Delgado v. Ally Fin., Inc.

MAURICE DELGADO, Plaintiff, v. ALLY FINANCIAL, INC., CASHCALL,INC., NAVY FEDERAL CREDIT UNION, ONEMAIN FINANCIAL SERVICES,INC. f/k/a SPRINGLEAF FINANCIAL SERVICES, INC,CELLCO PARTNERSHIP, INC. d/b/a VERIZON WIRELESS, INC,EXPERIAN INFORMATION SOLUTIONS, INC,and EQUIFAX INFORMATION SERVICES LLC, Defendants.

Case No.: 3:17-cv-02189-BEN-JMA

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

FILED: May 8, 2018

May 7, 2018

ORDER GRANTING DEFENDANT CASHCALL, INC.'S MOTION TO COMPEL ARBITRATION AND TO DISMISS ACTION

Before this Court is a Motion to Compel Arbitration and to Dismiss or Stay Action, filed by Defendant CashCall, Inc. ("CashCall"). (Doc. No. 8.) Defendant asserts that this dispute is subject to a binding arbitration clause, and asks this Court to grant the Motion to compel arbitration and dismiss or stay. For the reasons stated below, the Motion to Compel is GRANTED, and the action is DISMISSED.

BACKGROUND

The facts relevant to CashCall's Motion to compel arbitration are as follows. On November 30, 2012, Plaintiff Maurice Delgado ("Delgado") submitted an online application to CashCall for a $2,600 loan. (Doc. No. 8-1 at 1-2.) After the loan was approved, CashCall provided Delgado with a document titled CashCall, Inc. Promissory Note and Disclosure Statement dated November 30, 2012. ("Note") (Id.) Before CashCall would execute the Note and disperse the funds, Delgado was required to review and check several boxes as part of the online loan application process.¹ (Id.) The first box that Delgado checked represented confirmation of the following:

YOU CERTIFY THAT YOU HAVE READ AND UNDERSTAND THIS ARBITRATION PROVISION AND AGREE TO BE BOUND TO ITS TERMS.

(Id.)

Under the heading "ARBITRATION PROVISION," the Note sets out the agreement to arbitrate all disputes. (Id.) According to the Note, the term "Dispute" is "given the broadest possible meaning" and includes "all claims, disputes or controversies arising from or relating directly or indirectly to . . . any claim or attempt to set aside thisArbitration Provision," "all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to the Loan Agreement," "all claims based upon a violation of any state or federal constitution, statute or regulation," and "all claims asserted by you individually against us." (Id.)

The Note specifies that Delgado acknowledges and agrees that by entering into the arbitration provision:

(a) YOU ARE GIVING UP YOUR RIGHT TO HAVE A TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED AGAINST US OR RELATED THIRD PARTIES;

(b) YOU ARE GIVING UP YOUR RIGHT TO HAVE A COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL, RESOLVE ANY DISPUTE ALLEGED AGAINST US OR RELATED THIRD PARTIES; and

(c) YOU ARE GIVING UP YOUR RIGHT TO SERVE AS A REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER REPRESENTATIVE CAPACITY, AND/OR TO PARTICIPATE AS A MEMBER OF A CLASS OF CLAIMANTS, IN ANY LAWSUIT FILED AGAINST US AND/OR RELATED THIRD PARTIES.

(Id. at 3.)

The Note provides that the "Arbitration Provision continues in full force and effect, even if your obligations have been paid or discharged through bankruptcy" and CashCall will pay the filing fee and any costs or fees charged by the arbitrator. (Id.) Moreover, the Note provided Delgado with the right to opt out of the arbitration agreement by simply notifying CashCall within 60 days of the date of execution (in writing) of his intentions to do so.² (Id.)

After Delgado executed the Note by way of his electronic signature, CashCall dispersed the funds in accordance with the terms of the Note. (Id.) CashCall commenced collection activities against Delgado after he defaulted on the loan. (Id.)

On March 14, 2014, Delgado filed for Chapter 13 bankruptcy in the United States Bankruptcy Court for the Middle District of Pennsylvania (Wilkes-Barre).³ CashCall received notice of the filing and was included as a creditor in the Bankruptcy proceedings. CashCall did not seek to have the debt ordered "nondischargeable" or request relief from the "automatic stay" while the Bankruptcy was pending. (Compl. ¶¶ 89-93.) Delgado immediately commenced making monthly payments to the Bankruptcy Trustee as required by the Chapter 13 Bankruptcy Wage Earner Repayment Plan ("Plan").⁴

On April 11, 2017, the Bankruptcy Trustee filed a "Notice to Debtor" in the bankruptcy court reflecting Delgado made all 36 payments required by the Plan. Accordingly, Delgado's Bankruptcy was successfully discharged on April 18, 2017. (Id. ¶¶ 101, 110-11.) CashCall received notice of the discharged debt on April 20, 2017.⁵ (Id. ¶ 112.)

Despite receiving notice of the bankruptcy discharge, CashCall "classified and reported" or "caused to be reported" on an Equifax report, the prior CashCall debt as "Status: Charge-Off; Scheduled Payment Amount: $388," instead of discharged via bankruptcy. (Id. ¶¶ 5, 152.) In effect, CashCall was erroneously representing to potential creditors that Delgado was actively delinquent with respect to a debt when in actuality, the debt was no longer owed. (Id.)

Upon discovering the misleading and inaccurate account information, Delgado disputed the inaccurate tradelines with CashCall and Equifax. (Id. ¶ 151.) He alleges that CashCall failed to conduct a reasonable investigation and continued to report the false information. His repeated attempts to have the inaccurate and misleading information corrected went unheeded. (Id. ¶ 153.) Due to CashCall's inaccurate reporting and inaction, Delgado alleges he sustained actual damages.⁶ (Id. ¶¶ 149-50.)

On October 26, 2017, Delgado filed his Complaint, alleging violations of the Fair Credit Reporting Act, 15U.S.C.§§ 1681 etseq. ("FCRA") and (ii) the California Consumer Credit Reporting Agencies Act, Cal. Civ. Code §§ 1785.1 et seq. ("CCCRAA"). (Doc. No. 1 ¶ 12.) CashCall brings this Motion to Compel Arbitration of Delgado's claims. (Doc. No. 8.)

LEGAL STANDARD

The Federal Arbitration Act ("FAA") governs the motion to compel arbitration. 9 U.S.C. §§ 1 et seq. Under the FAA, a district court determines (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue. Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 f.3d 1010, 1012 (9th Cir. 2004). "To evaluate the validity of an arbitration agreement, federal courts should apply ordinary state-law principles that govern the formation of contracts." Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003) (internal quotation marks and citation omitted). Arbitration agreements are "a matter of contract" and "may be invalidated by 'generally applicable contract defenses, such as fraud, duress, and unconscionability.' " Rent-A-Ctr. West, Inc. v. Jackson, 561 U.S. 63, 67-68 (2010).

If the court is "satisfied that the making of the arbitration agreement or the failure to comply with the agreement is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4. "[A]ny doubts concerning the scope of arbitral issues should be resolved in favor of arbitration[.]" Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (U.S. 1983). If a court "...determines that an arbitration clause is enforceable, it has the discretion to either stay the case pending arbitration or to dismiss the case if all of the alleged claims are subject to arbitration." Hoekman v. Tamko Bldg. Prod., Inc., No. 2-14-CV-01581-TLN-KJN, 2015 WL 9591471, at *2 (E.D. Cal. Aug. 26, 2015).

DISCUSSION

CashCall contends Delgado's claims arise from the parties' dealings regarding the CashCall debt and are thus subject to arbitration. (Doc. No. 8-1 at 5.) Delgado responds with two arguments: (1) CashCall's contract with Delgado is unenforceable; and (2) Arbitration cannot be compelled under the Federal Arbitration Act, in this case, because the contract is unenforceable. (Doc. No. 25 at 8.) The Court will analyze these arguments in order.

A. Plaintiff's Argument that CashCall's Contract with Delgado is Unenforceable.

First, the Court must determine whether "there is a valid agreement between the parties to arbitrate...." See Lifescan, Inc. v. Premier Diabetic Servs., Inc., 363 F.3d 1010, 1012 (9th Cir. 2004). In making that determination, the Court must "be [ ] satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue...." 9 U.S.C. § 4. "To evaluate the validity of an arbitration agreement, federal courts should apply ordinary state-law principles that govern the formation of contracts." Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1170 (9th Cir. 2003). Arbitration agreements are "a matter of contract" and "may be invalidated by 'generally applicable contract defenses, such as fraud, duress, and unconscionability.' " Rent-A-Ctr. West, Inc. v. Jackson, 561 U.S. 63, 67-68 (2010). As the party seeking to avoid arbitration, Delgadobears the burden of showing that the Arbitration Agreement does not cover this dispute. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 91-92 (2000).

Delgado fails to meet that burden here. CashCall offers ample evidence showing that Delgado entered into an arbitration agreement by completing the necessary steps and signing the Note at issue. First, when Delgado completed his application, he was presented with all the terms and conditions.⁷ (Doc. No. 8-1 at 8-12.) Pages three through five of the Note describe the terms of the Arbitration Provision and included four separate boxes that had to be clicked to "check off he read, understood and accepted them. (Id.) Included in the terms and conditions was an option for Delgado to opt-out of the arbitration agreement entirely by notifying CashCall in writing within 60 calendar days of the date of the Note [November 30, 2012]. (Id.) Finally, Delgado executed the Note by providing his electronic signature.⁸ (Id.) In support of its motion,...