United States District Court, E.D. Kentucky, Southern Division, London
MEMORANDUM OPINION & ORDER
GREGORY F. VAN TATENHOVE, District Judge.
This matter is before the Court upon the Motion to Compel Arbitration filed by Defendant Cavalry SPV I, LLC ("Cavalry"), in which Cavalry requests the Court to compel arbitration and to stay further proceedings in this case pending arbitration, pursuant to the Federal Arbitration Act, 9 U.S.C. §1 et seq. [R. 16.] For the reasons explained below, Cavalry's motion will be GRANTED.
This case arises out of a class action lawsuit filed by Plaintiff Sheila Martin concerning the collection of her credit card debt. At some point in the past, Martin opened a Lowes credit card, which was originally issued by GE Capital Retail Bank ("GE") and was governed by a Credit Card Agreement. [R. 1 at ¶ 10; R. 16-1 at 1-2.] According to Martin, GE "charged off" her credit card account on August 11, 2009, when the charge-off amount Martin owed on her debt was $806.50. [R. 20 at 11.] After that point, GE no longer imposed or accrued interest on Martin's credit card account. [ Id. ]
The Credit Card Agreement expressly states that GE has the right to "sell, assign or transfer any of [its] rights or obligations under [the] Agreement." [R. 16-1 at 2; R. 16-2 (Ex. 1) at 8 (Rivera Decl. Ex. C).] Pursuant to that clause, Defendant Cavalry SPV I, LLC ("Cavalry") purchased Martin's credit card account from GE on September 23, 2010. [R. 16-1 at 2.] In January, 2013, Cavalry attempted to collect on Martin's debt. According to Martin, she and Cavalry reached an agreement in which Martin would pay Cavalry $75.00 per month until her debt was satisfied, but on April 4, 2013, Cavalry filed a motion for default judgment against Martin in Whitley County District Court for failure to pay her debt. [R. 1 at ¶¶ 11-14.] Martin then filed suit against Cavalry in this Court on April 30, 2013, alleging that Cavalry had violated the Fair Debt Collections Practices Act, 15, U.S.C. § 1692, et seq. ("FDCPA"), as well as Kentucky's interest and usury statute, KRS 630.010, et seq. [ See R. 1.] Specifically, Martin alleges that Cavalry violated the FDCPA by illegally attempting to collect a debt, accruing and imposing interest retroactively, and charging interest at a rate of 21.99% which exceeds the interest rate allowed by Kentucky law. [R. 1 at ¶¶ 19-23.]
In support of the instant motion, Cavalry contends that its purchase of Martin's account from GE also included a transfer of GE's contractual rights under the Credit Card Agreement. The Credit Card Agreement contains an arbitration provision which expressly states that "any past, present, or future legal dispute or claim of any kind" must be resolved by binding arbitration if any party to the agreement elects to arbitrate. [R. 16-1 at 2; R. 16-2 (Ex. 1) at 8 (Rivera Decl. Ex. C).] Because of that provision, Cavalry argues that pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §1 et seq., and under the terms of the Credit Card Agreement, the Court is required to compel arbitration in this case, and that § 3 of the FAA also requires the Court to stay further proceedings pending the outcome of arbitration. [R. 16-1 at 4-10.]
In response, Martin contends that Cavalry cannot invoke the arbitration provision because Cavalry only purchased an account receivable and did not purchase GE's other contractual rights contained in the Credit Card Agreement. Specifically, Martin argues that arbitration should not be compelled because 1) the scope of GE's assignment of her account to Cavalry did not include a transfer of GE's corresponding contractual rights, and therefore GE cannot invoke the arbitration provision against her [R. 20 at 2-10]; and 2) that even if the assignment included the arbitration provision, Cavalry's alleged violations of the FDCPA and Kentucky's usury laws are outside the scope of the agreement to arbitrate. [ Id. at 11-15.]
Cavalry bases its argument on the Federal Arbitration Act ("FAA"), 9 U.S.C. §1 et seq., which "manifests a liberal federal policy favoring arbitration agreements." Masco Corp. v. Zurich American Ins. Co., 382 F.3d 624, 626 (6th Cir. 2004) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)) (internal quotation marks omitted). Section 2 of the FAA states that arbitration clauses in commercial contracts "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; see also Javitch v. First Union Sec., Inc., 315 F.3d 619, 624 (6th Cir. 2003) (applying §2 in the context of the Sixth Circuit's interpretation of arbitration clauses). According to the United States Supreme Court, the FAA "places arbitration agreements on an equal footing with other contracts, and requires courts to enforce them according to their terms." Rent-A-Center, Est, Inc. v. Jackson, 130 S.Ct. 2772, 2776 (2010) (internal citations omitted).
When a party is "aggrieved' by the failure of another party to arbitrate under a written agreement for arbitration, '" that party "may petition a federal court for an order directing that such arbitration proceed in the manner provided for'" by the contract. Rent-A-Center, 130 S.Ct. at 2776 (quoting 9 U.S.C. § 4). The court then "shall order arbitration upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue." Id. (quoting 9 U.S.C. § 4). The FAA further provides that once the court determines that the dispute "is referable to arbitration" under an agreement to arbitrate, the court must stay all further proceedings in the case "until the arbitration process is complete." Fazio v. Lehman Bros., Inc., 340 F.3d 386, 392 (6th Cir. 2003) (citing 9 U.S.C. §3).
When a "contract contains an arbitration clause, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be in favor of coverage." AT&T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 650 (1986) (internal citations and quotation marks omitted). "Courts are to examine the language of the contract in light of the strong federal policy in favor of arbitration, " and "any ambiguities in the contract or doubts as to the parties' intentions should be resolved in favor of arbitration." Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir. 2000). This presumption of arbitrability is "particularly applicable" where the arbitration clause at issue is broad, such as clauses that submit to arbitration "any and all disputes, " or "any differences arising with respect to the interpretation of this contract...." AT&T Techs., 475 U.S. at 650; see also United Steelworkers of Am. v. Mead Corp., Fine Paper Div., 21 F.3d 128, 131-32 (6th Cir. 1994). Despite the presumption in favor of arbitration, however, a party cannot be compelled to arbitrate "any dispute that the party has not agreed to so submit." Bratt Enterprises, Inc. v. Noble Int'l Ltd., 338 F.3d 609, 612 (6th Cir. 2003). "While ambiguities... should be resolved in favor of arbitration, we do not override the clear intent of the parties, or reach a result inconsistent with the plain text of the contract...." EEOC v. Waffle House, Inc., 534 U.S. 279, 294 (2002) (internal citations omitted).
Before compelling an unwilling party to settle a dispute by arbitration, the Court must apply a two-part test "to determine whether the dispute is arbitrable; meaning that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement." Javitch, 315 F.3d at 624. Although the FAA "preempts state laws and policies regarding arbitration, " in determining whether a "valid agreement" to arbitrate exists between the parties, the Court should apply state contract law, "provided the contract law applied is general and not specific to arbitration clauses." Fazio, 340 F.3d at 392-933 (citing Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996)). "[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem'l Hosp., 460 U.S. at 24-2. The Sixth Circuit has recognized, however, that even when applying state-law principles of contract interpretation, "due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration.'" Bratt Enterprises, Inc., 338 F.3d at 613 (quoting Volt Info. Scis., Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 475-76 (1989)).
Finally, "the party seeking to avoid arbitration bears the burden of establishing that Congress intended to preclude arbitration of the statutory claims at issue." Green Tree Fin. Corp.-Ala.v. Randolph, 531 U.S. 79, 91-92 (2000); see also ...