Cole v. Mariner Fin.

• Decision Date: 17 November 2022
• Docket Number: Civil Action 3:22-CV-00440-GNS
• Parties: HIXSA D. COLE PLAINTIFF v. MARINER FINANCE, LLC DEFENDANT
• Court: U.S. District Court — Western District of Kentucky

HIXSA D. COLE PLAINTIFF
v.
MARINER FINANCE, LLC DEFENDANT

Civil Action No. 3:22-CV-00440-GNS

United States District Court, W.D. Kentucky, Louisville Division

November 17, 2022

MEMORANDUM OPINION AND ORDER

Greg N. Stivers, Chief Judge

This matter is before the Court on Defendant's Motion to Compel Arbitration (DN 15). The motion is ripe for adjudication. For the outlined reasons, the motion is DENIED.

I. SUMMARY OF THE FACTS

In May 2021, Defendant Mariner Finance, LLC (“Mariner”) allegedly mailed a “live check”^[1] to Plaintiff Hixsa Cole (“Cole”), which was purportedly a solicitation for a high-interest loan. (Compl. ¶ 12, DN 1-1). Cole says she never received the mailing; instead, she claims someone stole her mail, cashed the check, and left Cole to deal with the consequences. (Compl. ¶¶ 24-28). Cole alleges she notified Mariner that she was a victim of identity theft, including submitting a police report and an identity theft affidavit. (Compl. ¶¶ 32-35). Regardless, Mariner

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allegedly began sending collection letters to Cole and reported false and negative credit information about Cole to major consumer reporting agencies. (Compl. ¶¶ 28-30).

Cole initiated this action in Jefferson Circuit Court, Kentucky, by filing a Complex Consumer Class Action Complaint. (Compl.). Cole, individually and as a potential class, alleged violations of the Kentucky Consumer Protection Act (“KCPA”), KRS 367.110 through 367.360. (Compl. ¶¶ 37-66). Mariner removed this matter to the instant Court. (Notice Removal, DN 1). Mariner filed a motion to compel arbitration and seeks an Order dismissing the action without prejudice or staying this action pending arbitration. (Def.'s Mot. Compel Arbitration, DN 15 [hereinafter Def.'s Mot.]). Cole objects and maintains that no arbitration agreement exists. (Pl.'s Resp. Def.'s Mot. Compel Arbitration, DN 16 [hereinafter Pl.'s Resp.]).

II. JURISDICTION

The Court has subject-matter jurisdiction of this matter based upon the Class Action Fairness Act. See 28 U.S.C. § 1332(d).

III. STANDARD OF REVIEW

To compel arbitration, “a federal court must [first] determine whether the parties have agreed to arbitrate the dispute at issue.” Great Earth Cos. v. Simons, 288 F.3d 878, 889 (6th Cir. 2002) (internal quotation marks omitted) (quoting Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000)). If an agreement to arbitrate is not “in issue,” then arbitration must compelled. Id. Inversely, if an agreement is “in issue,” the action “must proceed to a trial to resolve the question.” Id. (citing 9 U.S.C. § 4). Whether an agreement is “in issue” is evaluated under the summary judgment standard set forth in Fed.R.Civ.P. 56(c). Id.; see Nu-X Ventures v. SBL, LLC, 568 F.Supp.3d 829, 833 (W.D. Ky. 2021). “[T]he party seeking to enforce an agreement has the burden of establishing its existence, but once prima facie evidence of the agreement has been presented,

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the burden shifts to the party seeking to avoid the agreement.” Schnuerle v. Insight Commc'ns., Co. L.P., 376 S.W.3d 561, 575 (Ky. 2012) (internal quotation marks omitted) (quoting Louisville Peterbilt, Inc. v. Cox, 132 S.W.3d 850, 857 (Ky. 2004)); Davis v. Glob. Client Sols., LLC, 765 F.Supp.2d 937, 940 (W.D. Ky. 2011) (same). Thereafter, “[t]he party who opposes arbitration must show a ‘genuine issue of material fact as to the validity of the agreement to arbitrate' . . . [and] ‘has an evidentiary burden of demonstrating that the arbitration agreement itself, rather than the contract in which it is found, is unenforceable.'” Nu-X Ventures, 568 F.Supp.3d at 833 (internal citation omitted) (quoting Atkins v. CGI Techs. & Sols., Inc., 339 F.Supp.3d 619, 628 (E.D. Ky. 2018)). Notably, challenges to the arbitration clause's formation are decided by the Court. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445 (2006) (citation omitted).

IV. DISCUSSION

The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16, applies to arbitration clauses in “contract[s] evidencing a transaction involving commerce ....” 9 U.S.C. § 2. Such agreements are “valid, irrevocable, and enforceable, save upon grounds as exist at law or in equity for the revocation of any contract ....” Id.; see also Stout, 228 F.3d at 714; KRS 417.050. The FAA

codifies a “liberal federal policy favoring arbitration agreements” and creates a presumption of arbitrability. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); see also Schnuerle, 376 S.W.3d at 574 (“[I]t has long been the public policy of Kentucky that arbitration is a favored method of dispute resolution.”). This presumption, however, only applies to signatories to a contract; courts must “follow neutral state-law rules when deciding whether nonparties may enforce or be bound by an arbitration contract-without suggesting that the outcome should be influenced by any federal policy-laden ‘thumb on the scale' favoring or disfavoring arbitration.” AtriCure, Inc. v. Meng, 12 F.4th 516, 525 (6th Cir. 2021) (citing Arthur

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Andersen LLP v. Carlisle, 556 U.S. 624, 630-32 (2009)). Naturally, “a contract cannot bind a nonparty.” Arthur Andersen, 556 U.S. at 632 (internal quotation marks omitted) (quoting EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002)).

Bonnie Klapaska, Mariner's Senior Executive Vice President and Chief Compliance Officer, provided a declaration which confirms Mariner “sent a prescreened firm offer of credit to [Cole] ....” (Def.'s Mot. Compel Arbitration Ex. A, at ¶ 4, DN 15-1 [hereinafter Klapaska Decl.]).

The declaration contains a copy of the mailing sent to Cole. (Klapaska Decl. Ex. A, DN 15-1). Additionally, a copy of the arbitration agreement terms was included. (Klapaska Decl. Ex. B, DN 15-1 [hereinafter Arbitration Terms]). The relevant terms provide:

By signing your check, you agree to this Arbitration Agreement (“Agreement”) and the terms of the related promissory note (“note”)

Arbitration Agreement. You or we may elect to have any Claim (defined below) resolved by neutral binding arbitration instead of in court. You waive any right you have to resolve a Claim between you and us in court. You waive any right you have to participate as a class representative or class member.....

Claim. Claim means any claim or dispute, whether arising in law, equity, or otherwise, and regardless of the type of relief sought arising from or relating to your application for credit, the note, the origination, servicing and enforcement of the obligation . . . and any relationship that result from the note, the underlying obligation or any of the foregoing. Claim includes initial claims, counterclaims, cross-claims, and third-party claims. Claim also includes disputes based upon contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation and ordinance. “Claim” does not include any dispute or controversy about the validity, enforceability or scope of this Agreement or any part thereof . . . all such disputes or controversies are for a court and not an arbitrator to decide. Any dispute or controversy that concerns the validity, enforceability or scope of the note as a whole is for the arbitrator, not a court, to decide.

(Arbitration Terms 1).

The FAA aims to “ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings.” Savers Prop. & Cas. Ins. Co. v. Nat'l Union Fire Ins. Co., 748 F.3d 708, 717 (6th Cir. 2014) (internal quotation marks omitted)

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(quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011)). However, “[a]rbitration under the FAA is contract-driven and principally ‘a matter of consent.'” Id. (quoting Waffle House, 534 U.S. at 294); see also Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007) (“[A]rbitration is a ‘matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'” (quoting AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648 (1986))); Ping v. Beverly Enters., Inc., 376 S.W.3d 581, 600 (Ky. 2012) (“Arbitration is . . . something the contracting parties . . . must agree to. It is not something that one party may simply impose upon another.” (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002))). “Before compelling an unwilling party to arbitrate, the court must engage in a limited review to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir. 2004) (internal quotation marks omitted) (quoting Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003)). “Because arbitration agreements are fundamentally contracts,” review is governed by “the applicable state law of contract formation.” Seawright, 507 F.3d at 972 (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943-44 (1995)). Neither party...