Kelly

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

ASHLY KELLY,

Plaintiff,

v. Case No. 5:26-cv-319-HDM

GULFCO OF ALABAMA, LLC,

d/b/a TOWER LOAN OF

HUNTSVILLE,

Defendant.

MEMORANDUM OPINION AND ORDER

This matter is before the court on two fully-briefed motions: Plaintiff Ashly

Kelly’s Motion to Strike Affirmative Defenses, (docs. 9, 17, 18), and Defendant

Gulfco of Alabama LLC’s (“Gulfco”) Motion to Compel Arbitration, (docs. 14, 19,

20). For the reasons set out herein, Gulfco’s motion is due to be GRANTED and

Kelly’s DENIED AS MOOT.

I. BACKGROUND

Gulfco, doing business under the name Tower Loan of Huntsville, is a limited

liability company that offers private consumer loans. (Doc. 14-1, ¶¶ 2, 4). On April

19, 2023, Gulfco issued a loan to Kelly in the amount of $7,525.87, and, as part of

this transaction, Kelly executed two documents relevant to this order. Id., ¶¶ 3, 6.

First, Kelly signed Gulfco’s standard promissory note (the “Note”), which sets out

the terms and conditions of her loan and, importantly, includes an arbitration

agreement that is identified by bold, capital letters. Id., ¶¶ 3–5; (Doc. 14-2 at 2). The

Note states that Kelly “agrees to all provisions of this arbitration agreement” and

that the parties “agree that if there are any disputes between them, those disputes

will be resolved by arbitration.” (Doc. 14-2 at 2) (second emphasis added). The Note

defines “arbitration” as “a method of resolving disputes between parties without

going to court” and permits “[a]ny party [to] require the dispute or claim to be

submitted to an arbitrator in accordance with this provision.” Id. The Note further

states,

The arbitrator’s decision will be final and binding on all parties.

The parties agree that the funds loaned to [Kelly] were transactions in

interstate commerce, that this loan involves interstate commerce, and

that the Federal Arbitration Act applies to this transaction. [Kelly]

and [Gulfco] understand that under this arbitration agreement, they lose

their right to a jury trial, their pretrial discovery is more limited, the

dispute shall be heard and decided by someone who may not be a judge,

the arbitrator is not required to state the reasons for his decision, and

the right of appeal is very limited.

Id. (emphasis added). The Note uses expansive language to be clear that its

arbitration provision applies to “all claims and disputes between” Kelly and Gulfco,

including any claim or dispute “arising out of, in connection with, or relating to” the

April 19, 2023, loan and, most crucially, “[t]he validity of this arbitration agreement”

and “[w]hether the claim or dispute must be arbitrated.” Id. (emphasis added). There

is an exception to this broad language that excuses the parties from arbitration “for

matters of $10,000 or less.” Id.

The second relevant document Kelly executed on April 19, 2023, is simply

titled “IMPORTANT,” and reads:

Arbitration: My loan papers include an arbitration provision, when

I borrow money from Tower Loan, I agree that any disputes,

disagreements or claims I might have with Tower Loan will be

decided by an arbitrator instead of a Judge, Jury or Court. I have

been advised to read the arbitration provision carefully before

signing the loan papers.

(Doc. 14-3). Both the Note and the arbitration acknowledgement (the

“Acknowledgement”) bear Kelly’s signature. (Docs. 14-2 at 1, 14-3).

The Note established a repayment plan that required Kelly to make thirty

consecutive monthly payments, with the entire balance of the loan to be paid off on

or before November 3, 2025. (Doc. 14-2 at 1). After Kelly failed to make her

scheduled payments, Gulfco sued her in the District Court of Madison County,

Alabama, and, in January 2024, received a default judgment in the amount of

$9,622.65.1 (Doc. 14-4).

1 This sum consists of $7,525.87 for the principal balance of the loan, a $96 surcharge, an $11.43

maintenance fee, $62.25 in late fees, $1,552.10 in interest, and $375 in attorney’s fees. (Doc. 14-

4 at 1).

Kelly commenced this action against Gulfco on February 25, 2026. (Doc. 1).

She alleges that Gulfco reported materially inaccurate information about the loan to

TransUnion and Equifax, maintained incomplete and inaccurate records, and then

failed to conduct a reasonable investigation when she submitted multiple formal

complaints. Id., ¶¶ 13–29. Kelly alleges that Gulfco’s actions violated the

reinvestigation provisions of the Fair Credit Reporting Act, 15 U.S.C. § 1681s-2(b),

id., ¶¶ 30–39, thereby causing her to “suffer[] damage to her credit reputation,

lowered credit scores, denial or impairment of credit opportunities, emotional

distress, anxiety, loss of time, and out-of-pocket expenses,” id., ¶ 29. In its answer,

Gulfco denied all liability and asserted thirty affirmative defenses. (Doc. 6).

On April 13, 2026, Kelly moved to strike Gulfco’s affirmative defenses on

the basis that they “fail to meet the pleading standards required under the Federal

Rules of Civil Procedure and controlling case law.” (Doc. 9 at 1). Two weeks later,

Gulfco moved to compel Kelly to arbitrate her claims rather than litigating them in

this court. (Doc. 14). Because the court agrees with Gulfco that this matter must be

submitted to arbitration, it need not address the merits of Kelly’s motion to strike.

II. LEGAL STANDARD

The Eleventh Circuit has held that, in ruling on a motion to compel arbitration,

courts must apply a “summary judgment-like standard.” Bazemore v. Jefferson Cap.

Sys., LLC, 827 F.3d 1325, 1333 (11th Cir. 2016). Under this standard, a court “may

conclude as a matter of law that parties did or did not enter into an arbitration

agreement only if ‘there is no genuine dispute as to any material fact’ concerning the

formation of such an agreement.” Id. (quoting Fed. R. Civ. P. 56(a)). See also Reilly

v. Avery Auto Sales, Inc., No. 1:21-cv-857, 2021 WL 6050706, at *2 (N.D. Ala. Dec.

21, 2021). As a pro se plaintiff, the court will consider Kelly’s pleadings with “more

leeway” and “special care.” Dean v. Barber, 951 F.2d 1210, 1213 (11th Cir. 1992).

III. DISCUSSION

The court finds that Gulfco’s Motion to Compel Arbitration is due to be

granted because the parties entered into a valid arbitration agreement that delegates

the very question of arbitrability to the arbitrator. Kelly has not specifically

challenged that delegation provision and Supreme Court and Eleventh Circuit

precedent requires this court to enforce the arbitration agreement.

The validity of an arbitration agreement is generally governed by the Federal

Arbitration Act, 9 U.S.C. §§ 1–16 (“FAA”), Caley v. Gulfstream Aerospace Corp.,

428 F.3d 1359, 1367 (11th Cir. 2005), which Congress enacted more than a century

ago as “a response to hostility of American courts to the enforcement of arbitration

agreements,” Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111 (2001). The

“primary substantive provision” of the FAA is Section 2, Moses H. Cone Mem’l

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983), which provides that “a

written provision in . . . a contract evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter arising out of such contract . . . shall be

valid, irrevocable, and enforceable,” 9 U.S.C. § 2 (emphasis added).2 The FAA

“reflect[s] both a liberal federal policy favoring arbitration, and the fundamental

principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion,

563 U.S. 333, 339 (2011) (citations and quotation marks omitted). “In line with these

principles, courts must place arbitration agreements on an equal footing with other

contracts and enforce them according to their terms.” Id. (citations omitted). To

decide whether the parties entered into an enforceable arbitration agreement, the

court looks to state contract law. Caley, 428 F.3d at 1368.

Because arbitration agreements are simply contracts, the parties may agree “to

commit even threshold determinations to an arbitrator, such as whether an arbitration

agreement is enforceable.” Parnell v. CashCall, Inc., 804 F.3d 1142, 1146 (11th Cir.

2015). See also Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68–69 (2010)

(parties may delegate “threshold issues . . . such as whether the parties have agreed

to arbitrate or whether their agreement covers a particular controversy” to an

2 Sections 3 and 4 of the FAA “implement [Section] 2’s substantive rule,” Hall v. Talladega Hous.

Auth., No. 1:25-cv-647, 2026 WL 659308, at *3 (N.D. Ala. Mar. 9, 2026). Section 3 requires a

court to stay a case upon application of one of the parties if it is “satisfied that the issue involved

in such suit . . . is referable to arbitration under such an agreement,” 9 U.S.C. § 3, while Section 4

permits a party to petition for an order compelling arbitration, id. § 4.

arbitrator); Jones v. Waffle House, Inc., 866 F.3d 1257, 1264 (11th Cir. 2017)

(parties may “agree to arbitrate gateway questions of arbitrability including the

enforceability, scope, applicability, and interpretation of the arbitration

agreement.”). “An antecedent agreement of this kind is typically referred to as a

‘delegation provision,’” Jones, 866 F.3d at 1264, and it will bind the parties if “it

‘clearly and unmistakably’ evidences the parties’ intent ‘to delegate questions of

arbitrability to the arbitrator,’” Hall v. Talladega Hous. Auth., No. 1:25-cv-647, 2026

WL 659308, at *3 (N.D. Ala. Mar. 9, 2026) (quoting JPay, Inc. v. Kobel, 904 F.3d

923, 936–40 (11th Cir. 2018)). “When ‘an arbitration agreement contains a

delegation provision—committing to the arbitrator the threshold determination of

whether the agreement to arbitrate is enforceable—the courts only retain

jurisdiction to review a challenge to that specific provision.’” Jones, 866 F.3d at

1264 (quoting Parnell, 804 F.3d at 1144) (emphasis added). If the party opposing

arbitration challenges only “the arbitration provision generally” but does not

specifically challenge the validity and enforceability of the delegation provision, the

court “must treat the delegation provision as valid and allow the arbitrator to

determine the issue of arbitrability.” Parnell, 804 F.3d at 1148. Simply put, the

parties may contractually agree that the scope and validity of the arbitration

agreement are themselves subject to arbitration and, if they do so, a court is limited

to reviewing the delegation provision that establishes such terms. If the party

opposing arbitration never challenges that provision specifically, the delegation

provision controls and the threshold question of arbitrability must be reserved for

the arbitrator.

This court’s opinion in Board of Trustees of University of Alabama v.

Humana, Inc., No. 2:24-cv-165, 2024 WL 1748434 (N.D. Ala. Apr. 23, 2024),

explains how a delegation provision affects the analysis of a motion to compel

arbitration. In Humana, this court noted that, “while issues of arbitrability are

generally decided by the court, parties may agree to delegate this decision to an

arbitrator” and that the question of whether they have done so is a matter of state

contract law. Id. at *3. Applying a “standard of review . . . analogous to a summary

judgment motion,” id. at *2, the court found that there was no genuine dispute of

fact that the parties entered an agreement enforceable under Alabama contract law

“to submit questions of arbitrability to an arbitrator,” id. at *4. Accordingly, the court

recognized that its “role with respect to arbitrability [was] narrow,” id., and it

“possesse[d] no power to decide the arbitrability issue,” id. at *3 (citation and

quotation marks omitted) (emphasis added). Instead, the court “retain[ed]

jurisdiction for a limited purpose—to review any challenge . . . to [the] delegation

provision.” Id. at *5. Because the plaintiff “advance[d] only a general challenge to

the applicability of the arbitration provision” rather than a “direct challenge to the

validity of the delegation provision,” the court was required to “treat the delegation

provision as valid” and compel the parties to arbitrate. Id.

This court will resolve Gulfco’s Motion to Compel Arbitration with the same

two-prong analysis as in Humana and decide (1) whether the parties are bound by

an enforceable delegation provision and, if so, (2) whether Kelly has directly and

specifically challenged that provision. Because the answers to those questions are,

respectively, yes and no, the court will grant Gulfco’s Motion to Compel Arbitration

and need not consider Kelly’s Motion to Strike.

A. Are the Parties Bound by an Enforceable Delegation Provision?

In its Motion to Compel Arbitration, Gulfco argues that “the parties entered

into a valid delegation provision contained within a valid agreement to arbitrate” and

that, “[a]s this Delegation Provision requires that the scope or validity of the parties’

agreements should be decided by the arbitrator, and not the Court, this matter should

be referred to arbitration for any further resolution.” (Doc. 15 at 9). The court agrees.

As explained supra, the validity of the parties’ arbitration agreement, along with the

delegation provision contained therein, will be determined under Alabama contract

law, which requires an offer, an acceptance, consideration, and mutual assent. See,

e.g., Am. Com. Bank, NA v. Progress Leasing, LLC, No. 2:23-cv-117, 2023 WL

8518216, at *3 (N.D. Ala. Aug. 22, 2023) (quoting Shaffer v. Regions Fin. Corp.,

29 So. 3d 872, 880 (Ala. 2009)). Applying a “summary judgment-like standard,”

Bazemore, 827 F.3d at 1333, the court finds there is no genuine dispute that each of

these elements is satisfied. Gulfco offered the Note—which contains the arbitration

agreement and its delegation provision—to Kelly and she accepted its terms by her

signature. (Docs. 14-2 at 1; 14-3). See also Gerstenecker v. Gerstenecker, 238 So.

3d 646, 652 (Ala. 2017) (citation and quotation marks omitted) (a party may accept

a contract through any action that is “positive and unambiguous,” including, but not

limited to, his or her signature). Kelly’s signature on the Note also demonstrates the

parties’ mutual assent to the terms of the agreement. See Bowen v. Sec. Pest Control,

Inc., 879 So. 2d 1139, 1142 (Ala. 2003) (citation and quotation marks omitted) (“The

purpose of a signature on a contract is to show mutual assent.”). Although her

signature on the Note would be sufficient, the Acknowledgement is further proof of

acceptance and mutual assent, as Kelly expressly agreed in writing that she was

aware of the terms of the arbitration provision and agreed to be bound by them. (Doc.

14-3). Finally, under Alabama law, “[c]onsideration for an agreement to arbitrate

exists when both parties promise to resolve claims through arbitration rather than

another judicial process.” Carusone v. Nintendo of Am., Inc., No. 5:19-cv-1183,

2020 WL 3545468, at *4 (N.D. Ala. June 30, 2020) (applying Alabama law).

Because Gulfco has demonstrated offer, acceptance, mutual assent, and

consideration, the court finds that the arbitration provision within the Note—

including the delegation provision—is a valid and enforceable contract.

In opposing Gulfco’s Motion to Compel Arbitration, Kelly never attempts to

create a fact question on any of these elements. Rather, her entire argument is that,

even if the arbitration provision in the Note is valid, Gulfco waived its ability to

enforce it by suing her for the unpaid loan in Alabama state court. (Doc. 19). Kelly

attempts to frame Gulfco’s state court action in several different ways, claiming that

it “materially breached” the Note, “waived any right to compel arbitration,” is

“judicially estopped” from compelling arbitration, or acted in a manner

“fundamentally inconsistent” with the purpose of arbitration. Id. at 2–4. But her

essential argument never changes: Gulfco sued her and so she should be able to sue

Gulfco, despite the arbitration provisions of the Note.

There are two problems with this argument. First, Gulfco sued her in state

court for less than $10,000, (doc. 14-4 at 2), and the arbitration provision of the Note

permits litigation “for matters of $10,000 or less,” (doc. 14-2 at 2). Thus, that lawsuit

in no way constitutes a waiver—or a breach or any other term Kelly cares to use—

of the arbitration provision of the Note. The second problem with Kelly’s strategy is

that she assumes that the Note is enforceable: she never challenges the existence of

offer, acceptance, mutual assent, or consideration, (see generally doc. 19), and,

therefore, has not created a fact question on whether the arbitration agreement within

the Note—including the delegation provision—constitutes a valid, enforceable

contract.

Thus, there is no genuine dispute that the arbitration provision within the Note

constitutes a valid and enforceable contract that, per the FAA, “shall be valid,

irrevocable, and enforceable.” 9 U.S.C. § 2. Within that valid arbitration agreement,

Kelly and Gulfco explicitly included a delegation provision of the kind routinely

affirmed by the Supreme Court and the Eleventh Circuit, see, e.g., Rent-A-Center,

W., Inc., 561 U.S. at 68–69; Parnell, 804 F.3d at 1146, when they agreed to arbitrate

“[w]hether the claim or dispute must be arbitrated” and “validity of [the] arbitration

agreement,” (doc. 14-2 at 2). This delegation provision binds the parties because “it

clearly and unmistakably evidences the parties’ intent to delegate questions of

arbitrability to the arbitrator,” Hall, 2026 WL 659308, at *3 (internal quotation

marks omitted), and this “court retains jurisdiction for a limited purpose—to review

any challenge a party makes to a delegation provision,” id. at *5.

B. Has Kelly Challenged the Delegation Provision of the Note?

As explained supra, because the parties’ valid arbitration agreement contains

an unambiguous delegation provision, this “court[] only retain[s] jurisdiction to

review a challenge to that specific provision.” Jones, 866 F.3d at 1264. If Kelly only

challenges “the arbitration provision generally” but does not specifically challenge

the validity and enforceability of the delegation provision therein, the court “must

treat the delegation provision as valid and allow the arbitrator to determine the issue

of arbitrability.” Parnell, 804 F.3d at 1148. See also Humana, 2024 WL 1748434,

at *5 (“When a delegation provision is not challenged, a court must treat the

delegation provision as valid.”).

Even reading Kelly’s opposition to Gulfco’s Motion to Compel Arbitration

with the “special care” and “leeway” due to a pro se plaintiff, Dean, 951 F.2d at

1213, the court finds she has “advance[d] only a general challenge to the

applicability of the arbitration provision” rather than a “direct challenge to the

validity of the delegation provision,” Humana, 2024 WL 1748434, at *5. Despite

the considerable space Gulfco dedicates to the delegation provision in its motion,

Kelly never challenges its validity or enforceability. As explained supra, Kelly’s

entire strategy in opposing arbitration is to contest the Note’s arbitration provision

as a whole by arguing that Gulfco “materially breached” the Note, “waived any right

to compel arbitration,” or is “judicially estopped” from compelling arbitration. (Doc.

19 at 2–4). As in Humana, “[t]here is no direct challenge to the validity of the

delegation provision” specifically and Kelly relies solely on “a general challenge to

the applicability of the arbitration provision.” Humana, 2024 WL 1748434, at *5.

Per the parties’ own contract, such a challenge is reserved exclusively for the

arbitrator, not this court. See Rent-A-Center, 561 U.S. at 72.

IV. CONCLUSION

For all of the reasons set out above, the court finds that there is no genuine

dispute that Kelly and Gulfco entered into a “valid, irrevocable, and enforceable”

agreement to arbitrate, 9 U.S.C. § 2, that delegates the very question of arbitrability

to an arbitrator. Kelly has not challenged this delegation provision, and because the

court is “satisfied that the issue . . . is referable to arbitration,” id. § 3, the court

ORDERS as follows:

1. Defendant Gulfco of Alabama LLC’s Motion to Compel Arbitration,

(doc. 14), is GRANTED and the parties are ORDERED to submit their dispute,

including the antecedent question of arbitrability, to arbitration in compliance with

the arbitration provisions of the Note. The court STAYS this case and ORDERS the

parties to file a joint status report on or before January 7, 2027, and every ninety

days thereafter. The court retains jurisdiction over this case for post-arbitration

proceedings authorized by the Federal Arbitration Act. 9 U.S.C. §§ 9–11.

2. Plaintiff Ashly Kelly’s Motion to Strike Affirmative Defenses, (doc. 9),

is DENIED AS MOOT.

3. The Clerk of Court is DIRECTED to mail a copy of this Memorandum

Opinion and Order to Plaintiff Ashly Kelly at her address of record.

DONE and ORDERED on July 7, 2026.

HAROLD D. Il

UNITED STATES DISTRICT JUDGE

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