MortgageAmerica Inc v. Davis
MEMORANDUM OPINION. Signed by US Magistrate Judge T Michael Putnam on 3/28/2013. (KAM, )
2013 Mar-29 AM 11:29
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ALABAMA
Case No. 2:13-CV-00177-TMP
In this action for breach of contract, fraudulent representation, and fraudulent suppression,
plaintiff MortgageAmerica, Inc. (hereafter “plaintiff”) filed a motion to stay proceedings and compel
arbitration of the controversies in this matter on January 25, 2013. (Doc. 4). As grounds therefor,
plaintiff points to an unambiguous arbitration clause contained in the underlying agreement. (Doc.
4, Para 2). On March 20, 2013, defendant Nancy Davis (hereafter “defendant”) filed her response
to the motion to stay and compel arbitration, stating that she does not oppose it. (Doc. 10). The
parties have consented to the full dispositive jurisdiction of the undersigned magistrate judge
pursuant to 28 U.S.C. § 636(c). (See Doc. 13).
This action began as one for damages by MortgageAmerica against defendant Davis based
on breach of contract, fraudulent representation, and fraudulent suppression. Plaintiff alleges that
it contracted with Davis to manage its mortgage production office in Melbourne, Florida, and as part
of her duties, Davis breached the contract and committed fraud by originating, approving, and
processing mortgage loans based “on loan application packages that were deficient, were
non-compliant with applicable policies and procedures, and/or contained false representations of
material fact.” Filed at the same time as the complaint was plaintiff’s motion to stay proceedings
in this action and to order the parties to arbitrate the dispute between them based on a clause in the
contract between the parties, reading:
Any dispute between Manager and MAI is subject to binding arbitration if it arises
or involves a claim under this Agreement, under any federal or state statute,
regulation or common law doctrine regarding or relating to employment,
discrimination, or terms and conditions of employment including, but not limited to,
the Civil Rights Act, the Equal Pay Act, the Age Discrimination in Employment Act
(Federal or State), the Rehabilitation Act, the Americans with Disabilities Act, the
Employee Retirement Income Security Act or any other state or Federal law, statute
or regulation. The foregoing list is by way of example only and shall include all
present or future laws, statutes and regulations. The procedures to be used during any
arbitration shall be the rules of the American Arbitration Association or the National
Arbitration Forum, as selected by MAI. In order to make these arbitration procedures
readily available in the case of a dispute, MAI will pay 50% and the Manager will
pay 50% of the required administrative fees. Otherwise, each party will bear its own
arbitration expenses. Either party may demand an arbitration by written demand to
the other after which the parties will try to resolve any dispute by discussions
between themselves but if they are unable to resolve such dispute, then MAI will file
the appropriate documents to begin the arbitration. MAI may do so at any time after
giving or receiving a demand. The arbitrator(s) shall have the authority to grant any
remedy or relief that the arbitrator(s) deems just and equitable and which is consistent
with applicable law. To the fullest extent available under the law, Manager hereby
waives the right to a trial before a jury for any dispute or claim, whether the parties
have waived arbitration or whether a court has held arbitration provisions
inapplicable or unenforceable. The Manager and MAI acknowledge that Manager’s
employment involves the mortgage-related business and interstate commerce and that
arbitration is an appropriate method to resolve any disputes.
On March 20, 2013, defendant Davis filed her response to the motion to compel, saying simply that
she does not oppose it.
Because defendant does not oppose plaintiff’s motion to stay and compel arbitration, the
parties have essentially agreed that they are required to arbitrate the disputes pleaded in the
complaint, and the arbitrator will determine the merits of the controversy between them. By agreeing
that the motion to compel arbitration is due to be granted, the defendant is conceding that the movant
is able to show that “there is a valid arbitration agreement and that the disputed claims are subject
to arbitration.” See Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 626,
105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985); Lambert v. Austin Ind., 544 F.3d 1192, 1195 (11th Cir.
2008). Further, the parties agree that there is a “written arbitration agreement” that is “enforceable
‘under ordinary state-law’ contract principles.” Lambert, 544 F.3d at 1195; Perera v. H & R Block
E. Enterprises, Inc., 2012 WL 5471942 (S.D. Fla. Nov. 9, 2012). Thus, it is clear that the motion
to compel arbitration must be granted and the parties compelled to arbitrate their dispute. Therefore,
by separate order, the magistrate judge will grant the plaintiff’s motion to compel arbitration and will
compel the parties to proceed with arbitration of their controversies.
Stay or Dismissal?
Whether to stay a pending action in deference to arbitration or to dismiss it without prejudice
depends on whether all claims asserted in the action are subject to arbitration. Perera v. H & R Block
E. Enterprises, Inc., 2012 WL 5471942 (S.D. Fla. Nov. 9, 2012). If all of the claims pleaded in the
action are subject to arbitration, many courts have concluded that dismissal without prejudice is the
better course. “The weight of authority clearly supports dismissal of the case when all of the issues
raised in the district court must be submitted to arbitration.” Caley v. Gulfstream Aerospace Corp.,
333 F.Supp.2d 1367, 1379 (N.D.Ga. 2004) (compelling arbitration and dismissing the case), aff'd
428 F.3d 1359 (11th Cir.2005), quoting Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164
(5th Cir.1992); see also Perera v. H & R Block E. Enterprises, Inc., 2012 WL 5471942, *4-5 (S.D.
Fla. Nov. 9, 2012). When all issues raised in the judicial action are subject to arbitration, nothing
is left for the district court to litigate once arbitration has been ordered.
Other courts, however, have pointed to the express language of Section 3 of the Federal
Arbitration Act, which says that courts “shall” stay proceedings pending arbitration. Indeed, the
Eleventh Circuit has taken this position. See Bender v. A.G. Edwards & Sons, Inc., 971 F.2d 698,
699 (11th Cir.1992) (reversing the dismissal of arbitrable claims, remanding with instructions to
enter a stay, and stating that “[u]pon finding that a claim is subject to an arbitration agreement, the
court should order that the action be stayed pending arbitration”); Pilitz v. Bluegreen Corp., 2011
WL 3359641 (M.D. Fla. Aug. 4, 2011). The Pilitz court wrote:
In the Eleventh Circuit, some district courts opt to dismiss arbitrable claims where
all of the issues raised in the complaint must be submitted to arbitration. See, e.g.,
Olsher Metals Corp. v. Olsher, No. 01–3212–CIV, 2003 WL 25600635, at *9
(S.D.Fla. Mar. 26, 2003) (dismissing claims subject to arbitration in Italy). However,
the vast majority of district courts in the Eleventh Circuit stay arbitrable claims
pending arbitration, citing the express language of 9 U.S.C. § 3. See, e.g., Dorward
v. Macy’s Inc., No. 2:10–cv–669–FtM–29DNF, 2011 WL 2893118, at * 12 (M.D.Fla.
July 20, 2011); Mainsail Dev., LLC v. Rusco Invs., Inc., No.8:11–cv–45–T–33AEP,
2011 WL 2881599, at *1 (M.D.Fla. July 19, 2011) (staying action pending
notification that plaintiff has exhausted arbitration). While Bluegreen cites Alford
v. Dean Witter Reynolds, Inc., 975 F.2d 1161 (5th Cir.1992), a Fifth Circuit decision,
for the proposition that a case should be dismissed when all of the issues raised in the
district court are submitted to arbitration, the Eleventh Circuit has expressed a
preference that district courts stay arbitrable claims rather than dismiss them.
Pilitz v. Bluegreen Corp., 2011 WL 3359641 (M.D. Fla. Aug. 4, 2011) (citing Bender); but see
Gilchrist v. Citifinancial Services, Inc.334, LLC, 2007 WL 177821 (M.D. Fla. Jan. 19, 2007 (noting
that Eleventh Circuit has “frequently affirmed where the district court compelled arbitration and
dismissed the underlying case”) (citing Samadi v. MBNA Am. Bank, N.A., 178 Fed. Appx. 863 (11th
Cir. 2006), cert. denied, 127 S. Ct. 494 (2006); Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359
(11th Cir. 2005); Jackson v. Cintas Corp., 425 F.3d 1313 (11th Cir. 2005)).
The procedural posture of this case is unlike most of the cases involving arbitration. Here,
it is the same party that file the action for breach of contract and fraud that also moved to compel
arbitration. MortgageAmerica is both the plaintiff in this action and the party moving to compel
arbitration. Most (if not all) of the cases cited above involved an action commenced by one party,
prompting the defendant to compel arbitration of the claims pleaded by the plaintiff. In such cases
it is logically possible that not all claims alleged in the original complaint end up being arbitrated.
A stay preserves for the plaintiff a forum and timely action to litigate non-arbitrable claims, while
a dismissal pending arbitration requires the plaintiff to refile anew once the arbitration is finished
and subjects him to the possibility that his claims will become time-barred by a limitation period.
Thus, a stay of the ordinary case would be preferable and less potentially prejudicial to the plaintiff
compared to an outright dismissal of his claim.
But, as mentioned, this case is not the same as the paradigm cases noted above. Here, it is
the plaintiff who not only filed the action but also moved to compel arbitration of the claims alleged
by it in its own action. In this case, the danger of prejudice to the party against whom compelled
arbitration is sought is non-existent. Defendant Davis has been sued in this action, and plaintiff
MortgageAmerica also has also moved to compel her to participate in the arbitration of its claims
against her. It seems unfair to subject Davis to two separate proceedings — even if one is stayed
— when she has not elected either forum or even is asserting any claim against the plaintiff. The
plaintiff seems to want to have its cake and eat it too, by both suing Davis and insisting that she
participate in an arbitration plaintiff wants, not she. Admittedly, the court has been unable to find
a case similar to the instant one in which it is the plaintiff who seeks both to sue on substantive
theories and to compel arbitration.1 That may reflect that it is very usual for the plaintiff in a lawsuit
to move to stay his action while he arbitrates. By successfully moving to compel arbitration, the
plaintiff effectively elects to forgo litigation of the action, at least until the arbitration is completed.
As such, the complaint in this action should be dismissed without prejudice while it proceeds with
the arbitration it asked for.
By separate order the court will grant the motion to compel arbitration as opposed and will
dismiss this action without prejudice to allow the parties to arbitrate their controversy.
DONE this 28th day of March, 2013.
T. MICHAEL PUTNAM
U.S. MAGISTRATE JUDGE
This case is not like those in which a plaintiff files suit in federal court for the sole purpose
of seeking an order to compel a party in a separate action to arbitrate a claim. In those cases, the
usual pattern is where one party has filed an action against the other, usually in state court, and the
defendant in the state-court action files a complaint in federal court to stay the state-court action and
compel the state-court plaintiff to arbitrate rather than litigate. In this case, the plaintiff seeking to
compel arbitration also has pleaded substantive claims for breach of contract and fraud against the
defendant while simultaneously urging the court to compel the parties to arbitrate. Asking for a stay
is very close to asking for two bites at the apple — both arbitrating and holding in reserve this
lawsuit in the event the arbitration does not go well.
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