Saturday, November 4, 2017

Thomas v. Progressive Leasing (Maryland U.S.D.C.)

Filed: October 25, 2017

Opinion by: Judge Richard D. Bennett

Holding: A non-signatory to a contract containing an arbitration clause can be compelled to arbitrate when it receives a direct benefit from the contract, and/or when the claims arise from the contract containing the clause.


From September 2015 to February 2017, Plaintiff applied for financing from Defendant. Plaintiff applied a total of six times, and each time, Defendant denied the applications. In November 2015, Plaintiff's wife successfully applied for and entered into a lease with Defendant. The lease contained both an arbitration provision and express permission allowing Defendant to call Plaintiff's wife at any number provided.

In December 2015, Defendant called Plaintiff's wife in an attempt to collect a payment that had not gone through. Plaintiff's wife allowed her husband to speak with the Defendant; Plaintiff then informed Defendant to defer to him for debt collection, provided his phone number, and instructed the Defendant to remove her information and transfer the account over to his own.

Afterwards, Plaintiff received calls from Defendant in an attempt to collect the account balance owed under the lease. Plaintiff alleged that Defendant made the calls using a telephone dialing system. In addition, Plaintiff claimed that he requested Defendant stop calling, yet despite this, the calls continued for multiple times a day. Plaintiff then filed suit under the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227. Defendant filed a Motion to Compel Arbitration and to Dismiss or Stay the Litigation based on the lease's arbitration agreement between Defendant and Plaintiff's wife.


Plaintiff did not dispute the validity of the arbitration agreement but rather argued that because he was neither a signatory nor a beneficiary to the lease, the arbitration agreement was not enforceable against him. Defendant countered by asserting the theory of equitable estoppel. In an arbitration context, the theory of equitable estoppel recognizes that under some circumstances, a party may agree to submit to arbitration by means other than personally signing a contract containing an arbitration clause. When the signatory to an arbitration agreement seeks to compel a non-signatory to arbitrate, the Fourth Circuit has applied the "direct benefit" test. This test prevents a non-signatory from refusing to comply with an arbitration clause when it receives a direct benefit from a contract containing an arbitration clause, and/or when the claims arise from the the contract containing the clause. 

The Court turned to the following facts: the lease giving Defendant the right to call any telephone number provided to it, and Plaintiff voluntarily giving his phone number to Defendant with the intention of his information being associated with his wife's account. By doing so, the Court determined that Defendant had the right to call him. Plaintiff's TCPA claim, stemming from Defendant's actions, were a result of Plaintiff giving Defendant that right. The Court held that Plaintiff's allegations arose from and were directly related to the duties imposed within the lease, and arbitration should be compelled.

The Court also pointed to Plaintiff's instructions informing Defendant to transfer his wife's account to his own, voluntarily assuming the obligation of payment under the lease.  The Court concluded that by doing so, Plaintiff derived a benefit from the lease. The Court then determined that it would be inequitable to allow Plaintiff to pursue his TCPA claim against Defendant for calls it made to Plaintiff to collect on the lease, and yet permit him to avoid the arbitration provision in that same lease. The Plaintiff objected to enforcing the arbitration agreement against him as a whole, yet he did not contend that if the agreement applies, his claim against Defendant is beyond the scope of the lease. Furthermore, the Court has previously held that TCPA claims may be properly subjected to arbitration.

The Court granted Defendant's motions and dismissed the case.

The full opinion is available in PDF.