United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTIONS TO COMPEL ARBITRATION AND
STAYING CASE Re: Dkt. Nos. 42, 51
H. Koh United States District Judge.
a putative class action brought by Plaintiff Jamie Lomeli
against Midland Funding, LLC (“Midland Funding”),
Midland Credit Management, Inc. (“MCM”), Hunt
& Henriques (“H&H”), Michael Scott Hunt,
and Janalie Ann Henriques (collectively,
“Defendants”). Plaintiff alleges that Defendants
committed violations of the federal Fair Debt Collection
Practices Act, 15 U.S.C. §§ 1692 et seq.
in connection with Defendants’ efforts to collect a
consumer debt from Plaintiff. Before the Court are
Defendants’ motions to compel arbitration. ECF Nos. 42,
51. Having considered the parties’ submissions, the
relevant law, and the record in this case, the Court hereby
grants the motions to compel arbitration and stays the
following facts come from several sources, including the
Complaint and the evidence Defendants have submitted in
support of their motions. The Court focuses upon the
undisputed facts and notes which facts come only from the
moving parties, Defendants.
lawsuit stems from a debt collection action brought by
Defendants against Plaintiff. In 2004, Plaintiff opened a
Shell credit card with Citibank, N.A.
(“Citibank”). ECF No. 51-2, Ex. A (“Peck
Decl.”) ¶ 9; see also ECF No. 1
(“Compl.”) ¶ 13. Defendants aver that the
card was subject to a written card agreement (“Card
Agreement”), which set forth the terms and conditions
for the credit card account. Peck Decl. ¶ 7, Ex. 1.
According to Defendants, it is Citibank’s regular
business practice to send the applicable card agreement to
the customer when the account is opened.
Card Agreement contains three provisions relevant to the
instant motions: (1) an arbitration agreement, (2) a choice
of law provision, and (3) an assignment clause. As to the
arbitration agreement, the Card Agreement proffered by
PLEASE READ THIS PROVISION OF THE AGREEMENT
CAREFULLY. IT PROVIDES THAT ANY DISPUTE MAY BE RESOLVED
BY BINDING ARBITRATION. ARBITRATION REPLACES THE RIGHT TO GO
TO COURT, INCLUDING THE RIGHT TO A JURY AND THE RIGHT TO
INITIATE OR PARTICIPATE IN A CLASS ACTION OR SIMILAR
PROCEEDING. IN ARBITRATION, A DISPUTE IS RESOLVED BY AN
ARBITRATOR INSTEAD OF A JUDGE OR JURY. ARBITRATION PROCEDURES
ARE SIMPLER AND MORE LIMITED THAN COURT PROCEDURES.
Agreement to Arbitrate. Either you or we may,
without the other’s consent, elect mandatory, binding
arbitration for any claim, dispute, or controversy between
you and us (called “Claims”).
ECF No. 42-1, Ex. 1 (“Card Agreement”) at 4. The
Card Agreement elaborates on the claims covered by the
arbitration clause and explains how arbitration works.
Id. In particular, a section titled “What
Claims are subject to arbitration?” clarifies that
“[a]ll Claims relating to your account” are
subject to arbitration, “including Claims regarding the
application, enforceability, or interpretation of this
Agreement and this arbitration provision.” Id.
Additionally, there is a section titled “Whose Claims
are subject to arbitration?” which states:
Not only ours and yours, but also Claims made by or against
anyone connected with us or you or claiming through us or
you, such as a co-applicant or authorized user of your
account, an employee, agent, representative, affiliated
company, predecessor or successor, heir, assignee, or trustee
the Card Agreement contains the following choice of law
provision: “Federal law and the law of South Dakota,
where we are located, govern the terms and enforcement of
this Agreement.” Id. at 5.
the purported assignment clause states: “We may assign
any or all of our rights and obligations under this Agreement
to a third party.” Id.
point, Plaintiff allegedly incurred a debt on his credit
card. Compl. ¶ 13. He subsequently defaulted on the
debt. Id. ¶ 14. On May 25, 2016, Midland
Funding, LLC (“Midland Funding”), purchased
Plaintiff’s debt from Citibank. Id. ¶ 14;
Peck Decl. ¶ 12. Defendants proffer what they assert is
the Purchase and Sale Agreement (the “Purchase
Agreement”) assigning Plaintiff’s account to
Midland Funding and containing the terms of the transaction.
See ECF No. 42-1, Ex. A to Ex. C; ECF No. 51-2, Ex.
A to Ex. B (“Purchase Agreement”). The Purchase
Agreement states that Citibank “agrees to sell, assign
and transfer” to Midland Funding “all right,
title and interest of Bank in and to the Accounts.”
Id. at 2. According to Defendants, Midland Credit
Management, Inc. (“MCM”) is “the servicer
and authorized agent for Midland Funding and manages debts
that Midland Funding purchases, ” which Plaintiff does
not dispute. ECF No. 51-2, Ex. B (“Mulcahy
Decl.”) ¶ 2.
is a company “engaged in the collection of
outstanding financial obligations.” ECF No. 28
(“H&H Def. Answer”) ¶ 9. At some point
after Plaintiff defaulted, H&H was retained by Midland
Funding for the purpose of collecting Plaintiff’s
outstanding credit card debt. Compl. ¶ 16-17. On or
about October 16, 2017, Midland Funding filed suit against
Plaintiff in Santa Clara Superior Court in order to collect
Plaintiff’s debt. Id. ¶ 17; Midland
Funding, LLC v. Jamie Prieto, et al., No.
17-CV-317436 (Cal. Super. Ct. 2017). Defendants state that
H&H filed the suit on Midland Funding’s behalf.
See ECF No. 51-1 at 2; ECF No. 42-1 at 3. In
connection with that suit, Emily Walker executed a
Declaration in Lieu of Testimony as an officer for Midland
Funding. Compl. Ex. 1. In the Declaration, Walker indicated
that her business address is 16 McLeland Road Suite 101, St.
Cloud, Minnesota, 56303. Id.
February 28, 2019, Plaintiff filed the Complaint in the
instant case. ECF No. 1. In his Complaint, Plaintiff alleges
that the Declaration in Lieu of Testimony is invalid because
Walker’s address “is located more than 150 miles
from the place of trial” and that Defendant’s
attempt to use the Declaration in Lieu of Testimony “is
false, misleading, and unconscionable.” Plaintiff
therefore asserts a claim under the federal Fair Debt
Collection Practices Act, 15 U.S.C. §§ 1692 et
seq. (“FDCPA”) on behalf of himself and all
others similarly situated. Compl. at 1, ¶¶ 50-63.
25, 2019, Midland Funding and MCM (collectively, the
“Midland Defendants”) filed a Motion to Compel
Arbitration. ECF No. 42 (“Midland Def. Mot. to
Compel”). H&H, Hunt, and Henriques (collectively,
the “H&H Defendants”) joined in that motion
on July 22, 2019. ECF No. 52. On the same day, the H&H
Defendants also filed their own Motion to Compel Arbitration.
ECF No. 51 (“H&H Def. Mot. to Compel”).
Plaintiff opposed both motions. See ECF Nos. 49, 57.
The two Motions to Compel Arbitration have been fully
briefed, ECF Nos. 42, 49, 50, 52, 57, 59, and are now before
here, both the Midland Defendants and the H&H Defendants
filed redacted versions of the exhibits attached to their
Motions to Compel Arbitration. Therefore, on September 18,
2019, the Court ordered Defendants to produce the complete,
unredacted Purchase Agreement to Plaintiff, ECF No. 73, and
Defendants complied on September 19, 2019, ECF No. 74. In its
order, the Court gave Plaintiff an opportunity to file a
supplemental briefing based upon the unredacted Purchase
Agreement, and Defendants an opportunity to respond to
Plaintiff’s supplemental brief. ECF No. 73 at 2.
Plaintiff declined to file a supplemental brief. ECF No. 78.
Federal Arbitration Act (“FAA”) “is a
congressional declaration of a liberal federal policy
favoring arbitration agreements.” Moses H. Cone
Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24
(1983) (referencing 9 U.S.C. § 2). Courts must therefore
“rigorously enforce arbitration agreements according to
their terms.” Am. Express Co. v. Italian Colors
Rest., 570 U.S. 228, 233 (2013) (internal quotation
marks omitted). In particular, the Act provides that suits
brought “upon any issue referable to arbitration under
an agreement in writing for such arbitration” must be
stayed “until such arbitration has been had . . .,
providing the applicant for the stay is not in default in
proceeding with such arbitration” and the court has
been “satisfied that the issue involved in such suit or
proceeding is referable to arbitration under such an
agreement.” 9 U.S.C. § 3. The United States
Supreme Court has emphasized that the Act speaks in mandatory
terms. See Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 218 (1985).
command only comes into play, however, when there is an
enforceable arbitration agreement. Italian Colors,
570 U.S. at 233 (“[A]rbitration is a matter of
contract.”). “Accordingly, the first task of a
court asked to compel arbitration . . . is to determine
whether the parties agreed to arbitrate that dispute.”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 626 (1985). Specifically, the
court’s role is to determine “(1) whether a valid
agreement to arbitrate exists and, if it does, (2) whether
the agreement encompasses the dispute at issue.”
Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207
F.3d 1126, 1130 (9th Cir. 2000). If the court is satisfied
that the answer to both questions is yes, then “the
court shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the
agreement.” 9 U.S.C. § 4.
cases, however, the second question-“whether the
parties have submitted a particular dispute to
arbitration”-is beyond the court’s domain.
Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 83 (2002) (internal quotation marks omitted). The
parties can delegate threshold questions of arbitrability to
the arbitrator through a “delegation provision.”
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 68-70
(2010). The parties must demonstrate “clearly and
unmistakably” that it is their intent to do so.
Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1208
(9th Cir. 2016) (quoting Howsam, 537 U.S. at
83). If the delegation provision is valid and
enforceable, then the Court must refer the case to
arbitration. See Brennan v. Opus Bank, 796 F.3d
1125, 1132 (9th Cir. 2015). Of course, a delegation provision
“is simply an additional, antecedent agreement the
party seeking arbitration asks the federal court to enforce,
” Rent-A-Ctr., 561 U.S. at 70, and the court
must assure its existence and validity as the court would any
other purported arbitration agreement.
determining the existence and validity of an agreement to
arbitrate, “a court applies a standard similar to the
summary judgment standard of Fed.R.Civ.P. 56.”
Concat LP v. Unilever, PLC, 350 F.Supp.2d 796, 804
(N.D. Cal. 2004) (internal quotation marks omitted). The
party seeking to compel arbitration bears “the burden
of proving the existence of an agreement to arbitrate by a
preponderance of the evidence.” Norcia v. Samsung
Telecommunications Am., LLC, 845 F.3d 1279, 1283 (9th
Cir. 2017). Accordingly, a court should grant the motion to
compel arbitration only “when there is no genuine issue
of material fact concerning the formation of an arbitration
agreement.” Concat, 350 F.Supp.2d at 804.
briefly review the Rule 56 standard, the court at the summary
judgment stage “does not assess credibility or weigh
the evidence, but simply determines whether there is a
genuine factual issue for trial.” House v.
Bell, 547 U.S. 518, 559-60 (2006). A fact is
“material” if it “might affect the outcome
of the suit under the governing law, ” and a dispute as
to a material fact is “genuine” if there is
sufficient evidence for a reasonable trier of fact to decide
in favor of the nonmoving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). “A party
asserting that a fact cannot be or is genuinely disputed must
support the assertion by citing to particular parts of
materials in the record.” Fed.R.Civ.P. 56(c)(1)(A).
Moreover, “the evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in
his favor.” Liberty Lobby, 477 U.S.
at 255. The nonmoving party’s opposition, however, must
consist of more than unsupported allegations or denials.
See Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986) (nonmoving party must
present specific, significant probative evidence, not simply
“some metaphysical doubt”). It must, through
affidavits, declarations, or other competent evidence, set
forth “specific facts showing that there is a genuine
issue for trial.” Anderson, 477 U.S. at 250;
see Fed. R. Civ. P. 56(e). “If the evidence is
merely colorable, or is not significantly probative, summary
judgment may be granted.” Id. at
249-50. (citations omitted).
interpretive issues, courts generally should apply state law
principles of contract interpretation. First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). At
the same time, though, the FAA creates a body of federal
substantive law of arbitrability that requires a
“healthy regard for the federal policy favoring
arbitration” and preempts state law to the contrary.
Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 475-79 (1989). Hence, in
determining whether parties have agreed to arbitrate a
particular issue, the court applies “general state-law
principles of contract interpretation, while giving due
regard to the federal ...