Cooper v. Qc Financial Services, Inc.

• Decision Date: 30 March 2007
• Docket Number: No. CV 06-010-TUC-FRZ.,CV 06-010-TUC-FRZ.
• Citation: 503 F.Supp.2d 1266
• Parties: Emily COOPER, individually and as representative of all others similarly situated, Plaintiff. v. QC FINANCIAL SERVICES, INC., Defendant.
• Court: U.S. District Court — District of Arizona

503 F.Supp.2d 1266

Emily COOPER, individually and as representative of all others similarly situated, Plaintiff. v. QC FINANCIAL SERVICES, INC., Defendant.

No. CV 06-010-TUC-FRZ.

United States District Court, D. Arizona.

March 30, 2007.

COPYRIGHT MATERIAL OMITTED

Gary Frank Urman, Deconcini McDonald Yetwin & Lacy PC, Tucson, AZ, for Plaintiff.

Adrienne Ehrhardt, Collin Taylor Suit, Jeffrey Lynn Willis, Snell & Wilmer LLP, Tucson, AZ, Dana M. Mehrer, Joseph M. Rebein, Shook Hardy & Bacon LLP, Kansas City, MO, Matthew J. Wiltanger, Shook Hardy & Bacon LLP, Overland Park, KS, for Defendant.

ORDER

ZAPATA, District Judge.

This matter was referred to the United States Magistrate Judge for all pretrial proceedings and report and recommendation in accordance with the provisions of 28 U.S.C. § 636(b)(1) and LRCiv 72.1 and LRCiv 72.2, Rules of Practice of the United States District Court for the District of Arizona.

Magistrate Judge Hector C. Estrada issued his Report and Recommendation, filed on November 22, 2006, recommending that the District Court, after its independent review of the record: (1) sever the class-action prohibition; (2) grant Defendant's Motion to Compel Arbitration; (3) direct, the parties to submit to the arbitrator the question whether Plaintiff satisfies the requisite criteria necessary for class arbitration; (4) grant Defendant's Motion to Dismiss; and (5) deny as moot Defendant's alternative request for a stay.

Defendant QC Financial Services, Inc. filed objections to the Report and Recommendation requesting that the Court compel arbitration, but decline the recommendation of the magistrate judge to sever the class-action prohibition from the underlying agreement at issue and decline the recommendation directing the parties to submit the class action to the arbitrator.

Plaintiff filed a response supporting the Report and Recommendation, asserting that the Report and Recommendation should be adopted by the Court without further proceedings.

The Report and Recommendation provides an in-depth analysis and thorough discussion of the facts and issues and matters presented.

The Court, having made an independent review of the record herein, including Defendant's objections, finds that the Report and Recommendations of Magistrate Judge Estrada should be adopted as the findings of fact and conclusions of law of this Court.

Based on the foregoing IT IS ORDERED that the Report and Recommendation [Doc. # 33] is hereby ACCEPTED and ADOPTED as the findings of fact and conclusions of law by this Court;

IT IS FURTHER ORDERED that Defendant's Motion to Dismiss or in the Alternative to Compel Arbitration and Stay Proceedings [Doc. # 10] in GRANTED in part and DENIED in part;

IT IS FURTHER ORDERED that Defendant's motion to compel is GRANTED and the parties shall submit this matter to arbitration in accordance with the findings of the Report and Recommendation, adopted herein;

IT IS FURTHER ORDERED that the request to stay proceedings is DENIED; IT IS FURTHER ORDERED that this case is DISMISSED.

REPORT & RECOMMENDATION

ESTRADA, United States Magistrate Judge.

Pending before the Court is Defendant's Motion to Dismiss or in the Alternative to Compel Arbitration and Stay Proceedings. On September 14, 2006, the Magistrate Judge heard oral argument on Defendant's Motion. For the following reasons, the Magistrate Judge recommends that the District Court deny in part and grant in part Defendant's Motion.

I. FACTUAL & PROCEDURAL BACKGROUND

This lawsuit was originally filed in Arizona state court on September 15, 2005 by Plaintiff Ms. Emily Cooper "by and through her counsel ... individually and as representative of a class of all others similarly situated." (Complaint, p. 1) Plaintiff named as the sole Defendant QC Financial Services, Inc., a company which is in the business of providing "payday loans"¹ to the public. (Id.; Defendant's Memorandum of Points and Authorities in Support of Its Motion to Dismiss or in the Alternative to Compel Arbitration and Stay Proceedings (hereinafter "Defendant's Memorandum") p. 2)

On January 11, 2006, Defendant QC Financial Services, Inc., filed a notice of removal indicating that this Court had original and diversity jurisdiction.

Plaintiffs Complaint sets out the following eight counts: (1) Violation of Deferred Presentment Companies Statutes, A.R.S. § 6-1251, et seq.; (2) Breach of Contract; (3) Fraudulent Misrepresentation; (4) Negligent Misrepresentation; (5) Negligence Per Se; (6) Racketeering: Pattern of Unlawful Activity pursuant to A.R.S. § 13-2301, et seq.; (7) Unjust Enrichment; and (8) Declaratory Judgment. Plaintiff's claims arise from one or more loans, altogether totaling a principal amount, of $500, that she obtained from Defendant in 2003.² (Complaint, p. 2) "Each two weeks after Ms. Cooper obtained her initial loan, she returned to the Q.C. Financial office and made a payment to `roll-over' the loan. When her loan was increased to $500.00 the fee she paid every two weeks was approximately 80.00.... Ms. Cooper made $88.00 payments every two weeks, and her loan was `rolled-over' every two weeks, for approximately six to nine months. By that time, Ms. Cooper had paid fees totaling between $1,000.00 and $1,500.00 for her $500.00 payday loan." (Id. at p. 3) According to Plaintiff, during the time she continued to roll her loan over, Defendant charged her fees that exceeded the 15% permitted by Arizona statute. (Id. at p. 4; Plaintiffs Opposition, p. 3 (citing A.R.S. § 6-1260)) "Altogether, Ms. Cooper was charged fees totaling $1,395.44 for her payday loans." (Plaintiffs Opposition, p. 3) Plaintiff does not seek "any of the principal amount of the loan to be repaid." (TR. p. 63) The figure "alleged in the Complaint represents the amount that Ms. Cooper alleges that she paid in fees." (Id.)

Defendant moves to dismiss the instant action, or in the alternative, to compel arbitration and stay proceedings. At issue herein is whether Plaintiffs claims are subject to arbitration in light of a Customer Application (hereinafter "Application") and Deferred Presentment Agreement (hereinafter "Agreement") that she completed in order to obtain the loans. The Application, which Plaintiff signed on March 12, 2004, indicates that Plaintiff was 21 on that date; was employed as an optician earning $420; sometimes received additional income from her mother; and was referred to Defendant by a customer named Angela Randolph. (Defendant's Memorandum, Ex. A) The Application contained the following provision regarding arbitration:

ARBITRATION AND WAIVER OF JURY TRIAL: Arbitration is a means for legal matters between parties to be resolved by a neutral arbitrator rather than a Court. We have a policy of arbitrating all claims, demands, and disputes which cannot be resolved in a small claims tribunal, including the scope and validity of this arbitration provision and any right you may have to participate in an alleged class action (hereinafter "dispute(s)"). All customer agreements contain another arbitration provision that supersedes this arbitration provision and governs the resolution of disputes. However, if you do not enter into a customer agreement with us, then this arbitration provision governs the resolution of disputes [sic] You agree that YOU ARE WAIVING YOUR RIGHT TO HAVE A TRIAL BY JURY to resolve disputes against us, our agents and/or owners. The Federal Arbitration Act governs this arbitration provision. If either party has a dispute, they must notify the other in writing of the dispute. You have the right to select any of the following arbitration organizations, which will govern the arbitration under its consumer rules: American Arbitration Association..., J.A.M.S./Endispute ..., or National Arbitration Forum ..., and we will advance all of the expenses associated with the arbitration, including the filing, administrative, hearing and arbitrator's fees. You will be responsible for your attorney's fees, if any. Any appeal of a judgment from a small claims tribunal shall be resolved by binding arbitration. The arbitrator shall not conduct class arbitration. The arbitration hearing will be conducted in the county in which this Customer Application was signed.

You acknowledge that the information provided on this Application is accurate to the best of your knowledge and information .... You agree to the terms of the "Arbitration and Waiver of Jury Trial" provision.

(Defendant's Memorandum, Ex. A (emphasis by bold, underlined, and capital lettering in original; emphasis by italics added))

On March 12, 2004, Plaintiff also signed an Agreement promising to pay the principal amount of $235.29 borrowed at that time³ "plus service fee at the rate of 459.90 [⁴] per year according to the Payment Schedule as disclosed" elsewhere in the document. (Defendant's Memorandum, Ex. B) The Agreement contained the following concerning arbitration:

ADDITIONAL TERMS AND CONDITIONS OF THE DEFERRED PRESENTMENT AGREEMENT

Arbitration is a process in which persons with a dispute: (a) waive their rights to file a lawsuit and proceed in court and to have a jury trial to resolve their disputes; and (b) agree, instead, to submit their disputes to a neutral third person (an larbitrator) [sic] for a decision. Each party to the dispute has an opportunity to present some evidence to the arbitrator. Pre-arbitration discovery may be limited. Arbitration proceedings are private and less formal than court trials. The arbitrator will issue a final and binding decision resolving the dispute, which may be enforced as a court judgment. A court rarely overturns an arbitrator's decision THEREFORE, YOU ACKNOWLEDGE AND AGREE AS FOLLOWS:

1. For purposes of this Waiver of Jury Trial and Arbitration Provision (hereinafter the "Arbitration Provision"), the words "we", "us" and "our" mean QC Financial Services, Inc [sic] d/b/a/ Quick Cash. The words "you" and "your" mean the customer who has signed...