A federal judge recommended tossing a Fort Collins man's attempt to extract $300 million from the city of Loveland through a scheme the court traced to a trend of "bogus" arbitration claims nationwide.
The court said the effort to impose an arbitration agreement on the city mirrors similar incidents across the country, in which judges have labeled Sitcomm Arbitration Association, the group hired by Eyoel-Dawit Matios to pursue his claim against the city, a "sham."
Matios, of Fort Collins, engaged Sitcomm to resolve an alleged dispute with Loveland involving a police encounter. The arbitration contract sent to the city labeled the document as "self-executing" and "binding." The city replied that it did not view Matios' claims as valid. Matios subsequently asked the federal court to confirm Sitcomm's award of $300 million to him.
On Wednesday, U.S. Magistrate Judge N. Reid Neureiter strongly rebuked Matios for engaging in "frivolous, vexatious, bad faith litigation."
"Mr. Matios’ instant attempt to enforce in federal court this non-existent arbitration 'contract' and the accompanying patently ridiculous $300 million arbitration award is fraudulent, an undue imposition on the City, and an extreme waste of judicial resources," Neureiter wrote on Nov. 10.
The magistrate judge also faulted Matios for failing to realize Sitcomm's services were fraudulent, and awarded Loveland attorneys' fees for its costs of defending against the lawsuit.
"There must be consequences for such an abuse of the court system," Neureiter added.
Matios, who represented himself in court, told Colorado Politics he could not discuss the details of the active case. However, he said his next legal filing "will unravel a few things the public needs to know and understand about our constitutional rights, our court system and those who sit in the positions of authority as well as how Pro Se petitioners are treated in the courts."
The rejection of Matios' request stemmed from a simple conclusion: Loveland had not consented to arbitrate with Matios, so there was never a valid agreement in the first place.
According to the court's narrative of events, Loveland received multiple mailings containing legal-like documents that claimed arbitration was the sole remedy for addressing Matios' claim for damages. Failure to respond, the documents said, would indicate the city's "consent and agreement to said facts."
The city's risk manager wrote to Matios in June 2020, explaining that Loveland would not pay any money. After Matios sent another notice alerting the city to an arbitration hearing — without indicating the location of the hearing — then-Deputy City Attorney Alicia Calderón responded that she considered the arbitration process a scam.
"Sitcomm Arbitration Association has been found to have filed fraudulent arbitration awards in several states," she wrote in January of this year. "As stated previously, we find no merit in any of the stated claims. The City cannot be unilaterally required to participate in arbitration."
After Sitcomm issued its $300 million arbitration award, using language Neureiter termed "questionable, nonsensical legal mumbo-jumbo," Matios filed a petition in August asking the court to confirm the payment. His theory, as he explained in court filings, was that Loveland's inaction in response to his repeated requests indicated the city's "assent" and that it "intends to accept" the arbitration ruling.
"By not responding, they assented to the terms of the contract," he explained in one video on his channel of 25,000 followers. "The court doesn't get to determine whether there's a valid arbitration clause."
In its order, the court noted that the Anti-Defamation League has linked this type of activity to the anti-government sovereign citizen movement.
"These arbitration schemes are well-poised to exploit two of the sovereign citizen movement’s most receptive audiences: 1) people who are financially stressed and 2) people who believe they have been victimized by the government," wrote the ADL, which monitors anti-Semitism and extremism.
The ADL's Center on Extremism identified Sitcomm as the largest promoter of fraudulent arbitration. Sitcomm claims on its website that its services "reduce the burden on government, the courts, and other administrative agencies." The ADL countered that the tactic clogs court dockets and forces parties that never agreed to the arbitration, like Loveland, to spend time and money defending themselves once the petitioner asks for court enforcement of the arbitration award.
Although the Federal Arbitration Act empowers courts to confirm awards from arbitration agreements, there must be a mutual agreement in the first place between the parties.
"The notion that Mr. Matios could simply send a letter to the City demanding a response and declaring that a failure to respond would constitute a self-executing, binding arbitration agreement is both fanciful and contrary to first legal principles," Neureiter wrote.
Sitcomm did not respond to an emailed request for comment.
Federal courts in other jurisdictions have condemned the arbitration demands when facing similar cases.
Last year, a judge in the Southern District of Mississippi observed that there has been "a recent rash of cases involving arbitration awards" from Sitcomm. Although several cases arose in Mississippi, there were also legal actions in Virginia, Texas, Oklahoma and Illinois.
One district court judge in the Northern District of Texas went so far as to send his order in a Sitcomm case to the U.S. Attorney's Office and multiple state attorneys general.
The Colorado Attorney General's Office and U.S. Attorney's Office for Colorado did not immediately answer questions from Colorado Politics about their knowledge of Sitcomm's operations.
The parties in Matios' case have 14 days to object to Neureiter's findings before U.S. District Court Judge William J. Martínez renders a final decision.
The case is Matios v. City of Loveland.