Texas Judge Orders Consumers, Credit Monitor  to Arbitration

Texas Judge Orders Consumers, Credit Monitor to Arbitration

By Michelle Casady
 
Law360, Houston (July 11, 2017, 5:22 PM EDT) -- A federal judge in Texas on Monday determined a group of consumers who filed suit against One Technologies LP alleging the company committed fraud by leading them to believe they were signing up for a free credit report then enrolling them in a paid credit monitoring service will have to arbitrate the claim.
 
U.S. District Judge Sam A. Lindsey issued the order Monday, granting a request One Technologies had lodged with the court in April to send the Illinois Consumer Fraud Act claim brought by lead plaintiff Vickie Forby to arbitration and dismiss the lawsuit. Forby had argued sending the claim to arbitration after it's been litigated in the courts for months would unfairly prejudice her.
 
In his order Monday, Judge Lindsey wrote that Forby had failed to respond to the argument One Technologies raised about the enforceability of the arbitration provision, and therefore there isn't a dispute over whether there is a valid arbitration clause or whether this dispute falls within the clause. Judge Lindsey also rejected an argument from Forby that One Technologies had waived its right to enforce the arbitration clause by invoking the judicial process. While the company had invoked the judicial process by seeking to dismiss the claims before seeking arbitration, Judge Lindsey wrote that Forby hadn't shown she had been sufficiently prejudiced by that invocation.
 
“While the court agrees that Forby has suffered some prejudice, the court determines that she has not suffered prejudice to the extent required by existing precedent and Fifth Circuit authority,” the opinion reads. “The only prejudice that Forby has adequately demonstrated is delay, and delay alone is insufficient to establish that Forby has been prejudiced by defendants’ invocation of the judicial process.”
 
According to the opinion, Forby filed her class action complaint against One Technologies in April 2015, alleging unjust enrichment and violations of the Illinois Consumer Fraud Act. Forby alleged the One Technologies website led consumers to believe they were signing up for a free credit report when in actuality they were enrolled in a $29.95 per month credit monitoring service.
 
The lawsuit was removed to the Southern District of Illinois in July 2015 and the same month One Technologies moved to dismiss or transfer the case, contending that the parties entered a contract that requires disputes be arbitrated in Dallas. In March 2016, according to the opinion, the case was transferred to the Northern District of Texas.
 

But once transferred, rather than moving to compel arbitration, One Technologies instead moved to dismiss Forby's claims for failure to state a claim. The court partially granted the move in March 2017, allowing Forby's ICFA claim to proceed but dismissing her claim for unjust enrichment. In April, more than a year after the case was transferred to the Northern District of Texas, One Technologies moved to compel arbitration.

In seeking to compel arbitration, One Technologies argued that it should be up to the arbitrator to determine whether the arbitration clause is enforceable, not the courts.
 
According to Forby's April 2015 complaint, the Federal Trade Commission had filed a lawsuit against One Technologies alleging similar claims in November 2014 and the company agreed to “correct their misleading practices” and award $22 million in compensatory damages that the FTC would give back to consumers. But the following month, in December 2014, Forby's card was charged without authorization for the credit monitoring services and One Technologies still hadn't paid out the damages, so she filed this lawsuit, according to the complaint.
 
The parties did not immediately return messages seeking comment Tuesday afternoon.
 
Forby is represented by Stephanie K. Goldin and Benjamin J. Sweet of Carlson Lynch Sweet & Kilpela LLP, and David C. Nelson of Nelson & Nelson Attorneys at Law PC.
 
One Technologies is represented by Andrew Patrick LeGrand and Brian Edward Robinson of Gibson Dunn & Crutcher LLP, Jonathan R. Childers and Christopher J. Schwegmann of Lynn Pinker Cox & Hurst LLP and Troy A. Bozarth and W. Jason Rankin of HeplerBroomLLC.
The case is Vickie Forby v. One Technologies LP et al., case number 3:16-cv-00856, in the U.S. District Court for the Northern District of Texas, Dallas Division.
 
--Editing by Orlando Lorenzo.
Update: This story has been updated with additional counsel information for One Technologies.