Johnson v. Jora Credit of Wis.

1

Chriss Johnson, Plaintiff-Appellant, Plaza Services, LLC, Plaintiff-Respondent, v. Jora Credit of Wisconsin, LLC, Defendant-Respondent.

No. 2022AP48

Court of Appeals of Wisconsin, District IV

April 20, 2023

This opinion will not be published. See Wis.Stat. Rule 809.23(1)(b)5.

APPEAL from an order of the circuit court for Dane County Cir. Ct. No. 2021CV548 RHONDA L. LANFORD, Judge. Affirmed.

Before Blanchard, P.J., Fitzpatrick, and Nashold, JJ.

Per curiam opinions may not be cited in any court of this state as precedent or authority, except for the limited purposes specified in Wis.Stat. Rule 809.23(3).

PER CURIAM.

¶1 Chriss Johnson appeals an order of the Dane County Circuit Court compelling arbitration of his claims against Plaza Services, LLC ("Plaza") and Jora Credit of Wisconsin, LLC ("Jora"). Johnson argues that the circuit court erred in compelling arbitration for two reasons: (1) Plaza and Jora waived their right arbitrate Johnson's claims; and (2) the parties' arbitration agreement does not cover part of Johnson's claim against Plaza. For the following reasons, we affirm.

BACKGROUND

¶2 There is no dispute as to the following material facts.

¶3 Johnson entered into a Consumer Installment Loan Agreement ("the Agreement") to repay $2,600 he borrowed from Jora. As we will discuss later in this opinion, the Agreement contains a provision that requires nearly all disputes between Johnson and Jora to be resolved through arbitration (the "arbitration provision"). However, the arbitration provision permits the parties to resolve their disputes in small claims court if the small claims court has the authority to determine those disputes.

¶4 Jora assigned to Plaza its rights under the Agreement. When Johnson failed to make the payments required pursuant to the Agreement, Plaza filed a small claims action against Johnson. Nearly six months after Plaza initiated the small claims action, Johnson asserted a counterclaim alleging that Plaza violated the Wisconsin Consumer Act pursuant to Wis.Stat §§ 425.107 and 427.104 (2021-22).^[1] Because Johnson's counterclaim exceeded the monetary jurisdiction of the small claims court, Plaza's complaint and Johnson's counterclaim were transferred to circuit court and converted to a civil action. See Wis Stat. § 799.02(1) (if a party files a counterclaim in a small claims action that exceeds the jurisdiction of the small claims court, the entire matter shall be tried as a civil action under Wis.Stat. chs. 801 to 847).

¶5 On the same day that he filed his counterclaim against Plaza Johnson filed a civil action against Jora in circuit court alleging the same causes of action as his counterclaim against Plaza. Jora was served with the complaint in this civil action more than two months after it was filed, and Jora timely filed an answer to the complaint. In Jora's answer, Jora asserted an affirmative defense that "[Johnson's] claim may be subject to arbitration."

¶6 On the same day that Jora filed its answer, Plaza and Jora filed a joint motion to consolidate Johnson's lawsuit against Jora with the lawsuit between Plaza and Johnson. The motion to consolidate indicated that Plaza and Johnson had conducted some "preliminary discovery," but that Plaza and Jora sought to reserve their right to arbitrate Johnson's claims if the cases were consolidated. Two months after the motion to consolidate was filed, the circuit court granted the motion and consolidated the cases.

¶7 One day after the court granted the consolidation motion Plaza and Jora filed a joint motion to compel arbitration. The circuit court granted the motion, over Johnson's objection, and ordered that the matter be submitted to an arbitrator.^[2] Johnson appeals the court's order.

¶8 Additional material facts are mentioned in the following discussion.

DISCUSSION

¶9 Johnson argues that the circuit court erred in granting the motion to compel arbitration filed by Plaza and Jora (collectively, "the respondents"). First, Johnson argues that Plaza and Jora each waived the right to arbitrate Johnson's claims. Second, Johnson argues that the Agreement's arbitration provision does not apply to his requests for injunctive or equitable relief against Plaza. We begin by setting forth the governing principles and our standard of review regarding arbitration agreements.

I. Governing Principles and Standard of Review Regarding Arbitration Agreements.

¶10 This appeal requires us to interpret the arbitration provision in the Agreement. The interpretation of the arbitration provision involves contract interpretation, which is a question of law that we review de novo. First Weber Grp., Inc. v. Synergy Real Est. Grp., LLC, 2015 WI 34, ¶20, 361 Wis.2d 496, 860 N.W.2d 498.

¶11 The arbitration provision in the Agreement states that arbitration is governed by the Federal Arbitration Act ("FAA"), and the parties do not dispute that the FAA and germane federal case law apply to this dispute. The FAA provides that arbitration agreements "shall be valid, irrevocable, and enforceable." 9 U.S.C. § 2. This language reflects the "fundamental principle that arbitration is a matter of contract." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 67 (2010). The FAA "places arbitration agreements on an equal footing with other contracts and requires courts to enforce them according to their terms." Id. (citations omitted). If an issue in a lawsuit is covered by an arbitration provision, a court "shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3.

II. Plaza and Jora Did Not Waive Their Right to Arbitrate.

¶12 Johnson argues that Plaza and Jora waived their right to arbitrate Johnson's claims. We begin by setting forth the governing principles and our standard of review regarding waiver of the right to arbitrate.

A. Governing Principles and Standard of Review Regarding Waiver of the Right to Arbitrate.

¶13 "Like any other contractual right, the right to arbitrate can be waived."^[3] Smith v. GC Servs. Ltd. P'ship, 907 F.3d 495, 499 (7th Cir. 2018).

Waiver can be either explicit or inferred from a party's actions. Brickstructures, Inc. v. Coaster Dynamix, Inc., 952 F.3d 887, 891 (7th Cir. 2020). Here, the parties agree that Plaza and Jora did not explicitly waive their right to arbitrate, so we must determine whether waiver can be inferred from their actions.

¶14 "For waiver of the right to arbitrate to be inferred, we must determine that, considering the totality of the circumstances, a party acted inconsistently with the right to arbitrate." Kawasaki Heavy Indus., Ltd. v. Bombardier Recreational Prods., Inc., 660 F.3d 988, 994 (7th Cir. 2011). Courts may consider several factors in determining whether waiver may be inferred, but "diligence or the lack thereof should weigh heavily in the decision." Id. In determining whether a party was diligent, a court considers whether the party did "all it could reasonably have been expected to do to make the earliest feasible determination of whether to proceed judicially or by arbitration." Smith, 907 F.3d at 499. Other non-dispositive factors that we consider include whether the allegedly waiving party "participated in litigation, substantially delayed its request for arbitration, or participated in discovery." Kawasaki, 660 F.3d at 994. Other parties need not show that they were prejudiced by the purported waiver. Morgan v. Sundance, Inc., 142 S.Ct. 1708, 1711 (2022).

¶15 When the allegedly waiving party has participated in litigation, the "key determination" is whether the party "manifested an intent to proceed with litigation." Kawasaki, 660 F.3d at 995. "This policy prevents parties from waiting to see how they fare in a judicial forum before choosing arbitration [and] prevents the duplicative adjudication of disputes." Id. at 994-95. "[W]hen a party chooses to proceed in a judicial forum, there is a rebuttable presumption that the party has waived its right to arbitrate." Id. at 995.

¶16 Whether a party has waived its right to compel arbitration has "both a factual and a legal dimension." Brickstructures, 952 F.3d at 891. "We review de novo the [circuit] court's determinations regarding the legal principles, like the applicable common law rules and presumptions, but defer to the [circuit] court's findings with respect to the facts and the legal consequences of those facts." Id. Here, the parties do not dispute any material facts, so our review of the circuit court's decision is de novo.

¶17 We first consider whether Plaza waived its right to arbitrate.

B. Plaza Did Not Waive Its Right to Arbitrate.

¶18 Johnson argues that Plaza waived its right to arbitrate by litigating in small claims court and continuing to litigate after Johnson filed his counterclaim. Plaza argues that its conduct in the small claims action did not waive its right to arbitrate. Instead, Plaza contends that the proper focus of the analysis in this case is Plaza's conduct after Johnson filed his counterclaim, and that this conduct was consistent with Plaza's right to arbitrate. For the following reasons, we conclude that Plaza did not waive its right to arbitrate Johnson's counterclaim.

1. Plaza Did Not Waive Its Right to Arbitrate by Litigating in Small Claims Court Against Johnson.

¶19 The arbitration provision states in pertinent part: "In this [provision], the word 'Disputes' has the broadest possible meaning. This [provision] governs all 'Disputes' involving the parties to this Agreement and/or our servicers and agents." The arbitration provision requires all disputes to be resolved in arbitration except for disputes that may be resolved in small claims court:

Each party has the right to

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