Perry v. Exeter Finance LLC et al

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WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
Carissa Perry,
Plaintiff,
v.
Exeter Finance LLC, et al.,
Defendants.
No. CV-25-01552-PHX-DWL
ORDER
Carissa Perry (“Plaintiff”), who is proceeding pro se, alleges that Exeter Finance
LLC (“Exeter”) and Cobra Equity Holdco LLC (“Cobra”) (together, “Defendants”)
engaged in “a calculated scheme of financial misconduct” following the repossession of
her car “that culminated in the issuance of a fraudulent Form 1099-C, unlawful credit
reporting, and sustained economic retaliation—all following [Plaintiff’s] full performance
under a binding settlement agreement.” (Doc. 9 at 1.) In her 90-page complaint, Plaintiff
asserts 18 causes of action under federal and state law. Defendants have, in turn, moved
to compel arbitration. (Doc. 19.) For the reasons that follow, the motion is granted.
BACKGROUND
I. Factual Allegations
A. The Retail Installment Sales Contract
On or about July 25, 2020, Plaintiff “entered into a Retail Installment Sales Contract
[‘RISC’] with Earnhardt Lexus in Phoenix, Arizona, to finance a used 2016 Toyota Corolla
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with approximately 65,079 miles.” (Doc. 9 ¶ 35.)1 “The total amount financed under the
agreement was $13,967.24, with an annual percentage rate (APR) of 26.25%. The loan
was structured for repayment over 72 months in fixed monthly installments of $390.97.”
(Id. ¶ 36.) The RISC “reflected a total scheduled repayment amount of $28,149.84 over
the full term.” (Id. ¶ 37.) “Immediately upon execution, the [RISC] was assigned to
[Exeter], who assumed the role of creditor and servicer for all purposes related to the
account.” (Id. ¶ 38.) “Between July 2020 and 2023, [Plaintiff] made 47 monthly payments
totaling $19,905.89 toward the account.” (Id. ¶ 39.)
The RISC contains an arbitration provision (“the Arbitration Provision”). (Doc. 20
at 8.) The Arbitration Provision appears in a separate box from other provisions of the
RISC and is titled, in bold letters, “ARBITRATION PROVISION PLEASE REVIEW
– IMPORTANT – AFFECTS YOUR LEGAL RIGHTS.” (Id.) The Arbitration
Provision provides:
1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE
BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT
OR BY JURY TRIAL.
2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR
RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR
CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE
AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION
OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.
3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE
GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND
OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT
MAY NOT BE AVAILABLE IN ARBITRATION.
Any claim or dispute, whether in contract, tort, statute or otherwise
(including the interpretation and scope of this Arbitration Provision, and the
1 Plaintiff submitted a declaration, including exhibits, in support of the complaint.
(Doc. 14.) Plaintiff states that Exhibit A to that declaration is a “true and correct” copy of
the RISC. (Id. at 2.) However, Exhibit A appears to be an incomplete copy of the RISC
that omits the arbitration provision at issue here. (Id. at 8-10.) Defendants’ declaration in
support of their motion to compel arbitration attaches what appears to be a complete
version of the RISC that includes the arbitration provision. (Doc. 20 at 5-9.) Plaintiff does
not dispute the authenticity of the complete RISC provided by Defendants. When referring
to the RISC throughout this order, the Court therefore relies on the complete RISC provided
by Defendants. (Id.)
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arbitrability of the claim or dispute), between you and us or our employees,
agents, successors or assigns, which arises out of or relates to your credit
application, purchase or condition of this vehicle, this contract or any
resulting transaction or relation, (including any such relationship with third
parties who do not sign this contract) shall, at your or our election, be
resolved by neutral, binding arbitration and not by a court action. If federal
law provides that a claim or dispute is not subject to binding arbitration, this
Arbitration Provision shall not apply to such claim or dispute. Any claim or
dispute is to be arbitrated by a single arbitrator on an individual basis and not
as a class action. You expressly waive any right you may have to arbitrate a
class action. You may choose the American Arbitration Association
(www.adr.org) or any other organization to conduct the arbitration subject to
our approval. You may get a copy of the rules of an arbitration organization
by contacting the organization or visiting its website.
Arbitrators shall be attorneys or retired judges and shall be selected pursuant
to the applicable rules. The arbitrator shall apply governing substantive law
and the applicable statute of limitations. The arbitration hearing shall be
conducted in the federal district in which you reside unless the Seller Creditor
is a party to the claim or dispute, in which case the hearing will be held in
the federal district where this contract was executed. We will pay your filing,
administration, service or case management fee and your arbitrator or hearing
fee all up to a maximum of $5000, unless the law or the rules of the chosen
arbitration organization require us to pay more. The amount we pay may be
reimbursed in whole or in part by decision of the arbitrator if the arbitrator
finds that any of your claims is frivolous under applicable law. Each party
shall be responsible for its own attorney, expert and other fees, unless
awarded by the arbitrator under applicable law. If the chosen arbitration
organization’s rules conflict with this Arbitration Provision, then the
provisions of this Arbitration Provision shall control. Any arbitration under
this Arbitration Provision shall be governed by the Federal Arbitration Act
(9 U.S.C. § 1 et seq.) and not by any state law concerning arbitration. Any
award by the arbitrator shall be in writing and will be final and binding on
all parties, subject to any limited right to appeal under the Federal Arbitration
Act.
You and we retain the right to seek remedies in small claims court for
disputes or claims within that court’s jurisdiction, unless such action is
transferred, removed or appealed to a different court. Neither you nor we
waive the right to arbitrate by using self-help remedies, such as repossession,
or by filing an action to recover the vehicle, to recover a deficiency balance,
or for individual injunctive relief. Any court having jurisdiction may enter
judgment on the arbitrator’s award. This Arbitration Provision shall survive
any termination, payoff or transfer of this contract. If any part of this
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Arbitration Provision, other than waivers of class action rights, is deemed or
found to be unenforceable for any reason, the remainder shall remain
enforceable. If a waiver of class action rights is deemed or found to be
unenforceable for any reason in a case in which class action allegations have
been made, the remainer of this Arbitration Provision shall be unenforceable.
Id.
B. The Repossession And Deficiency Notices
In or about October 2023, “Defendants conducted a nonjudicial repossession of
[Plaintiff’s] vehicle.” (Doc. 9 ¶ 40.) On or about November 21, 2023, the vehicle was sold
at auction. (Id. ¶ 45.) Thereafter, “Defendants issued a post-sale ‘Deficiency Letter’ dated
November 28, 2023” and “claimed a deficiency balance of $8,599.72.” (Id. ¶¶ 41, 43.)
The complaint proceeds to allege several deficiencies with the repossession of Plaintiff’s
vehicle, the sale of Plaintiff’s vehicle, and the deficiency notices provided to Plaintiff.
C. The Settlement Agreement
In October 2024, Plaintiff and Exeter “executed a written settlement agreement”
(“Settlement Agreement”). (Id. ¶ 46. See also Doc. 14 at 12-15; Doc. 20 at 11-14.)
Plaintiff alleges that she executed the Settlement Agreement “under extreme financial
duress, induced by Defendants’ unlawful conduct and deliberate suppression of material
disclosures required under federal and state law.” (Doc. 9 ¶ 46.) Plaintiff alleges that the
Settlement Agreement “was presented in a coercive and deceptive manner, following an
unlawful repossession and facially defective post-sale notices,” and she asserts that the
Settlement Agreement “is void and unenforceable under established doctrines of fraudulent
inducement, lack of consideration, and unconscionability, and reflects a broader pattern of
abusive conduct.” (Id.) Plaintiff also alleges that the RISC “was nullified, superseded, or
rendered unenforceable by statutory violations, fraud in the inducement, and the execution
of [the Settlement Agreement].” (Id. ¶ 16.) Per the Settlement Agreement, Plaintiff
“remitted $650.” (Id. ¶ 47.)
The Settlement Agreement contains two provisions, excerpted here, that are relevant
to Defendants’ motion to compel arbitration:
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The Parties agree that except as expressly provided in this [Settlement]
Agreement, all other terms contained within the original [RISC], including
without limitation those relating to Exeter’s security interest in and lien on
the Vehicle, shall survive and are incorporated by reference into the terms of
this [Settlement] Agreement.
(Doc. 20 at 11 § I.A.iii.)
Customer(s) will comply with the Settlement Payment Terms set forth above
and all other [RISC] terms that are not impacted by this [Settlement]
Agreement.
(Id. at 12 § I.B.ii.)
D. The IRS Form 1099-C And Credit Reporting Issues
In November 2024, Plaintiff “received an IRS Form 1099-C stating that $5,374.43
had been canceled.” (Doc. 9 ¶ 51. See also Doc. 14 at 17.) The IRS Form 1099-C was
issued by Cobra, not Exeter. (Doc. 9 ¶ 51.) The complaint alleges that “Cobra is the parent
company of co-Defendant Exeter” and that Cobra “affirmatively exercised creditor
authority over Plaintiff’s account.” (Id. ¶ 21.) The complaint alleges various issues with
Cobra’s issuance of the IRS Form 1099-C.
Plaintiff further alleges that “[d]espite issuing the IRS Form 1099-C in November
2024 . . . Defendants continued to furnish false, derogatory, and legally inconsistent
information to consumer reporting agencies” and “failed to update the tradeline to reflect
the debt as canceled or settled in full.” (Id. ¶ 58.) Plaintiff “submitted formal disputes to
all three major credit bureaus, including Equifax, TransUnion, and Experian, demanding
deletion or correction of the materially false tradelines. . . . Despite this, Defendants
accessed [Plaintiff’s] credit report in June 2025 . . . and unilaterally altered negative
account data during [the pending] litigation—without notifying [Plaintiff] in writing.” (Id.
¶ 61.)
E. Plaintiff’s Formal Demands And CFPB Complaint
On or about April 24, 2025, Plaintiff “served a formal legal demand letter to both
Exeter and Cobra outlining their violations and providing a final opportunity to correct
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their conduct.” (Id. ¶ 63. See also Doc. 14 at 34.)2 Plaintiff alleges that despite this formal
demand, Exeter continued updating the tradeline with derogatory remarks. (Doc. 9 ¶¶ 64-
66.)
On April 26, 2025, Plaintiff “filed a formal complaint with the Consumer Financial
Protection Bureau (CFPB) against Exeter,” to which Exeter responded. (Id. ¶ 81. See also
Doc. 14 at 41-43.)
Plaintiff “issued a second legal notice on April 29, 2025, styled as a final 48-hour
demand letter.” (Doc. 9 ¶ 78.) On May 5, 2025, Exeter responded with a “non-substantive
acknowledgement email from its ‘Office of the President.’” (Id. ¶ 79. See also Doc. 14 at
26.) Plaintiff “promptly replied to the acknowledgement, reiterating [her] concerns, yet
ha[s] received no further communication or substantive resolution from Exeter.” (Doc. 9
¶ 79.)
F. The Alleged Harm
Plaintiff alleges that “[a]s a direct result of Defendants’ continued reporting of false,
derogatory, and misleading information, [Plaintiff was] denied vehicle financing on more
than thirty (20) separate occasions.” (Id. ¶ 68.) “Each denial specifically cited the presence
of the Exeter tradeline . . . .” (Id.) As a result, Plaintiff “lost access to over $500,000 in
cumulative vehicle financing opportunities.” (Id. ¶ 70.) Plaintiff has also been “forced to
rent a vehicle continuously since November 2024,” and she has “incurred more than
$15,000 in vehicle rental expenses” and “continue[s] to suffer ongoing emotional distress,
reputational harm, and material financial instability.” (Id. ¶¶ 71-72.)
II. Procedural History
On June 13, 2025, Plaintiff filed the complaint. (Doc. 9.) That same day, Plaintiff
also filed, among other things, an application to proceed in forma pauperis and an
emergency motion for temporary injunctive relief. (Docs. 10, 11.)
On June 30, 2025, the Court issued an order that, among other things, granted
2 Exhibit H to Plaintiff’s declaration purports to be a copy of Plaintiff’s demand letter,
but the exhibit appears to be incomplete. (Doc. 14 at 34.)
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Plaintiff’s motion to proceed in forma pauperis and denied Plaintiff’s motion for temporary
injunctive relief. (Doc. 15.) The Court also screened the complaint pursuant to 28 U.S.C.
§ 1915(e) and held that the complaint was “sufficient to meet the low threshold for
proceeding past the screening stage.” (Id. at 2, citation omitted.)
On September 19, 2025, Defendants moved to compel arbitration and stay the
litigation pending arbitration. (Doc. 19.) That motion is now fully briefed (Docs. 21-23)
and neither side requested oral argument.
DISCUSSION
I. Legal Standard
The Federal Arbitration (“FAA”) applies to contracts “evidencing a transaction
involving commerce.” 9 U.S.C. § 2.3 Under the FAA, written agreements to arbitrate
disputes “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” Id. Thus, absent a valid contractual
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.” Dean Witter Reynolds, Inc.,
v. Byrd, 470 U.S. 213, 218 (1985).
In general, a 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.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d
1126, 1130 (9th Cir. 2000). These two issues are sometimes referred to as the “gateway”
questions of arbitrability. Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010).
As the parties seeking to compel arbitration, Defendants bear the burden of proof.
Ashbey v. Archstone Prop. Mgmt., Inc., 785 F.3d 1320, 1323 (9th Cir. 2015). “It is
permissible to consider evidence outside the pleadings when resolving a motion to compel
3 The parties do not dispute that the FAA applies here. (Doc. 19 at 6-7; Doc. 21 at 1.
See also Doc. 20 at 8 [The Arbitration Provision in the RISC provides: “Any arbitration
under this Arbitration Provision shall be governed by the [FAA] (9 U.S.C. § 1 et seq.) and
not by any state law concerning arbitration.”].)
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arbitration. To the extent there are conflicts in the evidence submitted by the parties, the
court applies a standard similar to that applicable for a motion for summary judgment.”
Scott-Ortiz v. CBRE Inc., 501 F. Supp. 3d 717, 721 (D. Ariz. 2020) (cleaned up).
“In determining whether parties have agreed to arbitrate a dispute, we apply general
state-law principles of contract interpretation, while giving due regard to the federal policy
in favor of arbitration by resolving ambiguities as to the scope of arbitration in favor of
arbitration.” Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044 (9th Cir. 2009)
(cleaned up). See also Davis v. Nordstrom, Inc., 755 F.3d 1089, 1093 (9th Cir. 2014).
II. The Parties’ Arguments
Defendants “move to compel arbitration of [Plaintiff’s] claims and stay the litigation
pending completion of the arbitration.” (Doc. 19 at 1.) First, Defendants argue that
although the two gateway questions are normally “answered by the Court,” “where, as here,
an arbitration agreement expressly delegates to an arbitrator the decision concerning the
enforceability and scope of the arbitration agreement, the arbitrator—not the court—has
exclusive authority to determine these issues.” (Id. at 7.) Defendants argue that “[h]ere,
the Arbitration Provision in the RISC contains a clear and unmistakable delegation clause,
stating that the arbitrator, and not a court, must resolve any dispute concerning ‘the
interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or
dispute.’” (Id. at 8.) Defendants also argue, in the alternative, that “even absent the
delegation clause, the result is the same: Plaintiff is required to arbitrate her claims against
Defendants.” (Id.) Specifically, Defendants argue that “it is undeniable that Plaintiff
expressly agreed to arbitrate her claims with Defendants” because “the Arbitration
Provision is highlighted with a text box, bolding and all caps on a page that Plaintiff
expressly signed,” “[t]he Arbitration Provision is further referenced on the first and last
pages of the RISC,” and “the RISC title announces that it is a contract ‘with Arbitration
Provision.’” (Id. at 8-9.) Defendants also argue that “Plaintiff reaffirmed the entire
RISC—including her agreement to arbitrate—when she entered into the Settlement
Agreement” because the Settlement Agreement provides that the “terms contained within
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the original [RISC] . . . shall survive and are incorporated by reference into the terms of
this [Settlement] Agreement.” (Id.) And Defendants argue that Plaintiff’s claims are
encompassed by the “exceptionally broad” Arbitration Provision. (Id. at 9-10.) Second,
Defendants argue that Plaintiff’s claims against Cobra are also subject to arbitration
because “the Arbitration Provision expressly applies not only to claims arising out of the
RISC itself, but to ‘any resulting transaction or relationship (including any such
relationship with third parties).’” (Id. at 10-11.) Alternatively, Defendants argue that
Plaintiff’s claims against Cobra are subject to arbitration under the doctrine of alternative
estoppel. (Id. at 11-13.)
In response, Plaintiff first argues that the fully integrated Settlement Agreement
supersedes the RISC and that the Settlement Agreement “contains no arbitration clause, no
delegation provision, and no incorporation of any prior arbitration term.” (Doc. 21 at 1.)
Plaintiff argues that under Supreme Court precedent, “it is for this Court, not an arbitrator,
to determine which contract governs and whether arbitration may be compelled.” (Id.)
Plaintiff also contends that, in the Settlement Agreement, Defendants “preserved lien rights
in precise language but deliberately omitted arbitration.” (Id. at 2.) Second, Plaintiff
argues that “[e]ven if—hypothetically—the prior arbitration clause had survived, it
includes a federal-law carve-out: ‘If federal law provides that a claim or dispute is not
subject to binding arbitration, this arbitration provision shall not apply.’” (Id. at 8.)
Plaintiff argues that this carve-out applies here because her “claims under the FDCPA,
FCRA, and TILA . . . arise under federal law, and the arbitration clause itself acknowledges
that those claims are not subject to binding arbitration.” (Id.)4 Third, Plaintiff argues that
4 Plaintiff argues that her “claims are based exclusively on violations of federal law.”
(Doc. 21 at 14.) This is inaccurate. The complaint an array of claims under state law,
including Count Three – Violation of Arizona Uniform Commercial Code (Doc. 9 ¶¶ 106-
17); Count Four – Breach of Contract and Fraudulent Inducement (id. ¶¶ 118-29); Count
Six – Violation of Arizona Consumer Fraud Act (id. ¶¶ 139-48); Count Seven – Unjust
Enrichment and Equitable Restitution (id. ¶¶ 149-56); Count Nine – Declaratory Relief:
Settlement Agreement Is Void for Lack of Consideration and Failure of Performance (id.
¶¶ 167-75); Count Ten – Violation of Arizona Credit Reporting Law (id. ¶¶ 176-84); Count
Eleven – Common Law Fraud / Intentional Misrepresentation (id. ¶¶ 185-93); Count
Twelve – Promissory Estoppel (id. ¶¶ 194-201); Count Thirteen – Declaratory Relief:
Tradeline Is Legally Void and Misleading (id. ¶¶ 202-08); Count Fourteen – Breach of the
Covenant of Good Faith and Fair Dealing (id. ¶¶ 209-19); and Count Fifteen – Negligent
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even if the RISC and its Arbitration Provision controls, § 4 of the FAA contains a
“condition precedent to any order compelling arbitration” that “requires a movant to show
that arbitration was ‘refused’ before seeking judicial compulsion,” and “Defendants never
satisfied the threshold requirement of FAA § 4” because “[t]hey did not serve a written
demand to arbitrate, did not notify Plaintiff of any election to arbitrate, did not initiate or
identify any arbitral forum, did not contact AAA or any administrator, and did not provide
Plaintiff any opportunity to accept or reject arbitration before filing this Motion.” (Id. at
2-3.) Fourth, Plaintiff argues that even if the Court were to find that the RISC’s Arbitration
Provision applies, “it would remain unenforceable” because it “is structurally incoherent,
procedurally ambiguous, and substantively unconscionable.” (Id. at 9.) For example,
Plaintiff argues that the Arbitration Provision “vaguely provides that ‘you or we may
choose arbitration,’ with no mandatory trigger, no opt-in deadline, no procedural roadmap,
and no identifiable arbitral forum unless unilaterally approved by the stronger party” and
“preserves only Exter’s self-help and litigation rights.” (Id.) Plaintiff argues that “[c]ourts
interpreting such clauses routinely find them unconscionable, void for vagueness, or both.”
(Id.) Fifth, Plaintiff argues that “[g]ateway issues of arbitrability—including existence,
formation, scope, and enforceability—are for the Court to decide, not arbitrators, unless
delegation is ‘clear and unmistakable,’” and she argues that there is no delegation here
and/or that the delegation language in the Arbitration Provision “is not an enforceable
delegation clause under federal law.” (Id. at 5.) Sixth, Plaintiff argues that because her
“present lawsuit arises from conduct that occurred entirely after execution of the Settlement
Agreement and in violation of its terms,” her claims “all . . . fall outside the scope of any
prior agreement.” (Id. at 10, 16.) Seventh, Plaintiff argues that “[p]ublic policy, equity,
and Article III of the U.S. Constitution weigh heavily against allowing Defendants to
sidestep judicial review.” (Id. at 15.) Last, Plaintiff argues that “arbitration rights—like
any contractual right—may be waived by conduct inconsistent with an intent to arbitrate”
and that “Defendants’ silence in the face of [Plaintiff’s] demand letters, [her] CFPB
Misrepresentation (Common Law – Arizona) (id. ¶¶ 220-27).
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complaint, and their receipt of formal service—followed by months of litigation conduct
before ever mentioning arbitration—is textbook waiver.” (Id. at 4.)5
In reply, Defendants dispute Plaintiff’s “conten[tion] that there is no delegation
clause,” arguing that “the Arbitration Provision includes an explicit, unmistakable and
unambiguous delegation clause.” (Doc. 23 at 2.) Defendants also dispute Plaintiff’s
“conten[tion] that the delegation clause is contradictory,” arguing that “if a party elects
arbitration, the arbitration is mandatory.” (Id.) Defendants argue that because the
delegation clause is valid, “[a]lthough Plaintiff asserts various defenses to arbitration, these
remaining defenses are to the Arbitration Provision generally, not the delegation clause
specifically.” (Id. at 3 n.3.) Defendants next argue that “[a]lthough mooted by the
delegation clause, none of Plaintiff’s remaining challenges to arbitration are valid in any
event.” (Id. at 3.) Specifically, Defendants argue that § 4 of the FAA “does not include
such a notice, demand and refusal requirement.” (Id.) And Defendants argue that “even if
there was such a notice and rejection requirement (there is not), and even if there was no
delegation clause (there is), Plaintiff’s procedural challenge to arbitration based on an
imaginary condition precedent must be resolved by an arbitrator.” (Id. at 4.) Next,
Defendants argue that they did not waive their right to arbitration because their deadline to
respond to the complaint was September 19, 2025, and “[o]n that day Defendants filed their
Motion.” (Id. at 5.) Defendants further argue that their failure to seek to compel arbitration
in response to Plaintiff’s “written demands and CFPB complaint” are “pre-litigation
5 Plaintiff is proceeding pro se, but she still “must follow the same rules of procedure
that govern other litigants.” Ghadimi v. Ariz. Bank & Tr., 2025 WL 2928933, *4 (D. Ariz.
2025) (quoting King v. Atiyeh, 814 F.2d 565, 567 (9th Cir. 1987), overruled on other
grounds by Lacey v. Maricopa Cnty., 693 F.3d 896 (9th Cir. 2012)). The Court notes that
for at least two cases cited in Plaintiff’s opposition—Anderson v. Dean Witter Reynolds,
Inc., 306 F.3d 726 (9th Cir. 2002), and Chavez v. Bank of Am., 2014 WL 2159382 (D. Ariz.
2014)—the citation provided does not return the case identified. Furthermore, Plaintiff’s
opposition misattributes apparently fake quotations to real cases. (See, e.g., Doc. 21 at 12,
citing Matterhorn, Inc. v. NCR Corp., 763 F.2d 866, 868 (7th Cir. 1985)). “It appears the
incorrect citations may be the result of [Plaintiff] using artificial intelligence to draft [her]
filings.” Ghadimi, 2025 WL 2928933 at *4. “But whether [Plaintiff] used artificial
intelligence or simply imagined the cases [her]self, filing documents that contain such
cases results in confusion and unnecessary work for opposing parties and the court. In the
future, filing documents with fictitious cases will subject [Plaintiff] to sanctions under Rule
11.” Id.
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conduct that cannot form the basis of waiver.” (Id. at 6.) Defendants also dispute
Plaintiff’s argument that her claims are subject to a “federal-law carve-out” in the
Arbitration Provision. (Id. at 6-7.) Next, Defendants argue that the “Settlement Agreement
does not supersede the Arbitration Provision.” (Id. at 7, cleaned up.) Specifically,
Defendants argue that Plaintiff “ignores the fact that she expressly incorporated by
reference the RISC into the Settlement Agreement.” (Id.) Furthermore, Defendants argue
that the Arbitration Provision, by its own terms, “expressly survives the termination of the
RISC in any event.” (Id. at 8.) Defendants then dispute Plaintiff’s arguments that the
Arbitration Provision is unconscionable. (Id. at 9-11.) Specifically, Defendants argue that
“there is no ambiguity in the Arbitration provision,” “there is no unconscionable carve out
for self-help repossession or collection remedies,” and “the Arbitration Provision expressly
provides for governing rules, forum and procedure.” (Id. at 10.) Last, Defendants argue
that Plaintiff’s “last ditch effort” to invoke public policy fails because “the FAA ‘reflects
an emphatic federal policy in favor of arbitral dispute resolution.’” (Id. at 11, citation
omitted.)
III. Analysis
A. Contract Formation And Delegation Clause
As noted, a district court’s role under the FAA is generally “limited to determining
(1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement
encompasses the dispute at issue.” Chiron Corp., 207 F.3d at 1130. Furthermore,
“[a]lthough these questions are ordinarily resolved by the court, parties may agree to
arbitrate one or both of the gateway issues by including a delegation clause in the
arbitration agreement.” Williams v. Experian Info. Sols. Inc., 2024 WL 3876171, *11 (D.
Ariz. 2024). “An agreement to arbitrate a gateway issue is simply an additional, antecedent
agreement the party seeking arbitration asks the federal court to enforce, and the FAA
operates on this additional arbitration agreement just as it does on any other.” Rent-A-
Center, 561 U.S. at 70. The evidence of the parties’ intent to delegate such issues must be
“clear and unmistakable.” Brennan v. Opus Bank, 796 F.3d 1125, 1130 (9th Cir. 2015).
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Even if an arbitration provision includes a clause delegating gateway issues to the
arbitrator, certain issues remain non-delegable and must be decided by the court. Williams,
2024 WL 3876171 at *11. For example, “contract-formation issues are always matters for
judicial resolution . . . even in the presence of a delegation clause.” Caremark, LLC v.
Chickasaw Nation, 43 F.4th 1021, 1030 (9th Cir. 2022). The Ninth Circuit has held that
there are three guiding “principles” to assist in determining who—the district court or the
arbitrator—should decide certain issues:
First, a court must resolve any challenge that an agreement to arbitrate was
never formed, even in the presence of a delegation clause. Next, a court must
also resolve any challenge directed specifically to the enforceability of the
delegation clause before compelling arbitration of any remaining gateway
issues of arbitrability. Finally, if the parties did form an agreement to
arbitrate containing an enforceable delegation clause, all arguments going to
the scope or enforceability of the arbitration provision are for the arbitrator
to decide in the first instance.
Id.
1. The First Caremark Principle
Beginning with the first of these principles, Plaintiff does not appear to argue that
an arbitration agreement (or the RISC or Settlement Agreement) was never formed. At
most, Plaintiff makes the conclusory argument in her response brief that she “specifically
challenge[s] the enforceability of the arbitration clause—not just the contract overall.”
(Doc. 21 at 5. See also id. at 7 [“Plaintiff specifically challenges the arbitration clause
itself, not merely the broader contract.”].) But Plaintiff does not argue in her response
brief, for example, that there was no “offer, acceptance, consideration, a sufficiently
specific statement of the parties’ obligations, [or] mutual assent” with respect to the
Arbitration Provision in the RISC. Buckholtz v. Buckholtz, 435 P.3d 1032, 1035 (Ariz. Ct.
App. 2019) (citation omitted).6 True, the complaint alleges that the RISC “is unenforceable
due to statutory violations, fraud in the inducement, lack of consideration, and procedural
6 Because the parties’ briefs do not directly address which state’s law governs the
issue of contract formation but generally cite Arizona caselaw, the Court assumes that
Arizona law applies.
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irregularities.” (Doc. 9 ¶ 13. See also, e.g., id. ¶¶ 16, 49.) The complaint also alleges that
the Settlement Agreement “is void and unenforceable under established doctrines of
fraudulent inducement, lack of consideration, and unconscionability.” (Id. ¶ 46. See also,
e.g., id. ¶¶ 47, 49, 113, 116, 123, 124, 128.) But as an initial matter, Plaintiff’s allegations
that the RISC and Settlement Agreement “lack consideration”—which would be a question
of contract formation—are conclusory, lack any factual support, and are belied by the
agreements themselves. Plaintiff’s remaining challenges (at least as identified in the
complaint) appear to be directed at the validity and enforceability of the RISC and
Settlement Agreement contracts generally, not the Arbitration Provision itself. Caremark,
43 F.4th at 1029 (“In general, courts may resolve challenges directed specifically to the
validity of the arbitration provision itself. If there is no such challenge—or if such a
challenge fails—the court must send to the arbitrator any other challenges, including
challenges to the validity of the contract as a whole. For instance, in the presence of an
otherwise-valid arbitration provision, a challenge that the entire agreement was
fraudulently induced or that the illegality of one of the contract’s provisions renders the
whole contract invalid must be sent to the arbitrator.”) (cleaned up, emphasis added).
Nevertheless, Plaintiff also argues that the RISC (including its Arbitration
Provision) was superseded by the Settlement Agreement and that “it is for this Court, not
an arbitrator, to determine which contract governs.” (Doc. 21 at 1.) Whether the
Settlement Agreement superseded the RISC is not a gateway question subject to delegation.
Instead, it “is effectively a ‘contract-formation issue[],’ and such issues are ‘always matters
for judicial resolution.’” Williams, 2024 WL 3876171 at *15 (quoting Caremark, 43 F.4th
at 1030). See also id. at *17 (“[A] dispute over whether an earlier version of a contract has
been superseded by a later version . . . is best conceptualized as a non-delegable question
of contract formation.”). In a nutshell, Plaintiff argues that the Settlement Agreement
superseded the RISC, and because the Settlement Agreement was “integrated” and
“contains no arbitration clause,” the “omission” of such an arbitration provision from the
Settlement Agreement is “binding.” (Doc. 21 at 7-8.)
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Plaintiff’s argument is unavailing. The RISC, including its Arbitration Provision,
is expressly incorporated by reference into the Settlement Agreement. Section I.A.iii of
the Settlement Agreement provides:
The Parties agree that except as expressly provided in this [Settlement]
Agreement, all other terms contained within the original [RISC], including
without limitation those relating to Exeter’s security interest in and lien on
the Vehicle, shall survive and are incorporated by reference into the terms of
this [Settlement] Agreement.
(Doc. 20 at 11.)7 Under § I.A.iii, the terms of the RISC are expressly incorporated by
reference into the Settlement Agreement unless “expressly provided” otherwise in the
Settlement Agreement. That requirement is not satisfied here—both sides agree that the
Settlement Agreement is silent regarding arbitration. Thus, the RISC’s Arbitration
Provision is incorporated by reference into the Settlement Agreement.
In an attempt to avoid this conclusion, Plaintiff’s emphasizes that “Defendants
preserved their lien rights with precision but elected not to preserve any arbitration clause.”
(Doc. 21 at 8.) But § I.A.iii provides that “all other terms contained within the original
[RISC], including without limitation those relating to Exeter’s security interest in and lien
on the Vehicle, shall survive and are incorporated by reference.” (Doc. 20 at 11.) The use
of the phrase “including without limitation” forecloses Plaintiff’s argument.
Nor is there any merit to Plaintiff’s argument that “[t]his case presents precisely the
contractual conflict identified by the Supreme Court in” Coinbase, Inc. v. Suski, 602 U.S.
143 (2024). (Doc. 21 at 1.) In Coinbase, “[t]he parties . . . executed two contracts. The
first contained an arbitration provision with a delegation clause; per that provision, an
arbitrator must decide all disputes under the contract, including whether a given
disagreement is arbitrable. The second contract contained a forum selection clause,
providing that all disputes related to that contract must be decided in California courts.”
7 Section I.B.ii also provides that “Customer(s) will comply with the Settlement
Payment Terms set forth above and all other [RISC] terms that are not impacted by this
[Settlement] Agreement.” (Doc. 20 at 12, emphasis added.) Because nothing in the
Settlement Agreement “impacts” the RISC’s Arbitration Provision, the Settlement
Agreement does not extinguish the RISC’s Arbitration Provision.
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Coinbase, 602 U.S. at 145. The question presented was: “When two such contracts exist,
who decides the arbitrability of a contract-related dispute between the parties—an
arbitrator or the court?” Id. The Supreme Court held that the “court needs to decide . . .
which contract controls.” Id. Although Coinbase answers the question of who (i.e., the
Court) determines whether a subsequent agreement supersedes a prior agreement
containing an arbitration provision, Coinbase does not answer the second (related) question
of whether a subsequent agreement (i.e., the Settlement Agreement) that incorporates by
reference a prior agreement containing an arbitration provision (i.e., the RISC)
extinguishes the arbitration provision in the prior agreement. Indeed, Coinbase is factually
distinguishable from this case because, there, the subsequent agreement contained a forum
selection clause explicitly calling for disputes to be decided in California courts, directly
contradicting the prior agreement’s arbitration provision. In contrast, the Settlement
Agreement is silent on dispute resolution and incorporates all terms from the prior RISC
unless expressly contradicted by the Settlement Agreement.
In answering whether the Settlement Agreement incorporates by reference the
Arbitration Provision of the RISC, the Court finds Weatherguard Roofing Co. v. D.R. Ward
Const. Co., 152 P.3d 1227 (Ariz. Ct. App. 2007), instructive. There, Ward entered into a
“prime contract” to construct a home for the Gaskins. Id. at 1228. Ward also entered into
subcontracts with Weatherguard for certain aspects of the project. Id. Following
completion of the project, the Gaskins served a demand for arbitration on Ward seeking
damages for construction defects. Id. Ward, in turn, demanded arbitration with the
subcontractors (including Weatherguard) to indemnify him for claims arising from the
subcontractors’ work. Id. Weatherguard opposed the arbitration demand, arguing that (1)
“it was not contractually obligated to arbitrate Ward’s indemnity claim” because the
general conditions—which provided for indemnity—“never became part of its subcontract
with Ward”; (2) “even if the general conditions became part of the subcontract, the general
conditions did not incorporate by reference, and thus did not bind Weatherguard to, the
arbitration provision in the prime contract”; and (3) “because the subcontract contained
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express provisions governing arbitration, which Ward admitted did not require
Weatherguard to arbitrate Ward’s indemnity claim, these ‘more specific’ provisions
controlled the ‘more general’ arbitration provision in the prime contract.” Id. at 1229. The
Arizona Court of Appeals “disagree[d] with each argument.” Id.
As for Weatherguard’s first argument, the court held that “it is a basic rule of
contract construction that to incorporate by reference: The reference must be clear and
unequivocal and must be called to the attention of the other party, he must consent thereto,
and the terms of the incorporated document must be known or easily available to the
contracting parties.” Id. (cleaned up). The court held that because the subcontract
contained the language “The attached General Conditions are part of the subcontract,”
“[t]his statement made clear that the separate general conditions were part of the
subcontract.” Id. The same is true here—§ I.A.iii of the Settlement Agreement clearly and
unequivocally provides that “except as expressly provided in” the Settlement Agreement,
the terms of the RISC “shall survive and are incorporated by reference into the terms of”
the Settlement Agreement. (Doc. 20 at 11.)
As for Weatherguard’s second argument, the court rejected the notion “that an
arbitration provision in one agreement cannot be incorporated by reference into another
agreement absent a specific reference to arbitration.” Weatherguard Roofing, 152 P.3d at
1231. The court held that “contrary to Weatherguard’s argument, no specific word or
phrase—such as a specific reference to arbitration—is required.” Id. Here, although
§ I.A.iii does not expressly identify the Arbitration Provision as one of the terms of the
RISC being incorporated by reference into the Settlement Agreement, § I.A.iii is
nevertheless clear that “except as provided in this [Settlement] Agreement, all other terms
contained within the original [RISC] . . . shall survive and are incorporated by reference.”
(Doc. 20 at 11, emphasis added.)
As for Weatherguard’s third argument, the court held that the references to litigation
in the subcontract did not preclude arbitration. Weatherguard Roofing, 152 P.3d at 1233.
Plaintiff appears to make a similar argument. Pointing to § XII of the Settlement
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Agreement, Plaintiff argues that this section “reaffirms that litigation was fully
contemplated” and contends that “Courts have repeatedly held that such language does not
create a binding arbitration clause.” (Doc. 21 at 8.) But the only purported case Plaintiff
cites in support of her position—Anderson v. Dean Witter Reynolds, Inc., 306 F.3d 726,
740 (9th Cir. 2003)—appears to be a hallucinated citation. At any rate, Plaintiff’s argument
is at odds with Weatherguard.
Finally, although the analysis could end there, the Arbitration Provision in the RISC
also provides: “This Arbitration Provision shall survive any termination, payoff or transfer
of this contract.” (Doc. 20 at 8.) Therefore, even if the Settlement Agreement did not
incorporate by reference the terms of the RISC (it did), Plaintiff has failed to provide any
explanation as to how or why the Settlement Agreement extinguishes the RISC’s
Arbitration Provision in light of this clause providing for its survival.
In sum, as for Caremark’s first principle, an agreement to arbitrate was formed.
2. The Second Caremark Principle
Caremark’s second principle is that “a court must also resolve any challenge
directed specifically to the enforceability of the delegation clause before compelling
arbitration of any remaining gateway issues of arbitrability.” Caremark, 43 F.4th at 1030.
As noted, the evidence of the parties’ intent to delegate gateway issues of arbitrability must
be “clear and unmistakable.” Brennan, 796 F.3d at 1130.
One of Plaintiff’s arguments appears to be that the Arbitration Provision in the RISC
lacks a delegation clause. (See, e.g., Doc. 21 at 2, emphasis added [“Where—as here—
there is no valid or enforceable agreement governing the claims asserted, no delegation of
arbitrability, and no procedural compliance with the FAA, the Motion must be denied in
full.”]; id. at 5 [“No Delegation Exists Here”]; id.at 6 [“That is not a delegation clause. . . .
In fact, the clause never once mentions the words ‘delegate,’ ‘delegation,’ ‘exclusive
authority,’ or anything resembling language that would shift gateway decisions to an
arbitrator.”]; id. at 7 [“Even if a delegation clause existed (it does not) . . . .”].) Any such
argument is without merit. By expressly agreeing that “the interpretation and scope of this
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Arbitration Provision, and the arbitrability of the claim or dispute . . . shall . . . be resolved
by neutral, binding arbitration and not by a court action” (Doc. 20 at 8), the parties provided
“clear and unmistakable” evidence of their intent to arbitrate arbitrability. See, e.g., Adams
v. Conn Appliances Inc., 2017 WL 3315204, *2-3 (D. Ariz. 2017) (where arbitration
provision explicitly provided that it “[c]overs any dispute concerning the arbitrability of
any such controversy or claim,” holding that “[t]he Supreme Court and this Circuit
repeatedly have concluded that similar delegation language is sufficiently clear and
unmistakable evidence that the parties intended to arbitrate questions of arbitrability”).
Equally meritless is Plaintiff’s argument that no delegation clause was formed
because the Arbitration Provision does “no[t] reference . . . AAA Rule 7 or JAMS Rule
11” or any other “institutional rules that confer gateway authority.” (Doc. 21 at 6.) True,
the Ninth Circuit has held that “incorporation of the AAA rules constitutes clear and
unmistakable evidence that contracting parties agreed to arbitrate arbitrability.” Brennan,
796 F.3d at 1130. The Ninth Circuit has also held that “[i]ncorporation of the JAMS
arbitration rules by reference constitutes clear and unmistakable evidence that the parties
agree to arbitrate arbitrability.” Patrick v. Running Warehouse, LLC, 93 F.4th 468, 481
(9th Cir. 2024). But Plaintiff has not cited, nor has the Court located, any case suggesting
that the incorporation of such institutional rules is a prerequisite to the formation of a
delegation clause. Nor would such a rule make sense—incorporating AAA and/or JAMS
rules may be one way of evincing clear intent to arbitrate arbitrability, but it is not the only
way. Indeed, in Sedbrook v. Select Asset Recovery Grp., LLC, 2025 WL 1023994 (D. Ariz.
2025), the court held that an arbitration provision with language identical to the one in the
RISC “clearly and unmistakably delegates the question of arbitrability to the arbitrator.”
Id. at *2.8 See also Jacksen v. Chapman Scottsdale Autoplex, LLC, 2021 WL 3410912, *1,
8 Defendants argue, and Plaintiff does not appear to dispute, that Plaintiff’s claims
against Cobra, a non-signatory, are also subject to arbitration to the extent Plaintiff’s claims
against Exeter are subject to arbitration. (Doc. 19 at 10-13; Doc. 23 at 2 n.2.) At any rate,
at issue in Sedbrook was an arbitration provision with language identical to the Arbitration
Provision in the RISC. Sedbrook, 2025 WL 1023994 at *2. There, “[t]he parties
disagree[d] on whether Defendants as nonsignatories may invoke the arbitration clause
against Plaintiff, a signatory.” Id. The court held that this was a “question[] of arbitrability
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5 (D. Ariz. 2021) (holding that a similar contractual arbitration provision “clearly and
unmistakably delegates gateway issues to the arbitrator”); Johnson v. Santander Consumer
USA Inc., 2015 WL 7567483, *1-2 (D. Ariz. 2015) (same).
Of course, “[e]ven if the delegation of arbitrability is clear and unmistakable, the
provision may be unenforceable if the delegation provision itself is unconscionable.”
Drake v. Conn’s HomePlus, 2019 WL 2568841, *2 (D. Ariz. 2019) (citing Rent-A-Center,
561 U.S. at 71-74). “When a court finds that the parties unmistakably delegated the
question of arbitrability to the arbitrator, then ‘the only remaining question is whether the
particular agreement to delegate arbitrability—the Delegation Provision—is itself
unconscionable.’” Id. (quoting Brennan, 796 F.3d at 1132). “However, if the whole
agreement is challenged on unconscionability grounds, rather than the delegation provision
specifically, ‘the question of whether the agreement, as a whole, is unconscionable must
be referred to the arbitrator.’” Id. (quoting Nagrampa v. Mailcoups, Inc., 469 F.3d 1257,
1263-64 (9th Cir. 2006)).
Here, Plaintiff argues that “[t]he arbitration language is structurally incoherent,
procedurally ambiguous, and substantively unconscionable. It vaguely provides that ‘you
or we may choose arbitration,’ with no mandatory trigger, no opt-in deadline, no procedural
roadmap, and no identifiable arbitral forum unless unilaterally approved by the stronger
party. It preserves only Exeter’s self-help and litigation rights—including repossession
and court enforcement—while denying the consumer any mutual escape. Courts
interpreting such clauses routinely find them unconscionable, void for vagueness, or both.”
(Doc. 21 at 9, emphasis added. See also id. at 16, emphasis added [“[T]he 2020 arbitration
clause is procedurally and substantively unconscionable under both FAA§ 2 and Arizona
law. The clause is riddled with ambiguity (‘you or we may choose arbitration’), offers
carveouts solely in Defendants’ favor (repossession, collection, litigation), and fails to
designate any governing rules, forum, or procedure. It lacks mutuality, fails for vagueness,
and is unenforceable as a matter of public policy.”].)
the Contract clearly delegates to the arbitrator.” Id. The same is true here.
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The problem for Plaintiff is that many of these unconscionability arguments appear
to challenge the RISC’s Arbitration Provision generally, not the delegation clause
specifically. “[A] challenge to the validity of an entire arbitration agreement—[including]
an unconscionability challenge—must be decided by the arbitrator if the agreement
includes a delegation clause that is not directly challenged. . . . [A] party must challenge[]
the delegation provision specifically for a court to intervene.” Caremark, 43 F.4th at 1029
(cleaned up). In Bielski v. Coinbase, Inc., 87 F.4th 1003 (9th Cir. 2023), the Ninth Circuit
identified two principles to determine what a plaintiff must do to sufficiently challenge a
delegation provision specifically: “First, a party resisting arbitration must mention that it
is challenging the delegation provision and make specific arguments attacking the
provision in its opposition to a motion to compel arbitration. Second, a party may challenge
the delegation provision and the arbitration agreement for the same reasons, so long as the
party specifies why each reason renders the specific provision unenforceable.” Id. at 1009-
10.
It’s a close call whether Plaintiff’s arguments can be said to challenge the delegation
clause specifically as opposed to the Arbitration Provision generally. On the one hand,
Plaintiff specifies several times that her unconscionability arguments are directed at “[t]he
arbitration language” (Doc. 21 at 9) and at “the 2020 arbitration clause” (id. at 16). Indeed,
Plaintiff states in her opposition: “I specifically challenge the enforceability of the
arbitration clause.” (Id. at 5, emphasis added. See also id. at 7, emphasis added [“Plaintiff
specifically challenges the arbitration clause itself . . . .”].) On the other hand, Plaintiff’s
opposition does mention the delegation clause and argues that it “is not an enforceable
delegation clause under federal law.” (Id. at 5.) Plaintiff also argues, for example, that the
Arbitration Provision is “internally contradictory” because it does not “unambiguously vest
authority over arbitrability with an arbitrator.” (Id.) And Plaintiff argues that “Defendants’
attempt to cast this convoluted and contingent clause as a clear delegation is not only
legally incorrect—it is deceptive.” (Id. at 7.)
In an abundance of caution, and in light of her pro se status, the Court will assume
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that Plaintiff has sufficiently challenged the enforceability of the delegation clause
specifically. Even so, her arguments regarding unconscionability and unenforceability are
without merit. For example, Plaintiff argues that the phrase “shall . . . be resolved by
arbitration . . . at your or our election” is “internally contradictory” because the use of
“shall” “signals an imperative” but “at your or our election” “renders it conditional.” (Doc.
21 at 5. See also id. at 9 [“It vaguely provides that ‘you or we may choose arbitration,’
with no mandatory trigger, no opt-in deadline, no procedural roadmap, and no identifiable
arbitral forum unless unilaterally approved by the stronger party.”].) But these phrases are
not contradictory or confusing. Under the Arbitration Provision, either party may elect to
resolve a dispute by arbitration, and if either party so elects, arbitration (with delegation of
arbitrability to the arbitrators) is mandatory. Furthermore, Plaintiff may choose the AAA
or other rules to govern the arbitration, and her choice of governing rules is subject to
Exeter’s approval. It’s unclear what Plaintiff means when she refers to the lack of an “opt-
in deadline” or “procedural roadmap”; regardless, the Arbitration Provision provides
extensive guidance regarding the procedure to be followed in choosing the arbitrator, the
allocation of fees for the arbitration, and the forum in which the arbitration should take
place. (Doc. 20 at 8.) This language is not so vague or confusing as to render the delegation
clause ambiguous or unenforceable.
As for Plaintiff’s argument that the Arbitration Provision is one-sided because it
“preserves only Exeter’s self-help and litigation rights—including repossession and court
enforcement—while denying the consumer any mutual escape” (Doc. 21 at 9), that
argument—to the extent it can even be seen as targeted toward the delegation clause
specifically, as opposed to the Arbitration Provision generally—is unavailing. See, e.g.,
Jones v. Gen. Motors Corp., 640 F. Supp. 2d 1124, 1134-35 (D. Ariz. 2009) (arbitration
agreement not unconscionable where it contained self-help provision, specifically for
repossession, which the plaintiff argued benefited only the defendant).
As for Plaintiff’s argument that the Arbitration Provision is unconscionable because
it “fails to designate any governing rules, forum, or procedure” (Doc. 21 at 16), that is
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simply untrue. The Arbitration Provision provides that Plaintiff may choose the AAA or
other rules to govern the arbitration, subject to Exeter’s approval. (Doc. 20 at 8.) It
provides that the arbitrator must be an attorney or retired judge selected pursuant to the
chosen arbitral organization’s rules. (Id.) It also provides that “[t]he arbitrator shall apply
the governing substantive law and the applicable statute of limitations. The arbitration
hearing shall be conducted in the federal district in which [Plaintiff] reside[s] unless the
Seller Creditor is a party to the claim or dispute, in which case the hearing will be held in
the federal district where [the RISC] was executed.” (Id.) It also provides for how costs
will be distributed. (Id.)
Nor do Plaintiff’s undeveloped references to “[p]ublic policy, equity, and Article III
of the U.S. Constitution” (Doc. 21 at 15) support a finding of unconscionability,
particularly as applied to the delegation clause specifically. The policy behind the FAA
supports “direct[ing] the parties to proceed to arbitration on issues as to which an
arbitration agreement has been signed.” Dean Witter Reynolds, 470 U.S. at 218.
Accordingly, Plaintiff has not shown the delegation clause in the Arbitration Provision is
unconscionable or unenforceable.9
2. The Third Caremark Principle
Caremark’s third and final principle is that “if the parties did form an agreement to
arbitrate containing an enforceable delegation clause, all arguments going to the scope or
enforceability of the arbitration provision are for the arbitrator to decide in the first
instance.” Caremark, 43 F.4th at 1030. Because the parties did form an agreement to
arbitrate, which contained an enforceable delegation clause, Plaintiff’s remaining
arguments regarding the unconscionability of the Arbitration Provision, the RISC, or the
Settlement Agreement are for the arbitrator to decide.
Several of Plaintiff’s other arguments again raise questions for the arbitrator, not the
9 Plaintiff also appears to argue that because the delegation clause does not contain
“clause-severability language that would isolate delegation from other provisions” (Doc.
21 at 6), that somehow renders the delegation clause unenforceable. Plaintiff provides no
support for this argument, and the Court is unaware of any authority supporting such an
argument.
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Court. For example, Plaintiff argues at length that the Arbitration Provision “contains an
express carve-out—which fatally undermines any claim of total or automatic
applicability.” (Doc. 21 at 6.) Plaintiff points to language in the Arbitration Provision that
provides: “If federal law provides that a claim or dispute is not subject to binding
arbitration, this Arbitration Provision shall not apply to such claim or dispute.” (Id.) But
whether Plaintiff’s claims fall within this carve-out is a delegated question regarding the
scope of the Arbitration Provision. Oracle Am., Inc. v. Myriad Grp. A.G., 724 F.3d 1069,
1076 (9th Cir. 2013). Put another way, whether federal law provides that some or all of
Plaintiff’s claims are not subject to binding arbitration is an “arbitrability determination,
which the parties have clearly and unmistakably delegated to the arbitrator.” Id.
Likewise, Plaintiff argues that her claims “arise[] from conduct that occurred
entirely after execution of the Settlement Agreement and in violation of its terms.” (Doc.
21 at 10.) But to the extent Plaintiff is attempting to argue that her claims are not subject
to arbitration because they occurred post-settlement, that question, again, is one of scope
that has been delegated to the arbitrator.
Plaintiff also argues at length that Defendants did not demand, and she did not
refuse, arbitration, and she contends that § 4 of the FAA requires such a demand and refusal
as a condition precedent to arbitration. (Doc. 21 at 2-4.) But even assuming for the sake
of argument that Plaintiff’s understanding of § 4 is correct, the question of Defendants’
satisfaction of this condition precedent to arbitrability would be a question for the arbitrator
to decide. Cf. Quantum Fluids LLC v. Kleen Concepts LLC, 2021 WL 242104, *7 (D.
Ariz. 2021) (“The Court need not decide whether Kleen satisfied, or should be excused
from satisfying, all of the ADR Clause’s prerequisites to arbitration (i.e., engaging in at
least three negotiation sessions and then engaging in mediation) because that issue has been
delegated to the arbitrator to decide in the first instance.”). Indeed, even if the Arbitration
Provision did not have an enforceable delegation clause, the satisfaction of a condition
precedent to arbitrability would still be presumptively a question for the arbitrator. BG
Grp., PLC v. Republic of Argentina, 572 U.S. 25, 34-35 (2014) (“[C]ourts presume that the
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parties intend arbitrators, not courts, to decide disputes about the meaning and application
of particular procedural preconditions for the use of arbitration. . . . And they include the
satisfaction of ‘prerequisites such as time limits, notice, laches, estoppel, and other
conditions precedent to an obligation to arbitrate.’”) (cleaned up).
B. Waiver
As noted, Plaintiff argues that Defendants waived their right to arbitrate through
their pre- and post-litigation conduct. (Doc. 21 at 11-13.) Specifically, Plaintiff argues
that Defendants “were served by the U.S. Marshal and waited more than 60 days—without
raising arbitration as an affirmative defense, without responding to [Plaintiff’s] pre-
litigation demands, and without initiating any arbitral forum—before filing this Motion.”
(Id. at 15-16.)
The first question that must be addressed is who decides whether Defendants have
waived, through their litigation conduct, their right to arbitrate—the Court or the arbitrator?
The Ninth Circuit “ha[s] made clear that courts generally decide whether a party has waived
his right to arbitration by litigation conduct. If the parties intend that an arbitrator decide
that issue under a particular contract, they must place clear and unmistakable language to
that effect in the agreement.” Martin v. Yasuda, 829 F.3d 1118, 1124 (9th Cir. 2016). As
discussed, the Arbitration Provision provides that “[a]ny claim or dispute, . . . including
the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim
or dispute . . . shall . . . be resolved by neutral, binding arbitration.” (Doc. 20 at 8, emphasis
added.) The Court concludes that this language does not provide clear and unmistakable
evidence, sufficient to overcome the presumption of judicial resolution, of the parties’
intent to have an arbitrator decide issues of waiver by litigation conduct. See, e.g.,
Mohamed v. Uber Techs., Inc., 848 F.3d 1201, 1209 & n.4 (9th Cir. 2016) (even where the
“Agreements delegated to the arbitrators the authority to decide issues relating to the
‘enforceability, revocability or validity of the Arbitration Provision or any portion of the
Arbitration Provision,’” “[t]he arbitration agreements may not have clearly and
unmistakably delegated to the arbitrator the authority to decide the question of waiver by
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litigation conduct”); Morgan Stanley & Co. LLC v. Couch, 659 F. App’x 402, 404-05 (9th
Cir. 2016) (concluding, where the arbitration clause provided that “any dispute as to the
arbitrability of a particular issue or claim pursuant to this arbitration provision is to be
resolved in arbitration,” that “[t]his language, requiring that the arbitrability of individual
issues or claims be resolved by the arbitrator, does not encompass disputes over whether
the clause remains valid in light of the parties’ litigation conduct” and that “[t]he arbitration
clause is not clear and unmistakable evidence that the parties intended for an arbitrator to
decide claims of waiver by litigation”); In re Chrysler Pacifica Fire Recall Prods. Liab.
Litig., 143 F.4th 718, 723 (6th Cir. 2025) (“Here, although the clauses at issue broadly
delegate to arbitration all disputes over the sales contracts’ ‘validity,’ ‘enforceability,’
‘scope,’ and ‘arbitrability,’ they do not cover gateway questions such as waiver through
inconsistent litigation conduct. . . . [A]lthough the clauses do mention questions of
‘arbitrability,’ we believe that this lone reference falls well short of the clear and
unmistakable language needed for FCA to overcome the presumption of judicial
resolution.”) (citations omitted); Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 15 (1st
Cir. 2005) (concluding, where the arbitration agreement provided for the submission of
claims and disputes to arbitration “including the arbitrability of any such controversy or
claim,” that the use of the term “arbitrability” did not “evince[] a clear and unmistakable
intent to have waiver issues decided by the arbitrator” and thus “the question of waiver of
Allied’s right to arbitrate due to its participation in EEOC proceedings is properly for the
judge”).
Even so, Plaintiff’s waiver argument fails on the merits. “A determination of
whether the right to compel arbitration has been waived must be conducted in light of the
strong federal policy favoring enforcement of arbitration agreements.” Martin, 829 F.3d
at 1124 (citation omitted). “Because waiver of the right to arbitration is disfavored, any
party arguing waiver of arbitration bears a heavy burden of proof.” Id. (citation omitted).
“[T]he test for waiver of the right to compel arbitration consists of two elements: (1)
knowledge of an existing right to compel arbitration; and (2) intentional acts inconsistent
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with that existing right.” Hill v. Xerox Bus. Servs., LLC, 59 F.4th 457, 468 (9th Cir. 2023).
The second element is not satisfied here. Although Plaintiff is correct that
Defendants’ “first act in this Court was to file a Motion to Compel Arbitration” (Doc. 21
at 12), this does not remotely qualify as action inconsistent with Defendants’ right to
arbitration. “[A] party acts inconsistently with exercising the right to arbitrate when it (1)
makes an intentional decision not to move to compel arbitration and (2) actively litigates
the merits of a case for a prolonged period of time in order to take advantage of being in
court.” Martin v. TEKsystems Mgmt. Inc. (Fn), 2021 WL 2334389, *5 (D. Ariz. 2021)
(quoting Newirth by & through Newirth v. Aegis Senior Communities, LLC, 931 F.3d 935,
941 (9th Cir. 2019)). On the same day that Defendants were required to answer the
complaint, they moved to compel arbitration. There was no litigation activity by
Defendants beforehand. This is the antithesis of the sort of conduct that might support a
finding of waiver. Cf. id. (“Here, American Airlines only filed an answer to Plaintiff’s
complaint before filing the instant Motion to Compel Arbitration. Although the answer
failed to assert the affirmative defense of arbitration, American has not actively litigated
the merits of the case for a prolonged period of time and in fact has made an intentional
decision to move to compel arbitration. Inlight of American’s actions and the strong policy
against finding a waiver of arbitration, this Court finds that American has not acted
inconsistent with its right to arbitrate.”).
As for Plaintiff’s arguments regarding Defendants “ignor[ing] [Plaintiff’s] multiple
written demand letters and CFPB complaint” (Doc. 21 at 12), failing to make a pre-
litigation demand for arbitration does not amount to waiver. After all, waiver “requires
conduct inconsistent with the arbitration remedy,” and passive pre-litigation inaction by a
defendant who is merely being threatened with suit is not inconsistent with that remedy.
Okabayashi v. Travelers Home & Marine Ins. Co., 2015 WL 6447400, *3 (D. Ariz. 2015).
See also Specialty Merch. Corp. v. Navigators Ins. Co., 2012 WL 12892158, *3 (C.D. Cal.
2012) (“Plaintiffs nevertheless argue that Defendant had acted inconsistently with its
arbitration right by failing to submit the dispute to arbitration during the approximately
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twelve-month period leading up to the filing of this action, in which the Parties exchanged
correspondence regarding the denial of Plaintiffs’ claims. This argument is unavailing . . . .
Plaintiffs offer no authority to support the proposition that a party’s pre-litigation failure to
invoke the right to arbitration alone could constitute a waiver.”).10
C. Stay
Defendants ask the Court to stay this action pending completion of the arbitration.
(Doc. 19 at 13.) “When a district court finds that a lawsuit involves an arbitrable dispute,
and a party requests a stay pending arbitration, § 3 of the FAA compels the court to stay
the proceeding.” Smith v. Spizzirri, 601 U.S. 472, 478 (2024). Accordingly, Defendants’
stay request is granted.
Accordingly,
IT IS ORDERED that:
1. Defendants’ motion to compel arbitration (Doc. 19) is granted.
2. This action is stayed. Within 10 days of the conclusion of the arbitration
proceeding, Defendants must file a status report.
Dated this 26th day of February, 2026.
10 The Court is also unpersuaded by Plaintiff’s argument, handwritten on the exhibits
to her declaration (Doc. 22 at 10), that by responding to Plaintiff’s CFPB complaint and
advising her to “request information and/or documentation in accordance with the civil
procedure and local court rules associated with” the pending litigation, Defendants waived
their right to arbitrate. Cf. Specialty Merch. Corp., 2012 WL 12892158 at *3 (“The fact
that Defendant also expressly advised Plaintiffs of their administrative remedy with the
California Department of Insurance, as required by section 2695.7(b)(3) of the California
Code of Regulations, is not inconsistent with Defendant’s reservation of its rights under
the Policy, including its right to arbitration.”).
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