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Starace v. Lexington Law Firm

United States District Court, E.D. California

June 27, 2019

MARTIN STARACE, individually and on behalf of all others similarly situated, Plaintiff,
v.
LEXINGTON LAW FIRM and DOES 1- 10, Defendants.

          ORDER GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION (DOC. NO. 13)

         This matter is before the court on defendant's motion to compel arbitration and to dismiss this putative class action lawsuit. (Doc. No. 13.) A hearing on the motion was held on June 4, 2019. Attorney Kelsey Kuberka appeared telephonically on behalf of plaintiff, and attorneys Chad Fuller and Patrick Dillard appeared telephonically on behalf of defendant. The court has considered the parties' briefs and oral arguments, and for the reasons set forth below, will grant defendant's motion to compel arbitration and dismiss this action.

         BACKGROUND

         In his complaint plaintiff alleges the following. Defendant Lexington Law Firm (“Lexington”) is a debt collection company. (Doc. No. 1 (“Compl.”) at ¶ 7.) At some point in 2018, plaintiff contacted Lexington in an attempt to repair his credit. (Id. at ¶ 10.) Lexington required his debit card information in order to provide its services. (Id. at ¶ 11.) After plaintiff provided Lexington with the information, Lexington-“without Plaintiff's knowledge or consent”-“continued to deduct funds from [his] account multiple times on a reoccurring basis, without providing [him] a written authorization to do so.” (Id. at ¶ 13.) Plaintiff alleges that he “never provided Defendant with any authorization to deduct these sums of money on a regular basis from [his] banking account.” (Id. at ¶ 14.) Thus, on November 19, 2018, plaintiff initiated this class action against Lexington and Doe Defendants 1-10 on behalf of two putative classes, alleging that defendants' conduct violated the Electronic Funds Transfer Act (“EFTA”), 15 U.S.C. § 1693 et seq. (Id. at ¶¶ 16, 17, 19.)

         On April 10, 2019, Lexington filed the instant motion to compel arbitration and dismiss this action, contending that plaintiff executed an Engagement Agreement (the “Agreement”) with Lexington in which he “unmistakably agreed to arbitrate any claims between him and Lexington Law” on an individual basis. (Doc. No. 15 at 2, 11.) In support of its motion, Lexington offers evidence that plaintiff was provided the Agreement via text message, that he acknowledged receipt of the Agreement, and that he agreed to its terms by text message. (Id. at 2, Ex. 1.) Lexington argues that, by assenting to the terms of the Agreement, plaintiff also agreed to the arbitration clause, which provides in relevant part:

You agree to arbitrate all disputes and claims between you and Lexington on an individual basis only and not as part of any class. You agree that, by entering into this Contract, you are waiving the right to a trial by jury and you are waiving all rights to participate in a class action law suit or class action arbitration. . . . Lexington will reimburse you up to $300 of your arbitration filing fee. The rules of the American Arbitration Association shall govern the arbitration and can be viewed online at www.adr.org or by calling 1-800-778-7879.

(Doc. No. 15-1 at 16.) Based on this provision, Lexington argues that this court must compel arbitration of plaintiff's claims against it.

         On May 21, 2019, plaintiff filed his opposition to defendant's motion. (Doc. No. 18.) On May 28, 2019, defendant filed its reply thereto. (Doc. No. 19.)

         LEGAL STANDARD

         A written provision in any contract evidencing a transaction involving commerce to settle a dispute by arbitration is subject to the Federal Arbitration Act (“FAA”). 9 U.S.C. § 2. The FAA confers on the parties involved the right to obtain an order directing that arbitration proceed in the manner provided for in a contract between them. 9 U.S.C. § 4. In considering a motion to compel arbitration, the “court's role under the Act . . . is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.”[1] Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). The party seeking to compel arbitration bears the burden to prove by a preponderance of the evidence the existence of an agreement to arbitrate. Ashbey v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015); Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014) (citing Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal.4th 394, 413 (1996)).

         There is an “emphatic federal policy in favor of arbitral dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 631 (1985). As such, “‘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.'” Id. at 626 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Const. Corp., 460 U.S. 1 at 24-25 (1983)). An arbitration agreement may only “be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,' but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). Accordingly, courts may not apply traditional contractual defenses, like duress and unconscionability, in a broader or more stringent manner to invalidate arbitration agreements and thereby undermine FAA's purpose to “ensur[e] that private arbitration agreements are enforced according to their terms.” Id. at 344 (quoting Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 478 (1989)).

         ANALYSIS

         Lexington argues that the court must compel arbitration and dismiss this putative class action because: (1) plaintiff agreed to individually arbitrate his claims against Lexington; and (2) neither the Agreement nor its arbitration clause are unconscionable. (Doc. No. 15 at 5-10.) Plaintiff counters that the court cannot compel arbitration because Lexington has not established the existence of a valid agreement between the parties. (Doc. No. 18 at 10-12.) Plaintiff further contends that, even if the parties entered into an agreement containing an arbitration clause, the court should deny Lexington's motion because the Agreement and/or the arbitration clause are unconscionable. (Id. at 12-14.)

         A. Whether the Parties Entered into an Agreement

         To compel arbitration, this court must determine whether a valid agreement to arbitrate exists. Boardman v. Pac. Seafood Grp., 822 F.3d 1011, 1017 (9th Cir. 2016); Chiron, 207 F.3d at 1130. “The party seeking to compel arbitration bears the burden of establishing that a valid agreement to arbitrate exists by a preponderance of the evidence.” Langell v. Ideal Homes LLC, No. 16-CV-00821-HRL, 2016 WL 8711704, at *4 (N.D. Cal. Nov. 18, 2016) (citing Knutson, 771 F.3d at 565), report and recommendation adopted, 2016 ...


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