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.
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 forum
The Federal Arbitration Act ("FAA") provides that:
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,
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.
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.
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
Even if AAA is unable or unwilling to serve as an administrator, the Court is empowered to select a substitute arbitrator under § 5 of the FAA.
To be enforceable, a contract cannot be unconscionable. Plaintiff argues the arbitration clause 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). Although the West Virginia Supreme Court had touched on the issue of unconscionability, the Court had "never fully explained the principles and application behind unconscionability." Brown, ___ W.Va. at ___, 724 S.E.2d at 263. Thus, in Brown, the Court set out a comprehensive discussion of unconscionability under West Virginia law.
"The doctrine of unconscionability means that, because of an overall and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in refusing to enforce the contract as written. The concept of unconscionability must be applied in a flexible manner, taking into consideration all of the facts and circumstances of a particular case." Brown, ___ W.Va. at ___, 724 S.E.2d at 283-84. "A determination of unconscionability must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and `the existence of unfair terms in the contract.'" Brown, ___ W.Va. at ___, 724 S.E.2d at 284 (citing Syl. pt. 4, Art's Flower Shop, Inc. v. Chesapeake and Potomac Telephone Co. of West Virginia, Inc., 186 W.Va. 613, 413 S.E.2d 670 (1991)). "A contract term is unenforceable if it is both procedurally and substantively unconscionable. However,
Procedural unconscionability addresses the "inequities, improprieties, or unfairness in the bargaining process and formation of the contract." Brown, ___ W.Va. at ___, 724 S.E.2d at 285. This requires an examination of "a variety of inadequacies that results in the lack of a real and voluntary meeting of the minds of the parties." Id. A non-exhaustive list of inadequacies includes: "the age, literacy, or lack of sophistication of a party; hidden or unduly complex contract terms; the adhesive nature of the contract; and the manner and setting in which the contract was formed, including whether each party had a reasonable opportunity to understand the terms of the contract." Id. Procedural unconscionability often entails a contract of adhesion, but that is not necessarily the case. Brown, ___ W.Va. at ___, 724 S.E.2d at 287. "A contract of adhesion is one drafted and imposed by a party of superior strength that leaves the subscribing party little or no opportunity to alter the substantive terms, and only the opportunity to adhere to the contract or reject it." Brown, ___ W.Va. at ___, 724 S.E.2d at 287. A court should give greater scrutiny to an adhesion contract to determine if "it imposes terms that are oppressive, unconscionable or beyond the reasonable expectations of an ordinary person." Id.
Substantive unconscionability addresses the "unfairness in the contract itself and whether a contract term is one-sided and will have an overly harsh effect on the disadvantaged party." Brown, ___ W.Va. at ___, 724 S.E.2d at 287. When examining substantive unconscionability "courts should consider the commercial reasonableness of the contract terms, the purpose and effect of the terms, the allocation of the risks between the parties, and public policy concerns." Id. The burden of proof rests with the party who seeks to establish a contract term is unconscionable. Brown, ___ W.Va. at ___, 724 S.E.2d at 284-85.
In Brown, the Court held that "Congress did not intend for arbitration agreements, adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, and which require questions about the negligence be submitted to arbitration, to be governed by the Federal Arbitration Act." Brown, ___ W.Va. at ___, 724 S.E.2d at 292. The Court examined three consolidated cases which essentially had the same facts. Brown, ___ W.Va. at ___, 724 S.E.2d at 263-64. "In each case, a person was ill or incapacitated and needed extensive, ongoing nursing care. The person was admitted to a nursing home, and a family member signed an admission agreement with the nursing home that contained an arbitration clause." Id. The arbitration clause required the ill or incapacitated person to arbitrate personal injury claims (or any other dispute) that arose from the facility's subsequent actions. Id.
Plaintiff argues the Agreement is a contract of adhesion, like in Brown, because nothing in the Agreement indicates that any of the terms were negotiable. (Document 9 at 8-9). Plaintiff, therefore, contends the Agreement was "tendered on a take it or leave it basis." (Document 9 at 9). She argues the arbitration clause "sweeps in subsequent criminality that
The Court finds that the Agreement is a contract of adhesion because the agreement contains boiler-plate language that does not appear to be subject to negotiation. Rather, it appears that it was given on a take it or leave it basis. State ex rel. Saylor v. Wilkes, 216 W.Va. 766, 773, 613 S.E.2d 914, 921 (2005). Further, nothing in the language of the Agreement allows Plaintiff to opt-out of any portion or term in the agreement. However, this finding, alone, does not establish that the contract was procedurally unconscionable. Unlike in Brown, where the plaintiffs were each in a medical emergency situation and their representatives had little choice but to immediately accept the terms of the agreement upon their admittance to the nursing home, here, Plaintiff puts forth no pressing need or emergency to enter into the Agreement. Brown, ___ W.Va. at ___, 724 S.E.2d at 292-97. Further, in Brown, the plaintiffs had little choice but to enter into the agreement if they wanted to receive further medical care and did not appear to have any alternatives. Id. Here, Plaintiff puts forth no evidence of a pressing need and the record is void of any evidence that she had no other alternative but to enter into a credit card agreement with this particular Defendant. Additionally, Plaintiff actually was the party that assented to the agreement as opposed to the situation in Brown where the agreements were entered into by family members on behalf of the plaintiffs. ___ W.Va. ___, 724 S.E.2d at 292-97. Plaintiff wholly fails to put forth any evidence that the Agreement was procedurally unconscionable other than her assertion that the agreement was a contract of adhesion, which the Court noted supra does not in itself make a contract procedurally unconscionable. Accordingly, the Court finds the Agreement is not procedurally unconscionable. The Court will also consider whether the Agreement is substantively unconscionable.
The Court finds the Agreement is not substantively unconscionable under West Virginia law. Without any elaboration, Plaintiff contends that since the West Virginia Supreme Court found an arbitration clause dealing with a party's subsequent negligence to be unconscionable in Brown, then an arbitration clause dealing with subsequent intentional and criminal wrongdoings should likewise be unconscionable. (Document 9 at 9). Unlike the arbitration clause in Brown, where nursing home residents, through their personal representatives, waived their rights to pursue subsequent personal injury or wrongful death claims in court, here, there is a common consumer credit card arbitration clause. In determining if a term in a contract is substantively unconscionable, courts should generally "consider the commercial reasonableness of the terms, the purpose and effect of the terms, the allocation of the risks between the parties, and public policy concerns." Brown, ___ W.Va. at ___, 724 S.E.2d at 287. In Brown, the court found the nursing home agreement substantively unconscionable for several reasons. First, the court found there was no "modicum of bilaterality" because the nursing home could pursue payments and discharges in any forum it
Like the contract in Brown, the Agreement in the instant case does not give Plaintiff the right to reject or opt out of the arbitration clause, but Plaintiff argues this as a reason why the Agreement was a contract of adhesion, not that it was substantively unconscionable.
In light of the Court's finding that the parties entered a valid and enforceable agreement, the Court must now decide whether the dispute in the instant case falls within substantive scope of the Agreement. Glass v. Kidder Peabody & Co., 114 F.3d 446, 453 (4th Cir.1997) (citations and quotation marks omitted). The Agreement's broad arbitration clause seems to cover almost any conceivable dispute that could arise from interactions between the parties.
Plaintiff argues the allegations in her complaint amount to "misconduct that the United States Congress declares is `unlawful' and that the West Virginia Legislature deems criminal." (Document 9 at 7) (citing 47 U.S.C. § 227; W.Va.Code § 46A-5-103(4)). Further, Plaintiff contends her third claim alleges that Defendant committed a felony. (Document 9 at 7) (citing W.Va.Code § 61-3C-14a). Plaintiff cites an opinion of the Supreme Court of South Carolina wherein the court declined to interpret a consumer's arbitration clause to apply to the defendant's outrageous and unforeseen actions in collecting a debt. (Document 9 at 7) (citing Chassereau v. Global Sun Pools, Inc., 373 S.C. 168, 644 S.E.2d 718 (2007)). In Chassereau, a consumer alleged that a debt collector "repeatedly phoned her at her workplace; disclosed private information to [her] friends, relatives, and co-workers; and also made false and defamatory statements about [her] to these same people." Chassereau, 373 S.C. at 170, 644 S.E.2d 718. The Court finds Chassereau to be distinguishable and, therefore, unpersuasive because Plaintiff does not allege any conduct that would amount to "outrageous and unforeseen" actions, as was the case in Chassereau.
Plaintiff argues that a broad arbitration clause that covers "any dispute" lacks any limiting principle and, therefore, should not be enforced. She asserts the arbitration clause, if enforced, would require her to arbitrate a claim for assault even "if an overzealous collector `kneecapped' her or threatened her life to collect the debt." (Document 9 at 7-8). Plaintiff acknowledges that this example is far-fetched, but claims it is "the logical implication of sweeping into the clause anything and everything that could possibly
WHEREFORE, as discussed herein, the Court does hereby
