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JAMS approves Arb before hearing on MTC takes place...whoops!


DavidintheATX
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My wife is being sued by PRA and was served on 12/18/18 for a Synchrony Gap credit card. I filed the "Answer" to the court on 1/2/19. I filed the MTC to the court AND sent a Demand for Arbitration to JAMS on 1/18/19. On 1/25/19 the court set a hearing for 3/14/19 to hear the Defendant's Motion to Compel Arbitration. Lastly, on 2/6/19 JAMS sent "Notice of Intent to Initiate Arbitration to both parties and included a copy of a deposit request for PRA's lawyer for $1500. 

Of course, the lawyer is stating the following: 

"We need clarification on whether this arbitration is proceeding. Per the minimum standards procedures, #1, no party shall be precluded from seeking remedies in small claims courts for disputes or claims within the scope of its jurisdiction. Currently, there is a case pending in small claims court in Texas and our client wishes to proceed with that litigation in lieu of proceeding with arbitration."

Essentially, I requested Arb with JAMS before the hearing to Compel Arbitration has even taken place. 

Please help answer the following questions and provide any additional insight that might be helpful.

1. How bad did I screw up by going to JAMS prior to the actual hearing? 

2. Will the Judge frown on this mistake and/or how should I handle it? 

3. Does it help that JAMS approved Arb based on my documents and requested a $1500 deposit from PRA's lawyer?

Thank you so very much in advance for any guidance!

 

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45 minutes ago, DavidintheATX said:

1. How bad did I screw up by going to JAMS prior to the actual hearing? 

You didn't screw up.  JAMS opening the case gives you a bit of leverage in the MTC hearing in that you can honestly attest to the court that you are serious about wanting this option.

46 minutes ago, DavidintheATX said:

2. Will the Judge frown on this mistake and/or how should I handle it?

It isn't a mistake per se but you will still have to be able to argue why the court should grant your motion to compel.

47 minutes ago, DavidintheATX said:

3. Does it help that JAMS approved Arb based on my documents and requested a $1500 deposit from PRA's lawyer?

I think so.

Here is what you need to understand.  This statement by their lawyer:

"no party shall be precluded from seeking remedies in small claims courts for disputes or claims within the scope of its jurisdiction. Currently, there is a case pending in small claims court in Texas and our client wishes to proceed with that litigation in lieu of proceeding with arbitration."

All their lawyer is saying is that they know under JAMS rules that if the matter is suitable for small claims no party should be forced to pay the expense of arbitration.  Which for them is enormous.  So of course it is no surprise they would tell JAMS we wish to proceed with the case we already filed in small claims.  

Now you have to argue to the court that despite the fact that JAMS said neither party HAS to arbitrate the card agreement gives you that right and the court should compel PRA to do it.  I would wait until a day or two prior to the MTC hearing and consider contacting the lawyer and offering to drop the arbitration and MTC for a mutual walkaway.  They should take it.

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...no party shall be precluded from seeking remedies in small claims court for disputes or claims within the scope of its jurisdiction.

From JAMS Standards. Why didn't we notice this before? I don't see any other way to read this other than EVERY case - including Synchrony - has a Small Claims carve out. Does AAA have same verbiage? CC Agreements have more vague language but this strikes me as a crystal clear way out of arb.

 

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On 3/6/2019 at 11:00 AM, Goody_Ouchless said:

CC Agreements have more vague language but this strikes me as a crystal clear way out of arb.

From the Synchrony Bank Gap Credit Card Agreement:

PLEASE READ THIS SECTION CAREFULLY. IF YOU DO NOT REJECT IT, THIS SECTION WILL APPLY TO YOUR ACCOUNT AND PURCHASES, AND MOST DISPUTES BETWEEN YOU AND US WILL BE SUBJECT TO INDIVIDUAL ARBITRATION. THIS MEANS THAT: (1) NEITHER A COURT NOR A JURY WILL RESOLVE ANY SUCH DISPUTE; (2) YOU WILL NOT BE ABLE TO PARTICIPATE IN A CLASS ACTION OR SIMILAR PROCEEDING; (3) LESS INFORMATION WILL BE AVAILABLE; AND (4) APPEAL RIGHTS WILL BE LIMITED.

• What claims are subject to arbitration
1. You and we must arbitrate any dispute or claim between you or any other user of your account, and us, our affiliates, agents and/or The Gap, Inc. if it relates in any way to purchases from us or The Gap, Inc., including any of its brands, your account, and this agreement except as noted below.

2. We will not require you to arbitrate: (1) any individual case in small claims court or your state’s equivalent court, so long as it remains an individual case in that court; or (2) a case we file to collect money you owe us. However, if you respond to the collection lawsuit by claiming any wrongdoing, we may require you to arbitrate.

3. Notwithstanding any other language in this section, only a court, not an arbitrator, will decide disputes about the validity, enforceability, coverage or scope of this section or any part thereof (including, without limitation, the next paragraph of this section and/or this sentence). However, any dispute or argument that concerns the validity or enforceability of the Agreement as a whole is for the arbitrator, not a court, to decide.

4. The arbitration administrator will appoint the arbitrator and will tell the parties what to do next. The arbitrator must be a lawyer with at least ten years of legal experience. Once appointed, the arbitrator must apply the same law and legal principles, consistent with the FAA, that would apply in court, but may use different procedural rules. ***If the administrator’s rules conflict with this Agreement, this Agreement will control. ***

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2 hours ago, Goody_Ouchless said:

Loop-Hole-City. It seems the intent was to keep small claims in small claims, but the Synchrony agreement essentially forces the plaintiff to pay to have the arbiter say "it belongs back in court."

The JAMS rules are not a binding contract between the parties, whereas the actual agreement between the parties requires either side to honor the other's demand for arbitration. 

In any event, the JAMS rules don't say small clams cases can't be kicked into JAMS. It only says that JAMS will refuse to accept the case of there is a provision in the card agreement that precludes an action in small claims court. 

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"JAMS will administer arbitrations pursuant to mandatory pre-dispute arbitration clauses between companies and consumers only if ... no party shall be precluded from seeking remedies in small claims court for disputes or claims within the scope of its jurisdiction."

If one cuts out the bloat, JAMS says the above. If the plaintiff is precluded from small claims court, then the contract is not JAMS compliant - couldn't it be argued that there is no "agreement to arbitrate" in place? Will be interesting to see how judge rules if he understands that JAMS will just throw it right back over the wall.

 

 

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16 hours ago, Goody_Ouchless said:

I stand corrected - plaintiff's argument is silly.

Pretty much. 

ENFORCING AND AVOIDING ARBITRATION CLAUSES UNDER TEXAS LAW

"If a valid agreement to arbitration exists, and the analysis proceeds to an inquiry about whether the dispute in question falls within the scope of that arbitration agreement, then—and only then—a presumption favoring arbitration arises. Ellis v. Schlimmer, 337 S.W.3d 860, 862 (Tex. 2011). The presumption also counsels courts to resolve doubts as to the applicability of state law defenses to the enforcement of an arbitration agreement in favor of arbitration. Id.; see infra. "

[snip]

"Courts have also addressed situations where parties claim that there is no agreement to arbitrate because an arbitration agreement contains language stating that, if there is a dispute, a party “may request” arbitration. The Texas Supreme Court has rejected such arguments. The Court “disagree[d] that [such language] render[ed] the contracts ambiguous. . . . While the [clause containing the arbitration agreement] allowed either party to request arbitration, nothing in it suggests arbitration was optional if either did; to the contrary, the clause constituted a binding promise to arbitrate if either party requested it.” In re U.S. Home Corp., 236 S.W.3d 761, 765 (Tex. 2007). Ultimately, though , any question of interpretation of the agreement at issue depends on the contract at issue See Travelers Indem. Co. v. Tex. Mun. League Joint SelfInsurance Fund, No. 01-08-00062-CV, 2008 Tex. App. LEXIS 5297 (Tex. App. – Houston [1st Dist.] July 17, 2008) (distinguishing U.S. Home Corp. because, if the court “were to hold that arbitration was required once the requested it, [the court] would render meaningless the provision that the parties could choose to reject a request to arbitrate.”).

[snip] 

B. Issues Surrounding Whether a Dispute Falls
Within the Scope of an Arbitration Agreement.

Once a court concludes that a valid agreement to arbitrate exists, the court must then conclude that the dispute at issue falls within the scope of the agreement to arbitrate. Although this inquiry turns on the dispute at issue and the language of each arbitration agreement, certain generalizations can be made.
1. The Presumption in Favor of Finding Disputes to be Covered.
Texas and federal courts have repeatedly recognized that the FAA evinces “an ‘emphatic federal policy in favor of arbitral dispute resolution.’” In re American Homestar of Lancaster, Inc., 50 S.W.3d 480, 484 (Tex. 2001) (quoting Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, Inc., 473 U.S. 614, 631 (1985)); Safer v. Nelson Financial Group Inc., 422 F.3d 289 (5th Cir. 2005). As the Texas Supreme Court has held, “[t]he policy in favor of enforcing arbitration agreements is so compelling that a court should not deny arbitration unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which could cover the dispute at issue.” Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1999) (emphasis in original) (citation omitted); In re Rubiola, 334 S.W.3d 220, 225 (Tex. 2011) (quoting same); In re First Texas Homes, Inc., 120 S.W.3d 868 (Tex. 2003) (agreement to arbitrate “all disputes” covered all claims, even those arising after execution of arbitration agreement); see also Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (“any doubts concerning the scope of arbitral 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 like defense to arbitrability”); Fleetwood Enters. Inc. v. Gaskamp, 280 F.3d 1069, 1073 (5th Cir. 2002) (“ambiguities [are] resolved in favor of arbitration”).

2. Arbitration Will be Ordered Even if Piecemeal Litigation Results.
The parties must arbitrate any claims that fall within the scope of the arbitration agreement, even when other claims in a suit are not arbitrable and piecemeal litigation would result. KPMG LLP v. Cocchi, 132 S. Ct. 23, 24 (2011); Helena Chem. v. Wilkins, 18 S.W.3d 744, 750 (Tex. App. – San Antonio 2000), aff’d, 47 S.W.3d 486 (Tex. 2001); see also Wee Tots Pediatrics, P.A. v. Morohunfola, 268 S.W.3d 784 (Tex. App. – Fort Worth 2008, no pet.) (same). The same rule applies where a plaintiff’s claims against some parties must be arbitrated, but that plaintiff’s claims against other parties need not be arbitrated. Rasheed Al Rushaid v. National Oilwell Varco, Inc., 814 F.3d 300 (5th Cir. 2016).


In fact, courts have held that where an issue between two parties must be arbitrated, litigation involving that issue that may involve other parties must be stayed to allow the arbitration to proceed. See In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 195 (Tex. 2007); In re Ghanem, 203 S.W.3d 896 (Tex. App. – Beaumont 2006, orig. proceeding). The Fifth Circuit has explained that, where claims of signatories are being arbitrated, a stay of litigation involving non-signatory parties is subject to a district court’s discretion and is only warranted if:  (1) the arbitrated and litigated disputes involved the same operative facts; (2) the claims asserted in the arbitration and litigation were “inherently inseparable”; and (3) the litigation had a “critical impact” on the arbitration. Rainier DSC 1, LLC v. Rainier Capital Management, L.P., No. 15-20375 (5th Cir. 2016).
 

3. An Opponent of Arbitration Has the Burden to Show No Coverage.
Texas courts have explained that parties seeking to avoid arbitration have the burden “to show that [their] claims [fall] outside of the scope of the arbitration agreement.” Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896, 900 (Tex. 1999); Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (same). 

[Snip]

More recently, in AutoNation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex. App. – Houston [14th Dist.] 2003, no pet.), the court summarized that Texas law provides that “if the facts alleged ‘touch matters,’ have a ‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the contract that is subject to the arbitration agreement, the claim will be arbitrable. However, if the facts alleged are completely independent of the contract and the claim could be maintained without reference to the contract, the claim is not subject to arbitration.” Id. at 195; see also In re Sun Communications, Inc., 86 S.W.3d 313, 319 (Tex. App. – Austin 2002, orig. proceeding) (plaintiff’s breach of fiduciary duty claims that were based “on alleged deficiencies in the reports [plaintiff] was supposed to have received under the contract” that contained arbitration clause were “inextricably intertwined with the contract” and were thus subject to arbitration) (emphasis in original)."

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