Trеy Neal, individually and on behalf of all others similarly situated v. Navient Solutions, LLC; Navient Corporation; Navient Credit Finance Corporation; Navient Private Loan Trust
No. 19-2775
United States Court of Appeals For the Eighth Circuit
Submitted: September 23, 2020 Filed: October 19, 2020
Before SMITH, Chief Judge, BENTON, and KOBES, Circuit Judges.
Appeal from United States District Court for the Western District of Missouri - Jefferson City
Navient Solutions, LLC (NSL), Navient Corporation, Nаvient Credit Finance Corporation, and Navient Private Loan Trust (collectively, Navient) appeal from the district court’s denial of their motion to compel arbitration against Trey Neal. The district court found that the relevant arbitration clause does not include Navient as a party and sо Navient cannot compel arbitration. We respectfully disagree. Ohio law allows nonsignatory agents to compel arbitration under general principles of contract and agency law. Additionally, Ohio’s rule of alternate estoppel prevents Neal from disavowing the arbitration сlause because his claim arises out of the same contract. We reverse the district court’s denial of Navient’s motion and remand for further proceedings.
I.
Trey Neal received a private student loan from JP Morgan Chase Bank in 2008. Both parties signed a Promissory Note and Credit Agreement governеd by Ohio law that caps the interest rate on the loan at the maximum rate allowed in Ohio. The Credit Agreement also includes an agreement to arbitrate:
A. IF EITHER YOU OR US CHOOSES, ANY CLAIM OR DISPUTE (AS DEFINED BELOW) BETWEEN YOU AND US WILL BE DECIDED BY ARBITRATION AND NOT IN COURT AND NOT BY A JURY TRIAL . . . .
Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Agreement and the arbitrability of any
claim or dispute), between you and us or our employees, agents, successors or assigns, which arise out of or relate to this Agreement, your loan application, or any resulting or related transaction or relationship (including any such relationship with third parties who do not sign this Agreement) shаll, at your or our election, be resolved by neutral, binding arbitration and not by a court action. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class or any other representative type of action.
D. Ct. Dkt. 59-6 at 8. The Credit Agreement defines the terms “we” and “us” as “JP Morgan Chаse Bank, N.A., and its successors and assigns, and any other holder of this Agreement.” Id. at 6.
Chase sold Neal’s loan to Jamestown Funding Trust in 2017. Jamestown is related to Navient Credit Finance, an affiliate of NSL. NSL then became the servicer of the loan. Neal sued Chase and NSL in 2018 for breaching the Credit Agreement by imposing an interest rate exceeding the maximum permitted under Ohio law. Neal based his complaint on the belief that NSL purchased his student loan from Chase. After learning that Jamestown was the actual owner of the loan, Neal dismissed Chase as a defendant, but did not add Jamestown. Instead, Neal added the other Navient dеfendants to his suit.
Navient moved to compel arbitration and stay proceedings pursuant to the Credit Agreement’s arbitration clause.
The district court agreed with Neal and denied Navient’s motion to compel arbitration. The court determined that while the scope of the arbitration clause includes disputes between Neal and nonsignatories, the contractual language does not allow nonsignatоry agents to compel arbitration. The district court found that the definition of “us”—Chase “and its successors and assigns, and any other holder of this Agreement”—does not include Navient because it is an agent to Chase’s successor and not a successor, assign, or holder of the Credit Agreement itself. The district court also cоncluded that Ohio’s alternate estoppel doctrine does not prevent Neal from disavowing the arbitration agreement because Navient cannot compel arbitration under the clear language of the agreement. Navient timely appealed.
II.
We review a district court’s denial of a motion to compel arbitration de novo. Plummer v. McSweeney, 941 F.3d 341, 344 (8th Cir. 2019). The parties agree that Ohio law applies.
A.
Navient seeks to enforce the arbitration clause against Neal as a nonsignatory agent of Jamestown. Neal contends that Navient may not enforce the arbitration clause because it is not a party to the Credit Agreement, nor is it a successor or assign of Chase, nor a holder of the agreement. To decide whether Navient may compel arbitration, we look to Ohio law governing arbitration agreements and principles of agency.
Ohio applies a presumption in favor of arbitration when the claim falls within the scope of an arbitration provision. Williams v. Aetna Fin. Co., 700 N.E.2d 859, 865 (Ohio 1998). “In light of this strong presumption favoring arbitration, all doubts should be resolved in its favor.” Rivera v. Rent A Center, Inc., No. 101959, 2015 WL 5455882, at *2 (Ohio Ct. App. Sept. 17, 2015).1
Navient is a nonsignatory party to the original agreement between Neal and Chase. In Ohio, “[a]rbitration agreements apply to nonsignatories only in rare circumstances.” Miller v. Cardinal Care Mgmt., Inc., No. 107730, 2019 WL 3046127, at *4 (Ohio Ct. App. July 11, 2019) (quotation omitted). One such circumstance is when a “nonsignatory agent [enforces] an arbitration agreement between a plaintiff and the agent’s principal when ordinary principles of contract and agency law require.” Rivera, 2015 WL 5455882, at *4. “[U]nder agency principles, [] a nоnsignatory agent may enforce an arbitration agreement between a plaintiff and the agent’s principal when . . . the alleged misconduct arose out of the agency relationship.” Genaw v. Lieb, No. Civ.A.20593, 2005 WL 435211, at *4 (Ohio Ct. App. Feb. 25, 2005). “[Plaintiffs] will not be allowed to circumvent their promise to arbitrate . . . by simply suing [nonsignatory parties] separately . . . .” Manos v. Vizar, No. 96 CA 2581-M, 1997 WL 416402, at *1 (Ohio Ct. App. July 9, 1997).
The Sixth Circuit addressed this issue in Arnold v. Arnold Corp.-Printed Communications For Business, 920 F.2d 1269 (6th Cir. 1990). There, the plaintiff filed suit against a corporation and the individual members of its board of directors after the plaintiff sold back his preferred and common stock, alleging fraud and violations of the Securities Exchange Act and Ohio Securities Act. Id. at 1271–72. The defendаnts moved to compel arbitration pursuant to the stock purchase agreement, which contained an arbitration provision. Id. at 1272. The plaintiff argued that he could not be compelled to arbitrate his claims against the individual defendants because they were not parties to the stock purchase agreement. Id. at 1281. Applying Ohio law, the court disagreed and determined “the language of the arbitration agreement indicates that the parties’ basic intent was to provide a single arbitral forum to resolve all disputes arising under the stock purchase agreement.” Id. at 1282. The court explained that if a plaintiff “can avoid the practical consequences of an agreement to arbitrate by naming nonsignatory parties as defendants in his complaint . . . the effect of the rule requiring arbitration would, in effect, be nullified.” Id. at 1281.
Arnold and general Ohio agency law instruct us that Navient may compel arbitration here. As a nonsignatory agent,2 Navient is bound by the terms of the original Credit Agreement. The basis for its potential liability—imposing an interest rate higher than that permitted under Ohio law—is in the Credit Agreement. That agreement includes an arbitration clause. Neal attempts to both hold Navient liable under the Credit Agreemеnt and also “circumvent [his] promise to arbitrate” by suing Navient separately from Jamestown. Ohio law does not allow plaintiffs to exploit this situation. Manos, 1997 WL 416402, at *1.
Neal responds that allowing Navient to compel arbitration would rewrite the contract between Neal and Chase, and ultimately Jamestown, becаuse he and Navient never agreed to arbitrate and the Credit Agreement clearly excludes Navient as a party who may compel arbitration. Neal relies on Spalsbury, where the Ohio Court of Appeals prevented a nonsignatory from compelling arbitration. Spalsbury v. Hunter Realty, Inc., No. 76874, 2000 WL 1753436, at *3 (Ohio Ct. App. Nov. 30, 2000). There, a shareholder sued a corporation seeking relief under the terms of her shareholder agreement, which contained an arbitration clause. Id. at *1. In response, the corporation moved to compel arbitration and argued that while it was not a signatory to the shareholder agreement, it was a constructive party to the agreement because the plaintiff’s claims concerned rights granted to her by the corporation itself. Id. The court disagreed and held that the shareholder agreement governed disputes between the shareholders, not those between a shareholder and the corporation itself. Because the corporation never entered into an arbitration agreement with the shareholders, it could not compel arbitration under the agreement. Id. at *2–3.
Unlike the corporation in Spalsbury, Navient is a nonsignatory agent of a party
We reject Nеal’s argument that interpreting the Credit Agreement this way defies its clear language.3 Neal does not dispute that Jamestown could compel arbitration. And, as we have explained, Ohio law allows a nonsignatory agent to compel arbitration against a signatory plaintiff when the alleged liability is basеd on the contractual obligations owed to the plaintiff by the principal. Manos, 1997 WL 416402, at *2.
B.
Navient further urges that Ohio’s doctrine of alternate estoppel precludes Neal from refusing to arbitrate. The district court disagreed, concluding that alternate estoppel cannot be used to override сlear contractual language. The district court also determined that alternate estoppel would not further Navient’s interest because it merely prevents Neal from disavowing the arbitration clause, and, in its view, Navient could not compel arbitration under the Credit Agreement anyway.
Ohio cоurts recognize alternate estoppel where nonsignatories may compel arbitration against signatory parties due to “the close relationship between the entities involved, as well as the relationship of the alleged wrongs to the nonsignatory’s obligations and duties in the contract . . . .” I Sports v. IMG Worldwide, Inc., 813 N.E.2d 4, 8 (Ohio Ct. App. 2004) (nоting that other federal and state courts have adopted the theory) (quotation omitted). Alternate estoppel applies when “the claims [are] intimately founded in and intertwined with the underlying contractual obligations.” Short v. Res. Title Agency Inc., No. 95839, 2011 WL 1203906, at *3 (Ohio Ct. App. Mar. 31, 2011) (quotations omitted). Claims are intertwined when “a signatory must rely оn the terms of the written agreement in asserting claims against a nonsignatory.” I Sports, 813 N.E.2d at 8. Alternate estoppel has limited application to scenarios where a nonsignatory tries to bind a signatory to arbitration. Id. at 7. “The signatory will be estopped from attempting to avoid arbitration because their claims аgainst the nonsignatory are integrally related to the contract containing the arbitration clause.” U.S. Bank N.A. v. Wilkens, No. 96617, 2012 WL 892898, at *10 (Ohio Ct. App. Mar. 15, 2012) (quotation omitted).
Here, there is no express language excluding nonparties. In fact, the arbitration clause at issue clearly encompasses disputes between Neal and nonsignatory third parties. Although Neal contends that the language detailing who may compel arbitration excludes Navient by omission, the contract contains no express exclusion. Neal seeks to hold Navient liable for breaching the very same agreement that contains the arbitration clause. His claims against Navient are not just “integrally related to the contract containing the arbitration clause,” they are the same. Wilkens, 2012 WL 892898, at *10. Because Neal “rel[ies] on the terms of the written agreement in asserting [his] claims against a nonsignatory,” he is estopped from disavowing the arbitration clause. I Sports, 813 N.E.2d at 8.
III.
Ohio agency law permits Navient to compel arbitration against Neal as a nonsignatory agent of the holder of the loan. Furthermore, Neal is estopped from avoiding the arbitration clause because his claims are intеgrally intertwined with the contract containing the agreement to arbitrate. We reverse the district court’s denial of Navient’s motion to compel arbitration and remand for further proceedings consistent with this opinion.