services, Scott Been, Steven Dietz, and Raymond Davidson. Doc. No. 7 at 1.
Id. at 2.
Doc. No. 44.
As a preliminary matter, the Magistrate Judge first concluded that two evidentiary objections from Johnson-that a witness lacked personal knowledge of information in his declaration, and that documents attached to that declaration were hearsay-lacked merit and should be overruled. The Court agrees.
Doc. No. 72 at 5-8.
Turning to the motion to compel, the Magistrate Judge applied the Fifth Circuit's two-step inquiry for determining the legitimacy of arbitration agreements, concluding that (1) the parties entered into a valid agreement to arbitrate and this dispute is within the scope of that agreement, and (2) no external legal constraints foreclose the arbitrability of Johnson's claims. Thus, the Magistrate Judge recommends granting the motion.
Id. at 11-20 (further concluding that the agreement was not the result of duress, that it was not unconscionable, and that it included a valid delegation clause authorizing the arbitrator to determine issues of arbitrability); see Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002).
Id. at 20.
Finally, the Magistrate Judge concluded that the motion for a mandatory stay should be denied. Section 3 of the Federal Arbitration Act requires courts to stay actions properly referred to arbitration, but absent “exceptional circumstances,” this rule only applies to the actual signatories of the arbitration agreement. The Fifth Circuit uses three factors to determine whether such exceptional circumstances exist, i.e., whether a mandatory stay is warranted for non-signatories to an arbitration agreement: “(1) the arbitrated and litigated disputes involve the same operative facts; (2) the claims asserted in the arbitration and litigation are ‘inherently inseparable'; and (3) the litigation has a ‘critical impact' on the arbitration.” And “[t]he question is not ultimately one of weighing potential harm to the interests of the non-signator[ies], but of determining whether proceeding with litigation will destroy the signatories' right to a meaningful arbitration.”
See Adams v. Georgia Gulf Corp., 237 F.3d 538, 540-41 (5th Cir. 2001).
Rainier DSC 1, L.L.C. v. Rainier Capital Mgmt., L.P., 828 F.3d 356, 360 (5th Cir. 2016) (cleaned up).
Waste Mgmt. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 343 (5th Cir. 2004).
As the Magistrate Judge noted, Johnson asserts claims against non-signatories to the arbitration agreement, but Experian “fail[ed] to address the three factors” when arguing for its stay, instead asserting only that “the litigation is subject to a mandatory stay and should be stayed pending completion of the arbitration.” This conclusory statement fails to establish, or even argue for, the existence of exceptional circumstances that would justify staying Johnson's claims against non-signatories to the arbitration agreement. Here, the non-signatories include a credit reporting agency, a credit repair organization, a debt collector, and three individuals, and Experian has made no effort to show why Johnson's various claims against them are “inherently inseparable” or why Johnson's suit against each would have a “critical impact” on the arbitration with Experian.
Doc. No. 72 at 21 (quoting Doc. No. 44 at 28).
The District Court reviewed for plain error the proposed findings, conclusions, and recommendations. Finding none, the Court ACCEPTS the Findings, Conclusions, and Recommendation of the United States Magistrate Judge. [Doc. No. 72]. Accordingly, the Court GRANTS Experian's motion to compel arbitration and DENIES its motion for mandatory stay. The Court DISMISSES WITH PREJUDICE all claims against Experian.
IT IS SO ORDERED.