HENRY EDWARD AUTREY, District Judge.
This matter is before the Court on Defendant's Motion to Compel Arbitration and Stay Proceedings Pending the Completion of Arbitration [Doc 19], Plaintiff's Motion for Partial Summary Judgment, [Doc. No. 21], and Defendant's Motion to Stay Proceedings regarding Plaintiff's Motion for Summary Judgment, [Doc. No. 29]. For the reasons set forth below, the Motion to Compel Arbitration is granted.
Plaintiff (Schardan) filed this action against Defendant (Allied) for violations of the Telephone Consumer Protection Act of 1991 (TCPA), 47 U.S.C. 227 et seq.; the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. 1692 et seq.; and invasion of privacy. Plaintiff opened a J.C. Penny credit card on August 29, 2010 (the "J.C. Penny Account") and a Walmart credit card (the "Walmart Account") on June 8, 2014 (together the "Accounts). Both cards were issued by GE Capital Retail Bank, now Synchrony Bank, which is headquartered in Utah. The agreements of the Accounts (the "Agreements") are identical, except for the names of each retail store.
Defendant asserts it contacted Plaintiff only after being contracted by Synchrony Bank to collect an outstanding debt Plaintiff owed for defaulting on her credit cards. Defendant asserts that the contract signed between Plaintiff and Synchrony provides that all disputes arising from the contract must be settled through arbitration. On May 23, 2017, Defendant filed a Motion to Compel Arbitration and Stay Proceedings Pending the Completion of Arbitration. In response, Plaintiff argues that the Agreements are not arbitrable and, in the alternative, that Defendant has waived the right to arbitration through its participation in litigation.
Before compelling arbitration, a district court must determine (1) whether there is a valid arbitration agreement and (2) whether the particular dispute falls within the terms of that agreement. Robinson v. EOR-ARK, LLC, 841 F.3d 781, 783 (8th Cir. 2016). Any doubts raised in construing contract language on arbitrability should be resolved in favor of arbitration. CD Partners, LLC v. Grizzle, 424 F.3d 795, 795 (8th Cir. 2005).
Under Section 2 of the Federal Arbitration Act (FAA), "written arbitration agreements [are] valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of a contract." Anderson v. Carlisle, 129 S.Ct. 1896, 1901 (2009). Section 2 "creates substantive federal law regarding the enforceability of arbitration agreements, requiring courts to place such agreements upon the same footing as other contracts." Id. (quotations omitted). "Section 3, in turn, allows litigants already in federal court to invoke agreements made enforceable by Section 2." Id. "That provision requires the court, on application of one of the parties, to stay the action if it involves an issue referable to arbitration under an agreement in writing." Id.
State contract law governs whether the parties have entered into a valid arbitration agreement. Robinson, 841 F.3d at 784. Relevant to the Court's determination as to whether a valid agreement exists are the actual terms of the agreement. Id. The Agreements between Plaintiff and Synchrony state:
Further,
Utah contract law governs the Agreements. Pursuant to the Utah Statute of Frauds, "A credit card agreement is binding and enforceable without any signature by the party to be charged if:
Utah Code Ann §25-5-4(2)(e), MBNA America Bank, N.A. v. Goodman, 140 P.3d 589, 592 (Utah App. 2006).
Plaintiff does not dispute receiving written copies of the terms of the Agreements, either when she opened each line of credit, or in the mail, in her Complaint. Nor does she attest to not receiving them in her Affidavit. Rather, she admits that Defendant was attempting to collect a debt stemming from these Agreements. Further, she requests that this Court release her from the debt.
Plaintiff agreed to the terms of the Agreements by using her credit card. Though it was her right, Plaintiff did not reject the Arbitration Agreement in her Agreements by sending a notice within 60 days of opening her account, or 60 days after Synchrony provided her with an updated Agreement. Both Arbitration Agreements between Plaintiff and Synchrony are valid.
It is an elementary contract law is that, as a general rule, only parties to the contract may enforce the rights and obligations created by the contract. Robinson, 841 F.3d at 783. Only if the written contract's clear intent is to confer rights upon a third party may that third party enforce rights and obligations of the contract. Id. A litigant who was not a party to an arbitration agreement may invoke the Federal Arbitration Act (FAA) if the relevant state contact law allows the non-litigant to enforce the agreement. Anderson v. Carlisle, 129 S.Ct. 1896, 1903 (2009). As established under the terms of the Agreements, Utah state contract law is dispositive here.
The existence of a third party beneficiary status is determined by examining a written contract. Wagner v. Clifton, 62 P.3d 440, 442 (Utah 2002). The written contract must show that the contracting parties clearly intended to confer a separate and distinct benefit upon the third party. Id. If the language within the four corners of the contract is unambiguous, the parties' intentions are determined from the plain meaning of the contractual language, and the contract may be interpreted as a matter of law. Id. Whether the contract itself is ambiguous is also a question of law. Id. An ambiguity exists if the contract provision is susceptible to more than one reasonable interpretation. Id
Here, the Agreements are unambiguous regarding third parties.
In both the "Consent to Communications" and "Assignment" the Agreements clearly demonstrate that Synchrony Bank anticipated its use of contracted debt collectors upon default of borrowers. The Agreements also clearly show the intentions of Synchrony to assert its right to sell, assign, or transfer any or all of their rights to a third party, which would be provided with all of the contact information provided by Plaintiff to Synchrony upon opening her account. Here, the Defendant is that third party. Upon Plaintiff's default on the Agreements, Synchrony asserted its rights to contract Defendant for the collection of the overdue balance. Plaintiff agreed to be contacted by Synchrony or its agents under the terms of the Agreements.
The Arbitration Agreements are "valid, irrevocable, and enforceable" under the FAA. The dispute between Plaintiff and Defendant falls within the terms of those Agreements. The dispute must go to arbitration for the claims.
Plaintiff argues that, in the event this Court grants Defendant's Motion to Compel Arbitration, this Court should find that Defendant has waived its right to arbitration through its participation in pre-trial litigation.
Waiver of a contractual right occurs when a party to a contract intentionally acts in a manner inconsistent with its contractual rights, and, as a result, prejudice accrues to the opposing party or parties to the contract. ASC Utah, Inc. v. Wolf Mountain Resorts, 245 P.3d 184, 193 (Utah 2010). In the context of arbitration, this amounts to a two-part test, known as the Chandler test, to determine if a party has waived its contractual right: (1) whether the party seeking to assert the right has participated in litigation to the point inconsistent with the intent to arbitrate, and (2) whether the opposing party has been prejudiced as a result. Id. at 194.
In order to determine whether a party substantially participated in litigation, as required to waive its right to arbitration, the Court must consider the actions of the party seeking arbitration, and whether those actions evidence intent to submit to the jurisdiction of the court and pursue redress through litigation. Id. Factors to be considered include whether the party seeking arbitration ever asserted its right to do so, whether the party participated in extensive motions before the court, participated in extensive discovery, or allowed a considerable amount of time to pass before invoking its right to arbitration. Id.
Here, in its Answer to Plaintiff's First Amended Complaint, Defendant stated, "Upon information and belief, plaintiff may be contractually obligated to arbitrate any dispute, claim or controversy which arises out of the subject matter set forth in the instant litigation," on December 4, 2015. Defendant filed the Motion to Compel Arbitration and Stay Proceedings on May, 23, 2016. Between Defendant's answer and the motion before the Court today, Plaintiff and Defendant filed a Joint Scheduling Plan on February 18, 2016 by order of the Court, and the case was set for trial on March 13, 2017. Plaintiff also filed a Motion to Compel the Production of Documents by Defendant on May 4, 2016, and Defendant filed its Response in Opposition on May 11, 2016. Defendant filed this Motion to Compel Arbitration on May 23, 2016. On the same day, but after the filing of Defendant's motion here, the Plaintiff filed a Motion for Partial Summary Judgment and included in her filing discovery documents.
Despite Plaintiff's assertion that Defendant participated in extensive pre-trial litigation, the record simply does not support such a conclusion. Defendant asserted its right to arbitration in its Answer to the Amended Complaint by Plaintiff. The Joint Scheduling Plan was ordered by the Court. Upon Plaintiff's Motion to Compel Production of Documents, Defendant filed a response in opposition 7 days later and its Motion to Compel Arbitration 12 days after that. There has been no extensive pre-trial litigation.
Defendant has not waived its right to arbitration by participating in extensive pre-trial litigation. Therefore, it is unnecessary for the Court to continue to the second step of the Chandler test. Plaintiff has not been prejudiced as there has been no participation in litigation to the point inconsistent with the intent to arbitrate by Defendant.
Based on the foregoing, the Court concludes Defendant, as a third party, may invoke the Arbitration Agreements between Plaintiff and Synchrony Bank, and that Defendant has not waived its right to arbitration. The Motion to Compel Arbitration and Stay Proceedings will be granted.
Accordingly,