Cobb v. Resurgent Capital Servs., LP

• Decision Date: 01 February 2021
• Docket Number: Case No. 1:19-cv-5833-MLB
• Parties: Janay Cobb, individually and on behalf of all others similarly situated, Plaintiff, v. Resurgent Capital Services, LP, LVNV Funding LLC, and John Does 1-25, Defendants.
• Court: U.S. District Court — Northern District of Georgia

Janay Cobb, individually and on behalf of all others similarly situated, Plaintiff, v. Resurgent Capital Services, LP, LVNV Funding LLC, and John Does 1-25, Defendants.

Case No. 1:19-cv-5833-MLB

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

February 1, 2021

OPINION & ORDER

Plaintiff Janay Cobb brings this putative class action against Defendants Resurgent Capital Services, LP, LVNV Funding LLC, and John Does 1-25 for violations of the Fair Debt Collection Practices Act ("FDCPA"). Defendants move to compel arbitration. (Dkt. 12.) The Magistrate Judge recommends granting the motion. (Dkt. 29.) Plaintiff filed objections, and Defendants responded. (Dkts. 31; 35.) The Court adopts the Magistrate Judge's Report and Recommendation ("R&R") as modified herein.

I. Background

In April 2015, Plaintiff opened a credit card account ("Account") with Credit One Bank, N.A. (Dkts. 12-2 at 4; 12-3 at 2-3.) The Account is governed by a written cardholder agreement ("Agreement"). (Dkts. 12-2 at 5, 38-43; 12-3 at 2.) The Agreement includes an arbitration clause, which says: "You and we agree that either you or we may, without the other's consent, require that any controversy or dispute between you and us (all of which are called 'Claims'), be submitted to mandatory, binding arbitration." (Dkt. 12-2 at 42.) The Agreement defines "we" and "us" as "Credit One Bank, N.A., its successors or assigns." (Id. at 38.) The Agreement also defines "Claims" to include disputes over "collection matters relating to your account"; "billing"; "the application, enforceability or interpretation of this Agreement, including this arbitration provision"; and "any other matters relating to your account." (Id. at 42.)

In November 2015, Credit One assigned the Account to another company. (Dkt. 12-3 at 4.) After a series of further assignations from one company to another, the Account was ultimately assigned to Defendant LVNV in December 2015. (Dkt. 12-2 at 3-4.) DefendantLVNV retained Defendant Resurgent to service the Account on its behalf. (Id. at 2.)

In January 2019, Defendant Resurgent sent Plaintiff a letter about an alleged debt on her Account. (Dkt. 1-1.) Plaintiff filed this lawsuit in December 2019, claiming the letter violated the FDCPA. (Dkt. 1.) Defendants moved to compel arbitration of Plaintiff's claims and to dismiss this case with prejudice. The Magistrate Judge recommends granting Defendants' motion for arbitration but staying, rather than dismissing, this case while arbitration takes place. Plaintiff filed objections. Defendants filed a response.

II. Standard of Review

The district court must "conduct[] a plain error review of the portions of the R&R to which neither party offers specific objections and a de novo review of the Magistrate Judge's findings to which [a party] specifically objects." United States v. McIntosh, 2019 WL 7184540, at *3 (N.D. Ga. Dec. 26, 2019); see 28 U.S.C. § 636(b)(1) ("[T]he court shall make a de novo determination of those portions of the [R&R] to which objection is made."); United States v. Slay, 714 F.2d 1093, 1095 (11th Cir. 1983) (plain error review appropriate in absence of objection). "Partiesfiling objections to a magistrate's report and recommendation must specifically identify those findings objected to. Frivolous, conclusive, or general objections need not be considered by the district court." Marsden v. Moore, 847 F.2d 1536, 1548 (11th Cir. 1988). After conducting the required review, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1).

III. Discussion

"A party who attempts to compel arbitration must show that a valid agreement to arbitrate exists, that the movant is entitled to invoke the arbitration clause, that the other party is bound by that clause, and that the claim asserted comes within the clause's scope." InterGen N.V. v. Grina, 344 F.3d 134, 142 (1st Cir. 2003); see Cmty. State Bank v. Strong, 485 F.3d 597, 619 (11th Cir. 2007) (same);¹ Johnson v. Carter, 2012 WL 666089, at *4 (M.D. Ala. Feb. 13, 2012) (same). Only the second element is disputed here: whether Defendants can invoke the arbitration clause despite their status as non-signatories to the Agreement. The MagistrateJudge found (1) the parties must arbitrate whether Defendant LVNV can invoke the clause; (2) the Court need not reach whether Defendant Resurgent can invoke the clause; and (3) this case should be stayed pending arbitration. Plaintiff's sole objection is to the first finding. The Court sustains Plaintiff's objection but concludes Defendant LVNV can invoke the arbitration clause—so the Court still agrees with the Magistrate Judge that arbitration is required here. The Court also agrees with and adopts the Magistrate Judge's other findings.

A. Whether Defendant LVNV can Invoke the Arbitration Clause

The Agreement says the parties to the Agreement ("you or we") can invoke the arbitration clause.² The Agreement defines those parties as Plaintiff and "Credit One Bank, N.A., its successors or assigns."³ The Magistrate Judge concluded an arbitrator—rather than a court—must decide whether Defendant LVNV falls within this definition. The Courtdisagrees. The Court further finds, upon its own review, that Defendant LVNV falls within the definition of a party to the Agreement (and can invoke the arbitration clause).

1. The Court Must Decide Whether Defendant LVNV is a Party to the Agreement

"Under the Federal Arbitration Act, parties to a contract may agree that an arbitrator rather than a court will resolve disputes arising out of the contract." Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 527 (2019). Parties can agree to arbitrate any dispute, including whether a dispute is covered by the arbitration clause in the first place—that is, whether the dispute is "arbitrable." See id. ("[P]arties [can] agree by contract that an arbitrator, rather than a court, will resolve threshold arbitrability questions as well as underlying merits disputes."). Parties can even agree to arbitrate the question of who decides the arbitrability of a dispute. See id. ("[T]he question of who decides arbitrability is itself a question of contract."); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995) ("Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question 'who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter."). But "whether the partieshave submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination unless the parties clearly and unmistakably provide otherwise." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (emphasis omitted).

The Agreement here provides for "mandatory, binding arbitration" of certain disputes, including disputes about "the application, enforceability or interpretation of this Agreement, including th[e] arbitration provision." (Dkt. 12-2 at 42.) The Magistrate Judge thought this language "clearly and unmistakably" makes the arbitrator responsible for deciding whether Defendant LVNV counts as a party to the Agreement (within the meaning of "Credit One Bank, N.A., its successors or assigns"). (Dkt. 29 at 9-12.) The Court disagrees.

"[A] delegation clause granting authority to an arbitrator to decide issues of application, enforceability, or interpretation [is] only applicable to the parties of the agreement." In re Midland Credit Mgmt., Inc. Tel. Consumer Prot. Litig., 2019 WL 398169, at *6 (S.D. Cal. Jan. 31, 2019). As a result, "the Court must first decide which parties are bound by the delegation clause[] before the arbitrator can determine the applicability, enforceability, and interpretation of the arbitration agreement[]." Id. Inother words, "the threshold issue of whether the delegation clause is even applicable to a certain party must be decided by the Court," not the arbitrator. Soto v. Am. Honda Motor Co., 946 F. Supp. 2d 949, 954 (N.D. Cal. 2012); see Barbosa v. Midland Credit Mgmt., Inc., 2019 WL 3781629, at *4 (D. Mass. July 3, 2019) ("[E]ven though the arbitration provision at issue here contains a delegation clause as to the 'applicability' of the arbitration provision, this court is still tasked with evaluating whether the defendants fall within the terms of the provision at all.").⁴

This result is clear on the face of the Agreement. Specifically, the Agreement requires arbitration of all claims arising between "you" (Plaintiff) and "us" (Credit one and its successor and assigns). (Dkt. 12-2 at 42.) If Defendant LVNV is not an "us," it may not enforce Plaintiff's agreement to arbitrate. Nothing in the Agreement suggests the parties intended an arbitrator to make this decision.

This result also makes sense. "[A]rbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration." AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648-49 (1986); see Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287, 302 (2010) ("[A] court may submit to arbitration only those disputes that the parties have agreed to submit."). The Court cannot say parties contractually agreed to send a dispute to arbitration (including a dispute over their relationship to the contract) until the Court first determines whether they entered the into contract at all. See China Minmetals Materials Imp. & Exp. Co. v. Chi Mei Corp., 334 F.3d 274, 288 (3d Cir. 2003) ("[A] contract cannot give an arbitral body any power, much less the power to determine its own jurisdiction, if the parties never entered into it."). To do otherwise, at least on our facts, would assume an answer to the very question being sent to the arbitrator to resolve. See Allstate Ins. Co. v. Toll Bros., Inc., 171 F. Supp....