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Ewell v. Heath

United States District Court, E.D. Michigan, Southern Division

January 18, 2018



          Linda V. Parker U.S. District Court Judge

         Plaintiff Samantha Ewell (“Plaintiff”) and Defendant John C. Heath, Attorney at Law d/b/a Lexington Law Firm (“Defendant”) entered into an agreement for Defendant to provide credit repair services on Plaintiff's behalf. Plaintiff initiated this lawsuit on June 13, 2017, alleging violations of the Credit Repair Organizations Act (“CROA”), 15 U.S.C. § 1679 et seq. and breach of contract. (ECF No. 1.) Presently before the Court is Defendant's Motion to Stay Proceedings and Compel Arbitration, filed on August 28, 2017, Plaintiff's response, filed September 8, 2017, and Defendant's reply, filed September 15, 2017. (ECF Nos. 8, 10, & 11.) For the reasons stated below, the Court grants Defendant's motion.

         I. Factual and Procedural History

         Defendant is a credit repair organization. On or about October 21, 2016, Plaintiff and Defendant entered into an Engagement Agreement and Limited Designation of Agency (“Agreement”) whereby Defendant would perform credit repair services on behalf of Plaintiff. (ECF No. 1 at Pg ID 2.) Section VIII of the Agreement provided: “You agree to arbitrate all disputes and claims between you and Lexington on an individual basis only and not as a party of any class. . . . You may individually arbitrate any claim against Lexington in any jurisdiction in the United States.” (ECF No. 8 at Pg ID 69.)

         Plaintiff paid Defendant $734.69 for its credit repair services. (ECF No. 1 at Pg ID 3.) On October 31, 2016, Defendant sent Plaintiff a letter notifying her that it had initiated credit repair services on her behalf. (Id.) According to Plaintiff, she sent Defendant numerous requests for a copy of the validation letter sent to the credit reporting agencies. (Id. at Pg ID 4-6.) To date, Plaintiff has never received a copy of the validation letter, and her credit score has not improved. (Id. at Pg ID 6.) On March 31, 2017, Plaintiff terminated Defendant. (Id.)

         On June 13, 2017, Plaintiff initiated this lawsuit against Defendant for violation of CROA and breach of contract. Plaintiff alleges that Defendant violated CROA when Defendant failed to provide Plaintiff the validation letters, failed to include the total amount of all payments and the date service was to be completed or the length of time necessary to complete the service, waived Plaintiff's right to class action, and included a severability clause. (ECF No. 1 at Pg ID 10-11.)

         Defendant filed a motion to compel arbitration on August 25, 2017. (ECF No. 8.) Plaintiff filed a response on September 8, 2017, and Defendant filed a reply on September 15, 2017. (ECF Nos. 10-11.)

         II. Standard of Review

         The Federal Arbitration Act, (“FAA”) 9 U.S.C § 2, provides in part, that

[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable . . . .

         When considering a motion to compel arbitration, the court must consider whether: (1) a valid arbitration agreement exists between the parties; (2) the disputes fall within the scope of the agreement; (3) Congress intended for certain federal statutory claims to be nonarbitrable; and (4) if some of the claims fall outside the scope of the arbitration agreement, if those claims will be stayed pending arbitration. Orcutt v. Kettering Radiologists, Inc., 199 F.Supp.2d 746, 750 (S.D. Ohio Mar. 11, 2002) (citing Compuserve, Inc. v. Vigny Int'l Finance, Ltd., 760 F.Supp. 1273, 1278 (S.D. Ohio 1990); see also Stevens-Bratton v. Trugreen, Inc., 675 F. App'x 563, 566-67 (6th Cir. 2017) (unpublished) (quoting Rowan v. Brookdale Senior Living Cmtys., Inc., 647 F. App'x 607, 609 (6th Cir. 2016)). “Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Orcutt, 199 F.Supp.2d at 749-50. Finally, the opposing party may challenge the validity of the arbitration agreement “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

         The United States Supreme Court has divided challenges to arbitration agreements into two types. “One type challenges specifically the validity of the agreement to arbitrate. The other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract's provisions renders the whole contract invalid.” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 (2006) 2006 (internal quotations and citations omitted). Challenges to the contract as a whole must go to the arbitrator. Id.

         III. Applicable Law & Analysis

         Because the Court finds the arbitration clause valid, the Court does not have authority to determine the validity of the contract as a whole, and the arbitrator shall resolve ...

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