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Harrison v. Legal Helpers Debt Resolution, LLC

United States District Court, D. Minnesota

August 22, 2014

Reece Harrison, on behalf of himself, and a class of similarly situated individuals, Plaintiff,
v.
Legal Helpers Debt Resolution, LLC; d/b/a The Law Firm of Macey, Aleman, Hyslip & Stern; CDS Client Services, Inc.; and James Agosto, Defendants.

Shawn J. Wanta, Esq., Baillon Thome Jozwiak & Wanta, LLP, Minneapolis, MN, and Brian J. Ellsworth, Esq., Law Office of Brian J. Ellsworth, Rochester, MN, on behalf of Plaintff.

Kevin M. Carrara, Esq., Charles L. Philbrick, Esq., and Polina Arsentyeva, Esq., Rathje & Woodward, LLC, Wheaton, IL; and Jeffrey E. Grell, Esq., and S. Steven Prince, Esq., Grell & Feist LLC, Minneapolis, MN, on behalf of Defendants.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge.

I. INTRODUCTION

On July 7, 2014, the undersigned United States District Judge heard oral argument on Defendants Legal Helpers Debt Resolution, LLC ("LHDR"), and James Agosto's Motion to Vacate Arbitrator's Partial Final Decision [Docket No. 58]. Plaintiff Reece Harrison opposes the motion. For the reasons set forth below, Defendants' motion is denied.

II. BACKGROUND

On August 10, 2012, Harrison filed a putative class action in Olmsted County District Court. Not. of Removal [Docket No. 1]. Harrison alleges that in June 2010, he responded to an internet advertisement by Defendants purporting to offer debt settlement and credit repair services. Id . Ex. A (Compl.) ¶¶ 27-28. LHDR, advertising itself as a law firm, contacted Harrison. LHDR offered to have its attorneys review Harrison's financial situation and tailor a debt resolution plan. Although correspondence to Harrison appeared to be from LHDR, Harrison alleges LHDR's contact information, such as its phone numbers and addresses, actually are those of Defendant CDS Client Services, Inc. ("CDS"). Id . ¶ 29. Harrison alleges CDS used its affiliation with LHDR, and LHDR's managing partner James Agosto, to circumvent consumer protection laws. By representing themselves as a law firm, Harrison alleges, Defendants could charge higher fees and omit otherwise-necessary disclosures. Id . ¶¶ 20-25.

Unaware of this alleged scheme at the time, Harrison signed an "Attorney Retainer Agreement" (the "Agreement") with LHDR. Charles L. Philbrick Decl. [Docket No. 60] Ex. A. Harrison alleges Defendants made numerous misrepresentations in the Agreement and ultimately failed to provide the promised services. Harrison further alleges Defendants gave him incorrect, self-serving, and possibly illegal advice, thereby worsening his financial situation. Compl. ¶¶ 35-37. As part of Defendants' purported debt resolution plan, Harrison paid thousands of dollars to Defendants in monthly installments. Harrison alleges Defendants retained the majority of these payments as fees. Id . ¶¶ 47-51.

The Agreement included an arbitration clause, which stated in part:

In the event of any claim or dispute between Client and LHDR related to the Agreement or related to any performance of any services related to this Agreement, such claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request. The parties shall initially agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Services or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim.

Agreement § XVIII. On September 25, 2012, LHDR and Agosto moved to compel arbitration [Docket No. 12]. On December 19, 2012, Harrison, LHDR, and Agosto filed a joint stipulation in which they agreed to submit the case to arbitration and stay the federal proceedings [Docket No. 24].[1] In the meantime, CDS reached a settlement agreement with Harrison that included the claims of a settlement class. See Order, Feb. 18, 2014 [Docket No. 55]. CDS is not a party to the arbitration at issue, and has not joined in the present motion.

Sometime before February 4, 2014, the parties held a phone conference with the arbitrator, Judge James Rosenbaum (ret.) (also referred to as the "Arbitrator"). During the conference, the parties asked Judge Rosenbaum to decide whether the arbitration clause encompassed class claims. In response, on February 4, 2014, Judge Rosenbaum issued a scheduling order requiring the parties to submit briefing on the issue of class arbitration. The parties complied. See Philbrick Decl. Ex. B ("Partial Final Decision").

On April 25, 2014, Judge Rosenbaum issued the Partial Final Decision. Id . The Arbitrator concluded the Agreement was silent as to class arbitration. After reviewing relevant authority from the United States Supreme Court, the Arbitrator referred to principles of contractual interpretation, which in turn led him to consult Minnesota statutes. Because Minnesota law expressly authorizes class action claims in the debt settlement context, the Arbitrator allowed Harrison to proceed with a putative class arbitration. Id. at 5-7.

On May 8, 2014, LHDR filed the present motion to vacate the Partial Final Decision, arguing Judge Rosenbaum exceeded his authority by allowing ...


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