Montgomery v. Applied Bank

• Decision Date: 31 January 2012
• Docket Number: Civil Action No. 5:11–cv–00698.
• Parties: Senetha MONTGOMERY, Plaintiff, v. APPLIED BANK, Defendant.
• Court: U.S. District Court — Southern District of West Virginia

848 F.Supp.2d 609

Senetha MONTGOMERY, Plaintiff,

v.APPLIED BANK, Defendant.

Civil Action No. 5:11–cv–00698.

United States District Court, S.D. West Virginia.

Jan. 31, 2012.

Paul W. Roop, II, Roop Law Office, Beckley, WV, for Plaintiff.

Joshua Verdi, Reed Smith, Pittsburgh, PA, for Defendant.

MEMORANDUM OPINION AND ORDER

IRENE C. BERGER, District Judge.

The Court has reviewed Defendant's Motion to Dismiss or, in the Alternative, Stay Proceedings and Compel Arbitration (Document 4) together with Plaintiff's Complaint (Document 1 Ex. A.), the parties supporting memoranda and all submissions relative thereto.

I.

On August 19, 2011, Plaintiff, Senetha Montgomery, filed this action in the Circuit Court of Raleigh County, West Virginia, against Applied Bank, a Delaware corporation. Plaintiff's Complaint contains three counts based on an allegation of “not less than five hundred fifty-five (555) calls” placed by Defendant to Plaintiff's cellular phone between February 6, 2011, and June 29, 2011. (Compl.¶ 7). Plaintiff alleges that all calls made during the relevant time period were made after notification that Plaintiff had revoked Defendant's right to contact her. (Compl.¶ 6). Count One asserts a claim for violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 (2006). Count Two asserts a claim for several violations of the West Virginia Consumer Credit and Protections Act (“WVCCPA”), W. Va.Code §§ 46A–1–102 et seq. (2011), and Count Three is based on an allegation of violation of W. Va.Code § 61–3C–14a (2011). This state statute prohibits the making of telephone calls by use of a computer with the intent to harass after being requested by a person to stop contacting them. (Compl.). On October 4, 2011, Defendant properly removed this action to this Court. (Document 1).

On October 12, 2011, Defendant filed its Motion to Dismiss or, in the Alternative, Stay Proceedings and Compel Arbitration, wherein Defendant argues this Court should compel arbitration because Plaintiff agreed to arbitrate her claims and the arbitration agreement is valid and enforceable. (Document 5 at 2–5). Defendant further argues that because all of Plaintiff's claims are subject to the arbitration clause and a stay would serve no useful purpose, the Court should dismiss the case. ( Id. at 5–6).

Plaintiff argues that Defendant's motion to dismiss or compel arbitration should be denied for three reasons. First, Plaintiff argues two of the three arbitral forums listed are no longer available, and the third, by its own rules, has created a forumthat is unconscionably one-sided. (Document 9 at 2–6). Second, Plaintiff contends she did not assent to arbitrate what amounts to criminality ( Id. at 6–8), and lastly, she argues the arbitration clause in this contract is unconscionable under Brown v. Genesis Healthcare Corp., 228 W.Va. 646, ––––, 724 S.E.2d 250, ––––, 2011 WL 2611327 (Nos. 35494, 35546, 35635, June 29, 2011). (Document 9 at 8–9). The Court will address each of these arguments.

II.

A. General Arbitration Law

The Federal Arbitration Act (“FAA”) provides that:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2 (2006). Federal law strongly favors arbitration and interprets arbitration provisions under ordinary contract principles. AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1745–46, 179 L.Ed.2d 742 (2011) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). Also, the Supreme Court has held that there is a “fundamental principle that arbitration is a matter of contract.” Rent–A–Center, West, Inc. v. Jackson, 561 U.S. ––––, ––––, 130 S.Ct. 2772, 2776, 177 L.Ed.2d 403 (2010). “[C]ourts must put arbitration agreements on equal footing with other contracts and enforce them according to their terms.” Concepcion, 131 S.Ct. at 1746. (internal citation omitted.) Sections 3 and 4 of the FAA grant federal courts authority to compel arbitration and issue a stay upon the motion of one of the parties to the agreement.

The party who seeks to compel arbitration must establish “(1) [t]he making of the agreement and (2) the breach of the agreement to arbitrate.” Mercury Constr. Corp. v. Moses H. Cone Mem'l Hosp., 656 F.2d 933, 939 (4th Cir.1981). Whether a contract is valid and enforceable is governed by the contract formation and interpretation principles of the forum state. Cara's Notions, Inc. v. Hallmark Cards, Inc., 140 F.3d 566, 569 (4th Cir.1998). Nevertheless, when determining the scope of a valid arbitration clause, a federal district court is to use the “federal substantive law of arbitrability.” Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 417 n. 4 (4th Cir.2000) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. at 24, 103 S.Ct. 927).

A district court must “engage in a limited review to ensure that the dispute is arbitrable-i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Glass v. Kidder Peabody & Co., 114 F.3d 446, 453 (4th Cir.1997) (citations and quotation marks omitted). To challenge the validity of an arbitration clause within a contract, a party must specifically challenge the arbitration clause, not just the contract as a whole. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006). The scope of an arbitration agreement must be construed with “due regard ... to the federal policy favoring arbitration,and ambiguities ... [must be] resolved in favor of arbitration.” Cara's Notions, 140 F.3d at 569 (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475–76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989)).

B. Validity and Enforceability of Arbitration Clause

The Court must first decide if the Parties' Agreement (“Agreement”) (Document 6) is valid and enforceable under West Virginia law. The burden is on the Defendant to demonstrate that a valid contract exists. Mercury Constr. Corp., 656 F.2d at 939. Plaintiff essentially argues the Agreement is unenforceable due to a lack of a proper forum because two out of the three arbitration organizations are unavailable and the third forum is too one-sided to enforce. (Document 9 at 2). Plaintiff also argues the arbitration clause, itself, is unconscionable, thereby making the Agreement unenforceable. (Document 9 at 8–9). The parties do not appear to dispute that they entered into an arbitration agreement. However, they do dispute whether an available forum exists, whether the arbitration clause was unconscionable and whether the Plaintiff's claims are beyond the scope of the arbitration clause.

1. Availability of an Arbitration Forum

The parties' arbitration clause defines a claim as “any dispute between you and us that arises as a result of or has anything at all to do with: (1) your Account; (2) the events leading up to your becoming an Account holder; (3) this Agreement; (4) any prior credit account or agreement relating to such account; or (5) your relationship with us.” (Document 6). The term, “Administrator” in the arbitration clause, means “the National Arbitration Forum [NAF], the American Arbitration Association [AAA], or JAMS [Judicial Arbitration and Mediation Services Inc.].” ( Id.) The original agreement allows Plaintiff to select the arbitrator, but if Plaintiff fails to do so, the Defendant selects. ( Id.) Plaintiff points out that the agreement calls for all claims to be resolved “under this Arbitration Provision and the Administrator's Rules that are in effect at the time the Claim is filed with the Administrator.” ( Id.) However, the Agreement was apparently modified in February of 2010 to include a new definition of Administrator.¹ (Document 13 Ex.C). The term “Administrator” was redefined as the “American Arbitration Association (‘AAA’) ... or, in the event that AAA is not available as a forum for arbitration of a Claim, such alternative forum which administrates arbitration of a Claim in accordance with the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. and the Administrator's rules.” ( Id.) The Defendant does not contest that NAF and JAMS are unable to arbitrate the current dispute. (Document 13 at n. 2.)

In July 2009, AAA issued a moratorium on arbitrating cases concerning consumer debt collections if those cases were brought by the company and the consumer did not consent to the arbitration. (Document 9 Ex. 6). Plaintiff argues this moratorium now allows Defendant to “divert consumer claims against it into AAA arbitration while it enjoys a judicial forum for its claims.” (Document 9 at 5). Under AAA's moratorium, Defendant can only pursue a debt collection claim in a judicial forum against a consumer if the consumer agrees at the time of the dispute to arbitrate the Defendant's claim(s). ² (Document 9 Ex. 6). (emphasis added). Further, AAA indicates that it will “continue to administer all demands for arbitration filed by consumers against businesses, and all other types of consumer arbitrations.” ( Id.) Thus, all claims except for consumer debt collection claims remain unaffected by the moratorium. Therefore, to the extent Plaintiff argues that AAA's moratorium creates an agreement that is too one-sided to enforce, the Court finds AAA's moratorium and Plaintiff's argument are not applicable to the facts of this.

Even if AAA is unable or unwilling to serve...