Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
JANET HUDSON, on behalf of )
herself and all others, )
Supreme Court Nos. S-14740/14826
)
(Consolidated)
Petitioner, )
)
Superior Court No. 3AN-11-09196 CI
v. )
)
OPINION
CITIBANK (SOUTH DAKOTA) NA, )
ALASKA LAW OFFICES, INC., and )
No. 7141 – December 16, 2016
CLAYTON WALKER, )
)
Respondents. )
_______________________________ )
)
CYNTHIA STEWART, on behalf of )
Superior Court No. 3AN-11-12054 CI
herself and all others who are similarly )
situated, )
)
Petitioner, )
)
v. )
)
MIDLAND FUNDING LLC, )
ALASKA LAW OFFICES, INC., )
and CLAYTON WALKER, )
)
Respondents. )
_______________________________ )
Petition for Review from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage, Frank A. Pfiffner,
Judge.
Appearances: James J. Davis, Jr., and Goriune Dudukgian,
Northern Justice Project LLC, Anchorage, and Matthew
W.H. Wessler, Public Justice, P.C., Washington, District of
Columbia, for Petitioners. Jon S. Dawson and Elizabeth P.
Hodes, Davis Wright Tremaine LLP, Anchorage, for
Respondents Midland Funding LLC and Citibank (South
Dakota) NA. Marc G. Wilhelm, Richmond & Quinn,
Anchorage, for Respondents Alaska Law Offices, Inc. and
Clayton Walker.
Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
Bolger, Justices.
STOWERS, Justice.
MAASSEN, Justice, with whom FABE, Chief Justice, joins,
dissenting.
I. INTRODUCTION
Two credit card holders defaulted on their accounts, and the issuing bank1
elected to litigate debt-collection actions. After courts entered default judgments against
both card holders, the card holders filed new and separate suits alleging that the bank
violated the Uniform Trade Practices and Consumer Protection Act (UTPA) during the
earlier debt collection actions. The bank moved in each case to arbitrate the UTPA
claims, and the superior court stayed the UTPA litigation and ordered arbitration. We
must decide whether the bank waived its right to demand arbitration of the subsequent
UTPA claims by litigating the debt-collection claims. Because we conclude that the two
claims were not sufficiently closely related, we hold that the bank did not waive its right
to demand arbitration of the separate UTPA claims. But we also conclude that it was
error for the superior court to interpret the arbitration agreement on the question of the
1
In both cases Citibank (South Dakota) NA issued the cards, but in Stewart’s
case Midland Funding LLC purchased the account from Citibank.
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availability of statewide injunctive relief: the interpretation of an arbitration agreement
is in the first instance a matter for the arbitrator.
II. FACTS AND PROCEEDINGS
A. Hudson v. Citibank
In April 1999 Janet Hudson opened a Citibank credit card account. The
original terms of the Card Agreement did not contain an arbitration clause. In 2001
Citibank mailed Hudson a “Change-in-Terms” form along with her periodic statement.
The form included an arbitration clause that allowed either party to “elect mandatory,
binding arbitration” of “any claim, dispute, or controversy” (Claims). The arbitration
clause stated: “All Claims are subject to arbitration, no matter what legal theory they are
based on or what remedy . . . they seek. A party who initiates a proceeding in court may
elect arbitration with respect to any Claim advanced in that proceeding by any other
party.” The clause continued:
At any time you or we may ask an appropriate court to
compel arbitration of Claims, . . . even if such Claims are part
of a lawsuit, unless a trial has begun or a final judgment has
been entered. Even if a party fails to exercise these rights at
any particular time, or in connection with any particular
Claims, that party can still require arbitration at a later time
or in connection with any other Claims.
The clause also asserted that “[a]ny questions about whether Claims are subject to
arbitration shall be resolved by interpreting this arbitration provision in the broadest way
the law will allow it to be enforced.” Finally, the clause stated that “Claims must be
brought in the name of an individual person or entity and must proceed on an individual
(non-class, non-representative) basis.” Hudson was given the opportunity to opt out of
the Change in Terms and did not.
Hudson fell behind on her payments, and in November 2010 Citibank —
represented by Alaska Law Offices — filed a collection action in the Kenai District
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Court seeking the $24,170.24 that Hudson owed. Hudson did not appear in the action,
and the court entered a default judgment. Alaska Law Offices moved for attorney’s fees
under Alaska Rule of Civil Procedure 82, which allows the prevailing party in a default
judgment to recover either its reasonable attorney’s fees or 10% of the judgment,
whichever is less.2 Alaska Law Offices requested 10% attorney’s fees, arguing that its
actual attorney’s fees for the default judgment were $4,834.05, exactly 20% of the
recovery. The court granted Alaska Law Office’s motion and awarded $2,417 in
attorney’s fees.
In August 2011 Hudson filed a class-action complaint in the superior court,
alleging that Citibank, Alaska Law Offices, and Clayton Walker (an attorney at Alaska
Law Offices) violated the UTPA by asking the court for attorney’s fees in excess of the
“reasonable” fee allowed under Rule 82. Hudson sought damages and prospective
injunctive relief under the “private attorney general” provision of the UTPA. Citibank
promptly moved to stay the action and to compel arbitration on an individual basis. The
superior court granted Citibank’s motion to compel arbitration, but held that Hudson
could be awarded statewide injunctive relief by the arbitrator.
B. Stewart v. Midland Funding LLC
Cynthia Stewart opened a Citibank credit card account in 2002 with the
same arbitration provision as Hudson’s. Stewart fell behind on her payments, and in
December 2010 Midland Funding, which had purchased Stewart’s account from
Citibank, initiated an action in Anchorage District Court to collect the debt. Alaska Law
Offices represented Midland Funding in the proceeding. The district court entered
default judgment against Stewart, who failed to appear. Alaska Law Offices argued that
Midland Funding’s actual attorney’s fees in the case were $739.04, again 20% of the
2
Alaska R. Civ. P. 82(b)(1), (b)(4).
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recovery, and asked for 10% attorney’s fees under Rule 82. The district court awarded
the requested fees.
Stewart later filed an action in the superior court alleging that Midland
Funding and Alaska Law Offices violated the UTPA by using a contingency fee
arrangement as their “reasonable” fees under Rule 82. The defendants moved to stay the
action and to compel arbitration. In July 2012, the superior court stayed the action and
compelled arbitration “according to the same terms ordered by this court in Hudson v.
Citibank.”
C. Petition for Review
Hudson3 petitioned for review and we granted the petition on three issues:
(1) whether Citibank waived its right to arbitrate the UTPA claims by litigating the
debt-collection actions in court; (2) the extent of any waiver; and (3) whether the
superior court erred in holding that the arbitrator could issue statewide injunctive relief.
III. STANDARD OF REVIEW
Citibank argues that waiver is a factual issue that should be reviewed
deferentially, while Hudson argues that waiver is a mixed question of law and fact that
should ultimately be reviewed de novo. There is conflicting Alaska precedent on the
issue,4 but it is clear that the majority of jurisdictions treat arbitration waiver as a mixed
3
For convenience, the parties will be referred to collectively as “Citibank”
and “Hudson.”
4
Compare Airoulofski v. State, 922 P.2d 889, 894 n.5 (Alaska 1996)
(holding that waiver should be reviewed de novo when decided without trial on
undisputed facts), with Blood v. Kenneth Murray Ins. Co., 68 P.3d 1251, 1254 (Alaska
2003) (holding without elaborating that waiver is an issue of fact).
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question of law and fact.5 We believe that the mixed question of law and fact standard
accurately reflects the nature of the inquiry: the superior court must find the pertinent
facts — if they are in dispute — and then correctly apply the law to those facts.
Where the facts are not in dispute on appeal, as here, we must decide
whether the superior court applied the correct legal standard to the undisputed facts.6 On
questions of law we are “not bound by the lower court’s decision.”7 Rather, we apply
de novo review, “adopting the rule of law that is ‘most persuasive in light of precedent,
reason, and policy.’ ”8
IV. DISCUSSION
For the reasons that follow we agree with the superior court that Citibank
did not waive its right to arbitrate the UTPA claims by litigating the debt-collection
actions, but we hold that the superior court erred when it decided the question whether
the arbitrator could issue statewide injunctive relief — this question presents an issue of
5
See, e.g., La. Stadium & Exposition Dist. v. Merrill Lynch, 626 F.3d 156,
159 (2d Cir. 2010); In re Tyco Int’l Ltd. Sec. Litig., 422 F.3d 41, 44 (1st Cir. 2005) (“A
determination that a party has waived its right to arbitrate is reviewed de novo, whereas
the district court’s findings of fact are subject to ‘clear error’ review.”); Hoover v. Am.
Income Life Ins. Co., 142 Cal. Rptr. 3d 312, 319 (Cal. App. 2012) (“The waiver issue
may be reviewed de novo when the question is whether the superior court properly
applied the correct legal standard to the undisputed facts . . . .”); LAS, Inc. v. Mini-
Tankers USA, Inc., 796 N.E.2d 633, 636 (Ill. App. 2003) (holding that because the facts
are not in dispute the court should review the arbitration waiver de novo and gathering
federal cases holding the same).
6
Guttchen v. Gabriel, 49 P.3d 223, 225 (Alaska 2002) (citing Foss Alaska
Line, Inc. v. Northland Servs., Inc., 724 P.2d 523, 526 (Alaska 1986)).
7
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
8
Classified Emps. Ass’n v. Matanuska-Susitna Borough Sch. Dist., 204 P.3d
347, 352 (Alaska 2009) (quoting Lexington Mktg. Grp., Inc. v. Goldbelt Eagle, LLC, 157
P.3d 470, 472 (Alaska 2007)).
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interpretation of the arbitration agreement that should be decided in the first instance by
the arbitrator.
A. Citibank Did Not Waive Its Right To Arbitrate Hudson’s UTPA
Claims.
1. Federal law controls waiver by litigation conduct.
As a threshold matter, the parties dispute whether Alaska law or federal law
should be applied to determine if Citibank waived its right to demand arbitration.9 The
answer to this question depends on which provision of the Federal Arbitration Act10
provides the basis for waiver by litigation conduct. Hudson argues that waiver is a
9
Citibank also argues that the arbitrator should decide the question whether
a party waived its right to arbitrate by participating in litigation. But if “the waiver turns
on the significance of action taken in a judicial forum, ‘the issue is one for the court,
rather than the arbitrator, to decide.’ ” Int’l Bhd. of Teamsters Local 959 v. King,
572 P.2d 1168, 1174 (Alaska 1977) (quoting Weight Watchers of Que., Ltd. v. Weight
Watchers Int’l, Inc., 398 F. Supp. 1057, 1058-59 (E.D.N.Y. 1975)). This is the majority
view among state and federal courts. See River House Dev. Inc. v. Integrus Architecture,
P.S., 272 P.3d 289, 295 (Wash. App. 2012) (“The weight of both federal authority under
the Federal Arbitration Act, 9 U.S.C. §§ 1-14, and state authority under the current and
former versions of the [Uniform Arbitration Act] treat litigation-conduct waiver as an
issue for the court rather than an issue for the arbitrator, despite the U.S. Supreme
Court’s including waiver in its list of arbitrable procedural issues in Howsam [v. Dean
Witter Reynolds, Inc., 537 U.S. 79, 84 (2002)] . . . .”); see also Marie v. Allied Home
Mortg. Corp., 402 F.3d 1, 3 (1st Cir. 2005) (“The issue of waiver of the right to arbitrate
due to inconsistent activity in another litigation forum remains an issue for the court even
after the Howsam and Green Tree holdings.”); Perry Homes v. Cull, 258 S.W.3d 580,
587 (Tex. 2008) (noting that every federal circuit to consider the issue after Howsam has
held that waiver by litigation conduct is still a decision for the court). Courts have
reasoned that “[c]ontracting parties would expect the court to decide whether one party’s
conduct before the court waived the right to arbitrate,” Tristar Fin. Ins. Agency, Inc. v.
Equicredit Corp. of Am., 97 F. App’x 462, 464 (5th Cir. 2004), because the court is in
a much better position to decide whether conduct in its own courtroom amounted to
waiver. See Perry Homes, 258 S.W.3d at 588.
10
9 U.S.C. §§ 1-14 (2012).
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defense under § 2 of the Federal Arbitration Act (the savings clause), which calls for the
application of state law.11 Citibank argues that waiver arises under § 3 (the default
clause), which calls for the application of federal law.12
When it enacted the Federal Arbitration Act, “Congress intended to
establish a uniform federal law over contracts which fall within its scope.”13 Thus, “if
the Arbitration Act is deemed applicable, federal law applies in construing and enforcing
an arbitration clause, even in those cases in which jurisdiction is based on diversity.”14
The default clause — § 3 of the Federal Arbitration Act — directs a court to stay
proceedings and order arbitration so long as the “the applicant for the stay is not in
default in proceeding with such arbitration.”15 If waiver by litigation conduct arises
11
9 U.S.C. § 2 (“A written provision in any maritime transaction or a contract
evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction, or the refusal to perform the whole
or any part thereof, or an agreement in writing to submit to arbitration an existing
controversy arising out of such a contract, transaction, or refusal, shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” (emphasis added)).
12
9 U.S.C. § 3 (“If any suit or proceeding be brought in any of the courts of
the United States upon any issue referable to arbitration under an agreement in writing
for such arbitration, the court in which such suit is pending, upon being satisfied that the
issue involved in such suit or proceeding is referable to arbitration under such an
agreement, shall on application of one of the parties stay the trial of the action until such
arbitration has been had in accordance with the terms of the agreement, providing the
applicant for the stay is not in default in proceeding with such arbitration.” (emphasis
added)).
13
Goodwin v. Elkins & Co., 730 F.2d 99, 108 (3d Cir. 1984).
14
Id.
15
See 9 U.S.C. § 3 (emphasis added).
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under § 3 of the Arbitration Act, federal law applies.16 But the savings clause — § 2 of
the Arbitration Act — provides that arbitration agreements “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity for the revocation
of any contract.”17 State law, not federal law, is applicable when a court is considering
a defense under § 2 that is grounds for “the revocation of [the] contract.”18
Whether waiver by litigation conduct arises under § 2 or § 3 of the Federal
Arbitration Act has rarely been explicitly considered by courts. Many federal courts
apply federal law while using default and waiver language interchangeably, and state
courts generally apply state law while using waiver language only.19 According to one
commentator, “There is general agreement among the circuit courts that the term
‘default’ in Section 3 should, under appropriate circumstances, be read to include waiver
of the right to arbitrate by participation in litigation.”20 In many cases there is little
16
Under § 3, the court must apply federal law because “if the Arbitration Act
is deemed applicable, federal law applies in construing and enforcing an arbitration
clause, even in those cases in which jurisdiction is based on diversity.” Goodwin,
730 F.2d at 108.
17
9 U.S.C. § 2 (emphasis added).
18
Perry v. Thomas, 482 U.S. 483, 492-93 (1987); 9 U.S.C. § 2.
19
See, e.g., Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 13 (1st Cir. 2005)
(“A ‘default’ has generally been viewed by courts as including a ‘waiver.’ ”); Ehleiter
v. Grapetree Shores, Inc., 482 F.3d 207, 218 (3d Cir. 2007) (holding that waiver and
default are synonymous); Thompson v. Skipper Real Estate Co., 729 So. 2d 287, 290-93
(Ala. 1999) (discussing waiver under state law but not default); Kirk v. Credit
Acceptance Corp., 829 N.W.2d 522, 532-34 (Wis. 2013) (same); Townsend v. Quadrant
Corp., 268 P.3d 917, 922-23 (Wash. 2012) (same); Saint Agnes Med. Ctr. v. PacifiCare
of Cal., 82 P.3d 727, 737 (Cal. 2003) (same).
20
Thomas J. Lilly, Jr., Participation in Litigation as a Waiver of the
(continued...)
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difference between the tests under state and federal law, so the distinction is not usually
a crucial one.21
We conclude that waiver by litigation conduct is a defense arising under § 3
of the Federal Arbitration Act such that federal law applies. We believe that waiver is
not a defense that gives rise to “the revocation of [a] contract” under § 2.22 Waiver is a
defense that may make a contract unenforceable, but it does not traditionally give rise to
the right to revoke the contract.23 As Justice Thomas explained in his concurrence to
AT&T Mobility LLC v. Concepcion, “The use of only ‘revocation’ [in § 2’s savings
clause] and the conspicuous omission of ‘invalidation’ and ‘nonenforcement’ suggest
that the exception does not include all defenses applicable to any contract but rather
some subset of those defenses.”24 Again, waiver is not a defense traditionally included
20
(...continued)
Contractual Right to Arbitrate: Toward a Unified Theory, 92 NEB. L. REV. 86, 100
(2013) (citing Ehleiter, 482 F.3d at 217; Marie, 402 F.3d at 14; Patten Grading &
Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 204 (4th Cir. 2004)); see, e.g.,
S & H Contractors, Inc. v. A.J. Taft Coal Co., 906 F.2d 1507, 1514 (11th Cir. 1990)
(“Our determination of whether S & H waived its right to arbitration, as opposed to
whether the contract is void under Alabama law, is controlled solely by federal law.”).
21
See, e.g., Townsend, 268 P.3d at 922-23; Saint Agnes Med. Ctr., 82 P.3d
at 737.
22
9 U.S.C. § 2.
23
13 R. LORD, WILLISTON ON CONTRACTS § 39:14, at 612-13 (4th ed. 2012)
(“[E]ither party to a contract may waive virtually any contractual provision or right in
its favor . . . .”); id. § 39:27, at 678 (“Waiver of a contract provision may be made by a
party’s express declaration, or it may be implied from representations that fall short of
an express declaration of waiver . . . .” (emphasis added)).
24
563 U.S. 333, 354 (2011) (Thomas, J., concurring).
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in the “subset” of revocation defenses.25 Strengthening this position, when the Supreme
Court has listed defenses under § 2, it has only listed defenses that are traditionally
grounds for the revocation of a contract: fraud, duress, and unconscionability.26
It is true that the Supreme Court has used language that arguably sanctions
the use of state law for all defenses to the arbitrability of contracts. For example, in
Arthur Andersen LLP v. Carlisle, the Court explained, “ ‘[S]tate law,’ therefore, is
applicable to determine which contracts are binding under § 2 and enforceable under § 3
‘if that law arose to govern issues concerning the validity, revocability, and
enforceability of contracts generally.’ ”27 But in Arthur Andersen the Court was not
interpreting § 2. Instead, it was focused on allowing a non-party beneficiary to a contract
to invoke § 3 to enforce the Federal Arbitration Act arbitration clause in an agreement.28
The remainder of the Court’s analysis focused upon § 3. We think that these statements
do not sweep waiver, a defense giving rise to the non-enforcement of a contract
provision, into the category of defenses that are grounds for revocation of the contract.
Consequently, we hold that waiver arises under § 3 and federal law applies.
25
Compare 13 R. LORD, WILLISTON ON CONTRACTS § 39:15, at 622 (4th ed.
2012) (“[O]nce it has been established that a right has been waived, the party possessing
the right prior to the waiver is generally precluded from asserting it in a court of law,
particularly when the nonwaiving party has suffered prejudice or has relied to its
detriment on the waiver.” (footnotes omitted)), with 27 id. § 70:106, at 530 (“A contract
may be rescinded where there is a clear, bona fide, mutual mistake regarding a material
fact or law.”).
26
Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996) (“[G]enerally
applicable contract defenses, such as fraud, duress, or unconsionability, may be applied
to invalidate arbitration agreements without contravening § 2 . . . .”).
27
556 U.S. 624, 629-31 (2009) (quoting Perry v. Thomas, 482 U.S. 483, 493
n.9 (1987)).
28
Id.
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There is no uniformly accepted federal rule to determine whether a party
seeking arbitration has waived its right to arbitration, but the circuit courts generally
consider the following elements: (1) knowledge of the right to compel arbitration;
(2) acts inconsistent with that right; and (3) prejudice to the opposing party because of
those acts.29
The amount of prejudice required varies among the circuits.30 We generally
agree with the Seventh Circuit’s approach set out in St. Mary’s Medical Center of
Evansville, Inc. v. Disco Aluminum Products Co. that “where it is clear that a party has
forgone its right to arbitrate, a court may find waiver even if that decision did not
29
E.g., ABF Freight Sys., Inc. v. Int’l Bhd. of Teamsters, 728 F.3d 853, 862
(8th Cir. 2013) (citing Wootten v. Fisher Invs., Inc., 688 F.3d 487, 492-93 (8th Cir.
2012)); Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1270 (9th Cir. 2002) (citing Britton
v. Co-op Banking Grp., 916 F.2d 1405, 1412 (9th Cir. 1990)). Some courts consider a
variety of nonexclusive factors related to these elements in determining whether the right
to arbitration has been waived. E.g., Rota-McLarty v. Santander Consumer USA, Inc.,
700 F.3d 690, 702 (4th Cir. 2012); In re Pharmacy Benefit Managers Antitrust Litig.,
700 F.3d 109, 117 (3d Cir. 2012) (quoting Gray Holdco, Inc. v. Cassady, 654 F.3d 444,
451 (3d Cir. 2011); Nino v. Jewelry Exch., Inc., 609 F.3d 191, 208 (3d. Cir. 2010)); Hill
v. Ricoh Ams. Corp., 603 F.3d 766, 772-73 (10th Cir. 2010) (quoting Peterson v.
Shearson/Am. Express, 849 F.2d 464, 467-68 (10th Cir. 1988)); Khan v. Parsons Global
Servs., Ltd., 521 F.3d 421, 425 (D.C. Cir. 2008) (quoting Nat’l Found. for Cancer
Research v. A.G. Edwards & Sons, 821 F.2d 772, 774-75 (D.C. Cir. 1987)); In re
Crysen/Montenay Energy Co., 226 F.3d 160, 163 (2d Cir. 2000); PPG Indus., Inc. v.
Webster Auto Parts, Inc., 128 F.3d 103, 107 (2d Cir. 1997); Cabinetree of Wis., Inc. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995).
30
Compare Sovak, 280 F.3d at 1270 (noting in Ninth Circuit party has “heavy
burden” in showing prejudice (quoting Britton, 916 F.2d at 1412)), with In re Tyco Int’l
Ltd. Sec. Litig., 422 F.3d 41, 44-45 (1st Cir. 2005) (noting First Circuit requires party to
demonstrate “modicum of prejudice” (quoting Rankin v. Allstate Ins. Co., 336 F.3d 8,
12 (1st Cir. 2003))).
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prejudice the non-defaulting party.”31 We conclude that “a court may consider prejudice
to the [party opposing arbitration] as a relevant factor among the circumstances that the
court examines in deciding whether the moving party has taken action inconsistent with
the agreement to arbitrate.”32 The essential question is whether, based on the totality of
the circumstances, and giving due regard to the strong federal policy favoring
arbitration33 and disfavoring an inference of waiver, the alleged waiving party’s
participation in litigation evidences an intention to waive that right or is so inconsistent
with the right to arbitrate that it is contrary to any other intention than waiver.
2. Citibank did not waive its right to arbitrate the UTPA claims
because the totality of the circumstances does not evidence an
intention to waive its right to arbitrate.
In this case Citibank filed a debt-collection suit in state court, and after
prevailing it was awarded attorney’s fees; Hudson later filed a separate action based on
the alleged unfair trade practices associated with the attorney’s fees award. Citibank then
moved to arbitrate Hudson’s separate action.
We conclude that, based on the totality of the circumstances, Citibank’s
decision to litigate its debt collection claim and ask for attorney’s fees did not evidence
an intent to waive its right to arbitrate the different, more complex UTPA claim. First,
it is well accepted that “the law favors arbitration”34 and “waiver is not to be lightly
31
969 F.2d 585, 590 (7th Cir. 1992).
32
Nat’l Found. for Cancer Research, 821 F.2d at 777.
33
See AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see also
Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2309 (2013).
34
Blood v. Kenneth Murray Ins., Inc., 68 P.3d 1251, 1255 (Alaska 2003)
(citing Bd. of Educ., Fairbanks N. Star Borough Sch. Dist. v. Ewig, 609 P.2d 10, 13
(Alaska 1980)); Midwest Window Sys., Inc. v. Amcor Indus., Inc., 630 F.2d 535, 536 (7th
(continued...)
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inferred.”35 All doubts regarding the occurrence of waiver should be resolved in favor
of arbitration.36 And § 3 of the Federal Arbitration Act provides that if a suit is brought
on an issue that is referable to arbitration and one party moves to have the issue
arbitrated, the trial court “shall . . . stay the trial of the action until such arbitration has
been had in accordance with the terms of the agreement, providing the applicant for the
stay is not in default in proceeding with such arbitration.”37
Second, the Arbitration Agreement governing the relationship between the
parties allowed either party to “elect mandatory, binding arbitration” of “any claim,
dispute, or controversy.” The arbitration clause stated: “All Claims are subject to
arbitration, no matter what legal theory they are based on or what remedy . . . they seek.
A party who initiates a proceeding in court may elect arbitration with respect to any
Claim advanced in that proceeding by any other party.” The clause continued:
At any time you or we may ask an appropriate court to
compel arbitration of Claims, . . . even if such Claims are part
of a lawsuit, unless a trial has begun or a final judgment has
been entered. Even if a party fails to exercise these rights at
any particular time, or in connection with any particular
Claims, that party can still require arbitration at a later time
or in connection with any other Claims.
The clause also asserted that “[a]ny questions about whether Claims are subject to
34
(...continued)
Cir. 1980).
35
Blood, 68 P.3d at 1255 (citing S & R Co. of Kingston v. Latona Trucking,
Inc., 159 F.3d 80, 83 (2d Cir. 1988)).
36
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983); Blood, 68 P.3d at 1255 (citing Doctor’s Assocs. Inc. v. Distajo, 107 F.3d 126,
130 (2d Cir. 1998)).
37
9 U.S.C. § 3 (2012) (emphasis added).
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arbitration shall be resolved by interpreting this arbitration provision in the broadest way
the law will allow it to be enforced.” Finally, the clause stated that “Claims must be
brought in the name of an individual person or entity and must proceed on an individual
(non-class, non-representative) basis.” The text of the Arbitration Agreement clearly
provides that Citibank was authorized under its contract with Hudson to seek arbitration
on claims distinct from its original debt collection action and its request for attorney’s
fees.38
Third, a party may waive its right to arbitrate separate claims, but the claims
must be closely related in order for the party’s act in bringing suit on one claim to be
inconsistent with the existing right to arbitrate another claim.39 One circuit has held
claims were waived when “basically only one controversy exists between the parties.”40
And another has held that a party waived arbitration when matters were “so closely
38
We disagree with the dissent’s analysis about what would have happened
had Hudson actually raised a UTPA counterclaim in the collection litigation. If Hudson
had raised the UTPA simply to defend and reduce the Rule 82 award, Citibank may have
been locked in to the superior court litigation. But if Hudson had raised the UTPA to
assert an affirmative counterclaim of some kind, Citibank would have had every right
under the arbitration provision to demand arbitration of that counterclaim, regardless of
its connection to the Rule 82 claim. Under the dissent’s analysis, Hudson avoids the
plain language of the arbitration provision to which she agreed simply by defaulting in
the first lawsuit and waiting to assert her counterclaim in a separate lawsuit. That cannot
be the correct result.
39
See Midwest Window Sys., Inc., 630 F.2d at 537; PPG Indus., Inc. v.
Webster Auto Parts, Inc., 128 F.3d 103, 110 (2d Cir. 1997); see also Gutor Int’l AG v.
Raymond Packer Co., 493 F.3d 938, 946 (1st Cir. 1974) (holding that “[a]ll related
matters” must be arbitrated); G.T. Leach Builders, LLC v. TCMS, Inc., No. 13-11-310
CV, 2012 WL 506568, at *3-5 (Tex. App. Feb. 16, 2012) (applying federal law and
finding waiver when the two claims were based on the same contract).
40
Midwest Window Sys., Inc., 630 F.2d at 537 (holding claims waived
because they all “[grew] out of their unsatisfactory business relationship”).
-15- 7141
related as to form what is really a single controversy” because the claims involved the
“same facts and legal issues.”41 Another way of saying this is that the claims are
“intertwined” and that the “fact finder would necessarily have to resolve fact issues
common to both.”42 While being brought in separate actions makes it more likely that
two claims are not “intertwined,” the filing of separate actions alone does not make the
claims unrelated.43
We conclude that Citibank’s decision to litigate its simple debt-collection
action does not convey that it also intended to forgo arbitration on a different, more
complex UTPA claim. The UTPA claim broadens the scope of the proceeding by such
a magnitude that it fundamentally transforms the litigation.44 The evidence and legal
41
PPG Indus., Inc., 128 F.3d at 110.
42
Owens & Minor Med., Inc. v. Innovative Mktg. & Distrib. Servs., 711 So.
2d 176, 177 (Fla. Dist. App. 1998).
43
See Midwest Window Sys., Inc., 630 F.2d at 536-37 (holding that fraudulent
collection on promissory note was reasonably related to breach of contract claim);
Blackburn v. Citifinancial, Inc., No. 05AP-733, 2007 WL 927222, at *5 (Ohio App. Mar.
29, 2007) (holding that debt-collection action was closely related to fraud in origination
of the loan); G.T. Leach Builders, LLC, 2012 WL 506568, at *3-5 (holding that claims
in two separate lawsuits — one for breach of contract and one for payment — were
reasonably related).
44
See Plaintiff’s Shareholders Corp. v. Southern Farm Bureau Life Ins. Co.,
486 F. App’x 786, 790 (11th Cir. 2012) (“Nonetheless, where a plaintiff files an
amended complaint that ‘unexpectedly changes the scope or theory of the plaintiff’s
claims,’ fairness dictates that a defendant’s prior waiver of arbitration be nullified and
the right to compel arbitration revived.” (quoting Krinsk v. SunTrust Banks, Inc.,
654 F.3d 1194, 1202 (11th Cir. 2011))); Cabinetree of Wis. v. Kraftmaid Cabinetry, Inc.,
50 F.3d 388, 391 (7th Cir. 1995) (“The shape of the case might so alter as a result of
unexpected developments during discovery or otherwise that it might become obvious
that the party should be relieved from its waiver and arbitration allowed to proceed.”).
-16- 7141
theories included in the two different claims would have little if any overlap.45 The
bank’s claim for recovery of the debt would center on the language of the contract and
the breach of the cardholder’s duty to pay, while the cardholder’s UTPA claim would
involve attorney’s fees practices, e.g., whether Citibank entered into a contingency fee
contract with its collections attorneys and whether a contingency fee is a permissible
basis for recovering attorney’s fees under Alaska Civil Rule 82’s default judgment fee
provision.46 The claims did not arise out of the same transaction; one arose from the
credit card contract and one arose from the bank’s fee agreement with its lawyers and
post-litigation attorney’s fees motions.47
Other courts considering similar fact patterns have likewise held that a debt
collection proceeding does not waive arbitration of a later consumer-protection claim.
A federal district court in Michigan noted that “[n]umerous courts across the country
have found that commencing a separate debt collection lawsuit does not, on its own,
waive the right to arbitration.”48 In Fields v. Howe, a case from the Southern District of
45
See PPG Indus., Inc., 128 F.3d at 110 (holding that the claims must be “so
closely related as to form what is really a single controversy” and share the “same facts
and legal issues”).
46
The essence of Hudson’s UTPA claim is that Citibank’s attorneys
performed relatively little work to obtain a default judgment on a simple debt action, yet
because the attorneys were being compensated under a 20% contingency fee agreement,
the attorney’s fees requested and awarded under Rule 82(b)(1) were disproportionately
higher than the hourly fee they would have charged, making them unreasonable. Hudson
alleges this attorney’s fee practice violates the UTPA.
47
Cf. Midwest Window Sys., Inc., 630 F.2d at 537 (finding waiver for two
disputes — one for payment and one for performance — that grew out of the same
contract); G.T. Leach Builders, LLC, 2012 WL 506568, at *4 (same).
48
Garcia v. Weltman, Weinberg & Reis Co. of Mich., No. 2:13-CV-14362,
(continued...)
-17- 7141
Indiana, the court held that “[t]he fact that the present action arose because of Discover’s
allegedly improper conduct in the course of [the debt-collection action] does not render
this cause one and the same as Discover’s state court case.”49 The court explained, “The
state court case is a collection action — a case initiated by Discover; the federal court
case is an action for alleged violation of federal and state laws — a case initiated by
Fields.”50 And in Funderburke v. Midland Funding, L.L.C. a federal district court in
Kansas held that a debt-collection action did not waive the right to demand arbitration
of a later-filed consumer-protection claim.51 We agree with these courts.
Hudson relies on Midwest Window Systems, Inc. v. Amcor Industries, Inc.,52
a case from the Seventh Circuit. In that case, Midwest Window and Amcor agreed that
Amcor would make all of its pending deliveries and Midwest Window would issue
promissory notes for the pending orders.53 Unfortunately for Midwest Window, Amcor
did not make any of the deliveries but still went to court and received default judgment
on the notes.54 Midwest Window promptly filed a separate action alleging breach of the
48
(...continued)
2014 WL 1746522, at *5-6 (E.D. Mich. Apr. 30, 2014).
49
No. IP-01-1036-C-B/S, 2002 WL 418011, at *7-8 (S.D. Ind. Mar. 14,
2002).
50
Id.
51
No. 12-2221-JAR/DJW, 2013 WL 394198, at *7-8 (D. Kan. Feb. 1, 2013).
52
630 F.2d 535 (7th Cir. 1980).
53
Id. at 535-36.
54
Id.
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contract and fraud, which Amcor moved to arbitrate.55 Midwest Window re-opened the
promissory-note case and the court consolidated the two cases.56 On appeal, the Seventh
Circuit held that Amcor’s action to reduce the notes to judgment waived arbitration of
the second proceeding — the breach of contract claims. It found that the issues in the
breach of contract action and in the debt-collection action were similar enough that
“basically only one controversy exists between the parties.”57
But Midwest Window is distinguishable. The majority of the claims at issue
in that case were breach of contract claims all arising from the same contract. The fraud
claims on the notes were mainly incidental to these claims. Thus the issue was whether
the two suits — one for payment and one for performance, both on the same contract —
were related. The Seventh Circuit reasonably concluded they were related. The two
proceedings concerned the “same facts and legal issues”58 — facts relating to the
wording and origination of the contract. Here, however, Hudson does not argue that the
55
Id.
56
Id.
57
Id. at 537.
58
PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 110 (2d Cir.
1997). Hudson points to another case from the Ohio Court of Appeals where an elderly
woman was fraudulently convinced to sign a mortgage and loan secured by her house.
See Blackburn v. Citifinancial, Inc., No. 05AP-733, 2007 WL 927222, at *4 (Ohio App.
Mar. 29, 2007). Citifinancial instituted a foreclosure action in court and sought judgment
on the underlying promissory note, which was covered by an arbitration agreement. The
suit was dismissed as premature, and the plaintiffs filed suit against Citifinancial alleging
fraud in the origination of the loan. Citifinancial immediately moved to stay the
proceedings and compel arbitration, but the court held that it had waived the right to
arbitrate by litigating the foreclosure. Blackburn is distinguishable because the claims
were more closely related. The same evidence would have been relevant to both
claims — the origination of the note and the specifics of the contract.
-19- 7141
underlying contract was fraudulently induced or that she did not owe the debt. The
evidence and legal issues central to the two controversies do not overlap. The UTPA
proceeding would feature testimony relating to the standard for reasonable attorney’s
fees in debt-collection actions, the hours actually worked by Alaska Law Offices, and the
general practice of attorneys in similar types of cases. The debt collection proceeding
would rely on the credit card agreement and evidence of Hudson’s failure to pay her
debts.
We conclude that Citibank’s debt collection claims and Hudson’s UTPA
attorney’s fees claims are not sufficiently closely related such that they would be
considered only one controversy. Given this conclusion, and giving due regard to the
strong federal policy resolving all doubts in favor of arbitration, we also conclude that
Citibank’s filing a state court action to recover its debt did not evidence a clear intent to
waive its right to arbitrate a subsequent UTPA claim. Therefore, under the totality of the
circumstances — particularly given the language of the arbitration provision and the
unrelatedness of the two sets of litigation — we hold that Citibank did not waive its right
to arbitrate Hudson’s UTPA attorney’s fees claim and affirm this aspect of the superior
court’s decision.
B. It Was Error To Hold That The Arbitrator Could Issue Statewide
Injunctive Relief.
The superior court concluded, notwithstanding the explicit language of the
Arbitration Agreement providing that “the arbitrator may award relief only on an
individual (non-class, non-representative) basis,” that under the UTPA Hudson had a
non-waivable right to pursue relief on a statewide basis. By drawing a distinction
between the right to litigate a claim and the right to pursue a type of relief, the court held
that the arbitrator could grant statewide relief.
The Supreme Court has been exceedingly clear that parties to an arbitration
-20- 7141
agreement may not be subjected to procedures for which they did not bargain. In Stolt-
Nielsen S.A. v. AnimalFeeds International Corp., the Supreme Court decided whether
class arbitration was available when the contract was silent on the issue.59 The Court
held that parties may choose the type of arbitration they wish to employ and with whom
they want to arbitrate, and courts must “give effect to the contractual rights and
expectations of the parties.”60 But because the arbitration agreement was silent on the
availability of class arbitration in Stolt-Nielsen, the Court held that class arbitration was
not available because a “party may not be compelled under the [Arbitration Act] to
submit to class arbitration unless there is a contractual basis for concluding that the party
agreed to do so.”61 And in AT&T Mobility v. Concepcion, the Supreme Court struck
down a California rule of decision because it allowed consumers to demand class
arbitration even when it was prohibited by their arbitration agreements.62 The Court held
that this violated the central tenant of its arbitration precedent: to “ensur[e] that private
arbitration agreements are enforced according to their terms.”63
We do not need to decide whether the arbitration agreement in this appeal
prohibits statewide injunctive relief. The interpretation of an arbitration agreement is a
question for arbitration.64 For example, in Ferguson v. Corinthian Colleges, the Ninth
59
559 U.S. 662 (2010).
60
Id. at 682-83 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 479 (1989).
61
Id. at 684.
62
131 S.Ct. 1740, 1756 (2011).
63
Id. at 1748 (alteration in original) (quoting Volt, 489 U.S. at 478).
64
See Johnson v. Aleut Corp., 307 P.3d 942, 949 (Alaska 2013); Ahtna,
(continued...)
-21- 7141
Circuit concluded that the question whether public injunctive relief could be granted in
a student loan controversy was initially a question for the arbitrator.65 It was error for
the superior court to decide that the arbitrator could order statewide injunctive relief. We
vacate the court’s decision: on remand the issue of the availability and scope of
injunctive relief must be referred to arbitration.
V. CONCLUSION
We AFFIRM the superior court’s order staying court proceedings and
submitting the dispute to arbitration, but we REVERSE and VACATE the superior
court’s ruling that the arbitrator can order statewide injunctive relief, and we REMAND
for further proceedings consistent with this opinion.
64
(...continued)
Inc. v. Ebasco Constructors, Inc., 894 P.2d 657, 662 (Alaska 1995).
65
733 F.3d 928, 937 (9th Cir. 2013).
-22- 7141
MAASSEN, Justice, with whom FABE, Chief Justice, joins, dissenting.
The determinative issue in this case is whether Citibank’s claim for
attorney’s fees under Alaska Civil Rule 82 is “closely related” to Janet Hudson’s claim
in response: that Citibank’s attorney’s fees claim is greatly inflated, violates the Unfair
Trade Practices and Consumer Protection Act (UTPA), and entitles Hudson to statutory
remedies. I believe the attorney’s fees claim and the UTPA-based response to it are
indeed closely related. For that reason, and because the language of the parties’ contract
has no effect on the court’s authority to find that a party waived arbitration through its
use of the judicial process, I would hold that Citibank, by deliberately bringing its
attorney’s fees claim in Alaska’s courts and pursuing it to judgment, waived its right to
arbitrate Hudson’s factual and legal challenges to the claim’s basis and amount. I
therefore dissent from the court’s holding today.
A. Hudson’s UTPA Claim Based On Citibank’s Rule 82 Claim Is Closely
Related To Citibank’s Rule 82 Claim.
Citibank’s complaint against Hudson demanded not only “[a] money
judgment in the amount of $24[,]170.24” but also “Alaska Rule of Civil Procedure 82
Attorney[’]s fees” in an unspecified amount.1 After securing a default, Citibank filed an
affidavit in which it claimed $4,834.05 in “actual attorney[’]s fees”; it noted that this
amount exceeded the ten percent of the judgment allowed by the Rule 82 schedule and
therefore requested that lesser amount — $2,417.02 — instead. There is no question but
that Citibank intentionally put both its entitlement to Rule 82 attorney’s fees and their
amount at issue in its lawsuit and thereby waived the right to arbitrate the Rule 82 claim.2
1
I describe the background of only Hudson’s case here; Cynthia Stewart’s
ran a parallel course and is analytically indistinguishable.
2
Citibank contends that it “would have had the right to pursue its fees” in
(continued...)
-23- 7141
Hudson did not appear in the collection suit. She did not object to the fees
award until later, when she filed her class-action complaint alleging that the fees claimed
by Citibank, in her case and others, exceeded the amounts allowed by Rule 82 and
violated the UTPA. That her objections were raised in a later lawsuit does not matter to
whether the relevant claims are “closely related,” as the court agrees:3 In determining
whether the party demanding arbitration has already indicated an intent to litigate the
same legal and factual issues, “[i]t is irrelevant that the prior litigation occurred as part
of a separate action or in a different court.”4 What matters, in the words of the court
today, is whether the attorney’s fees claim and the response to it are “so closely related
as to form what is really a single controversy” because they involve the “same facts and
legal issues”;5 in other words, whether the claims are “intertwined” and the “fact finder
would necessarily have to resolve fact issues common to both.”6
The court’s application of this test today goes astray, in my view, when it
contrasts “[t]he evidence and legal theories included in the two different claims” — the
debt collection action and the UTPA claim — and concludes that they “have little if any
2
(...continued)
arbitration; it chose to litigate them in court instead.
3
Op. at 17-18 (“[T]he filing of separate actions alone does not make the
claims unrelated.”).
4
PPG Indus., Inc. v. Webster Auto Parts, Inc., 128 F.3d 103, 108 n.2 (2d Cir.
1997); see also In re Enron Corp., 364 B.R. 489, 512 (Bankr. S.D.N.Y. 2007) (“A party
waives the right to invoke arbitration where it has previously litigated the same legal and
factual issues even if that litigation occurred as part of a separate action or in a different
forum.”).
5
Op. at 17 (quoting PPG Indus., Inc., 128 F.3d at 110).
6
Id. (quoting Owens & Minor Med., Inc. v. Innovative Mktg. & Dist. Servs.,
711 So. 2d 176, 177 (Fla. Dist. App. 1998)).
-24- 7141
overlap.”7 The court is contrasting the wrong two claims. Citibank did not merely sue
to collect a debt; it also made a claim for Rule 82 attorney’s fees, which — as the court
points out — had a wholly separate evidentiary and legal basis.8 The proper focus of
today’s inquiry is on the overlap between Citibank’s claim for Rule 82 attorney’s fees
and Hudson’s UTPA claim raised in response to it.9 The evidentiary overlap between
these two claims is close to complete;10 a “fact finder would necessarily have to resolve
fact issues common to both,”11 i.e., whether Citibank misstated its fees. A victory for
Hudson in her later lawsuit would impugn the legitimacy of Citibank’s judgment in its
earlier lawsuit. Indeed, the two claims are inextricably intertwined even as the court
describes them:
The essence of Hudson’s UTPA claim is that Citibank’s
attorneys performed relatively little work to obtain a default
judgment on a simple debt action, yet because the attorneys
were being compensated under a 20% contingency fee
agreement, the attorney’s fees requested and awarded under
Rule 82(b)(1) were disproportionately higher than the hourly
7
Op. at 18.
8
See Op. at 18-19, 21-22.
9
The court’s attempt to distinguish Midwest Window Systems, Inc. v. Amcor
Indus., Inc., 630 F.2d 535 (7th Cir. 1980), is thus irrelevant, in my view, because
whether Hudson’s claim is related to any aspect of Citibank’s debt-collection action
other than its Rule 82 claim is beside the point. Op. at 21. I find support in the court’s
discussion of Blackburn v. Citifinancial, Inc., No. 05AP-733, 2007 WL 927222 (Ohio
App. Mar. 29, 2007), which the court distinguishes because “[t]he same evidence would
have been relevant to both claims.” Op. at 21 n.58. That is the situation here.
10
As the court describes it, Hudson’s UTPA claim “arose from the bank’s fee
agreement with its lawyers and post-litigation attorney’s fees motions” — in other words,
Hudson’s UTPA claim “arose from” Citibank’s Rule 82 claim. Op. at 19.
11
Op. at 17 (quoting Owens & Minor Med., 711 So. 2d at 177).
-25- 7141
fee they would have charged, making them unreasonable.[12]
One simply cannot articulate Hudson’s UTPA claim outside the context of Citibank’s
Rule 82 attorney’s fees claim.13
Although a challenge to the basis or amount of a Rule 82 attorney’s fees
claim can never be unanticipated in Alaska practice, we can perhaps assume that
Citibank did not anticipate a challenge based specifically on the UTPA.14 But I caution
against deferring too much to the defenses a litigant anticipated when we are deciding
whether its claim is closely related to the other party’s response. The court today
12
Op. at 19 n.46.
13
The court’s reliance on three unpublished cases that “consider[ed] similar
fact patterns” is unpersuasive. Op. at 19-20. The cases are similar in that they involved
consumer protection suits following debt collection actions, but, unlike here, they did not
also include a claim in the original action that turned on facts common to the consumer
protection suit. See Garcia v. Weltman, Weinberg & Reis Co. of Mich., No. 2:13-cv
14362, 2014 WL 1746522, at *2, *5 (E.D. Mich. Apr. 30, 2014) (finding “the issues at
play in the state court [debt-collection] litigation . . . fundamentally different from
Plaintiff’s unfair debt collection practice claims” based on debt collection practices taken
outside of court); Funderburke v. Midland Funding, L.L.C., No. 12-2221-JAR/DJW,
2013 WL 394198, at *2, *7 (D. Kan. Feb. 1, 2013) (finding the new claim arbitrable
where the first claim was for debt collection and the later claim alleged that the defendant
had no authority to collect the debt and the attempt to do so was tortious and otherwise
unlawful, issues “not litigated in [the first] action” and dependent on facts not at issue
there); Fields v. Howe, No. IP-01-1036-C-B/S, 2002 WL 418011, at *7 (S.D. Ind.
Mar. 14, 2002) (concluding that “the tort and other claims Fields pursues in federal court
are not the same claims [the defendant] lodged in state court,” though apparently
rejecting waiver as a defense categorically, noting in dicta that the cardmember
agreement would have allowed arbitration “even if the cases were one and the same”).
14
Even this is questionable, given our long-standing application of the UTPA
to debt-collection practices. See, e.g., State v. O’Neill Investigations, Inc., 609 P.2d 520,
523-36 (Alaska 1980) (rejecting constitutional challenges to the UTPA and applying it
to independent debt-collection practices).
-26- 7141
observes that “Citibank’s decision to litigate its simple debt-collection action does not
convey that it also intended to forgo arbitration on a different, more complex UTPA
claim.”15 I doubt that the plaintiff in a consumer debt-collection case will ever be found
to have subjectively anticipated a complex defense to its claim, no matter what that
defense might be and how “closely related” it appears to an objective eye. Sometimes,
as in these cases of consumer default, the plaintiff likely expects no defense at all. But
I suggest that whether the plaintiff anticipated the defense to its claim should not have
the significance the court gives it; much more important is whether the plaintiff intended
to litigate its claim. By filing its claim in court the plaintiff invites a response in the
same forum.16 Citibank’s claim for Rule 82 attorney’s fees was plainly inconsistent with
an intent to arbitrate either its right to those fees or the reasonableness of those fees.
Nor do I believe that the closely related claim and response lost their
relatedness because Hudson chose to file her action on behalf of a proposed class. The
proposed class consists of persons like Hudson “against whom defendants obtained a
15
Op. at 18.
16
This also differentiates other cases on which the court relies, in which it is
a defendant who acquiesces in a court proceeding and later invokes arbitration when the
plaintiff expands the theory or scope of the claims at issue. See Plaintiffs’ S’holders
Corp. v. S. Farm Bureau Life Ins. Co., 486 F. App’x 786, 790 (11th Cir. 2012)
(“[W]here a plaintiff files an amended complaint that ‘unexpectedly changes the scope
or theory of the plaintiff’s claims,’ fairness dictates that a defendant’s prior waiver of
arbitration be nullified and the right to compel arbitration revived.” (quoting Krinsk v.
SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011))); Cabinetree of Wis. v.
Kraftmaid Cabinetry, Inc., 50 F.3d 388, 389, 390 (7th Cir. 1995) (finding presumptive
waiver of arbitration when defendant to a contract claim first sought removal to federal
court and later “dropped a bombshell into the proceedings” by seeking arbitration
instead, but acknowledging that the defendant might be allowed to rescind the waiver
under certain “extraordinary circumstances”); Op. at 18 n.44. The same fairness
concerns are not implicated in a case like this one — at least not in favor of the party
demanding arbitration — where it is that party who opted for court in the first place.
-27- 7141
default judgment including attorney’s fees since July 15, 2009.” Had the collections
cases been defended, Citibank could reasonably have expected a challenge to the amount
of fees from each of these class member-defendants; it waived its right to arbitrate the
Rule 82 claim in each individual case and as to each potential class member. That
Hudson seeks to consolidate the cases for decision adds procedural efficiencies this court
has long encouraged;17 it does not dilute the claims’ relatedness. In other words, the fact
that all the class members’ claims are closely related to the attorney’s fees claims on
which they hinge cannot mean that none of them are. And the fact that Citibank waived
arbitration as to each one of them individually cannot mean that it reserved arbitration
as to all of them as a class.
B. The Language Of The Arbitration Agreement Does Not Restrain The
Court’s Application Of Waiver Principles.
The court today relies heavily on the language of the parties’ Arbitration
Agreement to conclude that Citibank retained the right “to seek arbitration on claims
distinct from its original debt collection action and its request for attorney’s fees”
regardless of waiver principles that would otherwise apply.18 But parties cannot contract
17
See State, Commercial Fisheries Entry Comm’n v. Carlson, 65 P.3d 851,
872 (Alaska 2003) (“Class action suits, in which the result for one becomes the result for
many in the same legal predicament, are necessary to avoid a multiplicity of duplicative
lawsuits.”); Turner v. Alaska Commc’ns Sys. Long Distance, Inc., 78 P.3d 264, 268
(Alaska 2003) (observing that “the aggregation of small individual claims is an important
use of the class action device, since without it, ‘aggrieved persons may be without any
effective redress’ ” (quoting Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 339
(1980))); Crawford & Co. v. Vienna, 744 P.2d 1175, 1177 (Alaska 1987) (“The purpose
of a class action is to afford numerous individuals united in interest an efficient means
to adjudicate claims.”).
18
Op. at 15-16; see also id. at 22 (“Therefore, under the totality of the
circumstances — particularly given the language of the arbitration provision and the
(continued...)
-28- 7141
away the courts’ exercise of the inherent authority to find that the right to arbitrate has
been waived by the pursuit of a judicial remedy.
Federal courts are appropriately skeptical of “no waiver” clauses in
arbitration agreements. “[T]he presence of [a] ‘no waiver’ clause does not alter the
ordinary analysis undertaken to determine if a party has waived its right to arbitration.”19
“This makes sense because ‘to allow the “no waiver” clause to preclude a finding of
waiver would permit parties to waste scarce judicial time and effort and hamper judges’
authority to control the course of the proceedings’ and allow parties to ‘test[] the water
before taking the swim’ by delaying assertion of their right to arbitration until the
18
(...continued)
unrelatedness of the two sets of litigation — we hold that Citibank did not waive its right
to arbitrate Hudson’s UTPA attorney’s fees claim and affirm this aspect of the superior
court’s decision.” (emphasis added)).
19
Johnson Assoc. Corp. v. HL Operating Corp., 680 F.3d 713, 717 (6th Cir.
2012) (quoting S & R Co. of Kingston v. Latona Trucking, Inc., 159 F.3d 80, 86 (2d Cir.
1998)); see also Gray Holdco, Inc. v. Cassady, 654 F.3d 444, 452 (3d Cir. 2011)
(holding “that the clause in the [agreement] allowing either party to seek injunctive relief
until the arbitration award is rendered d[id] not override the applicability of the . . .
analysis which examines whether a party, by its participation in litigation, has waived its
right to invoke arbitration”); Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d
341, 348-49 (5th Cir. 2004) (“The inclusion of a ‘no waiver’ clause in a contract does
not eliminate the district court’s inherent power to control its docket. In this case the
Settlement Agreement’s ‘no waiver’ clause is not sufficient to overcome the district
court’s exercise of its inherent authority in light of Republic’s extensive use of the
judicial process.”); Thomas Oehmke & Joan Brovins, Causes of Action Involving
Arbitrable Disputes, 32 CAUSES OF ACTION 2d 385 § 33 (2006 & Oct. 2016 Update)
(discussing Republic Ins.); JAY GRENIG, 1 ALT. DISP. RESOL. § 23.32 (3d ed. 2015)
(emphasizing as “important” that “[a] ‘no waiver’ clause in an arbitration provision of
a settlement agreement is not sufficient to overcome a court’s exercise of its inherent
authority to find that a party has waived its right to arbitrate” (citing Republic Ins.,
383 F.3d 341 (5th Cir. 2004))).
-29- 7141
litigation is nearly complete.”20
Citibank chose to file its debt-collection action in Alaska’s courts, where
Civil Rule 82 and the efficient default-judgment process allowed it to increase Hudson’s
consumer debt by what it claimed to be thousands of dollars in attorney’s fees. It opted
against arbitration, where its right to Rule 82 fees would be at best problematic.21 When
challenged in Hudson’s instant suit, Citibank demanded that the attorney’s fees issue it
had already litigated to an easy judgment in Alaska’s courts be arbitrated instead. But
under the “closely related” test of waiver as the court explains it today, I would hold that
Citibank is not entitled to relitigate the issue in a new forum under a new set of rules; the
parties’ contract has no effect on this conclusion. I therefore dissent.
20
Johnson Assoc., 680 F.3d at 717 (alteration in original) (quoting S &R Co.,
159 F.3d at 86).
21
According to Citibank, it could recover Rule 82 fees in arbitration because
the agreement allows it to recover “court costs or any other fees as allowed by law.”
According to Hudson, it is Citibank’s position that South Dakota law applies, and
Citibank acknowledges that an “award of attorney’s fees is not the norm” in South
Dakota but argues that they are permitted. Regardless of the forum and the applicable
law, Citibank admits that “there may [have been] a difference in the amount of fees
Citibank might . . . have recovered if it pursued Hudson’s undisputed debt in arbitration.”
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