Wallis v. Ad Astra Recovery Serv. Inc

JOSHUA WALLIS, Plaintiff,

v.AD ASTRA RECOVERY SERVICES, INC., Defendant.

Case No. 10-CV-647

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

Dated: February 24, 2011

ORDER

On July 29, 2010, the plaintiff, Joshua Wallis ("Wallis"), filed a complaint against the defendant, Ad Astra Recovery Services, Inc. ("Ad Astra"), alleging violations of the Fair Debt Collection Practices Act ("FPCPA"), 15 U.S.C. § 1692 et seq. (Docket #1). Specifically, Mr. Wallis alleges that the defendants, in attempting to collect $625, violated the FPCPA by: (1) contacting the plaintiff after he sent a cease and desist letter; (2) "engaging in conduct the natural consequence of which is to harass, oppress, or abuse the Plaintiff in connection with the collection of a debt"; and (3) "causing a telephone to ring repeatedly and continuously with the intent to annoy, abuse, and harass" Mr. Wallis. (Compl. ¶ 17). In response to the complaint, on October 4, 2010, Ad Astra filed a motion to compel arbitration. (Docket #4). With the benefit of the parties' briefs, the court proceeds to examine the legal efficacy of the defendant's motion.

The defendant submits that the plaintiff, a resident of Wisconsin, applied for and obtained a loan from Speedy Cash, a Kansas Corporation, on October 30, 2009.¹ (Def.'s Br. at 2). On that same day, Mr. Wallis and an agent for Speedy Cash signed an agreement that provided the plaintiff with $500. (Docket #6 Ex. A at 1). In exchange for the immediate loan of $500, the plaintiff agreed to pay $625 on November 13, 2009. Id. The parties also agreed to a series of contract provisions, including a lengthy arbitration provision that stated, in relevant part, that "[u]nless prohibited by applicable law and unless you reject the Arbitration provision... you and we agree that either party may elect to require arbitration of any Claim." Id. An affidavit attached to the defendant's motion indicates that Speedy Cash has indeed elected to "require Plaintiff to submit [his] claims against Ad Astra to arbitration." (Miller Aff. ¶ 8). The scope of the arbitration provision of Wallis and Speedy Cash's agreement is quite broad, with the term "Claim" being defined as:

any claim, dispute or controversy between you and us ("including related parties"...) that arises from or relates in any way to Services you request or we provide, now, in the past or in the future; the Applications (or any prior or future application); any agreement relating to Services ("Services Agreement"); any of our marketing, advertising, solicitations and conduct relating to your request for Services, our collection of any amounts you owe, our disclosure of or failure to protect any information about you; or the validity, enforceability or scope of this Arbitration Provision. "Claim" is to be given the broadestpossible meaning and includes claims of every kind and nature, including but not limited to, initial claims, counterclaims, cross-claims and third-party claims, and claims based on any constitution, statute, regulation, ordinance, common law rule... and equity.

(Docket #6 Ex. A at 3) (emphasis added). The agreement further specifies that the "related parties" include "any parent company and affiliated entities" "including Ad Astra Recovery Services, Inc." Id. at 4. The contract further provides that the administrator of an arbitration can be, in relevant part, the American Arbitration Association. Subsequently, Speedy Cash hired Ad Astra to collect the underlying debt (Def.'s Br. at 3), and the plaintiff's complaint is directed towards actions the defendant allegedly took in attempting to collect $625 for Speedy Cash. With this background in mind, the court proceeds to the examine the legal framework for ruling on a motion to compel arbitration.

Motions to compel arbitration are reviewed under the summary judgment standard set forth under Fed. R. Civ. P. 56, where the court must consider "all of the non-moving party's evidence construe all reasonable inferences in the light most favorable to the non-moving party." Tickanen v. Harris & Harris, Ltd., 461 F. Supp. 2d 863, 866 (E.D. Wis. 2006) (internal citations omitted). The statutory basis for a motion to compel arbitration stems from the Federal Arbitration Act ("FAA"), which allows a party to an arbitration agreement to petition the district court to compel arbitration in the manner provided for in the agreement. 9 U.S.C. § 4. If a case pending in the district court involves issues referable to arbitration under anarbitration agreement, a party may move the court to stay the proceedings pending arbitration of those issues. 9 U.S.C. § 3. In order to determine whether a binding arbitration agreement exists, the court must look to principles of state contract law. Tinder v. Pinkerton Security, 305 F.3d 728, 733 (7th Cir. 2002); see 9 U.S.C. § 2 (mandating enforceability of valid written arbitration agreements).

The parties' briefs fail to include substantive discussion regarding the body of law that will govern the interpretation of the arbitration agreement. Generally, a federal court employs the conflict-of-laws rules of the state where it sits. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). In Wisconsin, a contractual choice-of-law provision will usually be enforced, unless enforcement would contravene "important public policies of the state whose law would be applicable if the parties' choice of law provision were disregarded." Henderson v. United States Bank, N.A., 615 F. Supp. 2d 804, 808 (E.D. Wis. 2009) (quoting Drinkwater v. Am. Family Mut. Ins. Co., 2006 WI 56, 290 Wis. 2d 642, 652, 714 N.W.2d 568 (2006)). Here, the underlying agreement provides that Kansas law governs the interpretation of the arbitration clause. (Docket #6 Ex. A). While not argued by the parties, the court can only conclude that, if not for the choice of law clause in the agreement, the law governing the interpretation of the arbitration clause would be Wisconsin law, as Wisconsin appears to have the most contacts with respect to the parties' agreements given the residency of the plaintiff and the location of where the loan services were rendered. See Sybron Transition Corp. v. Security Ins. Co., 107 F.3d 1250, 1255 (7th Cir. 1997) (discussing Wisconsin's "grouping-of-contacts approach" to choice of law in contract cases). Hence, the first issue the court must resolve is whether any public policy of the state of Wisconsin would prevent the enforcement of the underlying arbitration agreement. Henderson, 615 F. Supp 2d. at 808.

The only public policy argument raised by the plaintiff as to why the arbitration provision cannot be enforced is that the provision is "unconscionable."² (Pl.'s Resp. Br. at 4). Under Wisconsin law, in order for an arbitration agreement to be declared invalid as unconscionable, the provision "m ust be determ ined to be both procedurally and substantively unconscionable, " Wis. Auto Title Loans, Inc. v. Jones, 290 Wis. 2d 514, 531-32, 714 N.W.2d 155 (2006), meaning the court must find unconscionability in both: (1) the factors that bear on the formation of the contract; and (2) the contract terms themselves. Westerfield v. Quizno's Franchise Co., LLC, 527 F. Supp. 2d 840, 852 (E.D. Wis. 2007). "Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." Discount Fabric House of Racine, Inc. v. Wisconsin Tel. Co., 117 Wis. 2d 587, 345 N.W.2d 417, 424 (1984). The central argument the plaintiff raises as towhy the agreement is unconscionable is that the agreement contained "boilerplate language" that was "not bargained for." (Pl.'s Resp. Br. at 7). The plaintiff's argument is premised on the argument that he did not actually sign the agreement, id., ("[The] provision is... completely unconscionable... because again, Plaintiff did not sign this agreement"), but Mr. Wallis does not present any admissible evidence to support such an assertion. Moreover, "adhesion contracts generally are valid, " Scaffidi v. Fiserv, Inc., 218 Fed. Appx. 519, 521 (7th Cir. 2007), and Wisconsin law presumes arbitration provisions to be valid. Wis. Auto Title Loans, Inc., 714 N.W.2d at 163-64. There is no coherent reason as to why the arbitration was so "one-sided, " as the plaintiff asserts (Pl.'s Br. at 7), to overcome the presumptions afforded the underlying agreement by Wisconsin law. In fact, the arbitration provisions are anything but "one sided, " as either party can elect to arbitrate a dispute related to the contract. (Docket #6 Ex. A at 3). More broadly, the bald assertion that a clause that allows for arbitration is, in and of itself, unconscionable has been squarely rejected by the Seventh Circuit, as the enforcement of the arbitration clause at issue here would merely place the resolution of this dispute in another forum. See Carbajal v. H&R Block Tax Servs., 372 F.3d 903, 906 (7th Cir. 2004) ("The cry of 'unconscionable' just repackages the tired assertion that arbitration should be disparaged as second-class adjudication... eople are free to opt for bargain-basement adjudication.") The plaintiff states that the terms of the arbitration agreement are so broad that "any action the defendanttakes against plaintiff to try and collect [the] debt would be subject to binding arbitration, " rendering the term unconscionable. (Pl.'s Resp. Br. at 6). However, the breadth of...