United States District Court, S.D. West Virginia, Charleston
MEMORANDUM OPINION AND ORDER
T. COPENHAVER, JR. SENIOR UNITED STATES DISTRICT JUDGE.
is defendant's motion to compel arbitration, filed May
18, 2018. Also pending is defendant's motion for oral
argument on its motion to compel arbitration, filed May 25,
17, 2016 and November 27, 2016, plaintiffs Stephen Lowell
Daniels and Lori Lee Daniels, both citizens of West Virginia,
Not. Removal, ECF No. 1, at ¶ 7, entered into separate
contractual agreements with defendant Diamond Resorts
Financial Services, Inc. (“DRFS”), a Nevada
corporation with its principal place of business in Nevada,
Id. at ¶ 8, for the “purchase and sale of
certain property in the nature of a timeshare.” Compl.,
ECF No. 1-1, at ¶¶ 3-4. The June 17, 2016 purchase
agreement concerned the purchase of a timeshare in Virginia,
and the November 27, 2016 purchase agreement concerned the
purchase of a timeshare in Tennessee. See ECF No. 7, Exs. A,
B, at 1.
initiated this action in the Circuit Court of Kanawha County,
West Virginia on March 5, 2018. Not. Removal, ECF No. 1, at
¶ 1. The plaintiffs allege that after their attorney
sent a formal demand letter to defendant, invoking the
consumer protections of 15 U.S.C. §
1692c(a)(2) and the West Virginia Consumer Credit and
Protection Act (“WVCCPA”), W.Va. Code §
46A-1-101 et seq., defendant proceeded to call the plaintiffs
forty-four times seeking to collect a debt. Compl., ECF No.
1-1, at ¶¶ 7-8, 54-58. The plaintiffs seek relief
for unlawful debt collection under the governing state Act
and request that “this Court cancel the debt owed to
the Defendant or its principal pursuant” to the WVCCPA.
Id. at 7.
mentioned in the complaint is the fact that the purchase
agreements were entered into with Diamond Resorts U.S.
Collection Development, LLC (“Developer”), a
Delaware limited liability company with its principal place
of business in Nevada. See ECF No. 7, Exs. A, B, at 2.
Developer is an indirect subsidiary of Diamond Resorts
International, Inc. (“DRI”), a company with a
network of more than 400 vacation destinations. Def.'s
Mem. Supp. Mot. Compel Arbitration (“Def.'s
Mem.”), ECF No. 8, at 1-2. DRFS is also an indirect
subsidiary of DRI and affiliate of Developer. Id. at
removed this action to this court on April 12, 2018, pursuant
to 28 U.S.C. § 1332. Not. Removal, ECF No. 1, at ¶
5. Defendant subsequently moved to compel arbitration of this
matter pursuant to the identical arbitration provisions set
forth in the purchase agreements of June 17, 2016 and
November 27, 2016. Def.'s Mem., ECF No. 8, at 2-3.
According to the defendant, “arbitration is appropriate
because a valid arbitration agreement exists and the issues
in this case fall within its purview.” Def.'s Mot.,
ECF No. 7, at 1.
purchase agreements detail that the Federal Arbitration Act
(“FAA”), 9 U.S.C. §§ 1-16, will govern
the arbitration provision and that Nevada law “shall
govern to the extent that state law is relevant under the FAA
in determining the enforceability of this Arbitration
Provision.” ECF No. 7, Exs. A, B, at ¶ 18(e).
arbitration provision includes three relevant subsections.
First, the purchase agreements contain an opt-out provision
that permits a purchaser to notify the seller within thirty
days if the purchaser does not want the arbitration provision
to apply by sending a letter to the seller “STATING
THAT THE ARBITRATION PROVISION DOES NOT APPLY.”
Id. at ¶ 18(a).
the arbitration provision states that “[u]nless
Purchaser has exercised his or her opt-out right pursuant to
Section 18(a), upon the election of Purchaser or any Company
Party, any Claim between Purchaser and such Company Party
shall be resolved by binding individual (and not class)
arbitration.” Id. at ¶ 18(c).
the arbitration provision defines several of the terms used
in Paragraph 18(c). “Company Party” is defined as
“Seller and/or the Association, their affiliates and
the agents, representatives, members, employees, officers
and/or directors of such entities, if and to the extent that
any Claim is asserted by or against such entity or
person.” Id. ¶ 18(b).
“‘Claim' means any legal claim, dispute or
controversy between any Company Party and Purchaser,
including statutory, contract and tort disputes of all kinds
and disputes involving requests for declaratory relief,
injunctions or other equitable relief.”Id.
plaintiffs have filed a response in opposition to
defendant's motion in which they object to the
enforcement of the arbitration provision on several grounds.
The defendant has since filed its reply.
Standard of Review
was enacted in 1925 and codified as Title 9 of the United
States Code in 1947. Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 25 (1991). Its purpose was to
“reverse the longstanding judicial hostility to
arbitration agreements ... and to place [them on] the same
footing as other contracts.” Id. Additionally,
the Gilmer court noted:
statutory claims may be the subject of an arbitration
agreement, enforceable pursuant to the FAA . . . . In these
cases we recognized that “[b]y agreeing to arbitrate a
statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial,
Id. at 26 (quoting Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985)). The FAA provides that arbitration clauses in
contracts concerning interstate commerce are “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 reflects “a
liberal federal policy favoring arbitration
agreements.” Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24 (1983).
“Accordingly, due regard must be given to the federal
policy favoring arbitration, and ambiguities as to the scope
of the arbitration clause itself resolved in favor of
arbitration.” Adkins v. Labor Ready, Inc., 303
F.3d 496, 500 (4th Cir. 2002) (internal citations and
quotations omitted). Thus, a district court must grant a
motion to compel arbitration when “a valid arbitration
agreement exists and the issues in a case fall within its
purview.” Id. (citing United States v.
Bankers Ins. Co., 245 F.3d 315, 319 (4th Cir. 2001)).
circuit, a party may compel arbitration under the FAA if it
(1) the existence of a dispute between the parties,
(2) a written agreement that includes an arbitration
provision which purports to cover the dispute,
(3) the relationship of the transaction, which is evidenced
by the agreement, to interstate or foreign commerce, and
(4) the failure, neglect or refusal of the defendant to
arbitrate the dispute.
Id. at 500-01 (quoting Whiteside v. Teltech
Corp., 940 F.2d 99, 102 (4th Cir. 1991)).
Adkins court also observed that “‘even though
arbitration has a favored place, there still must be an
underlying agreement between the parties to
arbitrate.'” Id. at 501 (quoting
Arrants v. Buck,130 F.3d 636, 640 (4th Cir. 1997)).
“Whether a party agreed to arbitrate a particular
dispute is a question of state law governing contract
formation.” Id. at 501 (citing First Options
of Chicago, Inc. v. Kaplan,514 U.S. 938, 944
(1995)); see also Sydnor v. Conseco Fin. Servicing
Corp.,252 F.3d 302, 305 (4th Cir. 2001) (citation
omitted). “Generally applicable contract defenses, such
as fraud, duress, or ...