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Clerk v. ACE Cash Express

January 29, 2010


The opinion of the court was delivered by: Baylson, J.


I. Introduction

Presently before the Court is Defendant's Motion to Compel Individual Arbitration and Stay Litigation (Doc. No. 4), brought pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. For the reasons discussed below, the Court will grant Defendant's motion.

II. Factual Background and Procedural History

This action was commenced on September 23, 2009, when Plaintiff Yulon Clerk filed a putative class action Complaint in the Court of Common Pleas for Philadelphia County, Pennsylvania against Defendant ACE Cash Express, Inc. ("ACE") (docketed at Case ID # 090902256). The Complaint sought to certify a class of "[a]ll persons in Pennsylvania, who have purchased or received loans, advances of money on credit, and/or negotiations in an amount less than Twenty-Five Thousand Dollars ($25,000.00) from Defendant, with an interest rate, by itself and/or interest in the aggregate, above six percent (6%) annum, and made payments on such agreements." (Def.'s Not. of Removal, Ex. 2, at 6.) Plaintiff alleges that the interest rate for each and all of these loans exceeds the interest rate permitted by Pennsylvania law, and asserts, inter alia, claims under the Pennsylvania Consumer Discount Company Act (the "CDCA"), 7 P.S. § 6201 et seq., the Pennsylvania Loan Interest and Protection Law (the "LIPL"), 41 P.S. § 101 et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-1 et seq. The relief requested by Plaintiff for herself and for the putative class includes, inter alia: (a) treble damages for interest payments exceeding the statutory rate of six percent (6%); (b) restitution of all excess interest and charges collected by Defendant; (c) disgorgement of all revenue, profits, benefits and monies obtained by Defendant and interest thereon; (d) injunctive and declaratory relief; (e) actual and statutory damages, attorneys' fees and costs; and (f) a fine of up to $5,000 for each loan agreement made in violation of law.

Plaintiff's claims arise from a "payday" loan agreement*fn1 she entered into on August 23, 2005 with First Bank of Delaware ("FBD"), which was serviced by Defendant ACE. ACE operates via storefront offices located throughout Pennsylvania which service and collect loans like the one at issue here. Plaintiff, a Pennsylvania citizen residing in the city of Philadelphia, obtained the loan from ACE's retail center located at 3544-46 Germantown Avenue, in Philadelphia. The putative class is defined as limited to citizens of Pennsylvania. Defendant ACE is a Texas corporation registered as a foreign company with the Commonwealth of Pennsylvania which has been engaged in the lending business throughout the Commonwealth. ACE has reviewed its records and confirmed that (1) it marketed and serviced FBD loans to more than 1,000 Pennsylvania residents in the past four years at rates that would not be permitted by Pennsylvania law, if applicable, and (2) the interest collected on these loans exceeds $5,000,000.

Plaintiff's loan was memorialized in a written "Consumer Installment Loan Agreement" ("Loan Agreement"), which incorporated a separately signed "Waiver of Jury Trial and Arbitration Agreement" ("Arbitration Agreement").*fn2 The Loan Agreement made reference to the Arbitration Agreement directly above the Loan Agreement's signature lines.

The Arbitration Agreement stated that it covered "all federal or state law claims, disputes or controversies, arising from or relating directly or indirectly to the Loan Agreement," as well as "all claims based upon a violation of any state or federal constitution, statute or regulation." (Def.'s Memo in Support of Mot. to Compel Arb. at 2.) The Arbitration Agreement permitted Plaintiff to select either the American Arbitration Association ("AAA") or the National Arbitration Forum ("NAF") to administer the arbitration, and also stated that it was "made pursuant to a transaction involving interstate commerce and shall be governed by the FAA." (Def.'s Memo in Support of Mot. to Compel Arb. at 2-3.) Additionally, the Arbitration Agreement expressly stated that any arbitration would be conducted on an individual -- and not a class action -- basis, gave Plaintiff thirty (30) days to reject the Arbitration Agreement without affecting any other aspect of her loan, and set forth the procedure for doing so. Plaintiff did not exercise her right to reject the Arbitration Agreement.

On November 6, 2009, Defendant ACE removed the matter to federal court (Doc. No. 1). On November 12, 2009, Defendant ACE filed a Motion to Compel Individual Arbitration and Stay Litigation (Doc. No. 4), asking this Court to compel Plaintiff to arbitrate her individual claims against it in accordance with the terms of the parties' written Arbitration Agreement, and to stay the litigation pending the completion of arbitration. Plaintiff filed her response on November 25, 2009 (Doc. No. 5), and Defendant ACE filed its reply on December 2, 2009 (Doc. No. 7).

III. Parties' Contentions

A. Defendant

In its Motion to Compel Individual Arbitration and Stay Litigation, and in its brief in support, Defendant ACE argues that all of the requirements for arbitration under the FAA are satisfied because (1) interstate commerce indisputably exists, (2) a written Arbitration Agreement indisputably exists, (3) Plaintiff's claims indisputably fall within the broad scope of the Arbitration Agreement, and (4) Plaintiff agreed to arbitrate on an individual basis.

Defendant ACE next argues that the Arbitration Agreement is not unconscionable, either substantively or procedurally. Regarding substantive unconscionability, Defendant ACE argues that: (1) the costs associated with the arbitration agreement do not render it substantively unconscionable because Plaintiff can seek to recover her attorney's fees and costs if she prevails in arbitration and because Plaintiff's arbitration fees are not a barrier to arbitration; and (2) the class action waiver does not render the arbitration agreement substantively unconscionable because (a) the class action waiver is not substantively unconscionable under Delaware law, which governs the Loan Agreement, (b) even under Pennsylvania law, the class action waiver does not render the Arbitration Agreement substantively unconscionable, and (c) it does not hinder Plaintiff or exculpate Defendant. Regarding procedural unconscionability, Defendant ACE argues that there is no merit to Plaintiff's allegation that the Arbitration Agreement is procedurally unconscionable.

Defendant ACE further argues that the AAA is fully available to administer the arbitration.

B. Plaintiff

Plaintiff argues that Defendant ACE made an illegal loan and now seeks to avoid responsibility based on an unenforceable Arbitration Agreement and class action waiver. Plaintiff further argues that the chosen arbitrators set forth in the Arbitration Agreement -- the AAA and the NAF -- are both unavailable to administer the arbitration, thus making the Arbitration Agreement and class action waiver unenforceable.

Plaintiff next argues that a choice-of-law analysis requires that Pennsylvania law be applied, and that under Pennsylvania law, the Arbitration Agreement is both procedurally and substantively unconscionable. Regarding procedural unconscionability, Plaintiff argues that the Loan Agreement is a contract of adhesion to which Plaintiff had no meaningful choice when accepting its terms. Plaintiff further argues that she had no part in drafting the Arbitration Agreement, that she did not recall reading the Arbitration Agreement, and that Defendant is a sophisticated company which had a superior bargaining position. Plaintiff also argues that the presence of an "opt-out" clause does not automatically compel the conclusion that the Arbitration Agreement was not procedurally unconscionable. Regarding substantive unconscionability, Plaintiff argues that the class action waiver term unreasonably favors Defendant ACE because the cost of ...

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