HALWAJIAN v. LASERAWAY LLC (2025)

ORDER RE: DEFENDANT FIRST ELECTRONIC BANK AND CONCORA CREDIT INC.’S MOTION TO COMPEL ARBITRATION AND TO STAY ACTION, AND DEFENDANT GREAT AMERICAN'S JOINDER OF MOTION

The matters before the Court are Defendant First Electronic Bank and Concora Credit Inc.’s Motion to Compel Arbitration and to Stay Action (Dkt. No. 20 (the “Motion”)), and Defendant Great American Finance Holdings, LLC'S Joinder of Motion (Dkt. No. 34).

I. BACKGROUND

On October 2, 2024, Plaintiff filed a Complaint against Defendants LaserAway, LLC (“LaserAway”), Great American Finance Holdings, LLC (“Great American”), First Electronic Bank (“FEB”), and Concora Credit Inc. (“Concora”) asserting the following six causes of action: (1) violation of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq.; (2) violation of the Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code §§ 1700 et seq.; (3) violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq.; (4) violation of the Rosenthal Fair Debt Collection Practices Act, Cal. Civ. Code §§ 1788 et seq.; (5) violation of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq.; and (6) recission.

II. STATEMENT OF THE LAW

Under the Federal Arbitration Act (“FAA”), a written agreement to arbitrate in a contract involving interstate commerce is “valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” See 9 U.S.C. § 2; see also Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 111-12, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). A party aggrieved by the refusal of another to arbitrate under a written arbitration agreement may petition any United States district court for an order directing that arbitration proceed in the manner provided for in the agreement. 9 U.S.C. § 4; Volt Info. Servs., Inc. v. Bs. of Ts. of Leland Junior Univ., 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989). “Under the Federal Arbitration Act, parties to a contract may agree that an arbitrator rather than a court will resolve disputes arising out of the contract.” Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. 63, 65, 139 S. Ct. 524, 528, 202 L.Ed.2d 480 (2019). The 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). If the answers to these questions are yes, then the FAA mandates that district courts shall direct the parties to proceed to arbitration on those claims. Id. (emphasis in original); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991). The burden of proof that a claim is exempt from arbitration is on the party contesting the arbitration. Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987).

An arbitration agreement may be invalidated only upon grounds that exist in law or equity for the revocation of any contract, such as fraud, duress, and unconscionability. See 9 U.S.C. § 2; Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67-68, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010). The Court must “interpret the contract by applying 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.” Wagner v. Stratton Oakmont, Inc., 83 F.3d 1046, 1049 (9th Cir. 1996); see also Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1022 (9th Cir. 2016) (“Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements.”) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). If the court compels arbitration, it may stay the action until arbitration has been completed in accordance with the terms of the arbitration agreement or dismiss the case if all of the alleged claims are subject to arbitration. See 9 U.S.C. § 3; Sparling v. Hoffman Constr. Co., 864 F.2d 635, 638 (9th Cir. 1988).

III. DISCUSSION

A. Arbitration

The Complaint alleges Plaintiff “sought tattoo removal services from LaserAway,” LaserAway offers a promotional open line-of-credit “[t]o entice persons into obtaining its services,” and on January 12, 2024, “LaserAway had the plaintiff sign a Consumer Line of Credit Agreement (open line-of-credit) offered by [Great American].” (Compl. ¶¶ 14, 15, 18.) Defendants FEB and Concora contend Plaintiff's claims are governed by an arbitration provision in the Agreement signed by Plaintiff, which provides:

• AT ANY TIME EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION. NEITHER YOU NOR WE ARE REQUIRED TO ARBITRATE CLAIMS, BUT IF EITHER OF US CHOOSES TO HAVE A DISPUTE DECIDED BY ARBITRATION, ARBITRATION WILL BE MANDATORY FOR BOTH PARTIES.

• IN ARBITRATION, YOU AND WE EACH GIVE UP OUR RIGHT TO A COURT OR JURY TRIAL.

• IN ARBITRATION, YOU GIVE UP YOUR RIGHT TO ACT AS A CLASS REPRESENTATIVE OR A CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US. THIS INCLUDES ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

• THE INFORMATION PARTIES MAY OBTAIN IN DISCOVERY FROM EACH OTHER IN ARBITRATION IS GENERALLY MORE LIMITED THAN IN A LAWSUIT.

• OTHER RIGHTS AVAILABLE IN A COURT MAY NOT BE AVAILABLE IN ARBITRATION.

• RIGHTS TO APPEAL OR CHANGE AN ARBITRATION AWARD IN COURT ARE VERY LIMITED.

A dispute is any claim or dispute, in contract, tort or otherwise, arising between you and us. Dispute includes disputes that arise from or relate to this Agreement, or relationships that result from this Agreement (including relationships with third parties who do not sign this Agreement).

“Dispute” includes claims or disputes arising before, during and after the transactions evidenced by this Agreement. “Dispute” includes disputes unrelated to this Agreement. “Dispute” shall have the broadest possible meaning.

“We,” “us,” “our” and “third party” include Seller and any assignees of Seller's rights “or obligations under this Agreement, including Great American Finance Holdings, and all affiliates, parents and subsidiaries of these parties and all their employees, agents, or assigns.

When you, a third party, or we request arbitration, the dispute will be resolved by neutral, binding arbitration under the Federal Arbitration Act and not by a court. Any dispute is to be arbitrated on an individual basis and not as a class action. You expressly waive your right to arbitrate a class action, including your right to class relief in arbitration. This is referred to below as “the Class Action Waiver”.

You may choose the American Arbitration Association (800-778-7879, www.adrorg) or, with our approval, any other arbitration organization as the administrator. The administrator will apply its relevant current rules. You may obtain a copy of the rules or additional information about arbitration by contacting the applicable arbitration organization or visiting its website. If you elect to arbitrate, you agree to notify us of your election in writing and to initiate arbitration in the manner set forth in the arbitration organization's rules.

The arbitration hearing shall be conducted in the federal district where you reside. The arbitrator shall be an attorney or retired judge and must be selected according to the rules of the applicable arbitration organization. Th arbitrator shall apply governing law.

The arbitrator shall award damages or other relief permitted by applicable law.

The arbitrator shall prepare a written decision stating reasoned findings of fact and conclusions of law.

When you request arbitration, you agree to pay a filing fee not to exceed the amount it would cost to file a lawsuit in small claims court. We will pay the rest of the filing fee, and the whole filing fee when we request arbitration first or when the arbitrator determines that applicable law or the rules of the arbitration organization require us to do so.

We will pay the arbitration costs and fees for the first day of arbitration, up to a maximum of eight hours. We will also pay or advance any additional fees for the first day of arbitration, up to a maximum of eight hours. We will pay or advance any additional fees and charges that the arbitrator determines we must pay or advance in order to assure that this arbitration clause is enforceable. The arbitrator shall decide who shall pay any additional costs and fees, and, if we advance any fees or charges, shall decide who must finally pay those advanced amounts.

The arbitrator's award shall be final and binding on all parties, except that the losing party may request new arbitration under the rules of the arbitration organization by a three-arbitrator panel. Unless prohibited by law, the appealing party shall pay all costs imposed by the administrators upon both parties on appeal, unless the arbitrator decides otherwise.

Neither you nor we waive the right to arbitrate by exercising self-help remedies, filing suit, or seeking or obtaining provisional remedies from a court. 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. A party may enter judgment on the award in any court of jurisdiction.

You acknowledge that the transaction(s) between you and us involve interstate commerce. The Federal Arbitration Act shall govern this arbitration clause and any arbitration under this arbitration clause.

If you do not want this arbitration clause to apply to this transaction, you may send us a written notice to that effect, return receipt requested, within 10 business days of the date you sign this Agreement 1 to this address:

Great American Finance Holdings, LLC200 S Michigan Avenue Suite 450Chicago IL 60604

If a court or arbitrator limits or voids the Class Action Waiver, this entire arbitration clause (except for this sentence) shall be null and void. If any part of this arbitration clause other than the Class Action Waiver is deemed or found unenforceable for any reason, the rest of the arbitration clause remains enforceable. This arbitration clause survives payment in full of the obligations incurred under this Agreement and survives discharge in bankruptcy.

(Nilsson Decl. Ex. A.)

Defendants FEB and Concora submit evidence demonstrating Plaintiff's open line-of-credit loan was acquired by FEB, and Defendant Great American assigned all servicing, collection and enforcement rights regarding Plaintiff's line-of-credit loan to FEB and Concora. (Nilsson Decl. ¶¶ 5-6, 8-12.) Plaintiff does not dispute that he entered into the Agreement with Great American, nor challenge the authenticity of the Agreement filed by Defendants FEB and Concora, nor contend the Agreement does not apply to Great American, FEB and Concora,² nor dispute that his claims asserted in the Complaint are covered by the arbitration provision in the Agreement. Therefore, Plaintiff agreed to arbitrate any disputes against Defendants Great American, FEB, and Concora arising from his open line-of-credit loan he obtained for the tattoo removal services from Defendant LaserAway.

Plaintiff, however, contends the arbitration provision is invalid because it waives public injunctive relief by prohibiting class and representative actions, relying on McGill v. Citibank, N.A., 2 Cal. 5th 945, 216 Cal.Rptr.3d 627, 393 P.3d 85 (2017). Defendants FEB and Concora argue Plaintiff does not seek public injunctive relief, and therefore McGill is inapplicable.

In McGill v. Citibank, the California Supreme Court held “[a]greements to arbitrate claims for public injunctive relief under the CLRA, the UCL, or the false advertising law are not enforceable in California,” and the FAA does not preempt the rule that an arbitration agreement is invalid and unenforceable under California law if the agreement includes a provision that “purports to waive, in all fora, the statutory right to seek public injunctive relief under the UCL, CLRA, or the false advertising law.” McGill v. Citibank, N.A., 2 Cal. 5th 945, 962, 956, 216 Cal.Rptr.3d 627, 393 P.3d 85 (2017); see also Keebaugh v. Warner Bros. Ent., Inc., 100 F.4th 1005, 1022 (9th Cir. 2024). In distinguishing between private injunctive relief vs. public injunctive relief, the California Supreme Court noted private injunctive relief is “relief that primarily resolve[s] a private dispute between the parties and rectif[ies] individual wrongs, and that benefits the public, if at all, only incidentally” whereas public injunctive relief is “relief that by and large benefits the general public and that benefits the plaintiff, if at all, only incidental[ly] and/or as a member of the general public.” McGill, 2 Cal. 5th. at 955, 216 Cal.Rptr.3d 627, 393 P.3d 85 (internal quotations and citations omitted).

Here, the Complaint seeks injunctive relief as to Plaintiff's fifth cause of action under the UCL, Cal. Bus. & Prof. Code § 17200. (See Compl. at 18, Prayer for Relief (seeking “[a]n order enjoining the defendant's unfair and deceptive methods, acts, or practices, and false advertising” for Plaintiff's UCL claim).) The only other reference to an injunction in the Complaint is in paragraph 72 wherein Plaintiff alleges “[b]y reason of the foregoing, the defendant has been unjustly enriched and should be required to disgorge its illicit profits and/or make restitution to Plaintiffs and other California consumers who have been harmed, and/or be enjoined from continuing in such practices pursuant to California Business & Professions Code Sections 17203 and 17204.” (Compl. ¶ 72.) Plaintiff's claims are based on LaserAway's open line of credit agreement offered to persons seeking to obtain its tattoo removal services. (Id. ¶¶ 14-16, 19, 24.) The Complaint alleges Defendants’ actions were “deceptive” because “[t]hey purposefully provided conflicting, confusing and inadequate disclosures to conceal the true cost of the tattoo removal,” “the plaintiff was never informed of the cost of medical services and was unaware of the cost for each tattoo removal session,” “[t]he plaintiff was never informed as to the amount LaserAway received from the funds advanced under the promotional transaction summary,” and “[a]t various points the Concora would send letters offering to ‘reduce’ the plaintiff's debt if he made a one-time payment of a specified lower amount again without informing the cost of medical services owed.” (Id. ¶ 35.) The Complaint further alleges “defendant's acts and practices are likely to deceive” and “[t]he scheme implemented by the defendant is designed to defraud California consumers and enrich the defendant” (id. ¶ 71).

Therefore, the injunctive relief sought by Plaintiff is private injunctive relief because it is “relief that primarily resolve[s] a private dispute between the parties and rectif[ies] individual wrongs, and that benefits the public, if at all, only incidentally” in contrast to public injunctive relief “that by and large benefits the general public and that benefits the plaintiff, if at all, only incidental[ly] and/or as a member of the general public.” McGill, 2 Cal. 5th at 955, 216 Cal.Rptr.3d 627, 393 P.3d 85 (internal quotations and citations omitted). The alleged deceptive/unlawful acts by Defendants do not “threaten future injury to the general public,” and the injunctive relief sought in the Complaint is not “forward-looking relief that generally aims to prevent unlawful conduct in the future,” and would not benefit the “general public” as a whole. Hodges v. Comcast Cable Commc'ns, LLC, 21 F.4th 535, 542 (9th Cir. 2021) (citing McGill, 2 Cal. 5th at 955, 216 Cal.Rptr.3d 627, 393 P.3d 85). Rather, the relief sought in Plaintiff's Complaint is “aimed at ‘redressing or preventing injury’ to a person or group of persons” and would benefit a group of individuals similarly situated to Plaintiff—i.e., customers of LaserAway who entered into an open line-of credit agreement for tattoo removal services. Id. (citing McGill, 2 Cal. 5th at 960, 216 Cal.Rptr.3d 627, 393 P.3d 85). Therefore, the McGill rule thus does not apply here because Plaintiff's Complaint seeks private injunctive relief.

Because Plaintiff raises no other basis for finding the arbitration provision is invalid, Plaintiff fails to meet his burden of demonstrating a valid agreement to arbitrate his claims does not exist. Moreover, Plaintiff does not argue his claims are not covered within the scope of arbitration provision. Therefore, the Court must compel arbitration of Plaintiff's claims. See Chiron, 207 F.3d at 1130 (if there is a valid agreement to arbitrate and the agreement covers the dispute at issue, the FAA mandates that district courts “shall” direct the parties to proceed to arbitration on those claims).

B. Stay of Proceedings Pending Arbitration

Section 3 of the FAA provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3. Here, Defendants FEB and Concora request a stay of this case pending arbitration of Plaintiff's claims and Defendant Great American filed a joinder in the Motion. Therefore, the Court must stay the action pending the arbitration pursuant to 9 U.S.C. § 3.

IV. CONCLUSION

Accordingly, the Court GRANTS Defendant FEB and Concora's Motion to Compel Arbitration and Stay Proceedings, GRANTS Defendant Great American's Joinder of Motion, and stays this action pending completion of the arbitration.³ The parties shall file a status report re: arbitration no later than May 30, 2025.

IT IS SO ORDERED.

FOOTNOTES

1.   Defendant FEB and Concora submit evidence demonstrating Plaintiff did not give written notice that he was opting out of the agreement to arbitrate. (See Nilsson Decl. ¶ 11.)

2.   The Agreement expressly provides that the arbitration provision applies to Great American, “all affiliates, parents and subsidiaries” of Great American, and “all their employees, agents, or assigns.” (Nilsson Decl. Ex. A.)

3.   Having stayed this action, the Scheduling Conference set for February 24, 2025 is VACATED.

CONSUELO B. MARSHALL, UNITED STATES DISTRICT JUDGE