Lichtman v. Equifax Information Services, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

LESLIEANNE LICHTMAN,

Plaintiff,

v. Case No. 8:21-cv-1370-VMC-AEP

BAR EDUCATION, INC.,

EXPERIAN INFORMATION SOLUTIONS,

INC., and EQUIFAX INFORMATION

SERVICES, LLC,

Defendants.

_____________________________/

ORDER

This cause comes before the Court pursuant to Defendant

Bar Education, Inc.’s Motion to Dismiss Plaintiff’s Complaint

and Compel Arbitration (Doc. # 15), filed on July 14, 2021.

Plaintiff Leslieanne Lichtman filed a response on August 3,

2021, and Bar Education filed a reply on August 13, 2021.

(Doc. ## 19, 23). For the reasons given below, the Motion is

granted.

I. Background

In June 2012, Lichtman executed an Enrollment Agreement

with Southeastern Institute – now known as Southeastern

College, an entity owned at all relevant times by Bar

Education. (Doc. # 1 at ¶¶ 8, 14; Doc. # 15 at 1).

Later that summer, Lichtman obtained a student loan

financed by Bar Education to attend classes at Southeastern

College. (Doc. # 1 at ¶ 14). In March 2013, Lichtman filed a

petition for Chapter 7 bankruptcy with a federal court in

South Carolina. (Id. at ¶ 15). An order of discharge was

entered in the bankruptcy case in June 2013, and Lichtman

alleges that her student loan was discharged pursuant to this

order. (Id. at ¶¶ 16-17, 29).

The instant complaint arises from allegations that Bar

Education reported false information regarding the student

loan to the main credit reporting agencies, including

Defendants Experian and Equifax. (Id. at ¶¶ 19-29). On June

7, 2021, Lichtman filed this action against Bar Education,

Experian, and Equifax alleging violations of the Fair Credit

Reporting Act (“FCRA”). (Doc. # 1). As to Bar Education,

Lichtman alleges that it violated 15 U.S.C. § 1681s-2(b) when

it twice failed to conduct a reasonable investigation upon

receiving notice of a dispute by Lichtman via Equifax and

Experian. (Id. at ¶ 85). According to Lichtman, if Bar

Education had done so, it would have realized that it was

reporting false information about Lichtman to the credit

reporting agencies. (Id.).

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Now, Bar Education seeks to dismiss the complaint and

compel arbitration of Lichtman’s FCRA claim as against Bar

Education. (Doc. # 15). The Motion has been fully briefed and

is ripe for review. (Doc. ## 19, 23).

II. Legal Standard

In enacting the Federal Arbitration Act (FAA), Congress

set arbitration agreements on equal footing with all other

contracts. 9 U.S.C. § 2. Under the FAA, pre-dispute agreements

to arbitrate “evidencing a transaction involving commerce”

are “valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of

any contract.” Id. The FAA reflects a “liberal federal policy

favoring arbitration[,]” AT&T Mobility LLC v. Concepcion, 563

U.S. 333, 339 (2011), but courts can only require parties to

arbitrate if the parties have agreed to do so. Hanover Ins.

Co. v. Atlantis Drywall & Framing LLC, 611 F. App’x 585, 588

(11th Cir. 2015); see also Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24 (1983) (discussing the

strong federal policy supporting arbitration). As such,

arbitration agreements must be “rigorously enforce[d]” by the

courts according to their terms. See Walthour v. Chipio

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Windshield Repair, LLC, 745 F.3d 1326, 1329-30 (11th Cir.

2014).

“[T]he FAA requires a court to either stay or dismiss a

lawsuit and to compel arbitration upon a showing that (a) the

plaintiff entered into a written arbitration agreement that

is enforceable ‘under ordinary state-law’ contract principles

and (b) the claims before the court fall within the scope of

that agreement.” Lambert v. Austin Ind., 544 F.3d 1192, 1195

(11th Cir. 2008) (citing 9 U.S.C. §§ 2–4). “There are three

factors courts consider in ruling on a motion to compel

arbitration of a given dispute: (1) whether a valid written

agreement to arbitrate exists; (2) whether an arbitrable

issue exists; and (3) whether the right to arbitrate was

waived.” Senti v. Sanger Works Factory, Inc., No. 6:06-cv-

1903-ACC-DAB, 2007 WL 1174076, at *2 (M.D. Fla. Apr. 18,

2007).

Only the first issue – whether a valid and enforceable

arbitration agreement exists – is at issue here. State law

generally governs whether an enforceable contract or

agreement to arbitrate exists. Caley v. Gulfstream Aerospace

Corp., 428 F.3d 1359, 1368 (11th Cir. 2005); Dale v. Comcast,

498 F.3d 1216, 1219 (11th Cir. 2007) (explaining that, in

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reviewing the validity of arbitration agreements, contract

defenses such as fraud, duress, or unconscionability are

governed by state law).

Generally, “certain gateway matters, such as whether the

parties have a valid arbitration agreement at all or whether

a concededly binding arbitration clause applies to a certain

type of controversy[,]” are questions a district court must

resolve before a court can compel arbitration. Green Tree

Fin. Corp. v. Bazzle, 539 U.S. 444, 452 (2003).

III. Analysis

Bar Education requests that this Court compel

arbitration of Lichtman’s FCRA claim based on an arbitration

clause in the June 2012 Enrollment Agreement between Lichtman

and Southeastern Institute. (Doc. # 15). That arbitration

clause provides as follows:

IT IS AGREED THAT, IN THE EVENT THE PARTIES TO THIS

ENROLLMENT AGREEMENT ARE UNABLE TO AMICABLY RESOLVE

ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR

RELATING TO THIS AGREEMENT, OR IF A CLAIM IS MADE

BY EITHER AGAINST THE OTHER OR ANY AGENT OR

AFFILIATE OF THE OTHER, THE DISPUTE, CLAIM OR

CONTROVERSY SHALL BE RESOLVED BY ARBITRATION

ADMINISTERED BY THE AMERICAN ARBITRATION

ASSOCIATION [“AAA”] UNDER ITS COMMERCIAL

ARBITRATION RULES. IF THIS CHOSEN FORUM OR METHOD

OF ARBITRATION IS UNAVAILABLE, OR FOR ANY REASON

CANNOT BE FOLLOWED, OR BY FURTHER AGREEMENT OF THE

PARTIES, A COURT HAVING JURISDICTION HEREUNDER MAY

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APPOINT A PANEL OF ARBITRATORS PURSUANT TO SECTION

N.C. GEN. STAT. 1.567. IT IS THE INTENT OF THE

PARTIES TO THIS AGREEMENT THAT IN ADDITION TO ANY

CONTRACT DISPUTE THIS CLAUSE ALSO INCLUDES ANY

FUTURE TORT CLAIMS FOR PERSONAL INJURY ARISING

UNDER THE THEORY OF COMMON LAW NEGLIGENCE OR ANY

OTHER THOERY.

THE INITIAL EXPENSES OF THE ARBITATION (EXCLUDING

ATTORNEY’S FEES), INCLUDING ANY ARBITRATOR(S) FEES

SHALL BE BORNE EQUALLY BY THE PARTIES. THE

ARBITRATOR MAY, IN THE AWARD, ALLOCATE ALL OR PART

OF THE COSTS OF THE ARBITRATION, INCLUDING THE FEES

OF THE ARBITRATOR IN FAVOR OF THE PREVAILING PARTY.

THE ARBITRATOR SHALL, IN THE AWARD, GRANT

REASONABLE ATTORNEY’S FEES TO THE PREVAILING PARTY.

VENUE FOR ANY PROCEEDING RELATING TO THE

ARBITRATION OF CLAIMS IN ACORDANCE WITH THIS CLAUSE

SHALL BE IN THE COUNTY WHEREIN THE INSTITUTION IS

LOCATED. JUDGMENT ON THE AWARD MAY BE ENTERED IN

ANY COURT HAVING JURISDICTION. THIS CLAUSE SHALL

NOT PRECLUDE THE PARTIES FROM SEEKING PROVISIONAL

REMEDIES IN AID OF ARBITRATION FROM A COURT OF

APPROPRIATE JURISDICTION.

IT IS THE INTENT OF THE PARTIES TO SPECIFICALLY

WAIVE ANY RIGHT TO HAVE SUCH CONTROVERSY OR CLAIM

RESOLVED BY JUDICIAL PROCEEDINGS, INCLUDING ANY

RIGHT TO TRIAL BY JURY. IN DOING SO, THE PARTIES

UNDERSTAND THAT THEY ARE SPECIFICALLY WAIVING THEIR

RIGHTS TO ACCESS THE COURTS AND TO A JURY TRIAL. I

REALIZE THAT ANY GRIEVANCES NOT RESOLVED ON THE

INSTITUTIONAL LEVEL MAY BE FORWARDED TO THE STATE

BOARD OF COMMUNITY COLLEGES, 200 WEST JONES,

RALEIGH, NORTH CAROLINA, 27603, (919) 807-7100.

(Doc. # 15-1 at 3) (emphases added).

Lichtman argues that the arbitration clause is void as

against public policy and is also unconscionable. (Doc. # 19

at 6-13). She also argues that there is no delegation clause

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in the arbitration provision and, if the contract is broadly

construed to include a delegation clause, it “is similarly

unconscionable and void, and cannot be separated from the

arbitration provision as a whole.” (Id. at 15-16).

A. Void as against public policy

Lichtman argues that the instant arbitration clause

violates public policy for three reasons: (1) it shifts the

burden of attorney’s fees to the prevailing party, which is

against the public policy of the FCRA as a consumer-oriented

remedial statute; (2) the venue provision imposes an undue

burden on her as the consumer; and (3) the clause’s imposition

of the AAA’s Commercial Rules imposes an undue burden on her.

(Doc. # 19 at 8-11).

As an initial matter, the Court believes that the issue

of whether the arbitration clause is unenforceable on public

policy grounds is for the Court, not the arbitrator, to

determine. See Shotts v. OP Winter Haven, Inc., 86 So. 3d

456, 459 (Fla. 2011) (holding that it is for the court to

determine whether an arbitration agreement is unenforceable

on public policy grounds). Not only has the Florida Supreme

Court held as much, but under federal law, “before referring

a dispute to an arbitrator, the court determines whether

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a valid arbitration agreement exists. [I]f a valid agreement

exists, and if the agreement delegates the arbitrability

issue to an arbitrator, a court may not decide the

arbitrability issue.” Henry Schein, Inc. v. Archer & White

Sales, Inc., 139 S. Ct. 524, 530 (2019) (citation omitted).

A void-as-against-public-policy argument implicates the

arbitration agreement’s validity, a threshold issue for a

court to determine. See Id.; Shotts, 86 So. 3d at 459

(explaining that no valid agreement exists if the arbitration

clause is unenforceable on public policy grounds); see also

Grantham v. TA Operating, LLC, No. CV 20-1108 (RMB/KMW), 2020

WL 5542775, at *1 (D.N.J. Sept. 16, 2020)(holding that, even

in the presence of an explicit delegation clause, “whether an

arbitration clause is void as against public policy is an

issue for the Court — rather than the arbitrator — to decide

because Plaintiff’s argument challenges the arbitration

agreement which also contains the delegation clause”).

The first step in assessing the validity of an

arbitration agreement is to determine which state’s contract

law should govern its formation. Larsen v. Citibank FSB, 871

F.3d 1295, 1303 (11th Cir. 2017). Given the Court is

exercising federal question jurisdiction, federal common law

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choice-of-law rules provide the answer. Chau Kieu Nguyen v.

JP Morgan Chase Bank, NA, 709 F.3d 1342, 1345 (11th Cir.

2013). Federal common law follows the approach set forth in

the Restatement (Second) of Conflict of Laws. Id. With no

effective choice by the parties, the Restatement instructs

that “[t]he rights and duties of the parties with respect to

an issue in contract are determined by the local law of the

state which, with respect to that issue, has the most

significant relationship to the transaction and the parties.”

Restatement (Second) of Conflict of Laws § 188(1) (1971).

Here, while the Enrollment Agreement was executed in

North Carolina, Lichtman alleges that Bar Education is a

Florida corporation, that she herself is now a Florida

resident, and that the events giving rise to the instant

litigation took place in Florida. (Doc. # 1 at ¶¶ 4, 5, 7).

The parties also appear to agree that Florida law applies to

Lichtman’s asserted defenses. See (Doc. # 19 at 8; Doc. # 23

at 1-2). It is thus appropriate to apply Florida law in

analyzing the agreement. See Dunn v. Glob. Tr. Mgmt., LLC,

No. 8:19-cv-2223-WFJ-AEP, 2020 WL 7260771 (M.D. Fla. Dec. 10,

2020) (looking to similar factors in finding Florida law

governed the formation of arbitration agreement).

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1. Shifting of attorney’s fees

As Lichtman points out, the FCRA permits prevailing

consumer-plaintiffs to recover costs and reasonable

attorney’s fees but does not provide the same for prevailing

defendants. See 15 U.S.C. §§ 1681n, 1681o. Thus, according to

Lichtman, Congress authorized the “one-way fee provision” as

a way to enable litigation of the FCRA without “fear of a

large reciprocal fee award which [FCRA plaintiffs] could not

pay. Bar Education’s arbitration provision defeats this

purpose.” (Doc. # 19 at 9).

Bar Education does not dispute that the FCRA is a

remedial statute, nor that the arbitration clause

impermissibly shifts the burden of attorney’s fees in such a

way that is against public policy. See (Doc. # 23 at 1-3).

Instead, Bar Education argues that the attorney’s fees

provision of the arbitration agreement may be severed, even

in the absence of a severability clause, and Lichtman can

still be compelled to arbitration. (Id.).

Severability is decided as a matter of state law.

Terminix Int’l Co., LP v. Palmer Ranch Ltd. P’ship, 432 F.3d

1327, 1331 (11th Cir. 2005). “If the offensive terms are

severable, then the court must compel arbitration according

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to the remaining, valid terms of the parties’ agreement.” Id.

The Court finds the cases relied on by Bar Education in their

reply to be persuasive on this point. Under Florida law, “the

existence of a severability clause is not determinative of

whether an offending provision may be severed from the

agreement and . . . the controlling issue is whether an

offending clause or clauses go to the very essence of the

agreement.” Hochbaum v. Palm Garden of Winter Haven, LLC, 201

So. 3d 218, 222 (Fla. 2d DCA 2016). In Hochbaum, because the

offending provision dealt only with attorneys’ fees and did

not limit the compensatory or punitive damages that the

plaintiff could recover, the offending provision did not go

to the essence of the agreement and was severable. Id. at

223; see also Bean v. ES Partners, Inc., No. 20-62047-CIV-

ALTMAN/Hunt, 2021 WL 1239899, at *8-10 (S. D. Fla. Apr. 4,

2021) (relying on Hochbaum to hold that a prevailing-party

fee provision could be severed from an arbitration agreement

in a Fair Labor Standards Act case). Compare Gessa v. Manor

Care of Fla., Inc., 86 So. 3d 484, 490 (Fla. 2011) (holding

that limitations on liability – including a monetary cap on

noneconomic damages and a waiver of punitive damages – within

an arbitration agreement were not severable from the

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remainder of the agreement because they “constitute the

financial heart of the agreement”).

Here, similarly, the provision regarding attorneys’ fees

does not go to the essence of the agreement; it can be severed

without affecting the intent of the parties to arbitrate. See

Alterra Healthcare Corp. v. Bryant, 937 So. 2d 263, 270 (Fla.

4th DCA 2006) (“Severance is appropriate where the void

provision can be severed without affecting the intent of the

parties to arbitrate.”). Accordingly, the Court strikes the

following language from the arbitration agreement: “The

arbitrator shall, in the award, grant reasonable attorney’s

fees to the prevailing party.” See Hochbaum, 201 So. 3d at

223 (affirming order compelling arbitration but remanding

with instructions to strike the attorneys’ fee provisions

from the agreement).

2. Venue provision

Lichtman also argues that the arbitration agreement’s

venue provision, placing the arbitration in North Carolina,

places an undue financial burden on her. (Doc. # 19 at 9-10).

However, Bar Education states in its reply that it is

“agreeable to hold[ing] the arbitration in Ft. Lauderdale,

Florida or Tampa or remotely.” (Doc. # 23 at 4). In light of

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this agreement, the Court finds there will not be an undue

burden on Lichtman to attend the arbitration.

3. AAA Rules

Finally, Lichtman takes issue with the agreement’s use

of the AAA Commercial Rules because (1) the Commercial Rules

call for higher fees than the AAA Consumer Rules, and (2) the

Commercial Rules do not place the cost of the arbitrator’s

compensation on the business, as the Consumer Rules do. (Doc.

# 19 at 10).

Lichtman provides no caselaw to support her argument,

and the Court finds it to be without merit. The Supreme Court

has acknowledged that while high arbitration expenses could

prevent a litigant from effectively vindicating her federal

statutory rights in an arbitral forum, the party seeking to

invalidate an arbitration agreement on that ground bears the

burden to show the likelihood of incurring costs of that

magnitude. Green Tree Fin. Corp.—Alabama v. Randolph, 531

U.S. 79, 92 (2000). The Supreme Court explained that

invalidating an arbitration agreement based on the

speculative risk of prohibitive costs would both undermine

the liberal federal policy favoring arbitration and would

conflict with the principle that the party resisting

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arbitration bears the burden of proving that the claims are

unsuitable for arbitration. Id. at 91-92.

Here, the arbitration agreement provides that the

“initial expenses” of arbitration will be split equally

between the parties and that the arbitrator “may, in the

award, allocate all or part of the costs of the arbitration,

including the fees of the arbitrator in favor of the

prevailing party.” (Doc. # 15-1 at 3). But an arbitration

agreement will not be adjudged unenforceable merely because

it involves some fee shifting. Musnick v. King Motor Co. of

Fort Lauderdale, 325 F.3d 1255, 1259 (11th Cir. 2003).

Under Green Tree, Lichtman has an obligation to offer

evidence of the amount of fees she is likely to incur, as

well as her inability to pay those fees. See Id. at 1260. In

her response, Lichtman cites the relevant filing fees and the

Commercial Rules’ failure to place the costs of the

arbitrator’s compensation on the business. She also attaches

the AAA Commercial Rules’ fee schedules without explaining

which fees will likely be applicable here. This is

insufficient to demonstrate that the arbitration would result

in prohibitive costs that would force her to relinquish her

FCRA claim against Bar Education. See Id. (holding

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plaintiff’s bald affidavit that he “fear[ed]” the opponent’s

attorneys’ fees and was worried he’d be unable to pay was too

“speculative” and “wholly inadequate” to afford relief);

Bettin’ on Blue Farms, LLC v. Dole Berry Co., No. 8:18-cv-

755-SDM-JSS, 2018 WL 3862535, at *2 (M.D. Fla. Aug. 14,

2018)(rejecting unenforceability argument where plaintiff

submitted “no affidavit, declaration, account statement, or

other evidence to show that the arbitral filing fee is

prohibitively expensive for [plaintiff]”).

B. Delegation

Lichtman argues that the arbitration agreement is

unconscionable and that, to the extent the agreement contains

a delegation provision, it too is unconscionable and,

therefore, unenforceable. (Doc. # 19 at 11-13, 15-17).

Whether an arbitration agreement is unenforceable due to

unconscionability is a threshold issue of arbitrability. See,

e.g., In re Checking Account Overdraft Litig., 856 F. App’x

238, 243 (11th Cir. 2021) (addressing whether arbitrator or

court should determine threshold issue of unconscionability).

Parties may delegate threshold arbitrability issues to

the arbitrator, so long as the parties’ agreement does so by

“clear and unmistakable evidence.” Henry Schein, 139 S. Ct.

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at 530 (citing First Options of Chicago, Inc. v. Kaplan, 514

U.S. 938, 944 (1995)). The Eleventh Circuit has “repeatedly

ruled that the reference or incorporation of AAA Rules . . .

demonstrates a clear and unmistakable intent that the

arbitrator should decide all questions of arbitrability.” In

re Checking Account, 856 F. App’x at 243 (collecting cases).

The arbitration clause at issue here references and

incorporates the AAA Commercial Arbitration Rules, and the

Eleventh Circuit has held that incorporation of these Rules

provides the requisite clear and unmistakable evidence that

parties agreed to arbitrate all gateway issues of

arbitrability. Id. at 243-44. Accordingly, this Court only

retains jurisdiction over challenges directed specifically at

the delegation clause. Id. at 245 (citing Rent-A-Center W.,

Inc. v. Jackson, 561 U.S. 63, 70-71 (2010)).

That leads to the question of whether Lichtman here

raised an argument directed specifically at the delegation

provision. It is true that Lichtman dedicated two pages of

her response to the instant Motion to her argument that the

delegation clause is itself unenforceable. (Doc. # 19 at 15-

17); see Parm v. Nat’l Bank of Cal., N.A., 835 F.3d 1331,

1335 n.1 (11th Cir. 2016) (concluding that a party properly

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raised its challenge to a delegation provision by directly

challenging it in its opposition to the motion to compel

arbitration).

However, Plaintiff provided no arguments pertaining to

why the delegation clause itself is unconscionable; rather,

she relied on her arguments as to why the arbitration

agreement as a whole was procedurally and substantively

unconscionable. While the Court acknowledges the out-of-

circuit cases stating that this may be sufficient under Rent-

A-Center, the Eleventh Circuit has recently upheld a district

court’s refusal to tackle the unconscionability question

itself because the plaintiff did not specifically address it:

As the district court properly noted, “Plaintiffs

do not identify any specific defect in the

delegation clause and instead argue only that it is

unconscionable ‘for the same reasons’ as the

contract more generally.” Without Plaintiffs

pointing to any specific deficiencies in the

delegation clause, we find no reason to deem it

unconscionable. Plaintiffs may take up their

challenges to the contract as a whole with the

arbitrator.

In re Checking Account, 856 F. App'x at 245. Thus, it will be

for the arbitrator to determine Lichtman’s arguments

regarding unconscionability in the first instance.

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In sum, the Court will compel arbitration of Lichtman’s

FCRA claim against Bar Education pursuant to the parties’

arbitration agreement, except for (1) the clause regarding

prevailing-party attorneys’ fees, which is severable and

which the Court has stricken from the agreement; and (2) the

clause placing venue for the arbitration in North Carolina,

as Bar Education has agreed to hold the arbitration in Florida

or remotely.

IV. Stay or Dismiss

All that remains is for the Court to determine whether

this action should be stayed or dismissed. See Lambert v.

Austin Ind., 544 F.3d 1192, 1195 (11th Cir. 2008) (when

arbitration is appropriate, district courts must either stay

or dismiss a lawsuit). The FAA provides that, once a court is

satisfied that the issue involved in the lawsuit should be

referred to arbitration, the court “shall on application of

one of the parties stay the trial of the action until such

arbitration has been had[.]” 9 U.S.C. § 3.

Here, however, both Lichtman and Bar Education state

that, if the Court sends the claim against Bar Education to

arbitration, Lichtman’s claims against Bar Education should

be dismissed and the claims against Defendants Experian and

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Equifax should remain before this Court. (Doc. # 19 at 14-

18; Doc. # 23 at 10). Under these circumstances, the Court

will dismiss the claim against Bar Education and compel the

parties to pursue that claim in arbitration before the AAA.

This case will remain pending as to the remaining Defendants.

See Caley, 428 F.3d at 1379 (affirming district court’s grant

of the defendants’ motions to dismiss and compel

arbitration).

Accordingly, it is

ORDERED, ADJUDGED, and DECREED:

(1) Defendant Bar Education, Inc.’s Motion to Dismiss

Plaintiff’s Complaint and Compel Arbitration (Doc. # 15)

is GRANTED.

(2) The prevailing-party attorneys’ fees provision within

the arbitration agreement is hereby stricken, as set

forth in this Order. In addition, Bar Education, Inc.

has agreed to move the venue of arbitration to Ft.

Lauderdale, Florida, Tampa, Florida, or remote

arbitration. Plaintiff Leslieann Lichtman is otherwise

directed to submit her claim against Bar Education, Inc.

to arbitration in accordance with the parties’

arbitration agreement.

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(3) Count I of the complaint, as against Defendant Bar

Education, Inc., is hereby DISMISSED without prejudice.

Plaintiff’s claims against the remaining Defendants will

proceed.

DONE and ORDERED in Chambers, in Tampa, Florida, this

30th day of September, 2021.

VIRGINIA M. HERNANDEZ’COVINGTON

UNITED STATES DISTRICT JUDGE

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