Cantu v. Credit Acceptance Corp.

• Docket Number: 23-CV-520-JPS
• Decision Date: 25 August 2023
• Parties: DANIKA CANTU, Plaintiff, v. CREDIT ACCEPTANCE CORPORATION and KOHN LAW FIRM S.C., Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

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DANIKA CANTU, Plaintiff, v. CREDIT ACCEPTANCE CORPORATION and KOHN LAW FIRM S.C., Defendants.

No. 23-CV-520-JPS

United States District Court, E.D. Wisconsin

August 25, 2023

ORDER

J.P Stadtmueller U.S. District Judge

Before the Court is Defendants Credit Acceptance Corporation (“CAC”) and Kohn Law Firm S.C.'s (“Kohn,” and with CAC, “Defendants”) motion to compel arbitration and dismiss this lawsuit or, in the alternative, to stay the proceedings. ECF No. 17. For the reasons set forth below, the Court will grant the motion and dismiss the action without prejudice.

1. BACKGROUND

This action arises from Plaintiff Danika Cantu's (“Cantu”) purchase of a vehicle in 2017. ECF No. 3 at 13. Upon selecting a vehicle, Cantu and the dealership entered into a retail installment contract (the “Contract”), which was assigned to CAC. ECF No. 19 at 1-2; ECF No. 19-1. Cantu began making payments, but in October 2017, stopped. ECF No. 3 at 13. Cantu tried to catch up on the loan throughout 2018 and 2019. Id. Cantu alleges that, in 2020, she contacted CAC to voluntarily surrender the car. Id. CAC agreed to accept the voluntary surrender, but never picked up the car. Id. at 14. Instead, CAC told Cantu that, by February 1, 2022, she could pay CAC $5,000 in full satisfaction of the loan and own the car outright. Id. Cantu was not able to make this payment. Id.

Cantu thereafter attempted to trade in the car and purchase a new one, but she needed a payoff letter from CAC to do so. Id. CAC would not give Cantu a payoff letter. Id. Cantu asked CAC if the $5,000 deal was still available, and CAC directed Cantu to call Kohn to discuss a resolution. Id. Cantu spoke with an attorney at Kohn, who told her that the matter could not be resolved for $5,000 and that Cantu owed $20,000. Id. The attorney told Cantu that Kohn and CAC had a judgment against her and would begin garnishing her wages. Id. The attorney requested Cantu's budget information and informed her she would have to pay $500 per month. Id.

Cantu did not agree to pay $500 per month, and CAC, through Kohn, filed a civil lawsuit seeking a money judgment against Cantu in Walworth County Circuit Court on June 1, 2022 (the “State Court Action”). Id. at 15; ECF No. 20 at 2. On September 22, 2022, CAC moved for a default judgment against Cantu, after trying to serve her personally (at an address at which she has never lived or known anyone) and by publication. ECF No. 3 at 15. On October 10, 2022, default judgment was entered against Cantu in the State Court Action. Id. On November 28, 2022, CAC filed the transcript of the judgment in the State Court Action in the Fond du Lac County Circuit Court. ECF No. 20 at 2.

On December 21, 2022, Cantu, through counsel, moved to reopen the State Court Action, and included a set of proposed counterclaims. Id. at 3. CAC stipulated to reopening the matter and requested the judgment be vacated and the matter dismissed with prejudice. Id.; ECF No. 20-11. At Cantu's counsel's urging, the State Court Action was instead dismissed without prejudice. Id.; ECF No. 20-11.

Cantu then filed this action on April 24, 2023 seeking, inter alia, compensatory and punitive damages. ECF No. 1; ECF No. 3 at 20-21. Cantu alleges violations of the Fair Debt Collection Practices Act against Kohn and violations of state consumer transactions law against both Kohn and CAC. ECF No. 3 at 15-21. The state law claims raise deficiencies with the collection process that Defendants initiated in the State Court Action, as well as allegations regarding the Kohn lawyer's representations to Plaintiff and CAC's refusal to provide a payoff letter. Id.

On June 26, 2023, Defendants filed the instant motion to compel arbitration. ECF No. 17. Defendants argue that the Contract contains an “unambiguous written arbitration clause.” ECF No. 18 at 1. First, the Contract's first page contains a bold-faced notice of the arbitration clause (the “Arbitration Clause”) with a black border around it, which states:

ARBITRATION: This Contract contains an Arbitration Clause that states You and We may elect to resolve any dispute by arbitration and not by court action. See the Arbitration Clause on Page 5 of this Contract for the full terms and conditions of the Arbitration Clause. By initialing below, you confirm that you have read, understand and agree to the terms and conditions in the Arbitration Clause.

ECF No. 19-1 at 2 (emphasis in original). Cantu initialed underneath the notice. Id.^[1] In turn, the Contract contains the Arbitration Clause itself, which states, in pertinent part:

Your Right to Reject: If You don't want this Arbitration Clause to apply, You may reject it by mailing Us at [mailing address omitted] a written rejection notice .... If You reject this Arbitration Clause, that will not affect any other provision of this Contract or the status of Your Contract. If You don't reject this Arbitration Clause, it will be effective as of the date of this Contract.

A “Dispute” is any controversy or claim between You and Us arising out of or in any way related to this Contract, including, but not limited to, any default under this Contract, the collection of amounts due under this Contract, the purchase, sale, delivery, set-up, quality of the Vehicle, advertising for the Vehicle or its financing, or any product or service included in this Contract. “Dispute” shall have the broadest meaning possible, and includes contract claims, and claims based on tort, violations of laws, statutes, ordinances or regulations or any other legal or equitable theories. Notwithstanding the foregoing, “Dispute” does not include any individual action brought by You in small claims court or Your state's equivalent court, unless such action is transferred, removed or appealed to a different court. “Dispute” does not include any repossession of the Vehicle upon Your default and any exercise of the power of sale of the Vehicle under this Contract or any individual action by You to prevent Us from using any such remedy, so long as such individual action does not involve a request for monetary relief of any kind. In addition, “dispute” does not include disputes about the validity, enforceability, coverage or scope of this Arbitration Clause or any part thereof (including, without limitation, the Class Action Waiver described in the sixth paragraph of this Arbitration Clause, the last sentence of the seventh paragraph of this Arbitration Clause and/or this sentence); all such disputes are for a court and not an arbitrator to decide. However, any dispute or argument that concerns the validity or enforceability of the Contract as a whole is for the arbitrator, not a court, to decide.

[....]

Either You or We may require any Dispute to be arbitrated and may do so before or after a lawsuit has been started over the Dispute or with respect to other Disputes or counterclaims brought later in the lawsuit. If You or We elect to arbitrate a Dispute, this Arbitration Clause applies ....

[....]

It is expressly agreed that this Contract evidences a transaction in interstate commerce. This Arbitration Clause is governed by the [Federal Arbitration Act] and not by any state arbitration law.

Id. at 6 (emphasis in original). Cantu initialed underneath the Arbitration Clause, Id., and she did not reject the Arbitration Clause. ECF No. 19 at 1.

2. ANALYSIS

The Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., “is a congressional declaration of a liberal federal policy favoring arbitration agreements.” Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 730-31 (7th Cir. 2005) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Accordingly, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Id. at 731 (quoting Moses H. Cone, 460 U.S. at 24-25). “Under the [FAA], arbitration may be compelled if the following three elements are shown: [(1)] a written agreement to arbitrate, [(2)] a dispute within the scope of the arbitration agreement, and [(3)] a refusal to arbitrate.” Zurich Am. Ins. Co. v. Watts Indus., Inc., 417 F.3d 682, 687 (7th Cir. 2005) (citing 9 U.S.C. § 4 and Kiefer Specialty Flooring, Inc. v. Tarkett, Inc., 174 F.3d 907, 909-10 (7th Cir. 1999)).

Cantu does not dispute the validity of the arbitration agreement or that her claims in this case fall within its scope. Instead, she argues that Defendants waived their right to compel arbitration by choosing to litigate a dispute that is covered by the Arbitration Clause in the State Court Action. ECF No. 20 at 1, 3-5.

“A waiver can be express or implied through action.” Brickstructures, Inc. v. Coaster Dynamix, Inc., 952 F.3d 887, 891 (7th Cir. 2020) (citing Kawaski Heavy Indus., Ltd. v. Bombardier Recreational Prods., Inc., 660 F.3d 988, 994 (7th Cir. 2011)). “[T]he question is whether ‘based on all the circumstances, the party against whom the waiver is to be enforced has acted inconsistently with the right to arbitrate.'” Id. (quoting Welborn Clinic v. MedQuist, Inc., 301 F.3d 634, 637 (7th Cir. 2002)). Because federal policy favors arbitration, “parties asserting waiver bear a ‘heavy burden' and courts should not ‘lightly infer' waiver.” St. Mary's Med. Ctr. of Evansville, Inc. v. Disco Aluminum Prods. Co., 969 F.2d 585, 590 (7th Cir. 1992).

In Cantu's view, Defendants “plainly invoked the judicial forum” when they sued her civilly for a money judgment, a dispute covered by the Arbitration Clause, in Walworth County Circuit Court. ECF No. 20 at 4. They further “took steps to try to limit Cantu's post-judgment rights” using the judicial forum and, when Cantu appeared through counsel, did not move to compel arbitration of her proposed counterclaims. Id. Instead, they moved for dismissal with...