United States District Court, E.D. Louisiana
November 18, 2014
LATOISHA VAN BUREN,
PRO SE PLANNING, INC., Section
ORDER AND REASONS
IVAN L.R. LEMELLE, District Judge.
Before the Court is Defendant's, Pro Se Planning, Inc. ("Defendant"), Motion to Compel Arbitration, or Alternatively, Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(3), or Alternatively, to Transfer Pursuant to 28 U.S.C. §1404(a) (Rec. Doc. 7); Plaintiff's, Latoisha Van Buren ("Plaintiff") opposition thereto (Rec. Doc. 11); and Defendant's Reply (Rec. Doc. 15). Defendant seeks recognition of the enforceability of an alleged arbitration agreement contained in a contract executed with Plaintiff as well as order of this Court dismissing or staying the instant proceedings pending arbitration of this dispute. Alternatively, in the event the Court finds the alleged arbitration agreement unenforceable, Defendant seeks dismissal or transfer of this dispute, pursuant to the terms of a forum selection clause contained in the subject contract designating the state or federal courts of Washington as the venue for disputes arising out of the contract.
Facts and Cause of Action:
Contentions of Movant:
Alternatively, Defendant contends the forum selection clause included in the TOU designates the exclusive venue for any dispute arising out of or pertaining to the subject matter of the TOU to be state or federal court in Washington. Accordingly, to the extent the Court might find the arbitration agreement (or portions thereof) unenforceable, Defendant argues this Court must dismiss the instant action for improper venue, or alternatively, transfer the matter to the appropriate federal district court in the state of Washington for further consideration.
Contentions of Opponent:
Plaintiff opposes arbitration on four grounds. First, Plaintiff argues the arbitration agreement at issue here violates the "effective vindication" doctrine sanctioned by the United States Supreme Court in cases such as Mitsubishi Motors Corp. v. Soler Chrylser-Plymouth, Inc., 473 U.S. 614, 636-37, 105 S.Ct. 3346, 3360, 87 L.Ed.2d 444 (1985) and Green Tree Fin. Corp.-Alabama v. Randolph., 531 U.S. 79, 91-92, 121 S.Ct. 513, 522-23, 148 L.Ed.2d 373 (2000). This, Plaintiff argues, is because the cost of arbitration is likely to far exceed the amount of any potential recovery, thereby operating as an impermissible liability shield for Defendant. Second, Plaintiff argues the arbitration clause is unenforceable as illusory because Defendant has retained the right to unilaterally alter the terms of the agreement at any time without notice to Plaintiff. Third, Plaintiff argues there is no applicable arbitration agreement at all, because the alleged agreement to arbitrate is part of a broader contract that is contrary to public policy and void ab initio. Finally, Plaintiff argues the alleged arbitration agreement is unenforceable on grounds of unconscionability, based primarily on its physical appearance (i.e., that it was concealed) and also on the lack of mutuality in terms of its enforcement.
With respect to the forum selection clause ("FSC") discussed supra, Plaintiff makes the following arguments. First, Plaintiff contends the clause is inapplicable in light of its inclusion in a broader contract that is void ab initio. Second, Plaintiff argues the FSC violates the terms of 28 U.S.C. §1404(a) (the federal venue transfer statute) by failing to indicate to which specific court's jurisdiction the parties allegedly consented for purposes of venue ( i.e., that the clause fails by designating the state or federal courts of Washington). Finally, similarly as with the arbitration clause, Plaintiff argues the FSC is unenforceable due to Defendant's alleged unilateral right to alter the terms of the agreement as well as the concealment and lack of mutuality relating to the TOU generally.
Law and Analysis:
Section 2 of the Federal Arbitration Act ("FAA") provides:
A written provision in... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
9 U.S.C. §2. It is trite law at this point that §2 reflects a "liberal federal policy favoring arbitration" and "the fundamental principle that arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011)(internal citations omitted). Accordingly, courts must enforce arbitration agreements according to their terms, except "upon such grounds as exist at law or in equity for the revocation of any contract." Concepcion, 131 S.Ct. at 1746. Arbitration agreements may be invalidated only by "generally applicable contract defenses, such as fraud, duress, or unconscionability, " which are, in turn, determined according to applicable state contract law. Id.; accord Washington Mut. Fin. Co. v. Bailey, 364 F.3d 260, 264 (5th Cir. 2004)(because the purpose of the Federal Arbitration Act is to give arbitration agreements the same force and effect as other contracts, "courts apply the contract law of the particular state that governs the agreement.").
Additionally, in the context of challenges to the validity of an entire contract, the Supreme Court has established the following propositions:
First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46, 126 S.Ct. 1204, 1209, 163 L.Ed.2d 1038 (2006)(citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1983)). "But that agreements to arbitrate are severable does not mean that they are unassailable. If a party challenges the validity under § 2 of the precise agreement to arbitrate at issue, the federal court must consider the challenge before ordering compliance with that agreement under § 4." Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 71, 130 S.Ct. 2772, 2778m 177 L.Ed.2d 403 (2010).
In light of the foregoing, a court asked to compel arbitration must conduct a two-step inquiry:
"First, the court must determine whether the parties agreed to arbitrate the dispute. Once the court finds that the parties agreed to arbitrate, it must consider whether any federal statute or policy renders the claims non-arbitrable." R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir.1992). In conducting this two-step inquiry, courts must not consider the merits of the underlying action. Snap-On Tools, 18 F.3d at 1267."
Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). As to the first inquiry, two component questions must be answered: "whether there is a valid agreement to arbitrate between the parties; and... whether the dispute in question falls within the scope of that arbitration agreement." Id. However, where the arbitration agreement contains a provision referring issues of arbitrability to the arbitrator in the first instance (aka a "delegation clause"), the Supreme Court has recognized an additional layer to the arbitration analysis. As the Court stated in Rent-A-Center, supra:
[A] delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement. We have recognized that parties can agree to arbitrate gateway' questions of arbitrability, ' such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.... An agreement to arbitrate a gateway issue is simply an additional antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does any other. The additional agreement is valid under §2 save upon such grounds as exist at law or in equity for the revocation of any contract, ' and federal courts can enforce the agreement by staying federal litigation under §3 and compelling arbitration under §4.
561 U.S. at 69-70. Thus, the relevant question is "whether the delegation provision is valid under §2." Id. at 70. Importantly, as noted above, the Supreme Court has held that a challenge to the validity of a contract as a whole is insufficient to warrant court intervention in the absence of a specific challenge to the included arbitration agreement. Consequently, in the context of an arbitration agreement containing a delegation clause (which the Court has construed as an arbitration agreement nested within an arbitration agreement), the party seeking court intervention must further "challenge the delegation provision specifically, " or the court must "treat it as valid under §2, and must enforce it under §§3 and 4, leaving any challenge to the validity of the Agreement as a whole for the arbitrator." Rent-A-Center, 561 U.S. at 72.
11. DISPUTE RESOLUTION BY BINDING ARBITRATION
PLEASE NOTE THAT THIS AGREEMENT PROVIDES FOR THE MANDATORY ARBITRATION OF DISPUTES AND INCLUDES A WAIVER OF THE RIGHT TO A JURY TRIAL AND CLASS ACTION WAIVER, AS SET FORTH BELOW.
Most user issues can be resolved informally by contacting DivorceWriter customer service by e-mail at info@DivorceWriter.com. However, if you have a dispute with DivorceWriter, and you are unable to resolve the dispute informally, you and DivorceWriter agree that upon demand by either you or DivorceWriter, the dispute will be resolved through binding arbitration. A "dispute" is any unresolved disagreement between you and DivorceWriter, regardless of when the claim arose, and includes claims based on contracts, torts, statutes, regulations, common law, and equitable claims. All statutes of limitation applicable to any dispute shall apply in any arbitration between you and DivorceWriter.
YOU AGREE THAT YOU ARE EACH WAIVING THE RIGHT TO A JURY TRIAL OR A TRIAL BEFORE A JUDGE IN COURT.
You and DivorceWriter agree that: (1) the parties are participating in transactions affecting interstate commerce; (2) this arbitration provision and any resulting arbitration are governed by the Federal Arbitration Act (Title 9 of the United States Code); (3) the arbitrator shall decide any dispute regarding the interpretation, application, or enforceability of this arbitration provision; (4) neither party will disclose, to any third party, any information obtained from the other party in the arbitration proceeding, except as required by applicable law; and (5) neither party will be entitled to rely on any arbitration award, finding of fact, or conclusion of law issued in any other arbitration proceeding involving only one of the parties. This arbitration provision shall survive the termination of any other contract between you and DivorceWriter.
(Rec. Doc. 7-3 at 3)(emphasis added). As the foregoing clearly reflects, the challenged dispute resolution clause calls not only for arbitration of disputes relating to the underlying contract, but refers issues of the "interpretation, application, or enforceability of the arbitration provision" itself to the arbitrator; i.e., it includes a delegation clause. See, Rent-A-Center, 561 U.S. at 71 (deeming provision giving arbitrator "exclusive authority to resolve any dispute relating to the... enforceability... of [the] Agreement" a delegation clause). Although neither party specifically addresses the import of the delegation clause in pleadings, the presence of this provision effectively ends the Court's inquiry. Following, as this Court must, the Supreme Court's Prima Paint and Rent-A-Center line of decisions, the Plaintiff's failure to articulate a specific challenge to the delegation clause requires the Court to abstain from deciding the merits of any dispute concerning enforceability of the arbitration agreement or the underlying contract and refer the matter to arbitration. See, e.g., Rent-A-Center, 561 U.S. at 77 (Stevens, J., dissenting)("Even when a litigant has specifically challenged the validity of an agreement to arbitrate he must submit that challenge to the arbitrator unless he has lodged an objection to the particular line in the agreement that purports to assign such challenges to the arbitrator-the so-called delegation clause.'")
As noted above, even in the absence of a delegation provision, this Court may only entertain challenges to the validity of the arbitration agreement specifically, rather than to the contract as a whole. See Buckland, 546 U.S. at 448-49 ("We reaffirm today that, regardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator."). Even if the Court were to afford Plaintiff the benefit of characterizing her arbitration-specific challenges as pertaining to the delegation clause particularly, these would be limited to: (1) a challenge to the fee arrangement called for under the arbitration agreement (See Rec. Doc. 11 at 9) and (2) a challenge of substantive unconscionability (Plaintiff argues the clause is illusory and lacks mutuality) (See Rec. Doc. 9 at 12). Because Court decides the instant motion on other grounds, there is no need to address the merits of these particular challenges in any detail. However, the Court writes briefly to note the improbability of their success in the context of a challenge to the enforceability of the arbitration agreement as a whole.
As the Supreme Court noted in Green Tree Fin. Corp.-Alabama v. Randolph , where "a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." 531 U.S. 79, 91-92, 121 S.Ct. 513, 522-23, 148 L.Ed.2d 373 (2000). This, in turn, has been interpreted to require the Plaintiff to show that her particular circumstances would render her unable to afford any required fees of arbitration. See, e.g., Zuver v. Airtouch Commc'ns, Inc., 153 Wash.2d 293, 309-10, 103 P.3d 753, 763-63 (2004)(conscionability of fee-splitting provisions is to be determined in the context of the particular circumstances of the parties); accord Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 268-69 (3d Cir. 2003)(plaintiff must produce evidence showing an inability to pay and information regarding arbitration costs); Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1235 (10th Cir. 1999)(plaintiff produced sufficient evidence showing he could not afford arbitrator's fees); Bradford v. Rockwell Semiconductor Sys., Inc., 238 F.3d 549, 557-58 (4th Cir. 2001)(plaintiff must produce specific evidence showing that he could not afford the arbitrator's fees). Although Plaintiff has provided some evidence of the fees that could be charged were the matter referred to AAA Arbitration, there has been absolutely no showing of Plaintiff's particular means or ability to cover these fees (nevermind any showing as to the possibility of recovering fees or costs in the event of a favorable result in arbitration). (See Rec. Doc. 11 at 9-10). As such, Plaintiff's fee-based challenge to the enforceability of the arbitration agreement as a whole is relatively weak (even if it were directed specifically to the delegation clause). Nevertheless, this is an issue properly delegated to the arbitrator under the express provisions of the TOU.
Plaintiff's sole remaining arbitration-related challenge implicates the alleged substantive unconscionability of the agreement. Assuming arguendo that Plaintiff correctly characterizes various provisions of the agreement to allow Defendant to unilaterally alter terms of the agreement as well as affording Defendant certain unilateral advantages in opting to compel arbitration, Plaintiff's concerns are effectively mooted by the presence of a "severability clause" in the broader agreement. Paragraph 19 of the TOU provides:
(Rec. Doc. 1103 at 4-5). As such, even in the event the Court agreed with Plaintiff's particular conscionability challenges to the arbitration agreement (notwithstanding issues of the failure to challenge the delegation clause specifically), the Court would be bound to modify or excise the offending provision for purposes of rendering that agreement enforceable.
In light of the foregoing, the Court is bound to compel arbitration of the instant dispute. We turn now briefly to the issues raised in Defendant's motion relating to the propriety of the instant venue. In brief, Defendant argues the Court should dismiss this action pursuant to Fed.R.Civ.P. 12(b)(3) for improper venue, given the parties' selection of the courts of Washington in the "Governing Law" provision of the TOU. (See Rec. Doc. 7-1 at 10). This argument, however, is without merit. 28 U.S.C. §1391 defines three categories of forum where venue exists. The Supreme Court has recognized that if the chosen forum falls into any one of these categories, venue is proper and the presence or absence of a forum-selection clause in a particular contract has no bearing on the propriety of that venue. See Atlantic Marine Const. Co., Inc. v. Court for Western Dist. Of Texas, 134 S.Ct. 568, 577, 187 L.Ed.2d 487 (2013). Plaintiff resides in the Eastern District of Louisiana and was located there when she accessed Defendant's website and received the output of Defendant's services which were aimed at facilitating a divorce to occur in Louisiana. (Rec. Doc. 1-1 at 4-5). As such, a substantial part of the events or omissions giving rise to the claim occurred in this district and venue is proper pursuant to 28 U.S.C. §1391(b)(2). The Court therefore will not dismiss this action under Fed.R.Civ.P. 12(b)(3). Any further issues relating to potential transfer under 28 U.S.C. §1404(a) are deferred for possible resolution in the event the matter returns to this Court following submission to arbitration.
The Supreme Court has spoken in no uncertain terms as to the federal courts' mandate, pursuant to the FAA, to favor enforcement of arbitration clauses save on those generally applicable grounds of state contract law. Plaintiff has failed, for purposes of the instant motion, to surmount the presumption in favor of arbitration, rendered particularly onerous where, as here, the agreement includes both delegation and severability clauses. Accordingly,
IT IS ORDERED that the parties submit this matter to arbitration pursuant to the procedures called for under the TOU. IT IS FURTHER ORDERED that the case be STAYED, pursuant to 9 U.S.C. §3, pending final resolution of all arbitrable issues, the extent of which is to be determined by the arbitrator as discussed fully, infra.