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Neal v. Navient Solutions, LLC

United States District Court, W.D. Missouri, Central Division

August 12, 2019

TREY NEAL, individually and on behalf of all others similarly situated, Plaintiff,
v.
NAVIENT SOLUTIONS, LLC, et al., Defendants.

          ORDER

          NANETTE K. LAUGHREY, UNITED STATES DISTRICT JUDGE.

         Before the Court is a motion to compel arbitration and stay proceedings filed by Defendants Navient Corporation, Navient Credit Finance Corporation, Navient Private Loan Trust, and Navient Solutions, LLC. Doc. 58. For the following reasons, the motion is denied.

         I. Background

         Plaintiff Trey Neal initiated this action for breach of contract, on behalf of himself and other similarly situated, claiming that interest on his student loans exceeded the limitation stated in the loans' disclosures. Doc. 1. Neal originally alleged that JP Morgan Chase Bank, N.A. (“Chase”) made the loans, see, e.g., Id. at ¶¶ 2, 10, and later sold one loan to Navient Solutions, LLC (“NSL”). Id. at ¶¶ 5, 24. All defendants other than NSL were dismissed, [1] and in March 2019, Neal amended his complaint to add Navient Corporation, Navient Credit Finance Corporation and Navient Private Loan Trust as defendants (collectively, “Navient defendants”) under essentially the same breach of contract theory. Doc. 55 (Amended Complaint).

         In the Amended Complaint, Neal alleges that NSL services student loans, including Neal's loan, which Navient Credit Finance Corporation purchased from Chase, and that NSL had identified Navient Private Loan Trust as the current owner of his student loan. Id. at ¶¶ 2, 4-5. Navient Corporation is allegedly a direct or indirect owner of the other Navient entities. Id. at 3. The Navient defendants, however, have submitted a declaration stating that “[i]n or about 2017, [Chase] sold a portfolio of student loans, including a private student loan taken out by plaintiff Trey Neal, and in connection with that sale NSL became the servicer of Neal's loan and Jamestown Funding Trust became the owner. Jamestown Funding Trust is related to Navient Credit Finance Corporation, an affiliate of NSL.” Doc. 59-5 (Iorio Declaration), ¶ 2. Jamestown Funding Trust is not a party to this suit.

         Defendants privately demanded that Neal submit to arbitration on an individual basis, and when he refused, Defendants filed a motion to stay proceedings and compel arbitration. Doc. 58.

         II. Discussion

         The Navient defendants argue that the arbitration clause in Neal's credit agreement is valid and enforceable, and that this dispute falls within the scope of the arbitration clause. Doc. 59, pp. 12-14. Defendants further contend that they can enforce the agreement because Navient Credit Finance Corporation is a successor to Chase by virtue of its relationship to Jamestown Funding Trust, the holder of the loan, and that NSL is an agent to the successor, as servicer of the loan. Doc. 63, p. 6. Neal highlights that the agreement specifically defines who can enforce the arbitration clause, and contends that based on the Navient defendants' declaration, none of the defendants are empowered under the contract to compel arbitration. Doc. 62, p. 1.

         “The Federal Arbitration Act requires courts to enforce private arbitration agreements.” New Prime Inc. v. Oliveira, 139 S.Ct. 532, 536 (2019). The Act states that a “written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The Act establishes “a national policy favoring arbitration, ” Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006), while preserving the “fundamental principle that arbitration is a matter of contract, ” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010). Thus, “[i]f two parties agree to arbitrate future disputes between them and one side later seeks to evade the deal, §§ 3 and 4 of the Act often require a court to stay litigation and compel arbitration ‘accord[ing to] the terms' of the parties' agreement.” New Prime, 139 S.Ct. at 537.

         When presented with a motion to compel, a court must “‘[1] determine whether a valid arbitration agreement exists between the parties and, [2] if so, whether the subject matter of the dispute falls within the scope of the arbitration clause.'” Neb. Mach. Co. v. Cargotec Sols., LLC, 762 F.3d 737, 740 (8th Cir. 2014) (citation omitted). “[S]tate contract law governs the threshold question of whether an enforceable arbitration agreement exists between litigants; if an enforceable arbitration agreement exists, the federal substantive law of arbitrability governs whether the litigants' dispute falls within the scope of the arbitration agreement.” Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726, 731 (8th Cir. 2009). Federal substantive law, in turn, requires a court to “construe[] the clause liberally, resolving any doubts in favor of arbitration.” 3M Co. v. Amtex Sec., Inc., 542 F.3d 1193, 1199 (8th Cir. 2008).

         Here, the parties disagree as to whether an enforceable arbitration agreement exists between the parties but agree that Ohio contract law governs this threshold question.[2]

         A. The Terms of the Arbitration Clause

         “The enforceability of contractual arbitration provisions is governed by the laws of contract interpretation.” Javorsky v. Javorsky, 2017-Ohio-285, 81 N.E.3d 971, ¶ 9 (Ohio Ct. App. 2017). In Ohio, “‘[t]he basic objective . . . is . . . to ensure that commercial arbitration agreements, like other contracts, are enforced according to their terms, . . . and according to the intentions of the parties.'” Council of Smaller Enters. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 668, 687 N.E.2d 1352 (Ohio 1998) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947 (1995)). “[I]n determining the intent of the parties, the court must read the contract as a whole and give effect to every part of the contract.” CSX Transp., Inc. v. Columbus Downtown Dev. Corp., 307 F.Supp.3d 719, 739 (S.D. Ohio 2018) (citation omitted). “‘[N]o provision of the contract should be ignored as inconsistent if there exists a reasonable interpretation which gives effect to both.'” Praxis Capital & Inv. Mgmt. Ltd v. Gemini Holdings I, LLC, No. 15-2912, 2016 WL 2853591, at *3 (S.D. Ohio May 16, 2016) (quoting Ottery v. Bland, 42 Ohio App.3d 85, 87, 536 N.E.2d 651 (Ohio Ct. App. 1987)).

         Accordingly, the Court starts with the text of the arbitration provision contained in ...


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