United States District Court, M.D. Tennessee, Nashville Division
WENDY ATKINSON, individually and on behalf of other members of the general public similarly situated, Plaintiff,
HARPETH FINANCIAL SERVICES, LLC, MICHAEL HODGES, and TINA HODGES, Defendants.
A. TRAUGER United States District Judge.
defendants have filed a Petition to Compel Arbitration and
Dismiss Plaintiffs' Complaint or, in the Alternative,
Stay the Action Pending Resolution of Arbitration (the
“Petition”) (Docket No. 11), to which the
plaintiff has filed a Response in Opposition (Docket No. 15),
and the defendants have filed a Reply (Docket No. 20). For
the reasons stated herein, the Petition will be granted.
& FACTUAL BACKGROUND
Financial Services, LLC (“Harpeth Financial”) is
a Tennessee limited liability company that does business
under the name Advance Financial and provides short-term
loans to consumers. (Docket No. 1 ¶¶ 8, 10.) The
plaintiff, Wendy Atkinson, alleges that Harpeth Financial and
its co-owners - Michael and Tina Hodges - engaged in an
extortionate scheme whereby they refused to service their
customers' existing loans and, by threatening default on
those loans, forced their customers to take out additional
“FLEX” loans with far more onerous terms.
(Id. ¶¶ 10-13.) Ms. Atkinson brings claims
against Harpeth Financial for breach of contract and against
the Hodges for violations of the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C.
§ 1961 et seq., on behalf of herself and
“[a]ll Advance Financial customers who entered into a
short-term loan agreement, and subsequently transferred the
balance of the short-term loan to a FLEX loan, after Advance
Financial stopped servicing its short-term loan
products.” (Id. ¶¶ 48-87.) The
defendants now seek an order compelling arbitration of Ms.
Atkinson's claims and dismissal of this action or, in the
alternative, a stay of the matter pending resolution of the
arbitration. (Docket No. 11.)
April 6, 2017, the defendants filed the Petition (Docket No.
11), accompanied by a Memorandum in Support (Docket No. 12)
and the Affidavit of Michael Hodges (the “First Hodges
Affidavit”), which attaches two loan agreements between
Ms. Atkinson and Advance Financial (Docket No.
The first of these attached agreements demonstrates that, on
May 15, 2015, Ms. Atkinson took out a short-term loan for
$1025 from Harpeth Financial at an annual percentage rate of
104.63%, to be repaid in installments. (Docket No. 13-2.) The
instrument memorializing this loan (the “Installment
Agreement”) contains an arbitration clause that
provides, in part, that:
Any Dispute by either [the plaintiff] or [Advance Financial]
against the other, or against the employees, agents, or
assigns of the other, will, upon election by either [the
plaintiff] or [Harpeth Financial], be resolved by binding
arbitration, including the applicability of this arbitration
provision or the validity of the entire [Agreement].
(Id. at p. 2.) This arbitration clause defines the
term “Dispute” broadly, to include,
“without limitation, any claim, dispute or controversy
arising from or relating, directly or indirectly, to this
[Agreement].” (Id.) Ms. Atkinson's
signature appears at the end of this arbitration clause and
again at the end of the Installment Agreement. (Id.
at p. 3.)
second of the agreements attached to the First Hodges
Affidavit demonstrates that, on May 29, 2015, Ms. Atkinson
converted the remaining balance on her installment loan into
a flexible loan - called a FLEX loan - with a credit limit of
$1450 at an annual percentage rate of 279.50%. (Docket No.
13-5.) The instrument memorializing this loan (the
“FLEX Agreement”) contains an arbitration clause
providing that the parties will resolve all
“Dispute[s]” through arbitration, with the term
“Dispute” defined as follows:
In this Clause, the word “Disputes” has the
broadest possible meaning. This Clause governs all
“Disputes” involving the parties. This includes
all claims even indirectly related to your application and
agreements with us. This includes claims related to
information you previously gave us. It includes all past
agreements. It includes extensions, renewals, refinancings,
or payment plans. It includes all claims related to
collections, privacy, and customer information. It includes
claims related to setting aside this Clause. It includes
claims about the Clause's validity and scope. It includes
claims about whether to arbitrate.
(Id. at p. 4.) The FLEX Agreement also provides a
60-day period during which a customer can inform Advance
Financial in writing that she chooses to opt out of the
arbitration clause. (Id. at p. 5.) At the end of the
Flex Agreement is a statement indicating that it was
electronically signed by Ms. Atkinson. (Docket No. 13-5, p.
March 27, 2017 - shortly after Ms. Atkinson filed this action
- the defendants initiated arbitration of her claims. (Docket
No. 12, p. 4.) The defendants then filed the Petition,
requesting that the court compel arbitration of Ms.
Atkinson's claims and dismiss the Complaint for lack of
subject-matter jurisdiction, or - in the alternative - stay
this action pending resolution of the arbitration. (Docket
No. 11.) The defendants argue that Ms. Atkinson's claims
are properly subject to the FLEX Agreement's arbitration
clause, which “[b]y its terms, . . . supersedes the
dispute resolution procedures set forth in ‘all past
agreements' between the parties, including [the] prior
Installment Agreement.” (Docket No. 12, pp. 3, 5-6).
The defendants acknowledge that Ms. Atkinson has challenged
the application of this arbitration clause to her claims, but
they argue that the “delegation provision”
contained in that clause - which requires the parties to
arbitrate “claims related to setting aside [the
Clause[, ] . . . claims about the Clause's validity and
scope[, ] . . . [and] claims about whether to
arbitrate” - requires that an arbitrator, and not this
court, determine the arbitrability of Ms. Atkinson's
claims. (Id. at p. 7 (quoting Docket No. 13-5, p.
4).) As support for this argument, the defendants cite the
Supreme Court's decision in Rent-A-Center, West, Inc.
v. Jackson, 561 U.S. 63 (2010), which held that, when a
party opposing arbitration raises no specific challenge to
the enforceability of a delegation provision in an
arbitration clause, the provision is enforceable and
threshold questions concerning the arbitrability of the
parties' claims must be referred to arbitration.
(Id. at pp. 7-9.)
the court were to determine that the FLEX Agreement or its
arbitration clause were invalid, the defendants argue that
this matter must still be referred to arbitration.
(Id. at pp. 10-11.) If the FLEX Agreement or its
arbitration clause are not valid, the defendants contend,
then it cannot supersede the dispute resolution procedures
set forth in the parties' previous Installment Agreement,
which also contains an arbitration clause and delegation
provision. (Id.) Moreover, the defendants argue that
Ms. Atkinson alleged no basis for setting aside the
arbitration clause or delegation provision found in the
Installment Agreement but, rather, “affirmatively
suggest[s] [the contract's] validity by claiming that the
Installment Agreement [is a] ‘valid contract,
supported by good consideration.'” (Id.
(quoting Docket No. 1 ¶ 81).) Accordingly, the
defendants argue that, no matter which of the two agreements
currently governs the relationship between the parties, Ms.
Atkinson's claims are subject to a valid arbitration
agreement that requires the delegation of all issues of
arbitrability to an arbitrator.
the defendants request that the court dismiss Ms.
Atkinson's claims. The defendants acknowledge that
“the FAA mandates, at a minimum, that this action be
stayed pending the resolution of arbitration.”
(Id. at p. 11 (citing 9 U.S.C. § 3).) Arguing
that dismissal may be appropriate when a plaintiff's
claims, “on their face, . . . so clearly fall within
the scope of an arbitration clause that there [is] no
question as to their arbitrability, ” the defendants
contend that the court should dismiss the Complaint against
them, rather than merely staying the case. (Id.
(quoting Dearmon v. Bestway Rent-To-Own, No.
3:14-cv-900, 2014 WL 1961911, at *2 (M.D. Tenn. May 15,
2014)).) According to the defendants, Ms. Atkinson's
claims are “clearly governed” by the FLEX
Agreement's arbitration clause - or, in the alternative,
by the arbitration clause found in the Installment Agreement
- and the entire action, therefore, should be dismissed
rather than stayed. (Id. at pp. 12-15.)
Ms. Atkinson's Response in ...