Banks v. Cashcall, Inc.

188 F.Supp.3d 1296

Eddie L. Banks, Plaintiff,

v.Cashcall, Inc. ; and Delbert Services Corporation, Defendants.

Case No. 6:14-cv-488-Orl-37TBS

United States District Court, M.D. Florida, Orlando Division .

Signed May 26, 2016.

N. James Turner, N. James Turner, LLC, Orlando, FL, for Plaintiff.

Christopher S. Carver, Akerman Senterfitt, LLP, Miami, FL, Brian J. Fischer, Katya Jestin, Neil M. Barofsky, Jenner & Block, LLP, New York, NY, Daniel T. Fenske, Jenner & Block, LLP, Chicago, IL, Thomas R. Yaegers, Akerman Senterfitt, LLP, Orlando, FL, for Defendants.

ORDER

ROY B. DALTON JR., United States District Judge

This cause is before the Court on the following:

1. Defendants' Motion to Dismiss or, Alternatively, to Compel Arbitration and Stay or Dismiss the Case, and Memorandum in Support (Doc. 15), filed April 2, 2014;

2. Memorandum of Law in Opposition to Defendants' Motion to Dismiss, or Alternatively, to Compel Arbitration and Stay or Dismiss the Case (Doc. 30), filed April 30, 2014;

3. Defendants' Reply Memorandum of Law in Further Support of their Motion to Dismiss or, Alternatively, to Compel Arbitration and Stay or Dismiss the Case (Doc. 33), filed May 19, 2014;

4. Defendants' Notice of Supplemental Authorities (Doc. 55), filed November 11, 2015; and

5. Defendants' [Second] Notice of Supplemental Authorities (Doc. 58), filed February 16, 2016.

Upon consideration, the Court finds that the Motion is due to be granted in part and denied in part.

BACKGROUND

The instant action is but one of many that seeks to challenge the terms of a high-interest loan agreement issued by Western Sky Financial, LLC ("Western Sky "). (See Doc. 3 ("Complaint "); see also Doc. 1-1, pp. 30–35 ("Loan Agreement ").) According to the Complaint, Plaintiff executed the Loan Agreement on May 1, 2012, pursuant to which Western Sky loaned him the principal amount of $9,925.00 at an annual interest rate of 89.68% ("Loan "). (Doc. 3, ¶¶ 14, 15.) Western Sky subsequently transferred and sold the Loan to Defendant Delbert Services Corporation ("Delbert "). (Id. ¶ 16.) Plaintiff alleges that, in exchange for compensation, Defendant CashCall ("CashCall "), inter alia : (1) bears all risk of loss on the loans issued by Western Sky, services the loans, and tracks all consumer complaints regarding such loans; and (2) agrees to indemnify Western Sky for all costs arising or resulting from any and all civil, criminal, or administrative claims or actions relating to the loans. (Id. ¶ 18.)

Plaintiff made payments on the Loan from May 25, 2012, through December 15, 2013. (Id. ¶ 17.) Frustrated by the terms of the Loan Agreement, Plaintiff initiated the instant action alleging that Defendants violated: (1) the Florida Deceptive and Unfair Trade Practices Act; (2) the Florida Consumer Finance Act on excessive interest rates; (3) the Florida Interest, Usury, and Lending Practices Act; (4) the Florida Consumer Collection Practices Act; and (5) the Fair Debt Collection Practices Act. (Id. , ¶¶ 24–82.) Defendants removed the action to this Court on the basis of federal question jurisdiction, supplemental jurisdiction, and diversity jurisdiction. (Doc. 1.)

Shortly thereafter, Defendants moved for dismissal on two distinct grounds and alternatively moved to compel arbitration. (Doc. 15 ("Motion ").) First, citing a forum-selection clause ("Forum-Selection Clause ") within the Loan Agreement—which provides that "[t]he Loan Agreement is subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe ["Tribe "] (Doc. 1-1, p. 30)—Defendants request that the Court dismiss the action under the doctrine of forum non conveniens ("Ground One "). (Id. at 2, 5–6, 9–15.) Second, pursuant to both the Forum-Selection Clause and the doctrine of tribal exhaustion, Defendants contend that Plaintiff is required to exhaust his remedies in tribal court before pursuing claims in federal court. (Id. at 2–3, 16–18.) Finally, as an alternative to Grounds One and Two, Defendants: (1) move to compel Plaintiff to arbitrate his claims pursuant to the arbitration provisions ("Arbitration Requirement ") within the Loan Agreement (see Doc. 1-1, pp. 32–33); and (2) request that the Court stay or dismiss the case in favor of arbitration (collectively, "Alternative Ground "). (Id. at 3, 6–8, 19–23.)

In response, Plaintiff argues that: (1) the Forum-Selection Clause and Arbitration Requirement are unenforceable; and (2) the doctrine of tribal exhaustion does not apply. (Doc. 30.) In support, Plaintiff contends that: (1) Defendant's loan activities are prohibited by the Tribe's laws (id. at 4); (2) the Forum-Selection Clause was fraudulently put in place to avoid state and federal regulation of Defendants' practices, seeks to improperly extend tribal jurisdiction to the activities of non-tribal members occurring off the reservation, and is against public policy (id. at 5–8); (3) the disclaimer of the applicability of federal law in the Loan Agreement ("Federal Law Disclaimer ") bars Defendants from compelling arbitration under the Federal Arbitration Act ("FAA ") (id. at 9–11); and (4) the Arbitration Requirement is void because the entire Loan Agreement unconscionable, illegal, and unenforceable (id. at 11–15).

After obtaining leave of Court (see Docs. 31, 32), Defendants filed a reply contending, inter alia , that: (1) Plaintiff has not met his burden to show that the Forum-Selection Clause is unenforceable and, specifically, has not shown that the Forum-Selection Clause itself was based on fraud; (2) Plaintiff must exhaust his tribal remedies as he does not contest Defendants' demonstration that tribal jurisdiction is colorable; (3) under federal law, the FAA governs the enforceability of the Arbitration Requirement despite the Federal Law Disclaimer; and (4) the Court must compel arbitration because Plaintiff did not specifically challenge the delegation provision ("Delegation Provision ")¹ in the Arbitration Requirement. (Doc. 33.)

On July 11, 2014, the Court held a hearing on the Motion and took the matter under advisement. (See Doc. 42.) However, in the interest of judicial economy, the Court stayed the action pending resolution of two interlocutory appeals ("Appeals ") within the Eleventh Circuit, which raised the same issues as the Motion—(1) Inetianbor v. CashCall, Inc. , 962 F.Supp.2d 1303 (S.D.Fla.2013), aff'd , 768 F.3d 1346 (11th Cir.2014) (" Inetianbor "); and (2) Parnell v. Western Sky Financial, LLC , Case No. 4:14–cv–24–HLM, Doc. 19 (N.D.Ga. 2014), rev'd , Parnell , 804 F.3d 1142 (" Parnell "). (Doc. 45 ("Stay Order ").)

The pertinent arbitration provisions in Inetianbor required an authorized representative of the Tribe to conduct arbitration of the parties' disputes. 768 F.3d at 1350–51. However, in light of evidence showing that "the Tribe does not involve itself in arbitration between private parties at all," the Eleventh Circuit agreed with the district court's conclusion that the arbitral forum was unavailable, id. at 1354, and—on October 2, 2014—affirmed the district court's denial of the defendant's motion to compel arbitration, id. at 1347.

A year later, on October 28, 2015, the Eleventh Circuit issued a decision in the Parnell appeal. 804 F.3d 1142. The arbitration provisions under the Parnell loan agreement gave the plaintiff the option to submit his disputes to the American Arbitration Association, JAMS, or any other arbitration organization agreed upon by the plaintiff and defendant ("Choice of Arbitrator Provision "). Parnell , Case No. 4:14-cv-24-HLM, Doc. 1-3, p. 30. The Parnell arbitration provisions also contained a delegation provision committing disputes "concerning the validity, enforceability, or scope of [the] loan or the [a]rbitration agreement" to the arbitrator. 804 F.3d at 1147–48. Consequently, the Eleventh Circuit reversed the district court's denial of the defendant's motion to compel arbitration on the ground that the district court did not have jurisdiction to review a challenge to an arbitration agreement containing a delegation provision where the plaintiff did not directly challenge the delegation provision. See id. at 1144 (citing Rent – A – Center, West, Inc. v. Jackson , 561 U.S. 63, 72, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010) ).

Upon receiving notification from the parties regarding the Eleventh Circuit's resolution of the Appeals (Docs. 46, 52), the Court issued an Order: (1) lifting its Stay Order; and (2) directing the parties to notify the Court whether they (i) requested any amendments to the pleadings, or (ii) intended to rest on the current record for resolution of the Motion. (Doc. 53.) The parties each notified the Court of their intent to rest on their previous filings. (Docs. 54, 55.) Defendants, however, submitted two notices of supplemental authority in support of their position. (Docs. 55, 58.)

The matter is now ripe for the Court's consideration. For the reasons explained below, the Court finds that the Arbitration Ground is dispositive and, therefore, will compel the parties to arbitrate their disputes, including their disagreement regarding Grounds One and Two.

STANDARDS

Under the FAA, "courts must rigorously enforce arbitration agreements according to their terms." Am. Express Co. v. Italian Colors Rest. , –––U.S. ––––, 133 S.Ct. 2304, 2309, 186 L.Ed.2d 417 (2013). Upon the motion of any party to a valid arbitration agreement, courts must stay litigation of all claims that fall within the agreement's scope and compel arbitration according to the agreement's terms. See 9 U.S.C. §§ 3 –4. Arbitration agreements are presumptively valid and enforceable. See id. § 2.

However, arbitration under the FAA is ultimately "a matter of consent, not coercion," Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ. , 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989), and parties opposing arbitration can challenge the formation and validity of a contract containing an arbitration clause. Specifically, the...