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Williams v. Wellshire Financial Services, LLC

United States District Court, W.D. Texas, San Antonio Division

May 23, 2018




         On this date, the Court considered the status of the above-captioned case. After careful consideration, the Court hereby GRANTS Defendant's Motion to Compel Arbitration and to Stay Proceedings. Docket no. 6.


         On February 22, 2018, Plaintiff David Williams filed his Original Petition in the 37th Judicial District Court of Bexar County, Texas. Docket no. 1-1. Plaintiff alleges that Defendant Wellshire Financial Services, LLC d/b/a Loanstar Title Loans (“Wellshire”) breached a settlement agreement related to a debt that Plaintiff owed Defendant by refusing to accept Plaintiff's initial payment. Id. On March 5, 2018, Defendant removed this action to this Court, alleging that this Court has federal question jurisdiction over Plaintiff's Fair Debt Collections Practices Act (“FDCPA”) claim and supplemental jurisdiction over Plaintiff's state law claims. Docket no. 1.

         In January 2018, the parties allegedly entered into a settlement agreement, under which Plaintiff agreed to pay $625.00 for four months, with payments to begin in February 2018. Docket no. 1-1 at 3. Plaintiff alleges that Defendant agreed to a discharge of Plaintiff's payoff debt of $6, 327.73, which is secured by Plaintiff's vehicle. Id. Plaintiff alleges, however, that Defendant “refused to accept Plaintiff's initial payment under the guise of no settlement exists.” Id. at 4. Defendant allegedly seeks to repossess Plaintiff's vehicle. Id. Plaintiff further alleges that, although he communicated to Defendant that he was represented by counsel with respect to the alleged debt, Defendant “continued to communicate and harass Plaintiff by repeatedly calling him and texting him about the alleged debt.” Id.

         Plaintiff brings claims for breach of contract, violation of the Texas Debt Collection Act (“TDCA”), violation of the FDCPA, and violation of the Texas Deceptive Trade Practices Act (“DTPA”). Id. at 4-5. Plaintiff also seeks a declaratory judgment “specifying Plaintiff's and Defendant's rights and duties in connection with the vehicle and the alleged underlying debt.” Id. at 4.

         On April 4, 2018, Defendant filed a Motion to Compel Arbitration and to Stay Proceedings. Docket no. 6. According to Defendant, Plaintiff's debt stems from prior loan agreements between the parties, and Plaintiff's disputes are subject to a final and binding arbitration clause contained within the loan agreements. The Credit Services Agreement (“CSO”) states: “Either you or we may elect to arbitrate a Claim by giving the other party written notice of the intent to arbitrate the Claim or by filing a motion to compel arbitration of the Claim.” Docket no. 6-1 at 6. The CSO defines a “Claim” as:

“any claim, dispute or controversy between you and us, whether preexisting, present or future, that in any way arises from or relates to the CSO Agreement, any prior agreements or loans you obtained from us, the events leading up to the CSO Agreement (for example, any disclosures, advertisements, promotions or oral or written statements made by us), or any product or service provided by us or third parties in connection with the CSO Agreement. “Claim” has the broadest possible meaning, and includes initial claims, counterclaims, cross-claims and third-party claims and federal, state, local and administrative claims and claims which arose before the effective date of this Arbitration Agreement. It includes disputes based upon contract, tort, consumer rights, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity and claims for money damages and injunctive or declaratory relief.” Id. Plaintiff does not dispute that he entered into arbitration agreements for his May 2017 and November 2017 loans, but he disputes that these arbitration clauses cover the settlement agreement that the parties later reached. Docket no. 7.


         I. Legal Standard

         The Federal Arbitration Act (“FAA”) provides that 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.” 9 U.S.C. § 2. The Act “mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). It is for the court, not the arbitrator, to decide whether the parties have agreed to arbitrate the disputes in question. AT&T Tech., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 651 (1986).

         Determining whether to compel Plaintiff's claims to arbitration requires the application of a two-pronged test. Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002), opinion supplemented on denial of reh'g, 303 F.3d 570 (5th Cir. 2002). The first prong is aimed at determining whether the parties agreed to arbitrate the dispute in question. Klein v. Nabors Drilling USA L.P., 710 F.3d 234, 236 (5th Cir. 2013). In particular, this prong involves two sub-inquiries: (1) whether a valid agreement to arbitrate exists between the parties, and (2) whether the agreement covers the dispute in question. Id. The second prong requires a determination of “whether legal constraints external to the parties' agreement foreclosed the arbitration” of the relevant claims. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).

         II. Application

         First, the Court must determine whether the parties agreed to arbitrate the dispute over the alleged settlement agreement related to Plaintiff's remaining debt. As an initial matter, the parties agree that there is a valid agreement to arbitrate. Defendant states that Plaintiff signed a Loan Agreement, Promissory Note, and Security Agreement, and Plaintiff accepted “the obligation to submit all loan-related disputes to binding arbitration, rather than pursue them in court.” Docket no. 6 at 5. Defendant states that, “after having conferred with opposing counsel, the Plaintiff admits that he was aware of his agreement to arbitrate.” Id. Plaintiff signed the CSO that included the arbitration clause, and Plaintiff does not claim that he had no opportunity to read it. Under Texas law, an individual “who has the opportunity to read an arbitration agreement and signs it, knows its contents.” EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996). Defendant states that the parties' agreements “are amply supported by consideration” because the “provisions obligate both Williams and Wellshire to arbitrate all loan related disputes.” Docket no. 6 at 5. Finally, Plaintiff “does not dispute that he entered into two arbitration agreements ...

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