Asset Acceptance, LLC v. Newby

• Decision Date: 19 June 2014
• Docket Number: No. CV–13–319.,CV–13–319.
• Court: Arkansas Supreme Court
• Parties: ASSET ACCEPTANCE, LLC, Appellant v. Amy Murphy NEWBY, Appellee.

2014 Ark. 280

437 S.W.3d 119

ASSET ACCEPTANCE, LLC, Appellant

v.Amy Murphy NEWBY, Appellee.

No. CV–13–319.

Supreme Court of Arkansas.

June 19, 2014.

Dover Dixon Home PLLC, Little Rock, by: Michael G. Smith, for appellant.

Emerson Poynter LLP, by: Scott E. Poynter, Little Rock and Corey D. McGaha; The Cruz Law Firm, Hot Springs, by: Kathy A. Cruz; Arnold, Batson, Turner & Turner, by: Todd M. Turner; Arkadelphia, and Joel Hargis, Jonesboro, for appellee.

COURTNEY HUDSON GOODSON, Justice.

Appellant Asset Acceptance, LLC (Asset) appeals an order of the Pulaski County Circuit Court denying its motion to compel arbitration of a suit filed by Asset against appellee Amy Murphy Newby and a counterclaim filed by Newby individually and on behalf of a class of similarly situated persons (Newby). For reversal, Asset contends that the circuit court erred in concluding that Asset had waived its right to arbitration by filing its complaint in circuit court. Asset also asserts that it presented enough specific evidence to show that its claim against Newby, as well as her counterclaim, were subject to an arbitration agreement. Newby has filed a cross-appeal of the circuit court's decision denying sanctions against Asset pursuant to Arkansas Rule of Civil Procedure 11. As this case is an interlocutory appeal from a denied motion to compel arbitration, our jurisdiction is proper pursuant to Arkansas Rule of Appellate Procedure–Civil 2(a)(12) (2013). We affirm on direct appeal and dismiss the cross- appeal.

Asset acquires debts and collects defaulted debts, including credit-card debts. On February 28, 2012, Asset filed a complaint against Newby, alleging that she had received a credit card from Asset and that her account was past due and remained unpaid. The complaint sought a judgment in the amount of $6,204.35, interest in the amount of $4,907.73, and costs and attorney's fees. On April 13, 2012, Newby filed an answer and asserted a counterclaim against Asset. In her answer, Newby denied that she had ever been issued a credit card by Asset and denied owing Asset for any overdue balance. She asserted a class-action counterclaim alleging violations of the Fair Debt Collection Practices Act and the Arkansas Deceptive Trade Practices Act, and claims of unjust enrichment, malicious prosecution, and abuse of process. Essentially, Newby contended that Asset had a history of making false or reckless allegations regarding the existence of outstanding debts.

On October 11, 2012, Asset filed a motion to compel arbitration, asserting that the original credit card was issued to Newby by Chase Bank (Chase) Visa Credit and was subject to a Cardholder Agreement that contained an arbitration provision. According to Asset, the Cardholder Agreement provides, in relevant part:

Any dispute may be resolved by binding arbitration. Arbitration replaces the right to go to court. You will not be able to bring a class action or other representative action in court.

This Arbitration Agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by and enforceable under the Federal Arbitration Act (The “FAA”), 9 U.S.C. § 1–16 as it may be amended. This Arbitration Agreement set forth the circumstances and procedures under which claims (as defined below) may be resolved by arbitration instead of being litigated in court.

Asset attached a copy of an undated and unsigned Cardholder Agreement, which it contended governed Newby's account, a bill of sale purporting to show that Asset purchased several accounts from Chase, and a spreadsheet excerpt that purported to show that Newby had an outstanding balance on her account.

On October 24, 2012, Newby filed a motion in opposition to the motion to compel arbitration. In that motion, Newby asserted that Asset had waived its right to compel arbitration by filing an action in court, that Asset was not entitled to arbitration because Chase was not named as a codefendant in any action, and that Asset had failed to produce evidence of Newby's assent to arbitrate. Subsequently, Asset filed a documentary supplement to its motion to compel arbitration on February 12, 2013. Attached to that supplement were additional documents purporting to show that Newby had a credit card with Chase and that she had failed to make timely payments on her account. Included with these documents were additional account statements that Asset contended were mailed to Newby at her previous place of residence.

Newby's motion for sanctions was filed on November 21, 2012. In her motion, Newby contended that Asset's motion to compel arbitration was not well-grounded in fact and was not warranted under existing law. Newby asserted that Asset took an “affirmative step” by filing its lawsuit in circuit court and that Asset “implemented the litigation machinery” of the circuit court by issuing subpoenas for discovery, in addition to requesting damages, attorney's fees, and interest. Moreover, Newby contended that Asset's motion to compel “lacks a factual basis to determine assent to the alleged [arbitration] agreement.”

On February 13, 2013, the circuit court held a hearing on Asset's motion to compel arbitration, Newby's motion for sanctions, and several other pending motions. During the hearing, the circuit court made the following statement from the bench:

Assuming that it's in fact a Chase card, or that it's the information provided that has the arbitration, the plaintiff [Asset] has invoked the jurisdiction of this Court. The plaintiff did not file arbitration proceedings. The plaintiff invoked the jurisdiction of this Court with respect to the named defendant. The plaintiff's motion to compel arbitration is denied. The defendant's motion for sanctions is denied.

Subsequently, on March 1, 2013, the circuit court entered a written order disposing of Asset's motion to compel arbitration and Newby's motion for sanctions as follows, in relevant part:

4. Asset Acceptance's Motion to Compel Arbitration and Stay Plaintiff's Complaint is denied.

5. Ms. Newby's Motion for Sanctions is denied.

The circuit court's order contains no findings or conclusions of law regarding these two motions. Asset filed a timely notice of appeal from this order, and Newby filed a timely cross-appeal.

On appeal, Newby maintains that Asset has failed to show that an agreement to arbitrate existed because it has failed to present any specific evidence that the Cardholder Agreement was communicated to her. Asset argues that the circuit court implicitly found that an agreement to arbitrate existed because the court denied Asset's motion to compel arbitration on the basis of waiver. Because waiver is the relinquishment of a known right, see, e.g., T.C. v. State, 2010 Ark. 240, 364 S.W.3d 53, Asset contends that the circuit court must have implicitly found that the arbitration agreement existed in order to reach the waiver issue during the hearing.

When a court is asked to compel arbitration, it is limited to deciding two threshold questions: 1) Is there a valid agreement to arbitrate between the parties? and 2) If such an agreement exists, does the dispute fall within its scope? LegalZoom.com, Inc. v. McIllwain, 2013 Ark. 370, 429 S.W.3d 261. In Arkansas, as a matter of public policy, arbitration is strongly favored and is looked upon with approval by courts as a less expensive and more expeditious means of settling litigation and relieving docket congestion. Cash in a Flash Check Advance of Ark., L.L.C. v. Spencer, 348 Ark. 459, 74 S.W.3d 600 (2002). The question of whether a dispute should be submitted to arbitration is a matter of contract construction. Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27 S.W.3d 361 (2000). The same rules of construction and interpretation apply to arbitration agreements as apply to agreements generally. May Constr. Co., Inc. v. Benton Sch. Dist. No. 8, 320 Ark. 147, 895 S.W.2d 521 (1995). We have long recognized that the essential elements of a contract are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligations. Spencer, supra. This court reviews a trial court's order denying a motion to compel arbitration de novo on the record. Tyson Foods, Inc. v. Archer, 356 Ark. 136, 147 S.W.3d 681 (2004).

Recently, this court rejected the notion that a circuit court can implicitly rule on whether an arbitration agreement exists by simply denying a motion to compel arbitration on other grounds. Bank of the Ozarks, Inc. v. Walker, 2014 Ark. 223, at 6, 434 S.W.3d 357, 361 (“The Bank takes the position that the circuit court implicitly, if not expressly found, that there was a valid arbitration agreement. Without such a finding, however, we can only speculate about whether the circuit court considered the issue.”). In Bank of the Ozarks, this court reversed and remanded for the circuit court to resolve the disputed issue of mutual assent to the arbitration agreement, holding that a circuit court must rule on the threshold issue of contract formation before determining whether the claims fall within the scope of the arbitration agreement and before considering any defenses that might otherwise invalidate the agreement. While at first blush it might appear that our holding in Bank of the Ozarks would require us to reverse and remand this case for the circuit court to rule on the question of whether a valid arbitration agreement exists, we find that the order in present case is distinguishable from Bank of the Ozarks and is not controlled by that precedent.

In Bank of the Ozarks, the circuit court's written order denied the motion to compel arbitration based solely on the equitable defense that the arbitration agreement was unconscionable without addressing the threshold issue of assent to arbitrate. Here, the circuit court's oral ruling touched on the defense of waiver. However, the court's written order denying Asset's motion to compel...