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Hunt v. Debt Assistance Network, LLC

United States District Court, M.D. North Carolina

September 24, 2019

MICHAEL HUNT, Plaintiff,
v.
DEBT ASSISTANCE NETWORK, LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

         This matter is before the court on Defendant Debt Assistance Network, LLC’s (“DAN”) Motion to Dismiss and Compel Arbitration or, in the Alternative, to Stay Proceeding pending Arbitration, (Doc. 8), pursuant to Rules 12(b)(1), 12(b)(3), and 12(b)(6) of the Federal Rules of Civil Procedure and the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq. Because there is an applicable arbitration clause present that covers Plaintiff’s claims, Defendant’s motion to compel arbitration will be granted and the case will be stayed pending arbitration.

         I. FACTUAL ALLEGATIONS

         Plaintiff Michael Hunt entered into a contract (the “DAN Contract”) with Defendant for Defendant’s services in April 2017, (Complaint (“Compl.”) (Doc. 4) ¶ 6); namely, negotiating with Plaintiff’s creditors “for the purposes of consolidating payments and hopefully reducing the payments to creditors over time.” (Id. ¶ 11.) Pursuant to this agreement, Plaintiff made a down payment of $800 to Defendant, followed by monthly payments of $649.20. (Id. ¶ 12.) Plaintiff’s contract with Defendant did not contain an arbitration provision.

         Plaintiff contracted with a third-party payment processor, Secure Account Service, LLC (“SAS”), which would process the payments from Plaintiff to Defendant. (Id. ¶ 14.) Plaintiff’s contract with SAS contained an explicit arbitration clause. (Motion to Dismiss and Compel Arbitration (“Def.’s Mot.”) (Doc. 8) Ex. B, Account Agreement and Disclosure Statement (“ACH Agreement”) (Doc. 8-3) ¶ 6.)

         Defendant’s contract with Plaintiff contained a clause stating that “[a]ll sums paid according to the terms shown on the ACH AGREEMENT, which is included as part of this AGREEMENT.” (Def.’s Mot. (Doc. 8) Ex. A, Consumer Tender of Offer and Debt Assumption Agreement (“DAN Contract”) (Doc. 8-2) ¶ C.) Defendant alleges that “ACH AGREEMENT” refers to the contract between Plaintiff and SAS, entitled “Account Agreement and Disclosure Statement” (“ACH Agreement”), (Def.’s Mot. (Doc. 8), Declaration of Lee Sands (Doc. 8-1) ¶ 7), and Plaintiff does not dispute this.

         After Defendant allegedly allowed various of Plaintiff’s accounts with creditors to go into default, Plaintiff terminated Defendant’s services and SAS’s services, (Paige Kurtz Affidavit (“Kurtz Aff.”) (Doc. 13) at 7, 9)[1], and brought this case in Durham County Superior Court, (Petition for Removal (“Pet. For Removal”) (Doc. 1) Ex. A, State Court Summons and Complaint (Doc. 1-1)), alleging claims of breach of contract, fraud, negligent misrepresentation, and unfair and deceptive trade practices on Defendant’s part. Defendant properly removed the case to this court pursuant to 28 U.S.C. §§ 1332(a) and 1441(a) and (b). (Pet. for Removal (Doc. 1) at 5.) Defendant moved pursuant to Rules 12(b)(1), 12(b)(3), and 12(b)(6) of the Federal Rules of Civil Procedure, and the Federal Arbitration Act (the “FAA”), 9 U.S.C. § 1 et seq., for an order compelling Plaintiff to arbitrate all claims and to dismiss or, in the alternative, to stay proceedings, (Def.’s Mot. (Doc. 8) at 1). Defendant filed a memorandum in support of that motion, (Memorandum in Support of Defendant’s Motion to Dismiss and Compel Arbitration (“Def.’s Br.”) (Doc. 9)). Plaintiff responded to Defendant’s motion, (Response in Opposition to Motion to Dismiss and Compel Arbitration (“Pl.’s Resp.”) (Doc. 14), to which Defendant replied, (Doc. 15).

         II. ANALYSIS

         Defendant moves pursuant to the FAA and Federal Rules of Civil Procedure 12(b)(1), 12(b)(3) and 12(b)(6) for an order compelling Plaintiff to arbitrate his claims and either dismiss those claims or, in the alternative, stays this case pending completion of the arbitration. (Def.’s Mot. (Doc. 8) at 1).

         A. The Federal Arbitration Act

         Federal policy strongly favors arbitration, and the FAA represents “a liberal federal policy favoring arbitration agreements” and applies “to any arbitration agreement within the coverage of the [FAA].” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Under the FAA, a written arbitration agreement “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.

         1. FAA Section 4 Framework

          In order for federal district courts to compel parties to arbitrate under 9 U.S.C. § 4, four elements must be present:

(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of [a party] to arbitrate the dispute.

Galloway v. Santander Consumer USA, Inc., 819 F.3d 79, 84 (4th Cir. 2016) (quoting Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 696 n.6 (4th Cir. 2012)). The parties must have entered into a valid agreement to arbitrate, and the dispute in question must fall within the scope of the arbitration agreement. Chorley Enters., Inc. v. Dickey’s Barbecue Rests., Inc., 807 F.3d 553, 563 (4th Cir. 2015).

         The parties agree that elements one, three, and four of the FAA Section 4 analysis are satisfied here. (Compare Pl.’s Resp. (Doc. 14) at 10, with Def.’s Br. (Doc. 9) at 7, 10–12.) There is clearly a dispute between the parties, the parties’ transaction is related to interstate commerce (sending money to entities in different states)[2], and Plaintiff has refused to arbitrate. The only issue is whether there is a written arbitration agreement that covers the dispute.

         2. Existence of a Written Arbitration Agreement that ...


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