Pompeo v. Ad Astra Recovery Services, Inc.
1:16-cv-01371
D.N.M.Jun 22, 2017Background
- Plaintiff Steve Pompeo allegedly took a loan from Rapid Cash in 2014; Rapid Cash referred the delinquent account to Ad Astra Recovery Services for collection and Ad Astra reported the debt on Pompeo’s credit report.
- Pompeo sent a dispute letter to Ad Astra in September 2016; by November 2016 the debt remained on his credit report without a ‘disputed by consumer’ notation.
- Pompeo sued in December 2016 alleging violations of the Fair Debt Collection Practices Act based on the continued reporting and lack of dispute notation.
- Defendant moved to compel arbitration under the Rapid Cash loan Agreement Pompeo signed, which contains a broad arbitration clause covering claims against ‘‘related parties’’ including Ad Astra.
- The Agreement: (1) describes ‘‘Claim’’ in very broad terms, (2) allows a defending party to demand arbitration in court proceedings, and (3) specifies that FAA governs, with Kansas law applicable for state-law questions.
- Pompeo did not respond to the motion; the court nonetheless evaluated the merits and concluded the arbitration provision was valid and applicable and ordered arbitration and a stay.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether parties agreed to arbitrate this dispute | Pompeo did not file a response contesting agreement | Ad Astra relies on signed Rapid Cash Agreement containing broad arbitration clause that covers related parties | Court: Agreement was validly formed and covers the dispute; parties agreed to arbitrate |
| Whether arbitration clause is enforceable (illusory / unconscionable) | Pompeo raised no argument | Ad Astra argued clause is binding and supported by mutual consideration | Court: Clause is not illusory or unconscionable and is enforceable |
| Whether Ad Astra (a ‘‘related party’’) can invoke the clause | Pompeo did not dispute scope or related-party language | Ad Astra points to Agreement’s explicit definition including affiliates and related parties | Court: Related-party language brings Ad Astra within arbitration provision |
| Procedural effect of plaintiff’s non-response | Pompeo offered no factual or legal rebuttal | Ad Astra argued motion should be granted; requested dismissal or stay pending arbitration | Court: Non-response is deemed consent under local rules, but court reached merits and granted motion; stayed action pending arbitration |
Key Cases Cited
- Rent-a-Center, West, Inc. v. Jackson, 561 U.S. 63 (U.S. 2010) (courts must enforce arbitration agreements according to their terms)
- Reed v. Bennett, 312 F.3d 1190 (10th Cir. 2002) (failure to respond to summary-judgment–type motion waives contest to facts but court must still ensure entitlement)
- Hardin v. First Cash Fin. Servs., Inc., 465 F.3d 470 (10th Cir. 2006) (apply ordinary state-law contract principles to determine agreement to arbitrate)
- Doctor's Assoc., Inc. v. Casarotto, 517 U.S. 681 (U.S. 1996) (state contract rules may apply to arbitration agreements but cannot single them out for disfavor)
- Williams v. Imhoff, 203 F.3d 758 (10th Cir. 2000) (two-step inquiry: did parties agree to arbitrate and are there external legal constraints?)
- Clutts v. Dillard's, Inc., 484 F. Supp. 2d 1222 (D. Kan. 2007) (mutual promises to arbitrate constitute sufficient consideration under Kansas law)
- Carl Kelley Const. LLC v. Danco Techs., 656 F. Supp. 2d 1323 (D.N.M. 2009) (federal courts apply forum choice-of-law rules)
- Adair Bus. Sales, Inc. v. Blue Bird Corp., 25 F.3d 953 (10th Cir. 1994) (FAA requires a stay of proceedings where arbitration is required)