Guidotti v. Legal Helpers Debt Resolution, L.L.C.
716 F.3d 764, 2013 U.S. App. LEXIS 10642, 2013 WL 2302324 (2013)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When ruling on a motion to compel arbitration, a court must first apply a Rule 12(b)(6) standard. If the complaint and its supporting documents are unclear, or if the non-movant presents sufficient evidence to place the agreement to arbitrate in issue, the court must then apply a Rule 56 summary judgment standard, permitting limited discovery on the question of arbitrability.
Facts:
- Dawn Guidotti, who had approximately $19,550 in unsecured consumer debt, contacted JG Debt Solutions for assistance.
- JG Debt Solutions connected Guidotti with a debt reduction program run by Eclipse Servicing, Inc. and Legal Helpers Debt Resolution, LLC (LHDR).
- The program required Guidotti to make monthly payments into a special bank account with Rocky Mountain Bank and Trust (RMBT), with payments processed by Global Client Solutions (Global).
- On September 29, 2009, Guidotti received an email with a link to online documents, including an Attorney Retainer Agreement (ARA) and a Special Purpose Account Application (SPAA).
- The SPAA contained a clause stating that Guidotti acknowledged she had received and was bound by the terms of a separate 'Account Agreement,' which was incorporated by reference.
- Guidotti electronically signed and submitted the SPAA on or around September 29, 2009.
- The Account Agreement, which Guidotti claims she did not receive with the initial set of documents, contained a binding arbitration clause.
- Over the next 15 months, Guidotti made payments into the account, but her debts were not settled and three of her creditors sued her.
Procedural Posture:
- Dawn Guidotti filed a putative class action lawsuit in the Superior Court of New Jersey.
- Defendants removed the action to the United States District Court for the District of New Jersey.
- Guidotti filed an amended complaint.
- Rocky Mountain Bank and Trust (RMBT) and Global Client Solutions (Global), among other defendants, filed motions to compel arbitration.
- The District Court granted the motion as to certain defendants but denied the motion filed by RMBT and Global.
- The District Court held that Guidotti had sufficiently demonstrated that there was no meeting of the minds on an agreement to arbitrate with RMBT and Global.
- RMBT and Global (the Appellants) appealed the denial of their motion to the U.S. Court of Appeals for the Third Circuit.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Under the Federal Arbitration Act, what is the proper analytical framework for a district court to apply when deciding a motion to compel arbitration where one party disputes the formation of the arbitration agreement?
Opinions:
Majority - Jordan, J.
No, the District Court's denial of the motion was improper because it failed to apply the correct legal framework. When evaluating a motion to compel arbitration, a court should first apply a Rule 12(b)(6) standard if the agreement to arbitrate is apparent on the face of the complaint. However, if the pleadings are unclear, or if the party opposing arbitration comes forward with evidence that is more than a 'naked assertion' and places the formation of the agreement in issue, the court must convert its analysis to a Rule 56 summary judgment standard. This shift requires the court to permit the parties to conduct limited discovery on the narrow issue of arbitrability before ruling. In this case, while Guidotti's signed SPAA facially established an agreement, her evidence regarding the absence of a 'DocuSign' header on the Account Agreement was sufficient to place the agreement in issue. Therefore, the District Court erred by summarily concluding that no agreement was formed without first allowing for limited discovery under the summary judgment standard.
Analysis:
This decision clarifies the procedural framework for motions to compel arbitration in the Third Circuit, resolving previous inconsistencies in case law. It establishes a two-step standard that balances the Federal Arbitration Act's goal of speedy dispute resolution with the fundamental contract principle that arbitration requires consent. By creating a clear path for limited discovery when the formation of an arbitration agreement is credibly disputed, the ruling provides a check on forcing parties into arbitration without a clear agreement. This framework will likely influence litigation strategy, as parties opposing arbitration now have a clearer standard for what evidence is needed to survive an initial motion and proceed to discovery on the issue of arbitrability.
