United States District Court, W.D. Texas, San Antonio Division
CLAUDIA OCORO, ISRAEL ROSALES, DIANA ALVARADO HARRIS, CYNTHIA WOODS JONES, GALE JONES, et al. Plaintiffs,
ARMANDO MONTELONGO JR., REAL ESTATE TRAINING INTERNATIONAL, LLC, PERFORMANCE ADVANTAGE GROUP, INC., LICENSE BRANDING, LLC. Defendants.
MEMORANDUM OPINION; DENYING AS MOOT THE
DEFENDANTS' 12(B)(1) MOTION: GRANTING THE DEFENDANTS'
MOTION TO FILE A SURREPLV: AND GRANTING IN PART AND
WITHHOLDING JUDGMENT IN PART ON THE PLAINTIFFS' 15(A)(2)
C. LAMBERTH UNITED STATES DISTRICT JUDGE
the Court are the following motions:
(1) Defendants' Motion to Dismiss and Compel Arbitration
pursuant to Federal Rule of Civil Procedure 12(b)(1) [ECFNo.
(2) Plaintiffs' Motion for Leave to File a First Amended
Complaint pursuant to Federal Rule of Civil Procedure
15(a)(2) [ECF No. 24], and
(3) Defendants' Motion for Leave to File Surreply in
Opposition to Plaintiffs' Motion for Leave to Amend [ECF
because the relevant plaintiffs already voluntarily dismissed
their claims, the Court will deny as
moot the defendants' motion to dismiss and
compel arbitration pursuant to Rule 12(b)(1). Second, the
Court will grant the defendants' motion
for leave to file a surreply. Finally, the Court will
grant in part and delay ruling in
part on the plaintiffs' motion for leave to file
their First Amended Complaint.
case concerns allegations brought by 138 plaintiffs for
violations of the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), negligence, and
negligent misrepresentation in connection with the real
estate education programs of Armando Montelongo Jr.; Real
Estate Training International, LLC; Performance Advantage
Group, Inc.; and License Branding, LLC
("Defendants"). The plaintiffs are all current or
former students of Defendants' real estate education
March 6, 2017, the defendants filed a 12(b)(1) motion to
dismiss the claims of 36 plaintiffs for lack of subject
matter jurisdiction and requested that this Court compel
those plaintiffs to arbitrate [ECF No. 12]. The
defendants' allege that each of the 36 plaintiffs
identified entered into purchase agreements with the
defendants that contained the following arbitration
The arbitration will be governed by the Commercial
Arbitration Rules and the Supplementary Procedures for
Consumer Related Disputes (collectively, "AAA
Rules") of the American Arbitration Association
("AAA"), as modified by this Agreement, and will be
administered by the AAA. The AAA Rules are available online
at www.ADR.org, [or] by calling the AAA at 1-800-778-7879.
The parties agree that the validity of this arbitration
agreement will be solely decided by the arbitrator. Unless
otherwise agreed or provided herein this Agreement, the
Parties will split only the costs and fees associated with
conducting the arbitration.
[ECF No. 12]. On March 20, 2017, the 36 plaintiffs addressed
in the defendants' 12(b)(1) motion voluntarily dismissed
their claims to pursue them through arbitration. [ECF No.
17]. However, due to the defendants' failure to cooperate
with the AAA, these plaintiffs, in addition to 42 new
plaintiffs subject to the same arbitration clause, now seek
to rejoin/join the proceedings before this Court.
defendants' failure to cooperate with the AAA is
illustrated by the case of the Crabtrees. On March 8, 2017,
Mike and Susan Crabtree filed a request for dispute
resolution services with the AAA pursuant to their purchase
agreement with the defendants (the "Crabtree
Dispute"). The Crabtrees were two of the defendants'
students who were not named as plaintiffs in the present
case. The Crabtree's allege that they sustained damages
in connection with the purchase agreement they entered into
with the defendants.
April 7, 2017, the AAA issued a letter notifying the parties
that the AAA's Consumer Arbitration Rules ("Consumer
Rules") applied to the Crabtree Dispute and requesting a
waiver of the cost-splitting provision of the purchase
agreement. The AAA explained that the Crabtree Dispute arose
out of a consumer agreement and, while the arbitration
provision referenced the Commercial Arbitration Rules
("Commercial Rules"), under R-l of the Commercial
Rules "[a] dispute arising out of a consumer arbitration
agreement will be administered under the AAA's Consumer
Arbitration Rules." Additionally, the AAA found that the
cost-splitting provision of the arbitration provision