Pacanowski v. Alltran Fin., LP

• Decision Date: 19 September 2017
• Docket Number: CIVIL ACTION NO. 3:16–CV–1778
• Citation: 271 F.Supp.3d 738
• Parties: Francis PACANOWSKI, Plaintiff v. Alltran FINANCIAL, LP, Defendant
• Court: U.S. District Court — Middle District of Pennsylvania

271 F.Supp.3d 738

Francis PACANOWSKI, Plaintiff

v.Alltran FINANCIAL, LP, Defendant

CIVIL ACTION NO. 3:16–CV–1778

United States District Court, M.D. Pennsylvania.

September 19, 2017

Carlo Sabatini, Brett M. Freeman, Sabatini Law Firm, LLC, Dunmore, PA, for Plaintiff.

Erin Stottlemyer Gold, George J Lavin, III, George J. Lavin Ill & Associates, PLLC, Havertown, PA, Brandon A Carnes, Rock Fusco & Connelly, LLC, Chicago, IL, for Defendant.

MEMORANDUM OPINION

KAROLINE MEHALCHICK, United States Magistrate Judge

Before the Court is the motion of Defendant, Alltran Financial LP (hereinafter "Alltran," formerly known as "United Recovery Systems"), to dismiss and to compel arbitration, or alternatively stay proceedings pending arbitration. (Doc. 21). This matter having been fully briefed, it is ripe for disposition. For the following reasons, the Court will DENY Defendant's motion.

I. BACKGROUND AND PROCEDURAL HISTORY

At some point prior to 2003, Plaintiff, Francis Pacanowski ("Pacanowski") opened a new Home Depot credit card account ("the Account") (Doc. 21–1 at 1). Citibank, (South Dakota) N.A. ("Citibank") eventually purchased the Account. (Doc. 21–2 at ¶ 4). Pacanowski submits that the identity of the original creditor, and the terms of the original subject agreement are unknown. Pacanowski currently has a delinquent balance on his account in excess of $6,600.00, which is the subject of this lawsuit. While the Account was active, Citibank mailed to Pacanowski multiple documents, each of which purported to replace the prior terms of the Account. (Doc. 21–2 at ¶¶ 6–13). The last of these documents was sent in May 2011. (Doc. 1 at ¶ 11; Doc. 21–2 at ¶ 11). This document contains an arbitration provision. (Doc. 23–1 at 6). The May 2011 document advised Pacanowski that Citibank was changing the terms of the agreement, including the applicable arbitration provision, and provided Pacanowski with an opportunity to opt out of the 2011 Notice. Pacanowski did not opt out of the 2011 Notice.

This lawsuit was instituted by Pacanowski on July 20, 2016 against Alltran, in which Pacanowski alleges that Alltran, acting as a debt collector for Citibank, sent him a form letter on or around July 21, 2015, attempting to collect the outstanding account balance, and claiming that the letter violates the Fair Debt Collection Practices Act. (Doc. 1 at ¶ 12). Pacanowski alleges that the letter violates the FDCPA by failing to include a disclosure as to when the amount due was calculated or if the debt would continue to grow. (Doc. 1 at ¶¶ 12–14).

Alltran has moved the Court dismiss the case and to compel arbitration, or in the alternative, to stay this matter pending individual arbitration of Pacanowski's claims. Alltran submits that the Pacanowski's FDCPA claims against Alltran clearly relate to Pacanowski's account, and that the allegations establish that Alltran is connected with Citibank or was acting as Citibank's agent or representative when it contacted Pacanowski. Alltran further submits that Pacanowski alleges that Alltran attempted to collect a debt on behalf of Citibank, and the letter that Pacanowski allegedly received from Alltran identifies Citibank as Alltran's client. As such, Alltran submits that Pacanowski's claims fall squarely within the express terms of the arbitration provision of Pacanowski's Card Agreement, and that the arbitration agreement is valid and binding.

Pacanowski submits that he is not bound by the arbitration provision because (1) the cardmember agreement is a contract of adhesion; (2) Alltran has not presented any evidence regarding the initial terms of the contract with Citibank's predecessor; (3) Pacanowski's claim is not included within the provision's scope because it is not a "Claim" as defined in the agreement; (4) Alltran's alternative estoppel argument fails; (5) Alltran is not a third party beneficiary because it was not named in the cardmember agreement; and (6) that this Court should decide the gateway issue of arbitrability.

The Court addresses each of these arguments below.

II. DISCUSSION

A. THIS COURT SHOULD DECIDE THE GATEWAY ISSUE OF ARBITRABILITY.

The initial question of arbitrability—i.e. , whether or not the parties validly agreed to arbitrate—is presumed to be a question for the court unless the parties clearly and unmistakably indicate otherwise. Guidotti v. Legal Helpers Debt Resolution, L.L.C. , 716 F.3d 764, 773 (3d Cir. 2013) ; Briggs v. Macy's Inc. , No. CV 3:16-0902, 2017 WL 590274, at *2–3 (M.D. Pa. Feb. 14, 2017). In Guidotti , the Third Circuit Court of Appeals clarified the appropriate standard of review to be applied to a motion to compel arbitration filed before the completion of discovery. This clarification was needed due to conflicting precedent using the standard under Federal Rule of Civil Procedure 12(b)(6) applied to motions to dismiss as compared to precedent using the standard under Federal Rule of Civil Procedure 56 applied to motions for summary judgment. Guidotti , 716 F.3d at 771. The Third Circuit determined that this conflict was premised on the competing purposes of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. , governing arbitration versus the values underlying contract interpretation more generally. Guidotti , 716 F.3d at 773. While the FAA "calls for a summary and speedy resolution of motions or petitions to enforce arbitration clauses," enforcement of the private agreement between the parties is also an important consideration. Guidotti , 716 F.3d at 773 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 29, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ). "Accordingly, ‘[b]efore a party to a lawsuit can be ordered to arbitrate and thus be deprived of a day in court, there should be express, unequivocal agreement to that effect.’ " Guidotti , 716 F.3d at 773 (quoting Par–Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd. , 636 F.2d 51, 54 (3d Cir. 1980) ) (alteration in original).

The Third Circuit in Guidotti held that where the affirmative defense of arbitrability is apparent on the face of the complaint or those documents relied upon in the complaint, the standard under Rule 12(b)(6) should be applied. Guidotti , 716 F.3d at 773–74. In those cases, the FAA would favor speedy resolution without the delay of discovery. Guidotti , 716 F.3d at 773–74. "[A] more deliberate pace is required" when either (1) the complaint and documents referenced therein do not establish with "requisite clarity" that the parties agreed to arbitrate or (2) "the opposing party has come forth with reliable evidence that is more than a ‘naked assertion... that it did not intend to be bound,’ even though on the face of the pleadings it appears that it did." Guidotti , 716 F.3d at 774 (quoting Somerset Consulting, LLC v. United Capital Lenders, LLC , 832 F.Supp.2d 474, 479 (E.D. Pa. 2011) and Par–Knit Mills , 636 F.2d at 55 ).

When the issue of arbitrability is not apparent on the fact of the complaint, "the motion to compel arbitration must be denied pending further development of the factual record." Guidotti , 716 F.3d at 774 (emphasis added). When the issue of arbitrability is apparent on the face of the complaint but the non-moving party has come forward with evidence to place the question in issue, the motion should be resolved according to the standard provided in Rule 56. Guidotti , 716 F.3d at 774. "Under either of those scenarios, a restricted inquiry into the factual issues will be necessary to properly evaluate whether there was a meeting of the minds on the agreement to arbitrate, and the non-movant must be given the opportunity to conduct limited discovery on the narrow issue concerning the validity of the arbitration agreement." Guidotti , 716 F.3d at 774 (emphasis added) (internal citations and quotations omitted).

In this case, the parties exchanged limited initial discovery in anticipation of this motion, and therefore the Court has a complete factual record before it with regard to the issue of arbitrability, and will decide this motion based on a motion for summary judgment standard.

B. THE ARBITRATION AGREEMENT IS VALID.

To compel arbitration, Courts must determine (1) the validity of the arbitration agreement and (2) whether the dispute is encompassed by the scope of that agreement. Trippe Mfg. Co. v. Niles Audio Corp. , 401 F.3d 529, 532 (3d Cir. 2005). Accordingly, a court must initially inquire into whether a valid agreement to arbitrate exists. Bey v. Citi Health Card , No. CV 15-6533, 2017 WL 2880581, at *4–5 (E.D. Pa. July 6, 2017) ; Trippe , 401 F.3d at 532. Courts look to ordinary state law principles of contract formation to make this determination. Alexander v. Anthony Int'l, L.P. , 341 F.3d 256, 264 (3d Cir. 2003). The Card Agreement in dispute contains a choice-of-law provision, which states that "Federal law and the law of South Dakota, where we [Citibank] are located, govern the terms and enforcement of this Agreement." (Doc. 23–1 at 7). Therefore, South Dakota state law principles of contract formation apply here. Under South Dakota law, the elements necessary for contract formation are: (1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient consideration. American Prairie Constr. Co. v. Hoich , 594 F.3d 1015, 1023 (8th Cir. 2010) (citing S.D. Codified Laws § 53–1–2 ). To form a contract, there must be an objective manifestation of mutual assent. Jacobson v. Gulbransen , 623 N.W.2d 84, 90 (S.D. 2001). Regarding consumer credit cards, South Dakota defines the use of a credit card as acceptance of a credit card agreement. See S.D. Codified Laws § 54–11–9 (establishing that "[t]he use of an accepted credit card... creates a binding contract between the card holder and the card issuer.").

Here, all of the requisite elements for contract formation exist. First, Pacanowski and Citibank are both parties capable of contracting. Second, both provided their consent in contracting. In the May...