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Frazier v. Western Union Co.

United States District Court, D. Colorado

March 27, 2019

KAZMIERA FRAZIER, RHONDA LAUBLER, TERESA RIGGS, ANITA SEWARD, and KOALESHIA SIMON, individually and on behalf of all others similarly situated, Plaintiffs,
v.
THE WESTERN UNION COMPANY, WESTERN UNION FINANCIAL SERVICES, INC., HIKMET ERSEK, and VARIOUS “DOE” DEFENDANTS, including Western Union Officers, Directors, and Agents, Defendants.

          ORDER

          Kristen L. Mix United States Magistrate Judge.

         This matter is before the Court on Defendants' Motion to Stay Proceeding Pending Arbitration Pursuant to Section 3 of the Federal Arbitration Act [#33][1] (the “Motion”).[2] Thereafter, Defendants filed a Factual Supplement [#48], Plaintiffs filed a Response [#52] in opposition to the Motion [#33], and Defendants filed a Reply [#56]. The Court has reviewed the relevant briefs, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#33] is GRANTED.

         I. Summary of the Case

          Plaintiffs initiated this putative class action against The Western Union Company (“Western Union”), Western Union Financial Services, Inc. (“WUFSI”), Western Union's Chief Executive Officer Hikmet Ersek (“Ersek”), and various other unnamed Doe Defendants (collectively, “Defendants”). Am. Compl. [#27] at 4. Plaintiffs assert claims under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Colorado Organized Crime Control Act, and their respective state consumer protection laws.[3] Id. at 46-72. WUFSI, a subsidiary of Western Union, operates a “Money Transfer System” through which consumers send money to other individuals in the United States and around the world. Id. at 16. Each of the named Plaintiffs alleges that she was defrauded by an unnamed third-party fraudster who convinced her to send a fraudulent money transfer order. Id. at 5-6.

         Money transfer orders sent through WUFSI are subject to a set of contractual terms and conditions (“Terms and Conditions”) located on a pre-printed Send Money Form. Motion [#33] at 10, 12-13. The Terms and Conditions in place at the time of each of the named Plaintiffs' alleged money transfers included arbitration clauses, requiring the parties to arbitrate any disputes individually, rather than on a class-wide basis (the “Arbitration Clauses”). Id. at 10-11. Defendants maintain that the Terms and Conditions are included in both the Send Money Form customers fill out to send money and on the receipts given to customers after sending money transfer orders. Id. at 12-13. Defendants also assert that before a customer can send money using a Send Money Form, WUFSI's standard business practices require the customer to sign the form, agreeing to the accompanying terms and conditions. Id. at 13. Once the information on the Send Money Form is verified by a Western Union clerk on location, the clerk then prints a receipt for the customer. Id. at 14. Like the Send Money Form, Defendants assert that WUFSI's standard business practices require the customer to sign the receipt. Id.

         At the relevant times of Plaintiffs' alleged fraudulently-induced money transfer orders, two separate Arbitration Clauses appeared in Defendants' Terms and Conditions. Id. at 11-12; Response [#52] at 10. One Arbitration Clause appeared in Send Money Form Terms and Conditions in 2005, and the other Arbitration Clause appeared in Send Money Form Terms and Conditions in 2016 and 2017. Motion [#33] at 11-12; Response [#52] at 10.

         Defendants seek a stay of this case while arbitration proceedings are held. Motion [#33] at 7. At issue in the instant motion is: (1) whether Plaintiffs are bound by the Arbitration Clauses in dispute, (2) whether Defendants Ersek, Western Union, and WUFSI respectively are bound by the Arbitration Clauses in dispute, (3) whether the two individual Arbitration Clauses in question are enforceable, and (4) whether Plaintiffs' RICO claims fall within the scope of the Arbitration Clauses.

         II. Standard of Review

         Issues of arbitrability are governed by the Federal Arbitration Act (“FAA”). Belnap v. Iasis Healthcare, 844 F.3d 1272, 1279 (10th Cir. 2017). The FAA “manifests a liberal federal policy favoring arbitration.” Comanche Indian Tribe v. 49, L.L.C., 391 F.3d 1129, 1131 (10th Cir. 2004) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25 (1991)); see also Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018). Consequently, the Court must “resolve ‘any doubts concerning the scope of arbitrable issues . . . in favor of arbitration.'” P&P Indus., Inc. v. Sutter Corp., 179 F.3d 861, 866 (10th Cir. 1999) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). In addition, “this liberal policy ‘covers more than simply the substantive scope of the arbitration clause,' and ‘encompass[es] an expectation that [arbitration] procedures will be binding.'” Id. (citation omitted).

         Under the FAA, when parties agree to settle a controversy by arbitration, courts must enforce that agreement “save upon grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2 (2018). Such grounds include “generally applicable contract defenses, such as fraud, duress, or unconscionability.” Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68 (2010) (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). “Under the FAA, unless the arbitration provision states otherwise, the question of the enforceability of a contract as a whole is a matter for the arbitrator. Only if an enforceability argument applies specifically to the arbitration provision (such as a claim that the provision is unconscionable or that a party was defrauded into agreeing to the arbitration provision) is enforceability to be decided by the court.” In re Cox Enters., Inc. Set-top Cable Television Box Antitrust Litig., 835 F.3d 1195, 1209 (10th Cir. 2016). While the Supreme Court recently held that courts should decide whether certain types of employment contracts meet FAA exceptions prior to ordering arbitration, see e.g., New Prime Inc. v. Oliveira, 139 S.Ct. 532, 538 (2019), this holding does not impact whether courts or the arbitrator should decide challenges to the overall contract.

         Just as parties can agree to arbitrate the merits of a dispute, they can agree to arbitrate arbitrability, such as the validity and scope of an arbitration provision. Rent-A-Center, W., Inc., 561 U.S. at 69. If the parties' contract delegates the issues of arbitrability, the party opposing arbitration must specifically dispute the validity of the delegation clause. Id. at 72.

         “[A]lthough the presence of an arbitration clause generally creates a presumption in favor of arbitration, this presumption disappears when the parties dispute the existence of a valid arbitration agreement.” Bellman v. i3Carbon, LLC, 563 Fed.Appx. 608, 613 (10th Cir. 2014). Determining whether a dispute is subject to arbitration is “similar to summary judgment practice.” Id. at 612 (quoting Hancock v. Am. Tel. & Tel. Co., 701 F.3d 1248, 1261 (10th Cir. 2012)). The party moving to compel arbitration must present “evidence sufficient to demonstrate the existence of an enforceable agreement.” Id. If sufficient evidence of an enforceable agreement is presented, the burden then shifts to the nonmoving party to “raise a genuine dispute of material fact regarding the existence of an agreement.” Id.; BigBen 1613, LLC, v. Belcaro Grp., Inc., No. 17-cv-00272-PAB-STV, 2018 WL 4257321, at *2 (D. Colo. Sept. 6, 2018). When analyzing whether the parties agreed to submit a specific dispute to arbitration, “[a]ll ‘doubts are to be resolved in favor of arbitrability.'” Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1514 (10th Cir. 1995) (quoting Oil, Chem., & Atomic Workers Int'l Union, Local 2-124 v. Am. Oil Co., 528 F.2d 252, 254 (10th Cir. 1976)).

         Stays are generally disfavored in this District. See Wason Ranch Corp. v. Hecla Mining Co., No. 07-cv-00267-EWN-MEH, 2007 WL 1655362, at *1 (D. Colo. June 6, 2007). However, a stay may be appropriate in arbitration disputes given the strong federal policy in favor of arbitration agreements under the FAA. McWilliams v. Logicon Inc., 143 F.3d 573, 576 (10th Cir. 1998). Once the Court determines that the claims are subject to an arbitration agreement, the Court must stay “the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.” 9 U.S.C. § 3. If “all of [the] plaintiff's claims are subject to arbitration, under the FAA, [the Court] must stay litigation of the entire case pending arbitration.” GATX Mgmt. Servs., LLC v. Weakland, 171 F.Supp.2d 1159, 1167 (D. Colo. 2001).

         III. Analysis

         The analysis begins by examining whether enforceable Arbitration Clauses exist between the parties. The Court first determines whether each Plaintiff is bound by an existing Arbitration Clause. Next, the Court resolves whether Defendant WUFSI is bound by an Arbitration Clause, and whether Defendants Western Union and Ersek may enforce arbitration through equitable estoppel.

         After determining whether Arbitration Clauses exist, the Court then examines whether the existing Arbitration Clauses are enforceable and whether Plaintiffs' disputes fall within their scope. Regarding enforceability, the Court examines the enforceability of an Arbitration Clause which names an arbitrator who is no longer available for consumer disputes. Additionally, the Court determines whether a separate Arbitration Clause is unconscionable. Finally, regarding the scope of Plaintiffs' disputes, the Court examines whether Plaintiffs' RICO claims fall within the scope of the Arbitration Clauses under the FAA.

         A. Whether the Parties are Bound by the Arbitration Clauses

         The Court starts by determining which parties are bound by the Arbitration Clauses. Defendants argue that an enforceable Arbitration Clause exists from each alleged fraudulent transaction asserted by each named Plaintiff. Motion [#33] at 18. In support of this argument, Defendants argue that each named Plaintiff assented to the Terms and Conditions in order to send her money transfers as required by WUFSI's standard business practices. Id. at 18-19. Additionally, Defendants argue that WUFSI is bound by the relevant Arbitration Clauses, and that both Arbitration Clauses apply to non-signatory Defendants Western Union and Ersek through the doctrine of equitable estoppel. Id. at 28-34.

         Plaintiffs, by contrast, deny that Plaintiffs Kazmiera Frazier (“Frazier”) and Koaleshia Simon (“Simon”) ever agreed to Defendants' Terms and Conditions, which contain the Arbitration Clauses. Response [#52] at 26-32. Plaintiffs argue that WUFSI is not bound by the Term and Conditions, and therefore it cannot compel arbitration pursuant to the Arbitration Clause therein. Id. at 32-33. Further, Plaintiffs argue that the nonsignatory Defendants Western Union and Ersek also cannot enforce arbitration. Id. at 33-37.

         At the outset, the Court notes Plaintiffs' position regarding who among Defendants is bound by the Terms and Conditions, and thus the Arbitration Clauses. It appears that Plaintiffs assert that none of the named Defendants are parties or signatories to the Terms and Conditions. Plaintiffs argue that WUFSI cannot be bound by the Terms and Conditions and Arbitration Clauses as a nonsignatory. Id. at 32. Further, Plaintiffs argue that as nonsignatories to the Terms and Conditions, Defendants Western Union and Ersek are also not bound by the Arbitration Clauses. Id. at 33. It appears Plaintiffs argue that there is no Defendant who is bound by the Terms and Conditions giving rise to their substantive claims. Id. at 32-37. If that is the case, Plaintiffs' case seeks to hold Defendants accountable for a scheme to defraud customers through money order transactions, while they also argue that Defendants are not bound by the very agreements used in those transactions. See Am. Compl. [#27] at 22-36; Response [#52] at 32-37. Plaintiffs' contradictory argument defies logic, and the Court addresses this novel position in examining which Defendants can enforce arbitration in the analysis below.

         Disputes are subject to arbitration when a valid and enforceable arbitration agreement exists, and when the dispute falls within the scope of those identified in the arbitration agreement. See 9 U.S.C. § 2; Green Tree Fin. Corp. Ala. v. Randolph, 531 U.S. 79, 89 (2000); Newmont U.S.A. Ltd. v. Ins. Co. of N. Am., 615 F.3d 1286, 1274 (10th Cir. 2010). In determining whether a valid arbitration agreement exists, the Tenth Circuit relies on state law principles of contract formation to determine whether parties have agreed to arbitrate an issue or claim. Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470, 475 (10th Cir. 2006); Avedon Eng'g, Inc. v. Seatex, 126 F.3d 1279, 1287 (10th Cir. 1987). Thus, under Colorado law, [4] contract formation principles govern whether parties have agreed to submit disputes to arbitration. Allen v. Pacheco, 71 P.3d 375, 378 (Colo. 2003). An arbitration agreement governed by the FAA is presumed to be valid and enforceable, and the party resisting arbitration bears the burden of proving that Congress intended to preclude arbitration of the claims at issue. Randolph, 531 U.S. at 91-92.

         In ruling on a motion to stay pending arbitration, a federal court may consider “only issues relating to the making and performance of the agreement to arbitrate.” Prima Paint Corp., 388 U.S. at 404. This includes whether any agreement between the parties was ever concluded. Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 441 n.1 (2006). However, the arbitrator, not the Court, should determine whether the contract overall is otherwise enforceable. In re Cox, 835 F.3d at 1210. Thus, the Court begins its analysis by determining whether any arbitration agreements exists, and what parties are bound by them.

         The party seeking arbitration must present sufficient evidence demonstrating the existence of an arbitration agreement. Bellman, 563 Fed.Appx. at 612. If sufficient evidence of an enforceable agreement is presented, the burden then shifts to the nonmoving party to “raise a genuine dispute of material fact regarding the existence of an agreement.” Id.; BigBen 1613, LLC, 2018 WL 4257321, at *2. Facts are “material” if they are essential to the proper disposition of the claim under the relevant substantive law. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute is “genuine” if the evidence might lead a reasonable juror to return a verdict for the nonmoving party. Allen v. Muskogee, Okla., 119 F.3d 837, 839 (10th Cir 1997).

         In order to meet their initial burden of demonstrating the existence of enforceable arbitration agreements here, Defendants rely on: (1) the signed Terms and Conditions containing the Arbitration Clauses produced by certain Plaintiffs, (2) deposition testimony of certain Plaintiffs admitting that they signed the Terms and Conditions when conducting their transactions, and (3) WUFSI's standard business practices and procedures in sending money orders, with respect to Plaintiffs who have not produced signed Terms and Conditions and who testified that they do not recall signing arbitration agreements during their respective transactions. Reply [#56] at 8; Motion [#33] at 18-19; see also Factual Suppl. [#48] at 3-6. To further establish the practices and procedure associated with WUFSI money order transactions, Defendants submitted the Declarations of Edgardo Torres (“Torres”)[5] and Lisa Sherman (“Sherman”).[6] Reply [#56] at 8; Motion [#33] at 18-19; Torres Decl. [#33-1] at 1-5; Sherman Decl. [#33-2] at 1-12.

         Additionally, the Court considers whether Defendants Western Union, Ersek, and WUFSI are bound by the Arbitration Clauses, allowing them to enforce arbitration. Defendants argue that despite being a nonsignatory to the Terms and Conditions, WUFSI is still bound by the Arbitration Clauses. Motion [#33] at 28; Reply [#56] at 25. Similarly, Defendants argue that Defendants Western Union and Ersek can enforce arbitration without being signatories to the Terms and Conditions through the doctrine of equitable estoppel. Motion [#33] at 32; Reply [#56] at 25. The Court address these arguments in turn.

         1. Whether Plaintiffs Laubler, Riggs and Seward are Bound by the Arbitration Clauses

         It is undisputed that Plaintiffs Rhonda Laubler (“Laubler”), Teresa Riggs (“Riggs”), and Anita Seward (“Seward”) either produced signed Terms and Conditions from their alleged fraudulent transactions or testified that they signed agreements prior to sending their money orders. Factual Suppl. [#48] at 3-4. Plaintiffs Laubler, Riggs, and Seward's relevant transactions took place throughout 2016 and 2017. Id. During this period, the Terms and Conditions contained on the Send Money Forms and order receipts included an arbitration clause stating that National Arbitration and Mediation (“NAM”) (the “NAM Arbitration Clause”) will administer any arbitration arising from a dispute. Motion [#33] at 12.

         Defendants assert that the copies of signed receipts and affirmative testimony regarding signed receipts are sufficient to establish the existence of an agreement to arbitrate. Id. at 19; Factual Suppl. [#48] at 3-6. The Court agrees. See Bellman, 563 Fed.Appx. at 613; Hancock, 701 F.3d at 1264. Plaintiffs Seward and Laubler each produced copies of receipts that they received in connection with their transactions at issue. Factual Suppl. [#48] at 3-4. Plaintiff Riggs did not produce any documentation relating to her transactions but testified that she completed and signed a Send Money Form in connection with each of her money transfers. Id. at 4. Thus, Defendants have produced evidence that the parties were presented with the NAM Arbitration Clause in the course of their disputed transactions, and that Plaintiffs Laubler, Riggs, and Seward assented to the agreements with their signatures. As a result, Defendants have met their initial burden of demonstrating an enforceable arbitration agreement with respect to the NAM Arbitration Clause. Bellman, 563 Fed.Appx. at 613.

         Plaintiffs do not dispute the existence of agreements for Plaintiffs Laubler, Riggs, and Seward because these three Plaintiffs have produced copies of signed Terms and Conditions from their transactions or testified to signing receipts. Response [#56] at 27; Factual Suppl. [#48] at 3-5. Therefore, Plaintiffs do not raise a genuine issue of material fact. Bellman, 563 Fed.Appx. at 613. Thus, the Court finds that Plaintiffs Laubler, Riggs, and Seward are bound by the Arbitration Clauses.

         2. Whether Plaintiffs Frazier and Simon are Bound by the Arbitration Clauses

         Unlike Plaintiffs Laubler, Riggs, and Seward, Plaintiffs Frazier and Simon did not produce any evidence or testimony of signed Terms and Conditions. Factual Suppl. [#48] at 4-6. Plaintiff Simon's disputed transaction occurred in 2016, purportedly making her subject to the NAM Arbitration Clause included in the Terms and Conditions from 2016 through 2017. Response [#52] at 10. Plaintiff Frazier's disputed transaction occurred in 2005, purportedly making her subject to an older version of the Terms and Conditions which listed the National Arbitration Foundation (“NAF”) (the “NAF Arbitration Clause”) as the arbitrator. Id. Plaintiffs Frazier and Simon both testified that they do not specifically recall whether they signed any documentation with respect to their transactions in dispute. Id. Plaintiff Frazier testified that she filled out a form provided at the Western Union location where she completed her transaction that looked like a Send Money Form, and she received a receipt. Id. at 5-6. ...


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