Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_12-cv-00998/USCOURTS-azd-2_12-cv-00998-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1692 Fair Debt Collection Act

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Lydia Bultemeyer, on behalf of herself and 

all others similarly situated, 

Plaintiff, 

v. 

Systems & Services Technologies, Inc., 

Defendant.

No. CV12-0998-PHX-DGC

ORDER 

 Plaintiff filed a class action suit under the Fair Debt Collection Practices Act 

(“FDCPA”), 15 U.S.C. § 1692, alleging that Defendant Systems & Services 

Technologies, Inc. (“SST”), a debt-servicer for Argossy University (“AU”), violated a 

number of provisions of the FDCPA when it contacted Plaintiff and other similarly 

situated individuals regarding their debts owed to AU. Doc. 1. Defendant SST 

concurrently filed a motion to stay and compel arbitration (Doc. 11) and a motion to 

strike the class allegations. Doc. 12. The motions have been fully briefed. Docs. 16, 17. 

For reasons stated below, the Court will deny both motions. 

I. Background. 

 Plaintiff signed an enrollment agreement with AU in which she agreed to pay 

tuition and fees to AU as they came due. Doc. 11 at 5; see Doc. 11-1 at 3-6. The 

enrollment agreement contained an arbitration provision which stated that “any dispute or 

claim between you and AU (or any company affiliated with AU or any of its officers, 

directors, trustees employees or agents) arising out of or relating to this enrollment 

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agreement . . . shall be . . . submitted to and resolved by individual and binding 

arbitration pursuant to the terms described herein.” Doc. 11 at 6; Doc. 11-1 at 5. 

 Plaintiff alleges that AU assigned her alleged debt to SST for collection, and SST 

left her numerous voice mail messages and written communications in connection with 

this debt. Doc. 1, ¶¶ 12-14; 38-87. Plaintiff alleges that SST’s written correspondence 

and voice mail messages are substantially similar to those sent to an unknown number of 

other alleged AU debtors. Id., ¶¶ 86-87. Plaintiff alleges that these communications 

violated the FDCPA in four ways: (1) SST violated 15 U.S.C. § 1692d(6) because its 

callers failed to meaningfully disclose their identities (Doc. 1, ¶¶ 107-12); (2) SST 

violated Section 1692e(11) because its callers failed to disclose that the calls were from a 

debt collector (id., ¶¶ 113-16); (3) SST violated Section 1692e(10) because it used “false 

representations and deceptive practices” (id., ¶¶ 117-24); and SST violated Section 

1692e(14) because it falsely used a business or organization name other than the true 

name of its business (id., ¶¶ 125-128). 

 SST asks the Court to stay this action and compel arbitration on the grounds that 

Plaintiff’s FDCPA claims are within the scope of a valid arbitration agreement between 

Plaintiff and AU. Doc. 11. SST also moves to strike Plaintiff’s class allegations on the 

grounds that Plaintiff waived the right to maintain a class action under the arbitration 

agreement. Doc. 12. 

II. Legal Standard. 

 The FAA broadly provides that written agreements to arbitrate disputes arising out 

of transactions involving interstate commerce “shall be valid, irrevocable, and 

enforceable” except upon grounds that exist at common law for the revocation of a 

contract. 9 U.S.C. ' 2. Absent a valid contract defense, the FAA “‘leaves no place for 

the exercise of discretion by a district court, but instead mandates that district courts shall

direct the parties to proceed to arbitration on issues as to which an arbitration agreement 

has been signed.’” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th 

Cir. 2000) (quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985)) 

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(emphasis in original). The district court’s role under the FAA is “limited to determining 

(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement 

encompasses the dispute at issue.” Id. 

III. SST’s Motion to Stay and Compel Arbitration. 

 A. Agreement to Arbitrate. 

 Plaintiff does not deny that she signed AU’s enrollment agreement which 

contained the agreement to arbitrate, but she argues that this does not obligate her to 

arbitrate her claims against SST, a nonsignatory to that agreement. Doc. 16 at 3-10. 

Plaintiff also argues that the Court should deny SST’s motions because the arbitration 

agreement is substantively and procedurally unconscionable. Id. at 10-11. 

 In support of her assertion that the arbitration agreement is substantively and 

procedurally unconscionable, Plaintiff cites to the terms of the enrollment agreement that 

say “Your acceptance as a student at Argosy University is conditioned upon your 

agreement to be bound by the terms of the Arbitration Agreement.” Doc. 11-1 at 6. 

Plaintiff argues that this shows that the agreement was an “adhesion contract” because 

she had no choice but to sign it if she wished to enroll. Id. at 11. 

 In Broemmer v. Abortion Servs. of Phoenix, Ltd., the Arizona Supreme Court 

recognized an adhesion contract as one that is offered on a “take it or leave it basis” 

where the consumer “has no realistic choice as to its terms.” 840 P.2d 1013, 1016 (Ariz. 

1992) (quoting Wheeler v. St. Joseph Hosp., 63 Cal. App.3d 345, 356, 133 Cal. Rptr. 775, 

783 (1976)). The Arizona Supreme Court made clear, however, that adhesion alone is 

not sufficient to invalidate a contract provision. Id. The court looked additionally to 

whether the challenged provision violated the adhering party’s reasonable expectations 

and whether it was “unduly oppressive” or “unconscionable” to that party. Broemmer, 

840 P.2d at 1016 (quoting Graham v. Scissor-Tail, Inc., 28 Cal.3d 807, 171 Cal. Rptr. 

604, 611-12, 623 P.2d 165, 172-73 (1981)). 

 Plaintiff has not shown that the arbitration provision violated her reasonable 

expectations or that any of its terms are unduly oppressive. Plaintiff’s conclusory 

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assertion that the arbitration provision is “unconscionable” simply because it was offered 

on a “take it or leave it” basis, without any discussion of how its terms are 

disadvantageous to her, does not support invalidating the agreement. See Kingsley 

Capital Management, LLC v. Sly, 820 F.Supp.2d 1011, 1021 (D. Ariz. 2011) (finding that 

a plaintiff’s “vague and conclusory [assertions of increased expense] do not support 

invalidating the arbitration clause”); Green Tree Financial Corp. v. Randolph, 531 U.S. 

79, 90-92 (2000) (finding a plaintiff’s unsupported assertions that she would not be able 

to vindicate her rights in arbitration because of prohibitive costs “too speculative to 

justify the invalidation of an arbitration agreement.”). 

 The remaining question is whether the arbitration agreement obligates Plaintiff to 

arbitrate its claims against nonsignatory SST. SST argues on the basis of Kingsley that 

“those who have not signed a contract containing an arbitration clause may sometimes 

benefit from it through doctrines such as assumption, agency, veil-piercing/alter ego, and 

estoppel.” Doc. 11 at 13 (quoting Kingsley, 820 F.Supp.2d at 1018) (citing Mundi v. 

Union Sec. Life Ins. Co., 555 F.3d 1042, 1045 (9th Cir.2009); Zurich American Ins. Co. 

v. Watts Industries, Inc., 417 F.3d 682, 687 (7th Cir. 2005)). In addition, SST cites Ninth 

Circuit authority stating that “nonsignatories can enforce arbitration agreements as third 

party beneficiaries.” Id. (quoting Comer v. Micor, Inc., 436 F.3d 1098, 1101 (9th Cir. 

2006)). SST argues that equitable estoppel, agency, and third-party beneficiary status all 

support SST’s right to compel arbitration in this case. Id. at 13-19. 

 1. Equitable Estoppel. 

 Equitable estoppel applies when a party claiming the benefits of a contract 

simultaneously seeks to avoid the burdens of that contract. See Mundi, 555 F.3d at 1045-

46; Kingsley, 820 F.Supp.2d at 1023. The Ninth Circuit in Mundi recognized two lines of 

cases applying equitable estoppel in the arbitration context: (1) those in which a 

nonsignatory may be held to an arbitration agreement where that party “knowingly 

exploits” or takes advantage of that agreement despite not having signed it, and (2) those 

in which a signatory may be required to arbitrate with a nonsignatory because of a close 

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relationship between the parties involved and “‘the fact that the claims [a]re intertwined 

with the underlying contractual obligations.’” Id. at 1046 (quoting E.I. DuPont de 

Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates, 269 F.3d 187, 199 (3d 

Cir.2001)). Mundi stated that “in light of the general principle that only those who have 

agreed to arbitrate are obliged to do so, we see no basis for extending the concept of 

equitable estoppel of third parties in an arbitration context beyond the very narrow 

confines delineated in these two lines of cases.” Id. 

 As here, Mundi dealt with a nonsignatory defendant’s motion to compel 

arbitration. Id. at 1044. Mundi looked for guidance to Sokol Holdings, Inc. v. BMB 

Munai, Inc., 542 F.3d 354, 361 (2d Cir.2008), in which the Second Circuit “examined 

cases in which a nonsignatory was allowed to compel a signatory to arbitrate based on 

estoppel and reasoned that it was ‘essential in all of these cases that the subject matter of 

the dispute was intertwined with the contract providing for arbitration.’” Id. (quoting 

Sokol, 542 F.3d at 361). 

Mundi held that a plaintiff whose husband signed an arbitration agreement with 

Wells Fargo Bank as part of a contract for a home equity line of credit could not be 

compelled to arbitrate her claims against her husband’s credit insurer for its refusal to pay 

off the line of credit after her husband’s death. Id. at 1045, 1047. Even though payments 

for the credit insurance were added into the deceased’s monthly payments to Wells Fargo 

and Wells Fargo was the beneficiary of the insurance contract, resolution of the plaintiff’s 

failure-to-pay claims against the insurer did not require an examination of the terms of 

the underlying credit contract, and the plaintiff had not alleged collusion or misconduct 

on the part of Wells Fargo. Id. at 1047. 

Mundi discussed two other cases that provide guidance on when equitable estoppel 

applies to compel a signatory to an arbitration agreement to arbitrate his or her claims 

against a nonsignatory. Id. at 1046. In American Bankers Insurance Group, Inc. v. Long,

453 F.3d 623, 630 (4th Cir.2006), the Fourth Circuit found that the plaintiffs who had 

signed a contract containing an arbitration clause could be compelled to arbitrate their 

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claims against a nonsignatory where all of the claims depended on the terms of a 

promissory note that had been attached to and incorporated by reference into the contract. 

Conversely, in Brantley v. Republic Mortgage Insurance Co., 424 F.3d 392 (4th 

Cir.2005), the Fourth Circuit found that equitable estoppel did not apply to compel a 

plaintiff to arbitrate her Fair Credit Reporting Act claims against her mortgage insurance 

company where the plaintiff was party to an arbitration clause in her mortgage contract. 

The court found that “the plaintiffs’ claim was ‘wholly separate from any action or 

remedy for breach of the underlying mortgage contract that is governed by the arbitration 

agreement.’” Mundi, 555 F.3d at 1047 (quoting Brantley, 424 F.3d at 396). The court 

also found no allegations of collusion or misconduct on the part of the mortgage lender 

with whom the plaintiff had made the arbitration agreement. Id.

 SST argues that equitable estoppel applies in this case because Plaintiff will have 

to rely on the enrollment contract containing the arbitration agreement with AU to 

demonstrate that she was in default of her payment duties in order to prove that SST was 

acting as a debt collector subject to the FDCPA. Doc. 11 at 14. SST also argues that 

Plaintiff alleges “substantially interdependent” misconduct by AU and SST, that Plaintiff 

cannot make her claims against SST without showing how it and AU communicated with 

students who owed money to AU, and that apart from the conduct of AU in originating 

the debt, Plaintiff would not have any claims against SST. Id. at 14-15. 

 SST’s arguments are unpersuasive. Like Mundi and Bentley, in which the 

plaintiffs’ claims against their mortgage insurers would not have existed but for the 

underlying mortgage contracts, Plaintiffs claims against SST would not exist but for her 

underlying enrollment agreement with AU. As in those cases, however, this is not a 

sufficient link to show that “the subject matter of the dispute [i]s intertwined with the 

contract providing for arbitration.” Sokol, 542 F.3d at 361; See Kinglsely, 820 F.Supp.2d 

at 1025 (finding a similar “but for” argument insufficient to compel arbitration). 

 It is true, as SST argues, that Plaintiff’s claims under the FDCPA depend in part 

on a showing that SST’s actions occurred after Plaintiff’s default. But this does not mean 

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that resolution of Plaintiff’s claims against SST depends on the terms of Plaintiff’s 

agreement with AU. Even if evidence of Plaintiff’s alleged default is a required element 

of her claims, the substance of Plaintiff’s claims against SST depends entirely on SST’s 

alleged violations of the FDCPA, not on the enrollment agreement. Like the plaintiff’s 

claims against her mortgage insurer under the Fair Credit Reporting Act in Bentley, 

Plaintiff’s FDCPA claims are “wholly separate from any action or remedy for breach of 

the underlying . . . contract that is governed by the arbitration agreement.” 424 F.3d at 

396. 

 SST’s assertion of “substantially interrelated” conduct is also without merit. 

Plaintiff’s complaint alleges that AU assigned Plaintiff’s debt to SST for collection 

(Doc. 1, ¶ 14), but the complaint goes on to allege that SST employees are not monitored, 

supervised, disciplined, or trained as AU employees, and that “[SST] is independently 

involved in all aspects of the collection process regarding [SST’s] collection of Argossy 

University accounts.” Id., ¶¶ 15-25; 27. 

 SST cites to Johnston v. Arrow Financial Services, LLC, No. 06 C 0013, 2006 WL 

2710663 at *5 (N.D. Ill. Sept. 15, 2006), in which the plaintiffs argued that they only 

asserted claims against the defendant debt-collection service and not their lender, Capital 

One. The court in Johnston found that “despite [these] protestations . . ., plaintiffs do in 

fact allege interdependent and concerted misconduct by defendant and Capital One.” Id. 

But in Johnston, the plaintiffs alleged in their complaint that the defendant and Capital 

One acted together when they sent letters on Capital One letterhead and that the 

defendant “was complicit in the sending of those letters by allowing Capital One to use 

defendant’s phone number and contact information.” Id. Here, Plaintiff alleges that SST 

used AU letterhead and claimed to be calling from AU when communicating with 

Plaintiffs and others about their AU accounts (Doc. 1, ¶¶ 36, 38 passim), but Plaintiff 

makes no allegations that AU was complicit with these actions. Rather, Plaintiff alleges 

that SST maintains sole control over the letters and collection procedures and handles all 

correspondence independently from AU’s supervision or control. Id., ¶¶ 23-33. 

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 SST provides, without any analysis, a string of citations to cases in which courts 

have compelled a signatory to an arbitration agreement to arbitrate its claims against a 

nonsignatory. Doc. 17 at 7-8. These cases are inapposite. The Court briefly discusses 

them below as further evidence that equitable estoppel does not apply in this case. 

 In Lucas v. Hertz Corp., No. C 11–01581, 2012 WL 2367617 (N.D. Cal. June 21, 

2012), the court found that nonsignatory Hertz Rental Car could compel arbitration of the 

plaintiff’s claims against it on the basis of an arbitration clause contained in a car-rental 

contract between the plaintiff and Hertz’s licensee, Costa-Rica Rental Car. 2012 WL 

2367617, at *7. But this was because the court found that the plaintiff received benefits 

from Hertz under the car rental contract, and all of the plaintiff’s claims against Hertz 

rested on the terms of that contract. Id. 

Sourcing Unlimited, Inc. v. Asimco Intern., Inc., 526 F.3d 38, 48 (1st Cir. 2008), 

similarly concluded that all of the plaintiff’s claims against a nonsignatory “ultimately 

derive from benefits it alleges are due it under the partnership Agreement” and were 

therefore subject to that agreement’s arbitration clause. SST, by contrast, does not argue 

that Plaintiff received any benefit from SST as a result of her enrollment agreement with 

AU. Nor do Plaintiff’s claims against SST rest on the terms of her enrollment agreement 

with AU. 

American Bankers Ins. Group, Inc. v. Long, 453 F.3d 623, 627 (4th Cir.2006), as 

discussed above, involved the incorporation of the note that was the basis for the 

signatory’s claims into the contract containing the arbitration provision. No such 

incorporation of the FDCPA or any other provisions imposing obligations on SST are 

present in this case. 

 The remaining cases, Sanders v. Swift Transp. Co. of Arizona, LLC, 843 F.Supp.2d 

1033 (N.D. Cal. 2012); PRM Energy Systems, Inc. v. Primenergy, L.L.C., 592 F.3d 830 

(8th Cir. 2010); Griffin v. ABN Amro Mortg. Group Inc., 378 Fed. Appx. 437,2010 WL 

1976575 (5th Cir. 2010); and Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 

115 (2d Cir. 2010), all rely on allegations of interdependent and concerted misconduct of 

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a nonsignatory and a signatory. As discussed above, no such allegations are present in 

this case. SST’s equitable estoppel argument fails. 

 2. Agency Relationship. 

 “[N]onsignatories of arbitration agreements may be bound by the agreement under 

ordinary contract and agency principles.” Comer, 436 F.3d at 1101 (quoting Letizia v. 

Prudential Bache Securities, 802 F.2d 1185, 1187–88 (9th Cir.1986)) (internal quotation 

marks omitted). Agency theory applies “when a signatory has brought claims against 

nonsignatory agents and the agents then seek to invoke the arbitration clause against the 

signatory.” Legacy Wireless Servs. v. Human Capital, LLC, 314 F.Supp.2d 1045, 1054 

(D. Or. 2004)) (quoted in Petersen v. EMC Telecom Corp., No. CV-09-2552, 2010 WL 

2490002, at *4 (D. Ariz. June 16, 2010)) (emphasis deleted). “Independent contractors 

do not fall within the exception that non-signatory agents may be bound by an arbitration 

agreement.” Swift v. Zynga Game Network, Inc, 805 F.Supp.2d 904, 916 (N.D. Cal. 

2011). 

 Agency “results from the manifestation of consent by one person to another that 

the other shall act on his behalf and subject to his control, and consent by the other so to 

act.” Restatement (First) of Agency § 1 (1933). “[T]here is not necessarily an agency 

relationship because the parties to a transaction say that there is, or contract that the 

relationship shall exist, or believe it does exist. Agency results only if there is an 

agreement for the creation of a fiduciary relationship with control by the beneficiary.” Id.

at § 1 cmt. b (quoted in Valley Nat. Bank of Phoenix v. Milmoe, 248 P.2d 740, 743 (Ariz. 

1952)). 

 SST argues that it acted as AU’s agent pursuant to an agreement that AU entered 

with its sister company, NCO Financial Systems, Inc., in which SST was designated to 

act as AU’s payment processor and given responsibility to perform some of NCO’s 

servicing duties. Doc. 11 at 17; See Decl. of Gregory R. Steven, Doc. 11-1, ¶¶ 5-7. SST 

argues that Plaintiff’s arbitration agreement with AU expressly pertains to claims against 

AU “and . . . its agents” and that this permits SST to invoke arbitration. Id. Plaintiff 

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argues that no agency relationship exists because AU contracted with NCO, not SST, and 

SST presents no evidence that it was subject to AU’s control or consented to act on its 

behalf. Doc. 16 at 8. 

 SST has failed to demonstrate that it entered into an agency relationship with AU 

or to rebut Plaintiff’s allegations, discussed above, that SST operated independently from 

and outside of the supervision and control of AU. SST argues on the basis of Browne v. 

Nowlin, 570 P.2d 1246, 1248 (Ariz. 1977), that Plaintiff’s allegations that it contacted 

Plaintiff, purporting to be AU, and sought to collect payments on AU’s behalf are 

sufficient under Arizona law to show implied agency. Doc. 17 at 9. But Browne dealt 

with whether a lender could deny that a title company that accepted payments on its 

behalf acted as its agent after the lender ratified the title company’s actions. 570 P.2d at 

1248. Holding a principal accountable for actions it ratified is not the same as bringing 

an implied agent within the scope of the principal’s arbitration agreement. SST has 

presented no evidence that it entered into an agency relationship with AU, that AU 

ratified its actions, or that AU exercised supervision or control over its debt collection 

practices. The Court accordingly cannot conclude that SST is entitled to invoke AU’s 

arbitration clause on an agency theory. 

 3. Third Party Beneficiary. 

 Nonsignatories can enforce arbitration agreements as third party beneficiaries.

Comer, 436 F.3d 1098, 1101 (9th Cir.2006) (citing E.I. Dupont de Nemours & Co. v. 

Rhone Poulenc Fiber & Resin Intermediates, S.A.S., 269 F.3d 187, 195 (3d Cir. 2001)). 

This “requires a showing that the parties to the contract intended to benefit a third party.” 

Britton v. Co-op Banking Group, 4 F.3d 742, 745 (9th Cir. 1993) (emphasis in original); 

see also Nahom v. Blue Cross and Blue Shield of Arizona, Inc., 885 P.2d 1113, 1117-18 

(Ariz. Ct. App. 1994) (“an intention to benefit [the third party] must be indicated in the 

contract itself . . . . The contemplated benefit must be both intentional and direct . . . , 

and ‘it must definitely appear that the parties intend to recognize the third party as the 

primary party in interest’”) (internal citations omitted). 

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 SST’s argument that it is entitled to invoke the arbitration provision as a third 

party beneficiary is not persuasive. There is no evidence in the contract that it was 

intended for SST’s benefit. The contract makes no mention of benefits intended for SST 

or for any class of AU affiliates to which SST may claim to be a part. Whatever benefit 

SST may derive from its role in servicing student debt is at most a byproduct of the 

contract, not its intended purpose. “‘[I]t is not enough that some benefit incidental to the 

performance of the contract may accrue to [the third party].’” Lester v. Basner, 676 F. 

Supp. 481, 484 (S.D.N.Y. 1987) (quoting Vazman v. Fidelity Int’l Bank, 418 F. Supp. 

1084, 1086 (S.D.N.Y.1976)). SST is not entitled to compel arbitration on these grounds. 

B. Whether the Agreement Encompasses Plaintiff’s Claims. 

 Having found that Plaintiff did not have an agreement to arbitrate with SST, and 

that none of SST’s alternative theories for compelling arbitration apply, the Court cannot 

conclude that Plaintiff’s FDCPA claims fall within the scope of her arbitration agreement 

with AU. The Court will deny SST’s motion to stay and compel arbitration. 

IV. SST’s Motion to Strike Class Allegations. 

 SST’s motion to strike class allegations is based solely on its argument that 

Plaintiff is bound by the waiver of class action contained in her arbitration agreement 

with AU. Doc. 12 at 4-5. Having found that Plaintiff is not bound by the arbitration 

agreement as to her FDCPA claims against SST, the Court will deny SST’s motion to 

strike class allegations. 

IT IS ORDERED: 

 1. Defendant Systems & Services Technologies, Inc.’s motion to stay and 

compel arbitration (Doc. 11) is denied. 

 

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 2. Defendant Systems & Services Technologies, Inc.’s motion to strike class 

allegations (Doc. 12) is denied. 

 Dated this 26th day of September, 2012. 

Case 2:12-cv-00998-DGC Document 18 Filed 09/26/12 Page 12 of 12