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Mason v. Bank

United States District Court, W.D. Texas, Austin Division

July 18, 2017

CONNOR MASON, Plaintiff,



         Before the Court is Defendant Regions Bank's Motion to Compel Arbitration. (Dkt. 16). For the reasons that follow, the Court finds that the motion should be granted.


         Plaintiff purchased a personal automobile from a dealership in Austin, Texas. The retail installment sales contract that Plaintiff signed gave the dealership a security interest in the vehicle. It also included an arbitration clause providing that “[a]ny claim or dispute . . . which arises out of or relates to [Plaintiff's] credit application, purchase or condition of th[e] vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election be resolved by neutral, binding arbitration . . . .” (Sales Contract, Dkt. 16-1, at 3). The contract also stated that the dealership “may transfer th[e] contract to another person” and that the transferee “will then have all [the dealer's] rights, privileges, and remedies.” (Id. at 2).

         The dealership assigned the contract to Defendant Regions Bank (“Regions”). It appears that Plaintiff later fell behind in his payments, which led to his making payment arrangements with Regions. According to Plaintiff, Regions promised not to repossess his vehicle if he followed through with the agreed payments. Plaintiff alleges that he fulfilled their agreement, but that Regions repossessed the vehicle anyway.

         Plaintiff alleges that Regions issued a notice of sale of Plaintiff's vehicle, but mailed it to the wrong address. Plaintiff also asserts that Regions wrongfully failed to inform him that Plaintiff's personal property had been left in the vehicle or how and when he could collect it. Plaintiff asserts a variety of state and federal claims against both Regions and Defendant Ronald Thomas Ashby, who collected Plaintiff's vehicle pursuant to Regions' repossession order.

         Regions now moves to compel arbitration pursuant to the sales contract.


         “The Federal Arbitration Act (“FAA”) provides that pre-dispute arbitration agreements ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'” Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004) (quoting 9 U.S.C. § 2). The FAA's purpose is “to reverse the longstanding judicial hostility to arbitration agreement . . . and to place arbitration agreements on the same footing as other contracts.” Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 89 (2000).The FAA permits an aggrieved party to file a motion to compel arbitration based on “the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration.” 9 U.S.C. § 4. When considering a motion to compel arbitration, the Court must determine whether the parties agreed to arbitrate the dispute in question.[1] Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996). This determination involves two considerations: (1) whether a valid agreement to arbitrate exists between the parties, and (2) whether the dispute at issue falls within the scope of that agreement. Id. If, however, “the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof.” 9 U.S.C. § 4.

         While there is a strong federal policy favoring arbitration, this policy “does not apply to the determination of whether there is a valid agreement to arbitrate between the parties.” Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003) (internal quotations omitted). Instead, courts apply ordinary state contract law principles to the question of whether the parties formed a valid agreement to arbitrate. JP Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596, 598 (5th Cir. 2007). The policy favoring arbitration does, however, apply to the determination of whether a particular dispute falls within the scope of an arbitration agreement. Jones v. Halliburton Co., 583 F.3d 228, 242 (5th Cir. 2009).


         The present dispute relates to the sales contract and thus appears to fall within the scope of the arbitration agreement. However, Plaintiff opposes Regions' motion to compel arbitration on three grounds. First, he argues that the contract produced by Regions cannot be considered because it is unauthenticated and constitutes hearsay. Second, Plaintiff asserts that Regions, as a non-signatory to the contract, lacks standing to enforce the arbitration agreement. Finally, Plaintiff argues that the arbitration agreement is unconscionable because it gives Regions unilateral veto power over the selection of the arbitrator. The Court finds each argument unconvincing.

         First, the Court may properly consider the sales contract. Regions provided an affidavit from its custodian of records adequately authenticating the contract. (Dkt. 23). Additionally, “[a] contract is not hearsay because it has independent legal significance.” Crompton Greaves, Ltd. v. Shippers Stevedoring Co., 776 F.Supp.2d 375, 386 (S.D. Tex. 2011) (citing Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 540 (5th Cir. 1994)). Plaintiff's objection to the consideration of the contract is therefore overruled.

         Next, Regions has standing to enforce the arbitration agreement. The right to invoke the arbitration agreement was initially enjoyed by Plaintiff and the automobile dealership, but Plaintiff acknowledges that the sales contract was assigned to Regions. (Compl. ¶ 1, Dkt. 1). The contract Plaintiff signed provided that an assignee would receive all rights, privileges, and remedies in the contract. (Dkt. 16-1, at 3). And indeed, under Texas law, an assignee stands in the shoes of the assignor. Sw. Bell Tel. Co. v. Mktg. ...

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