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Forby v. One Technologies, LP

United States District Court, N.D. Texas, Dallas Division

July 10, 2017

VICKIE FORBY, individually and on behalf of all others similarly situated, Plaintiff,
v.
ONE TECHNOLOGIES, LP; ONE TECHNOLOGIES MANAGEMENT LLC; and ONE TECHNOLOGIES CAPITAL LLP, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay, United States District Judge

         Before the court is Defendants' Motion to Compel Arbitration and Dismiss the Case (Doc. 52), filed April 17, 2017. After careful review of the motion, record, and applicable law, the court grants Defendants' Motion to Compel Arbitration and Dismiss the Case, and dismisses with prejudice this action.

         I. Factual and Procedural Background

         On April 24, 2015, Plaintiff Vickie Forby (“Plaintiff” or “Forby”) filed a class action complaint in Illinois state court against One Technologies, LP; One Technologies Management LLC; and One Technologies Capital LLP (collectively, “Defendants”), alleging claims for violations of the Illinois Consumer Fraud Act (“ICFA”) and unjust enrichment. Specifically, Plaintiff contends that Defendants' website leads consumers to believe they are signing up for a free credit report; however, once consumers sign up, they are enrolled in a credit monitoring service that costs $29.95 per month.

         On July 14, 2015, this action was removed to the Southern District of Illinois pursuant to 28 U.S.C. § 1332(d) and 28 U.S.C. § 1441(a). On July 21, 2015, Defendants moved to dismiss or transfer the case. In its motion, Defendants contended that the parties entered into a valid contract that requires their dispute to be resolved by arbitration in Dallas, Texas. Defendants contended that pursuant to Seventh Circuit precedent the court could not compel arbitration outside of its district. Defendants, therefore, requested that the court dismiss the action pursuant to the doctrine of forum non conveniens, or transfer the action to the Northern District of Texas pursuant to 28 U.S.C. § 1404(a). In the alternative, Defendants requested that the court dismiss with prejudice the action pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. On March 25, 2016, Judge David R. Herndon issued a memorandum and order that transferred this action to the Northern District of Texas pursuant to 28 U.S.C. § 1404(a).

         On May 9, 2016, Defendants moved to dismiss all of Plaintiff's claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. On March 31, 2017, the court denied the motion with respect to Plaintiff's ICFA claim; granted the motion with respect to Plaintiff's unjust enrichment claim; and dismissed with prejudice Plaintiff's unjust enrichment claim. On April 17, 2017, almost thirteen months after the case was transferred to the Northern District of Texas, Defendants moved to compel arbitration and dismiss with prejudice this case. Defendants also simultaneously moved to stay the proceeding and for a protective order regarding discovery pending resolutions of the motion to compel. On April 24, 2017, the court held a telephonic hearing and granted Defendants' expedited motion to stay the proceedings and issued a protective order. On May 8, 2017, Plaintiff filed her response to Defendants' Motion to Compel Arbitration and Dismiss the Case. On May 22, 2017, Defendants filed their reply to Plaintiff's response.

         II. Applicable Law

         The Federal Arbitration Act (“FAA”) “embodies the national policy favoring arbitration.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006); Neal v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990). In deciding whether to grant a motion to compel arbitration, the court first considers whether the parties agreed to arbitrate the dispute at issue. See Webb v. Instacorp., Inc., 89 F.3d 252, 258 (5th Cir. 1996) (per curiam). The court next determines whether there are any legal restraints external to the agreement that would foreclose arbitration of the dispute. See OPE Int'l LP v. Chet Morrison Contractors, Inc., 258 F.3d 443, 445-46 (5th Cir. 2001) (per curiam). There is a strong presumption against a finding that a party waived arbitration, and the party contending that the right to arbitration has been waived bears a heavy burden. Al Rushaid v. Nat'l Oilwell Varco, Inc., 757 F.3d 416, 422 (5th Cir. 2014) (quoting Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341, 344 (5th Cir. 2004)).

         “Under this circuit's precedent, a party waives its right to arbitrate if it (1) ‘substantially invokes the judicial process' and (2) thereby causes ‘detriment or prejudice' to the other party.” Id. (quoting Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497 (5th Cir.1986)). To invoke the judicial process, “the party seeking arbitration must have taken acts in the lawsuit sufficient to ‘demonstrate[ ] a desire to resolve the arbitrable dispute through litigation rather than arbitration.'” Pacheco v. PCM Const. Servs., L.L.C., 602 F. App'x 945, 948 (5th Cir. 2015) (alteration in original) (quoting Republic Ins. Co., 383 F.3d at 345).

         Invocation of the judicial process alone does not constitute waiver. Republic Ins. Co., 383 F.3d at 346. There must also be prejudice to the party opposing arbitration. Id. Prejudice in this context refers to “inherent unfairness in terms of delay, expense, or damage to a party's legal position that occurs when the party's opponent forces it to litigate an issue and later seeks to arbitrate that same issue.” Id. (citation omitted). Delay alone is insufficient to establish waiver of the right to arbitration. Walker v. J.C Bradford & Co., 938 F.2d 575, 578 (5th Cir. 1991) (“The mere failure to assert [timely] the right of arbitration does not alone translate into a waiver of that right.”). Delay does, however, “bear on the question of prejudice, and may, along with other considerations, require a court to conclude that waiver has occurred.” Id. “Once a defendant has put the plaintiff on notice of its intent to demand arbitration, the plaintiff's burden of showing waiver by subsequent acts of the defendant is heavier.” Pacheco v. PCM Const. Servs., L.L.C., 602 F. App'x 945, 948 (5th Cir. 2015) (citing Keytrade USA, Inc. v. Ain Temouchent M/V, 404 F.3d 891, 897 (5th Cir.2005)). “Waiver of an arbitration right will not be lightly inferred without some showing of prejudice” and “plaintiffs' failure to bring forth more than generalized protestations about the costs of delay are insufficient to overcome the strong federal presumption in favor of arbitration.” Walker, 938 F.2d at 578.

         III. Discussion

         Defendants move to compel arbitration of the parties' dispute and dismiss this action. Defendants contend that the arbitrator should determine the enforceability of the arbitration clause, not the courts. Further, Defendants contend that even if the court decides the enforceability of the arbitration provision, the court ought to compel arbitration, as a valid arbitration provision exists and the dispute falls within the scope of that provision. Plaintiff counters that Defendants have waived their right to arbitration by invoking the jurisdiction of the courts, which has caused Plaintiff to suffer prejudice. The court will first address Defendants' argument regarding the enforceability of the arbitration clause, and then it will discuss whether the Defendants have waived their right to arbitration.

         A. Enforceability of the Arbitration Provision

         Plaintiff fails to respond to Defendants arguments regarding the enforceability of the arbitration provision. Plaintiff, therefore, does not dispute that she assented to the Terms and Conditions on the Defendants' website, which contained the arbitration provision at issue. Accordingly, there does not appear to be any dispute over the existence of a valid arbitration clause or whether the parties' dispute falls within that clause. As this ...


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