In a decision from a California federal court, the judge issued an order compelling arbitration of a TCPA claim over the plaintiff’s objection.
The case stems from a loan agreement that plaintiff Miguel Delgado entered into with Progress Financial Company in December 2012. An arbitration clause covering “[a]ny and all claims, controversies, or disputes arising out of or related in any way to” the loan agreement was included, as was a disclosure form that contained a clause authorizing Progress to contact Delgado electronically.
Despite the disclosure form’s notice that signatories agreed to be contacted via e-mail, text messages, and phone calls – even those automatically dialed and with recorded messages – Delgado sued Progress for violating the TCPA. The defendant “caused Plaintiff’s telephone to ring repeatedly and continuously to annoy Plaintiff,” according to the complaint, and “communicated with such frequency as to be unreasonable under the circumstances and to constitute harassment.”
Progress responded to the suit with a motion to compel arbitration pursuant to the terms of the loan agreement. Delgado objected, arguing that his claims were focused on the manner in which the defendant tried to collect a debt – not the debt itself, putting it outside the scope of the agreement.
But, emphasizing the broad language of the arbitration clause, particularly the phrase “related in any way to [the loan agreement],” U.S. District Court Judge Lawrence J. O’Neill sided with Progress.
“The use of the ‘related to’ language is a signal that the scope of the agreement is broad under Ninth Circuit case law and encompasses claims beyond the four corners of the contract,” he wrote. “Further, the arbitration agreement specifically states that it includes claims ‘whether arising in law or equity, and whether based upon federal, state or local law; contract; tort; fraud or intentional tort . . . .”
The court also pointed to the disclosure form signed by Delgado, that authorized Progress to contact him by phone, text message, or e-mail regarding the loan application and collection of the loan account. A lawsuit challenging such debt collection activities is “related to” that contract, the judge determined.
“[T]he agreement’s broad language, which explicitly includes ‘all claims’ including ‘tort’ and ‘intentional tort’ encompasses [the defendant’s] debt collection related activities, including practices discussed in the disclosure form – such as use of text messages and pre-recorded calls – for the narrow purpose of defendant’s ability to contact plaintiff about his loan account, payments and collections.”
Judge O’Neill cited similar decisions from California state courts as well as federal district courts in Florida and West Virginia. He distinguished contrary rulings from California and Colorado federal courts where the communications at issue related to future business and not an underlying contractual obligation.
Similarly, the court found that Delgado’s claims under California’s Rosenthal Fair Debt Collection Practices Act were also related to the loan agreement. Subsequently, the court ordered the parties to arbitration in accordance with the loan agreement.
To read the order in Delgado v. Progress Financial Co., click here.
Why it matters: For companies seeking to arbitrate claims, the Delgado decision provides an important lesson: California strongly favors the use of broad language such as “arising from or relating to” in the arbitration clause.