Pittman v. Santander Consumer USA, Inc.

Filing 14

MEMORANDUM OPINION AND ORDER as follows: 1) The 7 Motion to Compel Arbitration and DISMISS is GRANTED; 2) The Plaintiff must submit his claims to arbitration in accordance with the terms of the arbitration agreement contained in the Contract; 3) This case is DISMISSED. Signed by Honorable Judge W. Harold Albritton, III on 4/24/2014. (wcl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
JAMES LEE PITTMAN, JR.,
Plaintiff,
v.
SANTANDER CONSUMER USA, INC.,
Defendant.

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Case Number 2:14cv87-WHA

MEMORANDUM OPINION AND ORDER
I. INTRODUCTION
This cause is before the court on Defendant Santander Consumer USA, Inc.’s Motion to
Compel Arbitration and to Dismiss (Doc. # 7).
The Plaintiff, James Lee Pittman, Jr., originally filed his Complaint in this case on
February 10, 2014. He brings claims for violation of the Fair Debt Collection Practices Act
(“FDCPA”)(Count One), negligence (Count Two), wantonness (Count Three), breach of contract
(Count Four), fraud—intentional false statement (Count Five), fraud—reckless false statement
(Count Six), fraud—mistaken false statement and deceit (Count Seven), and fraud--concealment
(Count Eight).
For the reasons which follow, the Motion to Compel Arbitration and to Dismiss is due to
be GRANTED.
II. STANDARD FOR A MOTION TO COMPEL ARBITRATION
Pursuant to the Federal Arbitration Act, a written arbitration Aprovision in any . . . contract
evidencing a transaction involving commerce . . . [is] valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for the revocation of any contract.@ 9 U.S.C. ' 2.

Section 4 of the FAA allows a Aparty aggrieved by the alleged failure, neglect, or refusal of
another to arbitrate under a written agreement@ to petition the court Afor an order directing that
such arbitration proceed.@ 9 U.S.C. ' 4. When a court is Asatisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in issue,@ the court is required to
Amake an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement.@ Id.
III. FACTS
The submissions of the parties establish the following facts:
The Plaintiff, James Lee Pittman, Jr. (“Pittman”), on October 12, 2006, obtained a loan for
the purchase of a motor vehicle from Jack Ingram Motors Inc. and entered into a Simple Interest
Retail Installment Contract (“the Contract”). The contract included an arbitration clause, which
required arbitration of disputes which arise out of or relate to the Contract, and which also
provided that the arbitration clause survived termination of the Contract. The Contract with Jack
Ingram Motors Inc. was assigned to Santander Consumer USA, Inc. (“Santander”).
In 2011, Pittman filed a lawsuit against Santander in the United States District Court for
the Northern District of Alabama. That suit asserted violations of the FDCPA and the Telephone
Consumer Protection Act (“TCPA”), among other claims, in connection with the purchase of the
vehicle.
The case was ordered to arbitration, but the parties entered into a Confidential Settlement
Agreement and General Release (“Settlement Agreement”) and settled the case. The Settlement
Agreement contained an “entire agreement” clause which stated as follows:
This Agreement sets forth the entire agreement between the undersigned,
and fully supersedes any and all prior and/or contemporaneous agreements
or understandings between the undersigned, which pertain to the subject matter
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hereof. The terms of this Agreement may not be contradicted by evidence of
any prior or contemporaneous agreement, and no extrinsic evidence
whatsoever may be introduced to vary its terms in any judicial proceeding
involving this Agreement.
Confidential Settlement Agreement and General Release, at page 4 (emphasis added).1
In March 2013, Santander allegedly sent two emails in an attempt to collect on the
deficiency balance for the motor vehicle which was the subject of the Contract and Settlement
Agreement.
Pittman brought the federal statutory and state law claims in this case based on that
conduct by Santander.
IV. DISCUSSION
Santander moves to compel arbitration, arguing that Pittman entered into the Contract,
which contained an arbitration agreement, and that the claims in this case are related to the
Contract. Santander points out that the arbitration clause in the Contract contains a survival
clause which provides that it survives the termination, payoff, or transfer of the Contract and cites
cases which have concluded that disputes arising after termination of the parties’ agreement are
still subject to arbitration where the arbitration provision contains a survival clause. See, e.g.,
Bagley v. Allied Domecq Spirits & Wine USA, Inc., Civ. A. 3:06cv617-G, 2006 WL 2035660, at
*2 (N.D. Tex. July 19, 2006).
Pittman concedes that the Contract for the sale of the motor vehicle contained an
arbitration provision. Pittman argues, however, that his previous suit was resolved by settlement,
and that the Settlement Agreement did not contain an arbitration agreement, so his current claims

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The court notes that the Settlement Agreement was filed under seal. The court has referred in
this Memorandum Opinion and Order to language in that Settlement Agreement which was
quoted in Pittman’s brief, which has not been placed under seal.
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cannot be compelled to arbitration. He argues that the Settlement Agreement is a superseding
agreement that takes the place of the original Contract. He cites to language in the Settlement
Agreement that it “sets forth the entire agreement” and “fully supersedes any and all prior and/or
contemporaneous agreements or understandings between the undersigned, which pertain to the
subject matter hereof.” Pittman also argues that the Settlement Agreement intended to refer to
both contracts because the Settlement Agreement specifically refers to the Contract in the
“Recitals” section.
Pittman relies on the Eleventh Circuit’s recent decision Dasher v. RBC Bank (USA)__
F.3d __, No. 13-10257, 2014 WL 504704 (11th Cir. Feb. 10, 2014). In Dasher, there was an
account agreement between customers and RBC Bank which contained an arbitration clause.
RBC Bank was then acquired by PNC Financial Services Group, Inc., which issued its account
agreement which “ ‘superseded all prior versions’ of the account agreement, did not contain an
arbitration clause, and did not mention arbitration at all.” Id. at *1,*4. The Eleventh Circuit
determined that the PNC Financial Services Group, Inc. contract controlled and RBC could not
compel arbitration.

Id. at *14.

The Eleventh Circuit explained that the presumption of

arbitrability under the Federal Arbitration Act does not apply to a determination of whether an
agreement to arbitrate has been made. Id. at *3. The court reasoned that instead, courts apply
state contract formation law principles to determine whether the parties revealed an intent to
submit the dispute to arbitration.

Id.

The Eleventh Circuit acknowledged that in cases

involving the waiver of an arbitration provision, courts have found that arbitration can only be
waived by clear language, and not silence. Id. at *6. The court explained that in the waiver
cases, “the prior agreement remained effective to some extent for various reasons . . . .” Id. at *7.
The Eleventh Circuit distinguished those cases, however, and stated that the RBC agreement was
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completely superseded by express language that the most current version of the contract governed
and all prior versions were superseded. Id. at *4. The court held that if a subsequent agreement
only partially supersedes a prior agreement, amends it, or waives some but not all of its
provisions, the court must then determine if the arbitration provision was waived, but if the
subsequent agreement entirely supersedes the prior agreement, the court applies state law
principles to determine whether the subsequent agreement alone supports arbitration. Id. at *10.
Although Dasher is significantly different from this case in that it involved a successor
company which had entered into a new agreement to replace a previous agreement by a
predecessor company, not a settlement agreement resolving a dispute arising from the original
contract, and applied North Carolina, not Alabama law, it does provide a framework of analysis.
Therefore, this court must first determine whether the Settlement Agreement completely
supersedes the previous contract under state law, or whether the Contract remains effective in
some respect.
“Under general Alabama rules of contract interpretation, the intent of the contracting
parties is discerned from the whole of the contract.” Homes of Legend, Inc. v. McCollough, 776
So.2d 741, 746 (Ala.2000). “Whether a contract is integrated is ordinarily a question of law for
the court to decide.” Cavalier Mfg., Inc. v. Clarke, 862 So.2d 634, 640 (Ala. 2003). When
parties execute successive agreements and the “two agreements cover the same subject matter and
include inconsistent terms, the later agreement supersedes the earlier agreement.” Id. at 641.
As noted earlier, Pittman bases his interpretation of the parties’ intent on the inclusion
within the Settlement Agreement of language, fully quoted earlier, that it “fully supersedes any
and all prior and/or contemporaneous agreements or understandings between the undersigned,
which pertain to the subject matter hereof.”
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Santander responds that the purpose of that clause is to preclude parol evidence from
disproving the terms of the settlement. Santander argues that if the Settlement Agreement
completely superseded the previous retail installment contract, Pittman could not bring a FDCPA
claim, because there would be no consumer “debt.” Santander also argues that a contract which
is silent as to arbitration is not inconsistent with a contract which contains an arbitration clause.
Santander’s argument with respect to the “entire agreement” clause is consistent with
Alabama case law. The Alabama Supreme Court has explained, in a case which enforced an
arbitration provision, that the purpose of a such clauses is to ensure that “preliminary
negotiations, whether oral or written, are either memorialized in the final contract or are not
considered part of it.” Infiniti of Mobile, Inc. v. Office, 727 So.2d 42, 46 (Ala. 1999).
In Dasher, the Eleventh Circuit indicated that a clause which states that the agreement is
the entire agreement only as to the subject matter of the contract itself, is not effective as a
complete supersession of the previous contract. The Dasher court pointed to a case in which a
subsequent agreement was silent on arbitration and “expressly stated that it superseded the prior
agreement,” but was “explicitly limited to ‘matters covered by’ [the subsequent] agreement,” as
an example of a case in which the later contract did not completely supersede the original
contract. Dasher, 2014 WL 504704 at *7, 8 (quoting Sher v. Goldman Sachs, No. CCB–11–2796,
2012 WL 1377066, at *1–2 (D. Md. Apr. 19, 2012)). In contrast, the subsequent contract in
Dasher superseded the earlier one in its entirety. Id. at *8.
This analysis is consistent with the Alabama Supreme Court’s decision in Ex parte
Conference America, Inc., 713 So.2d 953 (Ala. 1998), in which the Court found arbitration to be
inappropriate where a contract stated broadly that it “shall constitute the entire agreement”

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between the parties, finding that the use of that broad language precluded consideration of an
arbitration clause found only in an earlier agreement.
In a case cited by Santander, the Alabama Supreme Court applied New York law, which
does not appear to be inconsistent with the Alabama cases discussed herein, to a case involving a
limited entire agreement clause and found the presumption in favor of arbitrability required
enforcement of an arbitration clause in an earlier agreement. Regions Bank v. Baldwin Cnty.
Sewer Serv., LLC, 106 So. 3d 383, 389 (Ala. 2012). The court reasoned that while the clause in
that case ensured that the contract constituted the entire agreement for one purpose, it did not have
an effect on the terms of earlier agreements, “including the scope of the arbitration clauses in
those agreements.” Id. at 390.
In this case, the “entire agreement” clause of the Settlement Agreement did not broadly
state that it is the entire agreement, but instead, as in Sher, stated that it supersedes any previous
agreements “which pertain to the subject matter hereof”, ie., the Settlement Agreement. That
limiting language appears to be sufficient to remove it from the category of “entirely
superseding” contracts, as identified by the Eleventh Circuit.
Pittman has argued that the “entire agreement” in the Settlement Agreement ought to be
read to include the Contract because the Contract is referenced in the recitals of the Settlement
Agreement. The reference to the Contract was not in the “Release and Agreement” section of the
Settlement Agreement, however, to which the “Entire Agreement” clause referred. The
historical note included in the Recitals that a Contract was entered into, and which is not found in
the substantive provisions of the Settlement Agreement, is not the “subject matter hereof”--the
Settlement Agreement.

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In this case, the court must conclude that, in applying Alabama law within the framework
provided by the Eleventh Circuit, the language of the Settlement Agreement that it is the entire
agreement between the parties “which pertain to the subject matter hereof” is not sufficient to
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entirely supersede the Contract.

As discussed, the argument Pittman has made in opposition to arbitration in this case is
that the Settlement Agreement entirely superseded the Contract which contained the arbitration
clause. Having concluded otherwise, the court further finds that arbitration was not waived by
clear language in the Settlement Agreement. Dasher, 2014 WL 504704, at *6. The claims in
this case, therefore, will be compelled to be submitted to arbitration.
Santander has sought dismissal of the case, not a stay, citing cases in which dismissal was
found to be appropriate where no substantive claims were left pending after compelling
arbitration. See, e.g., Clayton v. Woodmen of the World Life Ins. Soc., 981 F. Supp. 1447 (M.D.
Ala. 1997). In light of the plain language of 9 U.S.C. § 3, which requires a stay upon application
for a stay by one of the parties, in this case where neither party has requested a stay, but the
Defendant has requested dismissal, and finding dismissal appropriate, the court will dismiss the
claims.
V. CONCLUSION
For the reasons discussed, it is hereby ORDERED as follows:
1. The Motion to Compel Arbitration and DISMISS (Doc. #7) is GRANTED.

2 An interpretation that the Contract is not entirely superseded but is effective for at least some

purposes seemingly preserves the “debt” which forms the basis of Pittman’s federal claim in the
instant case.
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2. The Plaintiff must submit his claims to arbitration in accordance with the terms of the
arbitration agreement contained in the Contract.
3. This case is DISMISSED.
Done this 24th day of April, 2014.

/s/ W. Harold Albritton
W. HAROLD ALBRITTON
SENIOR UNITED STATES DISTRICT JUDGE

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