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Johnson v. ACE Cash Express, Inc.

United States District Court, D. Delaware

July 24, 2014

ROSALYN JOHNSON, on behalf of herself and all others similarly situated Plaintiffs,

Richard H. Cross, Jr., Esq., Christopher P. Simon, Esq., CROSS & SIMON, LLC, Wilmington, DE, Alexander J. Pires, Jr., Esq., PIRES COOLEY, Washington, DC, Attorneys for Plaintiffs.

Arthur G. Connolly, III, Esq., Christos T. Adamopoulos, Esq., CONNOLLY GALLAGHER LLP, Wilmington, DE, Claudia Callaway, Julian Dayal, KATTEN MUCHIN ROSENMAN LLP, Washington, DC. Attorneys for Defendant.


LEONARD P. STARK, District Judge.

Pending before the Court is Defendant's motion to stay and compel arbitration and Defendants' motion to dismiss pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6). (D.I. 16) Defendant argues that Plaintiffs claims must be arbitrated due to an arbitration agreement. Alternatively, Defendant argues that Plaintiff has failed adequately to plead fraud or otherwise state a claim upon which relief may be granted. The Court agrees in large part with Defendant but will provide Plaintiff leave to amend.


On July 3, 2013, Rosalyn Johnson ("Johnson" or "Plaintiff") filed her Complaint against ACE Cash Express, Inc. ("ACE" or "Defendant") alleging that ACE had breached its duty of fair dealing towards Johnson and had violated the Delaware Consumer Fraud Act ("DCFA"). (D.I. 1) On August 9, 2013, Johnson filed an Amended Complaint asserting the same claims. (D.I. 14) On September 10, 2013, ACE filed the pending motions. (D.I. 16) The Court heard oral argument on November 22, 2013. (D.I. 20, 22)

According to the Amended Complaint, Johnson borrowed $450 from ACE in March 2013. (D.I. 14 at ¶ 10) She then borrowed another $450 from ACE in June 2013. ( Id. ) Both the March loan and the June loan were secured by a lien on, and electronic access to, Johnson's bank account. ( Id. ) Both loans are subject to agreements detailing the interest ACE will charge and a loan repayment schedule. ( See id. at ¶ 25)

Both loan agreements also contain arbitration agreements, providing (in part) that "any legal dispute... that has anything at all to do with... this Arbitration Agreement [and/or] the Loan Agreement" is to be "resolved by binding arbitration." (D.I. 16 Ex. 1 at 3) The Arbitration Agreement further provides that if a borrower chooses to bind herself and ACE to the arbitration agreement, she must do so by affirmatively agreeing to the arbitration agreement - a decision from which the borrow may opt out within 30 days after accepting the loan.

Johnson agreed to the arbitration agreement for the March loan ("March Arbitration Agreement") but opted out of the arbitration agreement for the June loan ("June Arbitration Agreement"). (D.I. 16 at 3-4, 6) ACE argues that Johnson's causes of action arise out of the March loan agreement and, therefore, are subject to the March Arbitration Agreement. Johnson contends that her causes of action arise solely out of the June loan agreement and, hence, are not subject to any arbitration agreement. Both parties agree that if Johnson's case arises solely out of the June agreement, then Johnson is not required to arbitrate her claim. (D.I. 22 at 10-11)


ACE moves to stay these proceedings and compel arbitration under the Federal Arbitration Act ("FAA"). "The Federal Arbitration Act, 9 U.S.C. §§ 1 et seq. (FAA'), creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes." Century Indem. Co. v. Certain Underwriters at Lloyd's, London, subscribing to Retrocessional Agreement Nos. 950548, 950549, 950646, 584 F.3d 513, 522 (3d Cir. 2009). Section 3 of the FAA requires that

[i]f any suit... [is] referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement....

9 U.S.C. § 3. Under Section 4,

[a] party aggrieved by the... refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action... arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement.

Id. at § 4. Thus, "upon being satisfied that the issue involved... is referable to arbitration, " a district court must, upon "application of one of the parties" stay proceedings and compel arbitration. Id. at § 3.

"[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 648 (1986). "[W]hether or not [a party is] I bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined by the Court on the basis of the contract entered into by the parties." Id. at 649. Accordingly, "[b]efore compelling a party to arbitrate pursuant to the FAA, a court must determine that (1) there is an agreement to arbitrate and (2) the dispute at issue falls within the scope of that agreement." Century lndem. Co., 584 F.3d at 523.

"In resolving the arbitrability of particular claims, however, a court is not to rule on the potential merits of the underlying claims." Painewebber Inc. v. Hofmann, 984 F.2d 1372, 1377 (3d Cir. 1993). Moreover, "there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage." Id. "In determining if parties have agreed to arbitrate, [courts] apply ordinary state-law principles that govern the formation of contracts." Invista S.A.R.L. v. Rhodia, S.A., 625 F.3d 75, 84 (3d Cir. 2010).

It is undisputed that the March loan agreement contains an agreement to arbitrate. It is further undisputed that if the issues in this case arise solely out of the June loan agreement, then Johnson's claims are not subject to an arbitration agreement. The parties disagree as to whether their ...

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