Belyea v. GreenSky, Inc.

Background

Elizabeth Belyea and other plaintiffs sued GreenSky over loans for home improvements. The arbitration agreement assigned disputes about the validity, enforceability, and scope of the agreement to an arbitrator. After the court determined that a trial would otherwise be needed to decide whether Belyea had agreed to arbitration, the parties stipulated to facts about contract formation. The court then compelled Belyea to arbitrate and dismissed her claims without prejudice.

Belyea proceeded with arbitration through JAMS. JAMS billed GreenSky $1,500, with payment due upon receipt, and later requested payment again. GreenSky had not paid by August 3, 2022, when Belyea moved under Federal Rule of Civil Procedure 60(b)(6) to set aside the final judgment. GreenSky paid JAMS the next day.

Threshold Issues

The court held that it had jurisdiction to consider Belyea’s post-judgment motion because Rule 60(b) expressly permits a district court to revisit an earlier judgment. The court also held that it, rather than the arbitrator, could decide Belyea’s challenge to the arbitration agreement’s delegation clause. Belyea specifically challenged the enforceability of that clause, which delegated arbitrability questions to the arbitrator, rather than challenging the entire arbitration agreement. Under the Federal Arbitration Act, a court must decide a challenge directed specifically at a delegation clause.

Federal Arbitration Act Preemption

The court held that the Federal Arbitration Act preempts California Code of Civil Procedure section 1281.97 as applied here. That California statute requires a company that drafted an arbitration agreement to pay certain arbitration fees within 30 days of the due date. A failure to do so is treated as a material breach, default, and waiver of the right to compel arbitration.

The court reasoned that the statute imposes an arbitration-specific rule that makes an arbitration agreement unenforceable based on a ground that does not ordinarily apply to all contracts. In the court’s view, that conflicts with the Federal Arbitration Act’s equal-treatment principle, which permits generally applicable contract defenses but does not permit rules that single out arbitration agreements for special invalidation or non-enforcement. The court therefore ruled that section 1281.97 could not support Belyea’s request for relief.

Ordinary Breach and Waiver Principles

The court separately rejected Belyea’s argument under ordinary California contract principles. Although late payment or refusal to participate can sometimes breach an arbitration agreement, the court found that the agreement contained no provision making time essential and that GreenSky paid before JAMS terminated the arbitration. The court therefore concluded that GreenSky’s late payment was inefficient but did not breach the agreement.

The court also found no waiver. Although the Supreme Court has held that prejudice is not required to establish waiver of arbitration, the court concluded that GreenSky’s conduct was not sufficiently inconsistent with its arbitration rights. GreenSky participated in the arbitration, filed a timely answer with JAMS, and paid its share of the fees roughly 40 days after the invoice. The court also found no evidence that GreenSky acted in bad faith regarding the payment.

Disposition

The court held that Belyea did not meet Rule 60(b)(6)’s requirement of showing extraordinary circumstances justifying reopening a final judgment. It DENIED Belyea’s motion for relief under Rule 60(b)(6). The court also GRANTED Belyea’s motion to file a statement concerning a recent decision. The order stated that it disposed of Docket Nos. 176 and 182.