Gorden ex rel. Residents v. Lloyd Ward & Assocs., P.C.

• Decision Date: 08 April 2014
• Docket Number: No. 31399–9–III.,31399–9–III.
• Citation: 180 Wash.App. 552,323 P.3d 1074
• Court: Washington Court of Appeals
• Parties: Sherrie Kay GORDEN and Debbie Kay Miller, individually and on behalf of a Class of similarly situate Washington residents, Respondents, v. LLOYD WARD & ASSOCIATES, P.C. a Texas Domestic Professional Corporation; Lloyd Ward, P.C. a Texas Domestic Professional Corporation; The Lloyd Ward Group, P.C., a Texas Domestic Professional Corporation, Lloyd Eugene Ward and Amanda Glen Ward, individually and on behalf of the marital community; Silver Leaf Debt Solutions, LLC, a Texas Limited Liability Company; Michael Miles, individually and on behalf of the marital community of Michael Miles and Jane Doe Miles, and John and Jane Does 1–5, Appellants.

180 Wash.App. 552

323 P.3d 1074

Sherrie Kay GORDEN and Debbie Kay Miller, individually and on behalf of a Class of similarly situate Washington residents, Respondents,

v.LLOYD WARD & ASSOCIATES, P.C. a Texas Domestic Professional Corporation; Lloyd Ward, P.C. a Texas Domestic Professional Corporation; The Lloyd Ward Group, P.C., a Texas Domestic Professional Corporation, Lloyd Eugene Ward and Amanda Glen Ward, individually and on behalf of the marital community; Silver Leaf Debt Solutions, LLC, a Texas Limited Liability Company; Michael Miles, individually and on behalf of the marital community of Michael Miles and Jane Doe Miles, and John and Jane Does 1–5, Appellants.

No. 31399–9–III.

Court of Appeals of Washington, Division 3.

April 8, 2014.

Lloyd Eugene Ward, Amanda Glen Ward, (Appearing Pro Se), Dallas, TX, for Appellant.

Darrell W. Scott, Matthew John Zuchetto, Boyd McFadden Mayo, Andrew Sean Biviano, The Scott Law Group, P.S., Spokane, WA, for Respondents.

BROWN, J.

¶ 1 Respondent Washington debtors, Sherrie K. Gorden and Debbie K. Miller, individually and on behalf of a class of similarly situated Washington residents, sued appellant Texas debt adjusting service providers for violating Washington's Debt Adjusting Act (DAA), chapter 18.28 RCW and Washington's Consumer Protection Act (CPA), chapter 19.86 RCW. Lloyd Ward & Associates, P.C.; Lloyd Ward, P.C.; The Lloyd Ward Group, P.C.; Lloyd E. Ward (a Lawyer) and Amanda G. Ward; Silver Leaf Debt Solutions, LLC; Michael Miles, individually and on behalf of the marital community of Michael Miles and Jane Doe Miles; and John and Jane Does 1–5 (collectively LWG) appeal the trial court's denial of their arbitration and dismissal requests. LWG contends the trial court erred in deciding the contract was unconscionable and did not reserve all arbitration questions to the arbitrator. LWG additionally contends the Washington trial court lacked personal jurisdiction over the Texas residents, and is by later settlement moot. We disagree, and affirm.

FACTS

¶ 2 Ms. Gorden and Ms. Miller desired debt reduction assistance. After seeing an Internet advertisement, each separately enrolled in LWG's debt settlement program and electronically signed a client services agreement from Washington containing an attorney retainer agreement partly providing, “By this Agreement, Client retains Attorney for the limited and express purposes of providing legal and administrative services limited to Savings and Debt Negotiation with respect to Client's existing debt and current creditors, as identified by Client.” Clerk's Papers (CP) at 36.

¶ 3 The agreement partly states it is “governed by the laws of the State of Texas, without regard to the conflict of law rules of that state. Further, venue and jurisdiction for any dispute or conflict arising from or in any way related to this Agreement shall be exclusively in Dallas, Dallas County, Texas.” CP at 37. Relating to arbitration, the agreement sets venue and jurisdiction in Collin County, Texas:

If, after giving LWG thirty (30) days notice of any complaint, you remain unsatisfied with LWG's response to your complaint, you hereby agree to mediate and/or arbitrate any complaint against Firm prior to the initiation of any public or private complaints or claims of any kind against LWG or any of its attorneys. You agree to submit any dispute over the amount of fees charged to you to the Fee Dispute Committee of the Collin County Bar Association, State Bar of Texas. Client understands that this agreement is performable in Collin County, Texas and hereby consents to venue and jurisdiction in Collin County, Texas under Texas state law for any dispute arising hereunder. The parties will submit all disputes arising under or related to this Agreement to binding arbitration according to the then prevailing rules and procedures of the American Arbitration Association. Texas law will govern the rights and obligations of the parties with respect to the matters in controversy. The arbitrator will allocate all costs and fees attributable to the arbitration between the parties. The arbitrator's award will be final and binding and judgment may be entered in any court of competent jurisdiction,

CP at 37.

¶ 4 No attorney or attorney's representative discussed these provisions with the respondents, or advised them of the rights at stake. The respondents were not counseled or advised regarding the consequences of relinquishing the legal protections provided by Washington law or of the protections provided by Texas law. Ms. Gorden and Ms. Miller were not informed of the advantages or disadvantages of arbitration, including the requirement that they must bring arbitration claims in Texas. No one explained the inconsistent and mutually exclusive venue and jurisdiction provisions.

¶ 5 The respondents made monthly payments as required under LWG's debt settlement program: Ms. Gorden paid several thousand dollars, while Ms. Miller paid $800. After getting continued calls from creditors, Ms. Gorden and Ms. Miller each contacted LWG and learned none of the money they paid into the program had been paid to creditors; rather, LWG applied the payments to their own fees. Ms. Gorden and Ms. Miller believed they were in worse financial situations than before they entered the program, with increased debt, less money available to pay debts, and damaged credit scores. Both lacked the resources to travel to Texas to arbitrate their claims. LWG offered to move arbitration to Washington.

¶ 6 Not wanting to arbitrate, the respondents sued LWG, alleging it violated the DAA and CPA by charging predatory fees. The respondents requested injunctive relief. The action was brought on behalf of Ms. Gorden and Ms. Miller, as well as a proposed class of all Washington residents who have paid debt adjuster fees to LWG in violation of Washington law. The class, however, has not been certified.

¶ 7 About six months after the respondents served the complaint on LWG, it unsuccessfully requested orders to compel arbitration and dismiss the complaint based on a lack of subject matter and personal jurisdiction. The trial court concluded the arbitration clause was invalid and decided for Washington jurisdiction. The trial court certified its ruling as a CR 54(b) final judgment. After LWG appealed, it made CR 68 offers of judgment to both women on their individual claims.¹ Ms. Gorden chose to accept LWG's CR 68 offer on her individual claims; Ms. Miller did not.

ANALYSIS

A. Ruling Denying Arbitration

¶ 8 The issue is whether the trial court erred by denying LWG's motion to compel arbitration. Preliminarily, LWG contends this appeal is moot because it made offers of judgment to both Ms. Gorden and Ms. Miller. An appeal is moot if it presents “purely academic issues” and it is “not possible for the court to provide effective relief.” Klickitat County Citizens Against Imported Waste v. Klickitat County, 122 Wash.2d 619, 631, 860 P.2d 390 (1993). If an appeal is moot, it should be dismissed. Id. Generally, when parties settle their dispute, an appeal becomes moot. Diaz v. Washington State Migrant Council, 165 Wash.App. 59, 64–65, 265 P.3d 956 (2011).

¶ 9 Here, Ms. Gorden accepted LWG's offer of judgment, receiving $11,147.73 ($3,715.91 trebled for compensatory and exemplary damages), pre- and post-judgment interest, and attorney fees. LWG agreed to a “permanent injunction prohibiting [LWG] from engaging in future business violative of chapter 18.28 RCW and/or chapter 19.86 RCW and from accepting any future debt adjustment clients from the State of Washington.” Appellant's Br., App. C. Ms. Miller declined a similar offer. Since Ms. Gorden has settled her dispute with LWG there is no effective relief this court may provide to her. But, Ms. Miller's issues survive.

¶ 10 Relying on Genesis Healthcare Corp. v. Symczyk, –––U.S. ––––, 133 S.Ct. 1523, 185 L.Ed.2d 636 (2013), LWG argues the suit became moot following its offers of judgment. In Genesis, an employee sought relief under the Fair Labor Standards Act (FLSA) on behalf of herself and all others similarly situated. The lower court dismissed the complaint for lack of subject matter jurisdiction after the employer extended an offer of judgment in full satisfaction of the employee's alleged damages, fees, and costs. Employee appealed. The appellate court reversed. Certiorari was granted. The United States Supreme Court held that collective action brought by a single employee on behalf of herself and all similarly situated employees for employer's alleged violation of the FLSA was no longer justiciable when, as conceded by the employee, her individual claim became moot as a result of the offer of judgment by employer in an amount sufficient to make her whole. Id. at 1531–32.

¶ 11 Here, unlike in Genesis, a remaining party, Ms. Miller, did not accept the offer of judgment and has not been made whole. In Genesis the single lead plaintiff received an offer of settlement that made her whole. Here, we reason Ms. Miller stands separately from Ms. Gorden. Thus, our case is significantly distinguishable from Genesis because Ms. Miller's claims remain justiciable.

¶ 12 Genesis is inapposite here for other reasons. The claim in Genesis was a “collective action” under the FLSA, not a class action under CR 23; the Supreme Court noted the distinction in rejecting class action cases in its analysis. Furthermore, even in the statutory FLSA context, the Court did not resolve the question of whether a “full satisfaction” offer of settlement renders the plaintiff's claim moot. Rather, the Court noted that the Respondent had so stipulated in the lower court proceedings, and had not properly raised the issue by cross appeal.

¶ 13 Nevertheless, we note the Supreme Court has never considered, and the lower federal courts remain split, on the question of whether (and under what circumstances) the mooting of the named plaintiff's claims before a decision has been...