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Linsley v. DaimlerChrysler Financial Svcs. Americas LLC: US District Court : ARBITRATION - who's bound as signatory or otherwise; no unconscionability; no waiver in collection letter

Joan Lindsley, Civil No. 08-1466 (DWF/SRN)
DaimlerChrysler Financial Services
Americas LLC; MFR Asset Recovery
a/k/a Home Town Recovery Company;
Thomas Kingore1, individually; Anthony
Cady, individually; and Washington County,
Thomas J. Lyons, Jr., Esq., and Trista M. Roy, Esq., Consumer Justice Center, PA,
counsel for Plaintiff.
Brian L. McMahon, Esq., McMahon Law Firm LLC, counsel for DaimlerChrysler
Financial Services Americas LLC.
Roger L. Rowlette, Esq., Johnson & Lindberg, PA, counsel for Washington County.
This matter is before the Court on a Motion to Compel Arbitration and Stay
Proceedings brought by Defendant DaimlerChrysler Financial Services Americas LLC
(Chrysler Financial). For the reasons stated below, the Court grants in part and denies
in part Chrysler Financials motion.
1 It appears, based on the parties briefs, that this Defendants name was
misspelled in the case caption and should be Thomas Kilgore.
(Footnote Continued on Next Page)
In 2003, Plaintiff Joan Lindsley and Chrysler Financial entered into a finance
agreement for the purchase of a 2003 Dodge Stratus.2 The financing was memorialized in
a Retail Installment Contract (the Contract). In 2007, Lindsley fell behind on her
payments under the Contract. On April 4, 2008, Lindsleys vehicle was repossessed.
Defendant MFR Asset Recovery (MFR), a repossession company, and Defendants
Thomas Kilgore and Anthony Cady, agents of MFR, executed the repossession.3 The
vehicle was repossessed pursuant to the rights of Chrysler Financial.
Lindsley asserts that Defendants repossessed her vehicle without the required
written notice and, in the process, trespassed on Lindsleys property and assaulted and
battered her. Specifically, Lindsley alleges that Kilgore and Cady, as agents of MFR,
shouted profanities and forcibly attempted to remove Lindsley from her vehicle while it
was parked in the garage attached to her house. On May 28, 2008, Lindsley filed this
action, alleging a violation of the Fair Debt Collection Practices Act against the MFR
Defendants; conversion, assault, invasion of privacy, and breach of peace against
Chrysler Financial and the MFR Defendants; battery against Chrysler, MFR, and Cady;
and a violation of 42 U.S.C. 1983 against Defendant Washington County. Chrysler
(Footnote Continued From Previous Page)
2 Chrysler Financial is an assignee of the listed creditor.
3 The Court will refer to MFR, Kilgore, and Cady collectively as the MFR
(Footnote Continued on Next Page)
Financial now moves for an order compelling Lindsley to submit all of her claims against
Chrysler Financial and the MFR Defendants to arbitration and to stay the proceedings
before this Court.
I. Motion to Compel Arbitration
When considering a motion to compel arbitration, the Court is required to
determine whether: (1) a valid agreement to arbitrate exists between the parties; and
(2) the specific dispute is within the scope of that agreement. See Green Tree Fin. Corp.
v. Bazzle, 539 U.S. 444, 452 (2003); Pro Tech Indus., Inc. v. URS Corp., 377 F.3d 868,
871 (8th Cir. 2004).
The Contract contains an arbitration provision that reads:
[A]ny claim or dispute, whether in contract, tort or otherwise (including any
dispute over the interpretation, scope, or validity of this contract, the
arbitration clause or the arbitrability of any issue), between us or Creditors
employees, agents, successors or assigns, which arise out of or relate to this
contract or any resulting transaction or relationship (including any such
relationship with third parties who do not sign this contract) shall, at the
election of either of us (or the election of any such third party) be resolved
by a neutral, binding arbitration and not be a court action.
(Aff. of Brian L. McMahon (McMahon Aff.) 2, Ex. 1.)
Although Chrysler Financial is not a signatory to the Contract, the parties agree
that it is an assignee of the original creditor. Therefore, Chrysler Financial can invoke the
(Footnote Continued From Previous Page)
arbitration clause against Lindsley. Lindsley, however, asserts that there is no contract or
arbitration agreement between her and the MFR Defendants. While acknowledging that
the MFR Defendants are not parties to the Contract, Chrysler Financial asserts that they
can be compelled to arbitrate. In support, Chrysler Financial cites to Simitar
Entertainment, Inc. v. Silva Entertainment, Inc., 44 F. Supp. 2d 986 (D. Minn. 1999). In
Simitar, the Court explained that non-signatories to an arbitration agreement can, under
certain circumstances, compel arbitration under the agreement. Simitar, 44 F. Supp. 2d at
993 n.5. In particular, a signatory may be bound to arbitrate with a nonsignatory at the
nonsignatorys insistence in certain situations. Simitar, however, does not stand for the
proposition that a signatory to an arbitration agreement can invoke arbitration on behalf
of a third-party non-signatory. Here, the MFR Defendants are not signatories to the
Contract; nor have they elected to submit Lindsleys claims against them to arbitration.4
Accordingly, the Court declines to compel the arbitration of any claims against the MFR
With respect to the claims asserted against Chrysler Financial, Lindsley maintains
that the arbitration provision is unenforceable because it is unconscionable and because
Chrysler Financial waived its right to pursue arbitration. First, Lindsley asserts that the
arbitration clause is unenforceable because it is both substantively unconscionable as a
4 The Court is aware that MFR recently filed a Motion to Compel
Arbitration. The Court will address MFRs motion as scheduled, unless the parties
agree that the issues presented in that motion are resolved by this Order.
contract of adhesion and procedurally unconscionable because, for example, arbitration
would be expensive for Lindsley.
Whether a contract is unconscionable is a question of law. RJM Sales & Mktg.,
Inc. v. Banfi Prods. Corp., 546 F. Supp. 1368, 1375 (D. Minn. 1982). Minnesota courts
may refuse to enforce contracts of adhesion. Siebert v. Amateur Athletic Union of the
United States, Inc, 422 F. Supp. 2d 1033, 1040 (D. Minn. 2006) (citing Schlobohm v. Spa
Petite, Inc., 326 N.W.2d 920, 924 (Minn. 1982)). To demonstrate that the Contract is one
of adhesion, Lindsley must establish a great disparity in bargaining power with no power
for the negotiation and that the services offered by Defendants are a public necessity and
cannot be obtained elsewhere. Id. Factors to consider when determining if a contract is
one of adhesion include the sophistication of the parties, the circumstances surrounding
the execution of the agreement, and the burden the arbitration places on the complaining
party. See Ottman v. Fadden, 575 N.W.2d 593, 597 (Minn. Ct. App. 1998).
The Court concludes that the Contract is not an unconscionable contract of
adhesion. First, a contract for the financing of the purchase of a motor vehicle is not a
contract for a public necessity and there has been no showing that financing could not
have been obtained elsewhere. Second, Lindsleys factual basis for her claim fails.
Lindsley argues, among other things, that the arbitration agreement was buried in the
fine print of a lengthy document, was not presented or explained in any meaningful way,
and was presented without any opportunity for Lindsley to negotiate. Lindsley, however,
does not point to any record evidence to support her factual contentions. In addition, the
assertion that the arbitration agreement was buried is belied by the record evidence.
The arbitration clause is contained in a two-page document and appears in the same font
size as the other contractual terms and under a bold heading in larger font that reads
provisions significantly affect Your rights in any dispute with us. Please read this
carefully before You sign the contract. (McMahon Aff. 2, Ex.1.) Finally, the Court
concludes that the arbitration agreement is not procedurally unconscionable.5
Lindsley also asserts that Chrysler Financial waived its right to compel arbitration.
A court will find waiver where the party claiming the right to arbitrate: (1) knew of an
existing right to arbitration; (2) acted inconsistently with that right; and (3) prejudiced the
other party by these inconsistent acts. Lewallen v. Green Tree Servicing LLC, 487 F.3d
1085, 1090 (8th Cir. 2007). A party acts inconsistently with its right to arbitrate when it
substantially invokes the litigation machinery prior to asserting its arbitration right. Id.
See also Parler v. KFC Corp., 529 F. Supp. 2d 1009, 1014 (D. Minn. 2008). A party
substantially invokes the litigation machinery when, for example, it files a lawsuit on
arbitrable claims, engages in extensive discovery, or fails to move to compel arbitration
and stay litigation in a timely manner. Lewallen, 487 F.3d at 1090.
5 Lindsleys concerns regarding the cost of and limited discovery available in
arbitration are mitigated by the fact that the only claims being submitted to arbitration are
those against Chrysler Financial. As explained below, the core of Lindsleys case will
remain before this Court, where proceedings are open and discovery is available.
Lindsley claims that Chrysler Financial acted inconsistently with its right to
arbitration by retaining an attorney who sent a collection letter6 that threatened litigation
and made no reference to arbitration and by opting to engage in the non-judicial act of
possessing Lindsleys vehicle.
The Court disagrees. Nothing in the record supports the conclusion that Chrysler
Financial waived its right to compel arbitration against Lindsley. In particular, the Court
concludes that Chrysler Financial did not substantially invoke the litigation process
either by sending a collection letter or by repossessing Lindsleys vehicle.
Based on the reasons discussed above, the Court concludes that Lindsleys claims
against Chrysler Financial are properly submitted to arbitration. Lindsleys claims
against the MFR Defendants, however, shall remain before this Court.
II. Motion to Stay
Chrysler Financial moves the Court to stay Lindsleys entire lawsuit as to Chrysler
Financial and the MFR Defendants. A federal court must stay proceedings and compel
arbitration once it determines that a dispute falls within the scope of a valid arbitration
agreement. Houlihan v. Offerman & Co., Inc., 31 F.3d 692, 695 (8th Cir. 1994) (citing
9 U.S.C. 3 & 4). Chrysler Financials motion, insofar as it seeks a stay of the entire
action, is premised on the assumption that the claims against all of these defendants are
6 The collection letter reads in part: [P]lease be advised that [Chrysler Financial]
may pursue the return of the collateral securing the obligors obligations under the
Contract. Such pursuit may include the filing of a suit for Replevin and for
(Footnote Continued on Next Page)
referable to arbitration. The Court has already concluded that the only claims referable to
arbitration are those asserted against Chrysler Financial. Therefore, a mandatory stay is
appropriate only as Lindsleys claims against Chrysler Financial.
Chrysler Financial also asserts that the Court should stay any remaining
non-arbitrable claims, pending the outcome of arbitration, including those asserted against
Washington County. The decision of whether to stay such claims is within the Courts
discretion. Filson v. Radio Adver. Mktg. Plan, LLC, 553 F. Supp. 2d 1074, 1092
(D. Minn. 2008). As explained above, the claims against Chrysler Financial are
arbitrable. All claims against the MFR Defendants and Washington County remain
before this Court. This case centers on the actions of the MFR Defendants in their effort
to repossess Lindsleys vehicle on April 4, 2008. Other than the narrow issue of whether
Chrysler Financial gave proper notice before repossessing the vehicle, the claims against
all defendants contain common issues of fact. Moreover, because Lindsley alleges that
the MFR Defendants were acting as Chrysler Financials agents when they repossessed
Lindsleys vehicle, the outcome of many of the claims Lindsley asserts against Chrysler
Financial will depend on the outcome of the claims asserted against the MFR Defendants.
It is apparent to this Court that Lindsleys claims against the MFR Defendants
(Footnote Continued From Previous Page)
damages . . . . (Aff. of Thomas J. Lyons, Jr. 2, Ex. A.)
predominate. Therefore, it is prudent to move forward on those claims. Accordingly, the
Court denies Chrysler Financials motion to stay the non-arbitrable claims.7
Based on the files, records, and proceedings herein, and for the reasons set forth
above, IT IS ORDERED that:
1. Chrysler Financials Motion to Compel Arbitration and Stay Proceedings
a. Lindsleys claims against Chrysler Financial are submitted to
arbitration. In addition, these claims are STAYED pending the outcome of
such arbitration.
b. All other claims remain before this Court and are not stayed.
Dated: February 11, 2009 s/Donovan W. Frank
Judge of United States District Court
7 The Court understands that there will be overlap between the issues presented in
arbitration and before this Court. The Court encourages the parties to agree to a
procedure whereby the parallel actions can be streamlined or staggered so as to preserve


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