Bennett v. Sys. & Servs. Techs.

• Decision Date: 10 May 2022
• Docket Number: 2:21-cv-770-SPC-NPM
• Court: U.S. District Court — Middle District of Florida
• Parties: MARK BENNETT and PAULETTE BENNETT, Plaintiffs, v. SYSTEMS & SERVICES TECHNOLOGIES, INC. and TRUIST BANK, Defendants.

MARK BENNETT and PAULETTE BENNETT, Plaintiffs, v. SYSTEMS & SERVICES TECHNOLOGIES, INC. and TRUIST BANK, Defendants.

No. 2:21-cv-770-SPC-NPM

United States District Court, M.D. Florida, Fort Myers Division

May 10, 2022

OPINION AND ORDER ^[1]

SHERI POLSTER CHAPPELL UNITED STATES DISTRICT JUDGE

Before the Court is Defendants Systems & Services Technologies Inc. (“SST”) and Truist Bank's Motion to Compel Arbitration (Doc. 73). Plaintiffs Mark and Paulette Bennett responded in opposition (Doc. 79). Also here is Truist's Unopposed Motion for Judicial Notice (Doc. 9). The Court grants both.

BACKGROUND

This is a consumer-credit case. The Bennetts took out a loan for an RV (“Debt”). A bank (“Bank”) issued the Debt. A loan agreement (“Note”) memorializes the parties' relationship. Eventually, Bank transferred the Debt to SST for servicing. It is unclear whether the Bennetts defaulted. At any rate, they eventually agreed with SST to settle the Debt for a lesser amount.

Later Bank sold the Debt to Truist. SST then sent the Bennetts a collection letter about the Debt. So the Bennetts reviewed their credit reports-finding errors. Eventually, the Bennetts sued Defendants for violating the Fair Credit Reporting Act (“FCRA”) and the Florida Consumer Collection Practices Act (“FCCPA”) (together “Claims”).

LEGAL STANDARD

It is a “fundamental principle that arbitration is a matter of contract.” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 67 (2010). Since once cannot force another to arbitrate matters on which they did not agree, courts must determine validity, enforceability, and scope of an arbitration clause. Anders v. Hometown Mortg. Servs., Inc., 346 F.3d 1024, 1027 (11th Cir. 2003). These are “gateway questions” judges must resolve before sending a case to the arbitrators.^[2] JPay, Inc. v. Kobel, 904 F.3d 923, 929 (11th Cir. 2017) (cleaned up). Where state-law governs the Note, Utah law controls. (Doc. 73-1 at 3); Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630-31 (2009); Dasher v. RBC Bank (USA) (Dasher 2), 882 F.3d 1017, 1023 (11th Cir. 2018) (“State contract law determines the existence and contours of parties' agreements.”).

DISCUSSION

Before tackling the merits, the Court grants Truist's unopposed request to take judicial notice of a state-court case. Federal courts can usually take notice of state-court dockets. Paez v. Sec'y, Fla. Dep't of Corr. 947 F.3d 649, 651-53 (11th Cir. 2020). And the Court grants this Motion. With that settled, the Court turns to the dispute-whether to compel arbitration.

A. Enforceability

To start, the Bennetts do not challenge the Note's validity or existence (i.e., formation). Instead, they challenge Defendants' contractual standing. The Note is between the Bennetts and Bank. Neither Defendant signed the Note, but they seek to enforce its arbitration clause (“Clause”).

A “litigant who was not a party to the relevant arbitration agreement may invoke § 3 if the relevant state contract law allows him to enforce the agreement.” Carlisle, 556 U.S. at 632; Lawson v. Life of the S. Ins., 648 F.3d 1166, 1170 (11th Cir. 2011). Traditionally, states “allow a contract to be enforced by or against nonparties to the contract through assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver and estoppel.” Carlisle, 556 U.S. at 631 (cleaned up). Utah is almost identical. Inception Minding, Inc. v. Danzig, Ltd., 311 F.Supp.3d 1265, 1274 (D. Utah 2018).

Defendants say they can enforce the Clause under theories of assumption, agency, or equitable estoppel. The Court takes each in turn.

First, Truist can compel arbitration by assumption. “The theory of assumption involves subsequent conduct by the non-signatory indicating the non-signatory is assuming an obligation to arbitrate, despite being a nonsignatory.” Hopkins v. Genesis FS Card Servs., Inc., No. 3:19-cv-00157-AC, 2020 WL 466636, at *10 (D. Or. Jan. 9, 2020) (applying Utah law), report and recommendation adopted, 2020 WL 437544 (Jan. 28, 2020). Truist bought the Debt from Bank. In doing so, it assumed the Note's obligations. Even the Note's language contemplates Bank assigning the Debt to someone else. (Doc. 73-1 at 1 (“The words ‘we,' ‘us,' ‘our,' and ‘Lender' refer to . . . Bank . . . and its assignees.”), 4 (“ANY HOLDER OF THIS CONSUMER CREDIT NOTE IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER.”)).

The Bennetts do not dispute that logic. Instead, they attack whether Truist ever bought the Debt. They latch onto Truist's Answer, which asserts the Debt was “inadvertently included in a bulk purchase” of loans from Bank. (Doc. 41 at 16-17). So the Bennetts say Truist never assumed the Debt and any argument to the contrary is disingenuous. This, however, does not defeat Truist's assumption theory. Whether the sale was inadvertent is irrelevant because-as the Complaint and its exhibits show-Truist did buy the Debt. (Doc. 22-3 at 2 (“This notice is to advise you that . . . [Truist] has purchased the above referenced account from . . . Bank.”), 22-5 at 5 (reporting the Debt as owed to “SST/TRUIST”)). According to Truist, it later sold the Debt back to Bank. (Doc. 73 at 3). But intended or not, it owned the Debt for at least a few years-during which the conduct giving rise to the Claims occurred.

As much as the Bennetts challenge the lack of an affidavit, it falls short. They say there must be “direct and specific evidence of an agreement between the parties.” Mason v. Midland Funding LLC, No. 1:16-CV-2867-WMR, 2021 WL 3017993, at *8 (N.D.Ga. Jan. 18, 2021) (citation omitted), report and recommendation adopted, 2021 WL 3017990 (Mar. 23, 2021). That statement (made is a different context) changes nothing. Everyone agrees the Note was a valid agreement between the parties (i.e., the Bennetts and Bank). At issue is whether nonsignatories may enforce that agreement. Validity and enforceability are separate matters. E.g., Mason, 2021 WL 3017990, at *7.

So Truist assumed the Debt and can enforce the Clause.

Second, SST can compel arbitration by agency. Via “agency, an agent can assume the protection of the contract which the principal has signed.” Inception, 311 F.Supp.3d at 1275 (citation omitted). Many “courts have applied this principal to allow for non-signatory agents to avail themselves of the protection of their principal's arbitration agreement.” Id. (cleaned up). Under this theory, “it matters whether the party resisting arbitration is a signatory or not.” Id. (citation omitted). Nonsignatories (like SST) “may compel a signatory to arbitrate.” Id. Even “one-way protection of agents through arbitration may be enforced.” Seaborn v. Larry H. Miller MercedesBenz, No. 2:19-CV-941 TS, 2020 WL 1550789, at *3 (D. Utah Apr. 1, 2020).

According to the Amended Complaint, SST was an agent of both Truist and Bank to service the Debt. As an agent, therefore, SST can enforce the Clause. The Bennetts do not challenge this conclusion much. Rather, they say SST cannot compel arbitration because it was an agent of Truist (who never owned the Debt). Again, the Court disagrees as to ownership. What's more, even if Truist never owned the Debt, SST was Bank's agent too. (Doc. 22 at 4). So SST could enforce the Clause even if Truist couldn't.

And third, Defendants contend each could invoke the Clause under equitable estoppel. There is no need to address this alternative rationale given the conclusions above.

In short, Defendants have contractual standing to enforce the Clause.

B. Arbitrability

Next, the parties dispute whether the claims are subject to arbitration (i.e., whether they fall within the scope of the Clause). The Clause allows either side to invoke binding arbitration on “any dispute arising under this Note.” (Doc. 73-1 at 4). According to the Bennetts, the Claims might relate to the Note, but they don't arise under it. Defendants disagree.

1. Choice of Law

Before getting to that, the Court notes an unbriefed, sticky choice-of-law issue. The Bennetts say substantive federal law governs this scope dispute, citing cases that say as much. Defendants offer no position one way or the other. But appellate courts are wishy-washy on this question. Compare Entrekin v. Internal Med. Assocs. of Dothan, P.A., 689 F.3d 1248, 1251 (11th Cir. 2012) (“Because arbitration is a matter of contract, determining whether a claim falls within the scope of an arbitration agreement is generally a matter of state law.” (cleaned up)), with Lawson, 648 F.3d at 1170 (“To determine which disputes between the parties to an enforceable arbitration agreement are covered by the language of the arbitration clause, we apply the federal substantive law of arbitrability.” (cleaned up)). At times, the Supreme Court suggested state law controls. Carlisle, 556 U.S. 624, 630-31 (The Federal Arbitration Act (“FAA”) doesn't “alter background principles of state contract law regarding the scope of agreements (including the question of who is bound by them).”).

What seems probable is state law governs scope as a simple matter of contract interpretation; but lurking in the background is the federal preference for arbitration, which courts must consider. See Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 475-76 (1989) (When “applying general state-law principles of contract interpretation to the interpretation of an arbitration agreement within the scope of the Act, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration.” (internal citation omitted)). No matter the answer, resolving that issue is far outside the...