SmileDirectClub, Inc. v. Colorado

Background

SmileDirectClub, Inc. and SmileDirectClub, LLC, collectively called SDC, filed a petition asking the court to compel Renee Colorado to arbitrate. Colorado had filed an arbitration demand seeking declaratory relief as a putative class member and arguing that claims in a related class action were not arbitrable. The demand was closed because Colorado refused to sign a consent form required by the American Arbitration Association. Colorado had not filed a separate complaint and did not have a pending arbitration when SDC filed its petition.

Court’s reasoning

The court concluded that it lacked subject-matter jurisdiction, meaning the court did not have legal authority to decide SDC’s petition. Colorado was not the person who brought the claims in the related class action, and the closed arbitration demand did not appear to assert class claims. SDC did not adequately allege an amount in controversy specific to Colorado that could establish diversity jurisdiction; instead, SDC relied on the amount demanded in the related case. The court also explained that neither the Federal Arbitration Act nor the Declaratory Judgment Act independently provides federal-question jurisdiction.

The court stated that Colorado could challenge the arbitrability of claims in the related arbitration there, or assert Colorado’s own claims separately, but the court had no claims from Colorado to evaluate in this case.

Disposition

The court granted Colorado’s motion to dismiss SDC’s petition for arbitration and denied SDC’s petition to compel arbitration. The order resolved the matter on jurisdictional grounds and did not decide the underlying arbitrability question.