Dillon v. BMO Harris Bank, N.A.

173 F.Supp.3d 258

James Dillon, Plaintiff,

v.BMO Harris Bank, N.A., et al., Defendants.

1:13-CV-897

United States District Court, M.D. North Carolina.

Signed March 23, 2016

Darren T. Kaplan, Darren Kaplan Law Firm, P.C., New York, NY, F. Hill Allen, IV, Tharrington Smith, Raleigh, NC, Hassan A. Zavareei, Jeffrey D. Kaliel, Tycko & Zavareei LLP, Washington, DC, Jeffrey M. Ostrow, Kopelowitz Ostrow P.A., Ft. Lauderdale, FL, John Austin Moore, Norman E. Siegel, Steve Six, Stueve Siegel Hanson LLP, Kansas City, MO, for Plaintiff.

Debra Bogo-Ernst, Lucia Nale, Matthew C. Sostrin, Mayer Brown, LLP, Chicago, IL, Kevin S. Ranlett, Mayer Brown, LLP, Washington, DC, Mary Kathryn Mandeville, Alexander Ricks PLLC, Mark Vasco, Bryan Cave, LLP, Charlotte, NC, Carl N. Patterson, Jr., Clifton Lennis Brinson, Isaac Augustin Linnartz, Smith Anderson Blount Dorsett Mitchell & Jernigan, L.L.P., Garth A. Gersten, Knott & Boyle, PLLC, Raleigh, NC, Reid Calwell Adams, Jr., Jonathan Reid Reich, Womble Carlyle Sandridge & Rice, Winston-Salem, NC, Eric A. Pullen, Etan Tepperman, Leslie S. Hyman, Pulman, Cappuccio, Pullen, Benson & Jones, LLP, San Antonio, TX, Ann W. Ferebee, Michael P. Carey, Bryan Cave LLP, Atlanta, GA, Eric Rieder, Bryan Cave LLP, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

The defendant Bay Cities Bank has moved to compel arbitration based on documents purporting to be loan agreements between the plaintiff, James Dillon, and a pair of non-party payday loan lenders. (Doc. 154). The parties agree that Mr. Dillon and the lenders entered into loan contracts online after Mr. Dillon provided information requested by each lender. Mr. Dillon agreed to the contracts not by physically signing a written agreement, but by clicking boxes on a website accepting terms required by the lenders. At issue is whether the lenders presented and Mr. Dillon accepted an arbitration provision as part of the loan agreement.

If the lender did not present an arbitration provision to Mr. Dillon during the click-through process, then there was no mutual assent to arbitrate, and he cannot be forced to arbitrate claims arising from the loans. If, however, the lender did present an arbitration provision to Mr. Dillon and Mr. Dillon clicked through and accepted that provision, then the arbitration provisions shown to him are arbitration agreements enforceable by the lenders under the Federal Arbitration Act (“FAA”), subject to any equitable defenses.

Bay Cities has provided no evidence from the lenders showing that the arbitration provisions in the documents were presented to Mr. Dillon. The other evidence, including the testimony of non-party witnesses, Mr. Dillon's testimony, and the proffered documents themselves, is insufficient to satisfy the Court that Mr. Dillon and the lenders mutually agreed to the arbitration provisions. The motion will be denied.

BACKGROUND

Mr. Dillon alleges that he borrowed money at usurious rates from several online lenders in different transactions. (Doc. 1 at ¶¶ 81-103). To electronically deposit the loan proceeds and to debit Mr. Dillon's bank account for repayments, the lenders needed access to the Automated Clearing House (“ACH”) Network. (Id. at ¶ 6). Bay Cities and the other defendants are banks that allegedly provided that access by “originating” debits and credits on the ACH Network for the lenders. (Id. at ¶¶ 6, 8).

Bay Cities allegedly originated transactions in connection with loans Mr. Dillon received from USFastCash and VIN Capital. (Id. at ¶¶ 86-87, 90-91). The complaint alleges that Bay Cities, by providing this access, violated the Racketeer Influenced and Corrupt Organization Act. (Id. at ¶ 174). Mr. Dillon also asserts claims pursuant to North Carolina law. (E.g. , id. at ¶ 188). The lenders are not parties to this lawsuit.

Bay Cities moved to compel arbitration and to stay this action until arbitration is completed. (Doc. 154). It proffered documents it contends are the loan agreements with USFastCash and VIN Capital that Mr. Dillon referenced in his complaint; these documents contain arbitration provisions. (Doc. 123-1 at 15-25; Doc. 123-2 at 7-12). Bay Cities further contends it is entitled to enforce the arbitration provisions. (Doc. 155 at 22-28). Mr. Dillon contends the loan agreements proffered by Bay Cities have not been properly authenticated. (Doc. 173 at 18-25). In the alternative, Mr. Dillon asserts that the USFastCash arbitration provision is unconscionable, (id. at 9-18), and that Bay Cities is not a party to and cannot enforce either arbitration provision. (Id. at 25-29).

It is undisputed that Mr. Dillon applied online for loans from USFastCash and VIN Capital by providing information requested by the lenders and by clicking through various terms and conditions, that Mr. Dillon did not read the terms except those about the loan amounts, and that USFastCash and VIN Capital accepted Mr. Dillon's online applications and lent him money. Thus, there is no dispute that Mr. Dillon and the lenders entered into contracts. It is also undisputed that Mr. Dillon never viewed the documents proffered here by Bay Cities in their current format and that neither document bears Mr. Dillon's physical signature. The questions are whether the lenders presented the arbitration provisions in the proffered documents to Mr. Dillon during the online loan process and, therefore, whether the proffered documents accurately reflect the terms to which Mr. Dillon and the lenders mutually agreed.

STANDARD

The party seeking to compel arbitration under the FAA has the burden to prove several elements, including, as relevant here, a written agreement that includes an arbitration provision that purports to cover the dispute. Adkins v. Labor Ready, Inc. , 303 F.3d 496, 500–01 (4th Cir.2002) ; see also Hightower v. GMRI, Inc. , 272 F.3d 239, 242 (4th Cir.2001) ; Erichsen v. RBC Capital Mkts., LLC , 883 F.Supp.2d 562, 568 (E.D.N.C.2012).¹ Arbitration is “a matter of consent, not coercion.” Volt Info. Scis., Inc. v. Stanford Univ. , 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). “[A] party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.” Am. Bankers Ins. Grp., Inc. v. Long , 453 F.3d 623, 627 (4th Cir.2006) (quotation omitted). If the parties agreed to arbitrate, then “courts must place arbitration agreements on an equal footing with other contracts and enforce them according to their terms.” AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) (internal citations omitted).

Whether a party agreed to arbitrate is a question decided by state law governing contract formation. First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ; Adkins , 303 F.3d at 501. The contract enforceability principles of the forum state apply. Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 630–31, 129 S.Ct. 1896, 173 L.Ed.2d 832 (2009).

Before a valid contract can exist under North Carolina law,² the parties must “assent to the same thing in the same sense, and their minds meet as to all terms.” Normile v. Miller , 313 N.C. 98, 103, 326 S.E.2d 11, 15 (1985). The party seeking to compel arbitration has the burden to prove a valid arbitration agreement exists. Slaughter v. Swicegood , 162 N.C.App. 457, 461, 591 S.E.2d 577, 581 (2004). The agreement need not be signed if the parties otherwise commit themselves by act or conduct. Krusch v. TAMKO Bldg. Prods., Inc. , 34 F.Supp.3d 584, 589 (M.D.N.C.2014) ; Real Color Displays, Inc. v. Universal Applied Techs. Corp. , 950 F.Supp. 714, 717 (E.D.N.C.1997) ; Howard v. Oakwood Homes Corp. , 134 N.C.App. 116, 120, 516 S.E.2d 879, 882 (1999).

Although there is a legal presumption in favor of arbitrability, that presumption applies only when a “validly formed and enforceable arbitration agreement is ambiguous about whether it covers the dispute at hand,” not when there is a question as to whether an agreement exists between the parties in the first place. Granite Rock Co. v. Int'l Bhd. of Teamsters , 561 U.S. 287, 301–02, 130 S.Ct. 2847, 177 L.Ed.2d 567 (2010) ; see also Raymond James Fin. Servs., Inc. v. Cary , 709 F.3d 382, 386 (4th Cir.2013). Compelling arbitration is appropriate under the FAA only when there is “a judicial conclusion” that there is a validly formed, express agreement to arbitrate. Granite Rock , 561 U.S. at 303, 130 S.Ct. 2847. The language of the FAA itself says the district court will enter an order to arbitrate only “upon being satisfied” there is an agreement to arbitrate.

9 U.S.C. § 4. If there is an unresolved dispute over the existence of an arbitration agreement, the court conducts a “restricted inquiry into factual issues.” Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ; see also Dillon v. BMO Harris Bank , 787 F.3d 707, 716 (4th Cir.2015) ; Glass v. Kidder Peabody & Co. , 114 F.3d 446, 453 (4th Cir.1997).

Where a proponent of an arbitration agreement offers credible, admissible evidence to support a finding of an agreement to arbitrate, the opponent cannot rely on mere unawareness of whether it had made an arbitration agreement. Almacenes Fernandez, S.A. v. Golodetz , 148 F.2d 625, 628 (2d Cir.1945) (holding that when the proponent had shown, inter alia , that all sales contracts contained the arbitration agreement, that the opponent had accepted two such contracts in writing, and that the opponent merely asserted it “lacked sufficient knowledge” to determine whether it had agreed to arbitrate, the district court “had ample ground for being satisfied” there was an arbitration agreement). In disputed cases, the party opposing arbitration must unequivocally deny that there was an arbitration agreement and produce evidence to substantiate the denial. Drews Distrib., Inc. v. Silicon Gaming, Inc. , 245 F.3d 347, 352 n.3 (4th Cir.2001). This...