United States District Court, E.D. Virginia, Richmond Division
DERRICK A. MILBOURNE, et al., Plaintiffs,
JRK RESIDENTIAL AMERICA, LLC, Defendant.
Robert E. Payne Senior United States District Judge
This matter is before the Court on DEFENDANT'S MOTION TO COMPEL ARBITRATION OF THE CLAIMS OF CERTAIN PUTATIVE CLASS MEMBERS (ECF No. 153) . For the reasons set forth below, the motion will be denied.
On November 30, 2012, Plaintiff Derrick Milbourne ("Milbourne") filed a class action complaint on behalf of himself and all others similarly situated, alleging that Defendant JRK Residential America, LLC ("JRK") had violated the Fair Credit Reporting Act ("FCRA"). (Complaint ("Compl.") (ECF No. 1)). JRK was served with a summons and Complaint on December 2, 2012 (ECF No. 3) but failed to answer or otherwise plead to the Complaint.
The case sat unattended until August 1, 2013 when Milbourne's counsel, having finally observed the default, moved for entry of an order scheduling motions for default, for class certification, and for default judgment (ECF No. 5) . The previously somnolent JRK somehow learned of that motion and subsequently secured agreement to be allowed to file a late Answer, pleading excusable neglect for its default. CONSENT MOTION FOR LEAVE TO FILE RESPONSIVE PLEADING (ECF No. 7).
After obtaining leave to file a late response, JRK filed its Answer on August 28, 2013. (ECF No. 12) . JRK served two offers of judgment on Milbourne, then filed a motion to dismiss on a theory of mootness (ECF No. 13), which the Court denied after full briefing. (ECF No. 19).
On August 1, 2014, Milbourne filed a motion to certify two classes. (ECF No. 35) . After full briefing and a hearing on the matter, the Court ordered the parties to file a stipulation of a proposed revised class definition, (ECF No. 46), and subsequently certified two classes of plaintiffs on October 31, 2014. (ECF No. 56). In its Order certifying these classes, the Court defined the "Impermissible Use Class" as follows:
All natural persons residing in the United States (including all territories and other political subdivisions of the United States), (a) who applied for an employment position with Defendant or any of its subsidiaries, (b) as part of this application process were the subject of a consumer report obtained by Defendant during the two years proceeding [sic] the filing of the Complaint, (c) where Defendant used a form to make its disclosures pursuant to 15 U.S.C. § 1681b(b)(2) that contained a release and/or waiver of the signing consumer's claims and/or rights.
Id. The Court also certified an "Adverse Action" subclass, defined as follows:
All natural persons residing in the United States (including all territories and other political subdivisions of the United States), (a) who applied for an employment position with Defendant or any of its subsidiaries, (b) as part of this application process were the subject of a consumer report background check obtained by Defendant on or after the date two years proceeding [sic] the filing of the Complaint, (c) where Defendant's records show that the applicant was denied employment because of the background check, (d) and to whom Defendant did not provide a copy of the consumer report and other disclosures stated at 15 U.S.C. § 1681b(b)(3)(A)(ii) at least five business days before the date the employment decision is first noted in Defendant's records.
Meanwhile, JRK filed a motion for summary judgment (ECF No. 47), which the Court denied after full briefing. (ECF No. 68). Millbourne also moved for summary judgment, which was opposed by JRK and ultimately denied. (ECF No. 83) . After several weeks of negotiations following the Court's Order granting class certification, the parties agreed on a proposed class notice and notice plan, which were approved by the Court on March 17, 2015. (ECF No. 70) .
The case was set for a jury trial in July 2015. Both parties filed motions in limine, witness lists, exhibit lists, discovery designations, proposed jury instructions, and proposed voir dire questions, as well as oppositions and objections thereto. (ECF Nos. 88-115). On the eve of trial, JRK moved for leave to file a second motion for summary judgment, which was denied after full briefing. (ECF Nos. 86, 118, 127). Shortly thereafter, the Court ordered that discovery be re-opened based on JRK's argument that it had, in fact, provided an FCRA-compliant disclosure and authorization form ("the Standalone Disclosure Form") to some class members. (ECF No. 132). The Court accordingly continued the trial and re-opened discovery for the specific purpose of developing the factual record concerning the Standalone Disclosure Form. (ECF Nos. 132, 138). After several weeks of additional discovery, Milbourne filed a First Amended Complaint on October 26, 2015, alleging a new subclass definition and adding new class representatives (collectively, "the Named Plaintiffs"). (ECF No. 147).
On November 10, 2015, JRK filed the instant motion, seeking to compel arbitration on the ground that 510 class members had signed binding Mediation and Arbitration Agreements ("Arbitration Agreements" or "the Agreements"). (ECF No. 153). Plaintiffs have opposed the motion, and JRK has replied. (ECF Nos. 165, 168). The matter is therefore now ripe for decision.
The Federal Arbitration Act ("FAA") declares that a written agreement to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA "thereby places arbitration agreements on an equal footing with other contracts, and requires courts to enforce them according to their terms." Rent-a-Center, W., Inc. v. Jackson, 561 U.S. 63, 67 (2010). Like other contracts, therefore, arbitration agreements may be invalidated by "generally applicable contract defenses, such as fraud, duress, or unconscionability." Doctors Assoc, Inc. v. Casarotto, 517 U.S. 681, 687 (1996).
The FAA reflects a strong congressional preference for enforcing arbitration. Under the FAA, courts must refer disputes to arbitration where: (1) a valid agreement to arbitrate exists; and (2) the dispute falls within the scope of the agreement to arbitrate. Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 563 (4th Cir. 2015), petition for cert, filed, - U.S.L.W. -- (U.S. Dec. 2, 2015) (No. 15-719). Moreover, "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Dockser v. Schwartzberg, 433 F.3d 421, 426 (4th Cir. 2006).
However, the presumption in favor of arbitrability is not applied "to resolve questions of the arbitrability of arbitrability issues themselves." Carson v. Giant Food, Inc., 175 F.3d 325, 328-29 (4th Cir. 1999) (internal citation and quotation marks omitted). "[B]ecause the legal predicate of compulsory arbitration is contractual consent, courts can require arbitration only of those disputes which the parties have agreed to arbitrate." Hendrick v. Brown & Root, Inc., 50 F.Supp.2d 527, 532 (E.D. Va. 1999) (citing Gateway Coal Co. v. United Mine Workers of Am., 414 U.S. 368, 374 (1974)). A court resolving an arbitrability dispute must engage in a two-step inquiry. See Peabody Holding Co., LLC v. United Mine Workers of Am., Intern. Union, 665 F.3d 96, 102 (4th Cir. 2012). First, the court must "determine who decides whether a particular dispute is arbitrable: the arbitrator or the court." Id. Second, only if the court determines that it "is the proper forum in which to adjudicate arbitrability" does the court "then decide whether the dispute is, in fact, arbitrable." Id.
Thus, the threshold question of whether a particular dispute falls within the scope of an arbitration agreement is presumptively a matter for "judicial determination, " and "[c]ourts should not assume that the parties agreed to arbitrate arbitrability unless there is 'clear and unmistakable' evidence that they did so." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995) (quoting AT&T Techs., Inc. v. Commc'nWorkers of Am., 475 U.S. 643, 648 (1986) (internal alteration omitted)). The Fourth Circuit has explained that "the 'clear and unmistakable' ...