Stevens et al v. GFC Lending LLC

Filing 18

MEMORANDUM OPINION re: GFC Lendings motion to dismiss or to compel arbitration, strike class allegations, and stay proceedings. (Doc. 14). The Court DENIES GFCs motion to dismiss or compel arbitration, strike class allegations, and stay proceedings. Signed by Judge Madeline Hughes Haikala on 9/30/2015. (KEK)

FILED
2015 Sep-30 PM 05:24
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION

DUASJER STEVENS,
Plaintiff,
v.
GFC LENDING, LLC,
Defendant.

}
}
}
}
}
}
}
}
}

Case No.: 2:14-cv-02026-MHH

MEMORANDUM OPINION
I.

Introduction
This matter is before the Court on GFC Lending’s motion to dismiss or to

compel arbitration, strike class allegations, and stay proceedings.

(Doc. 14).

Duasjer Stevens alleges that GFC violated the Equal Credit Opportunity Act
(“ECOA”), 15 U.S.C. §§ 1691a–1691f, by failing to send her timely written
notification of the denial of her credit application and the reasons for it. (Doc. 13,
¶¶ 26-43).1

Ms. Stevens seeks to pursue her claim by certifying a class of

consumers who did not receive timely notice when GFC denied their applications
for credit. (Doc. 13, ¶ 17). GFC contends that Ms. Stevens lacks standing to
1

Ms. Stevens’s amended complaint is the operative pleading in this action. See Doc. 12; Pace
v. Peters, 524 Fed. App’x 532, 536 (11th Cir. 2013) (“Under the Federal Rules of Civil
Procedure, ‘an amended complaint supersedes the initial complaint and becomes the operative
pleading in the case.’”) (quoting Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir.
2011)).

pursue her claim because she has not shown that she was injured by GFC’s failure
to provide timely notice. (Doc. 14, pp. 12–16). Alternatively, GFC argues that
Ms. Stevens should be required to arbitrate her claim. (Doc. 14, pp. 6–11). For the
reasons stated below, the Court denies GFC’s motion.
II.

Factual Background
On June 13, 2014, Ms. Stevens “went shopping for a personal vehicle at

Champion [Automotive].” (Doc. 13, ¶ 11). After selecting a vehicle, Ms. Stevens
filled out a credit application, which employees of Champion sent to GFC. (Doc.
13, ¶ 12). GFC denied Ms. Stevens’s application for credit. (Doc. 13, ¶ 12).
Ms. Stevens did not receive an adverse action notice within 30 days of
GFC’s denial of her credit application. (Doc. 13, ¶ 12). In a statement of adverse
action dated August 24, 2014 and mailed to Ms. Stevens, GFC informed Ms.
Stevens in writing that her request for credit had not been approved. (Doc. 13, ¶¶
13–16; Doc. 13-1). Ms. Stevens alleges that her delayed receipt of a written
statement of adverse action caused her to suffer the following injuries: “the loss of
her rights to determine the basis for credit denial, the loss of her right to obtain a
free copy of her credit report, the potential exposure to discrimination, her loss of
the credit itself, frustration, anger, humiliation, fear, embarrassment and other
emotional and mental anguish.” (Doc. 13, ¶ 37).

2

Ms. Stevens did not sign an arbitration agreement with GFC in 2014, but she
did sign a stand-alone arbitration agreement with GFC on November 30, 2012.
(Doc. 6-5). That four-page arbitration agreement pertained to a separate vehicle
sales transaction. (Compare Doc. 6-5 and Doc. 13-1). GFC attempts to compel
arbitration of Ms. Stevens’ ECOA claim pertaining to her 2014 credit application
under the terms of the 2012 arbitration agreement. (Doc. 14).
III.

Discussion
A. Standing
GFC’s standing argument implicates the Court’s jurisdiction over Ms.

Stevens’s action.
“[B]ecause the constitutional standing doctrine stems directly from
Article III’s ‘case or controversy’ requirement, this issue implicates
our subject matter jurisdiction, and accordingly must be addressed as
a threshold matter regardless of whether it is raised by the parties.”
When analyzing a defendant’s “motion to dismiss we must evaluate
standing based on the facts alleged in the complaint, and we may not
‘speculate concerning the existence of standing or piece together
support for the plaintiff.’”
Duty Free Americas, Inc. v. Estee Lauder Companies, Inc., --- F.3d ----, 2015 WL
4709573, *16 (11th Cir. Aug. 7, 2015) (quoting Nat’l Parks Conservation Ass’n v.
Norton, 324 F.3d 1229, 1242 (11th Cir. 2003), and Shotz v. Cates, 256 F.3d 1077,
1081 (11th Cir. 2001)).

3

Federal courts, as courts of limited jurisdiction, may hear only those cases
that have been entrusted to them by the United States Constitution and a
Congressional grant of authority. See Univ. of S. Ala. v. Am. Tobacco Co., 168
F.3d 405, 409 (11th Cir. 1999). The Constitution restricts the jurisdiction of
federal courts to “Cases” and “Controversies,” as those terms are understood
within the context of Article III of the Constitution. U.S. Const. art. III, § 2, cl. 1.
“[T]he doctrine of standing serves to identify those disputes which are
appropriately resolved through the judicial process.” Whitmore v. Arkansas, 495
U.S. 149, 155 (1990).
At a minimum, a plaintiff wishing to establish standing to sue must show an
injury in fact that has been caused by the defendant and that is capable of being
redressed by the court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61
(1992); see also Duty Free Americas, 2015 WL 4709573, at *16. An injury in fact
is “an invasion of a legally protected interest which is (a) concrete and
particularized and (b) actual or imminent, not conjectural or hypothetical.” Lujan,
504 U.S. at 560 (internal citations and quotation marks omitted).
GFC argues that Ms. Stevens has alleged “potential injuries” that are too
“abstract, conjectural, or hypothetical in nature” to satisfy the requirements of
Article III. (Doc. 14, pp. 13–14). Some of the injuries that Ms. Stevens alleges,
such as “potential exposure to discrimination,” may be too conjectural or
4

hypothetical. (Doc. 13, ¶ 36). However, Ms. Stevens’s central contention is not at
all conjectural or abstract. Under the ECOA, Ms. Stevens was entitled to written
notification of GFC’s action on her credit application within thirty days of June 13,
2014, the date on which GFC received the completed application. 15 U.S.C. §
1691(d)(1). Because GFC denied her application, Ms. Stevens also was entitled to
a written statement of the reasons for the denial. 15 U.S.C. § 1691(d)(2); 12
C.F.R. §§ 1002.9(a)(1)(i), (a)(2). GFC did not prepare a statement of adverse
action until August 24, 2014. As a consequence, Ms. Stevens asserts that she lost
her right to determine the basis for the denial of her credit application, lost the right
to obtain a free copy of her credit report, lost credit, and suffered emotional and
mental anguish. (Doc. 13, ¶¶ 36–37). These alleged injuries, if proven, constitute
actual losses for which Ms. Stevens may recover damages. See Oden v. Vilsack,
No. 1000212, 2013 WL 4046456, at *13 (S.D. Ala. Aug. 9, 2013) (describing
mental anguish as a form of actual damages available under the ECOA); Fischl v.
General Motors Acceptance Corp., 708 F.2d 143, 148 (5th Cir. 1983) (“[U]nder
§ 1691e, . . . actual damages may include out-of-pocket monetary losses, injury to
credit reputation and mental anguish, humiliation or embarrassment.”).2
2

GFC argues that “Duasjer cannot avoid the import of her own previous allegations. In her
original complaint, Duasjer expressly alleged that she learned almost immediately after she
submitted her credit application that it had been denied by GFC, and that as a result she therefore
could not purchase the car she wanted. Doc. 1 at ¶¶ 12-13. She further alleged that she was told
by the dealership that due to her credit history, ‘she would need a co-signer in order to get
approved.’ Id. at ¶ 12.” (Doc. 14, p. 12; see also Doc. 17, p. 6). GFC’s argument fails in a
5

Citing two opinions that are not binding Eleventh Circuit precedent,3 GFC
argues that “[a] federal ‘statutory violation alone will not suffice to create
standing.’” (Doc. 17, p. 10) (quoting Morales v. U.S. Dist. Court for the Southern
Dist. of Fla., 580 Fed. App’x 881, 886–87 (11th Cir. Oct. 15, 2014), and Trujillio
v. Florida, 481 Fed. App’x 598 ([11th Cir. July 23,] 2012)). The law in this circuit
is not as clear as GFC suggests. In a decision that is binding on this Court, the
Eleventh Circuit noted that, “Congress may enact statutes creating legal rights, the
invasion of which creates standing, even though no injury would exist without the
statute.” United States v. Weiss, 467 F.3d 1300, 1311 (11th Cir. 2006) (quoting
Linda R.S. v. Richard D., 410 U.S. 614, 617 (1973)). By enacting the ECOA,
Congress created a legal right to timely written information regarding credit
variety of ways. First, Ms. Stevens can avoid her initial complaint because, as the Court has
noted, the amended complaint is now the operative pleading in this action. See note 1, supra.
Second, GFC’s liberal reading of Ms. Stevens’s original complaint is unpersuasive. In her
original complaint, Ms. Stevens did not allege that she learned at the dealership that her credit
application had been denied or that the dealership told her that she would need a co-signer “due
to her credit history.” Ms. Stevens alleged only that GFC denied her credit application and that
an employee of the dealership told her that she needed a co-signor for her loan to be approved.
(Doc. 1, ¶ 12). Ms. Stevens alleged that after her brother arrived at the dealership and provided
his credit information, she and her brother “were told that they had been approved.” (Doc. 1,
¶ 14). Neither Ms. Stevens’s original complaint nor her amended complaint contains an
allegation that she received information about the basis for GFC’s credit decision on June 13,
2014. Discovery may bring to light facts that substantiate GFC’s arguments, but the Court may
not assume the truth of GFC’s factual arguments at this stage of the litigation. At this stage, the
Court is limited to the actual allegations in Ms. Stevens’s amended complaint. And even if, as
GFC argues in its expansive reading of the amended complaint, someone at the dealership told
Ms. Stevens that her application was denied due to her credit history, that oral statement would
not eliminate the alleged ECOA violation or the alleged consequent damages. See Fischl v.
General Motors Acceptance Corp., supra.
3

11th Cir. Rule 36-2, 28 U.S.C.A. Rule 36-2.
6

decisions and provided for the private enforcement of that right by “aggrieved
applicants.” See 15 U.S.C. § 1691e(a) (“Any creditor who fails to comply with
any requirement imposed under this subchapter shall be liable to the aggrieved
applicant for any actual damages sustained by such applicant acting either in an
individual capacity or as a member of a class.”). The provisions of the ECOA
sufficiently “identify the injury [Congress] seeks to vindicate and relate the injury
to the class of persons entitled to bring suit.” Lujan, 504 U.S. at 580 (Kennedy, J.,
concurring in the judgment).
The United States Supreme Court has acknowledged that being denied
information can confer standing because “a plaintiff suffers an ‘injury in fact’
when the plaintiff fails to obtain information which must be publicly disclosed
pursuant to a statute.” Fed. Election Comm'n v. Akins, 524 U.S. 11, 21 (1998).
Ms. Stevens’s circumstances present an even stronger argument for standing given
that she was denied information concerning her own creditworthiness, not simply
information that might be of equal interest to any member of the public.
Ultimately, though, the point is academic for purposes of this action because Ms.
Stevens has alleged actual injuries. Ms. Stevens has identified consequences of
“an invasion of a legally protected interest” that are both “concrete and
particularized,” that GFC caused, and for which the Court may provide a remedy

7

via an award of damages pursuant to § 1691e(a). Therefore, the Court finds that
Ms. Stevens has standing to proceed with her suit.
B. Arbitration
The Federal Arbitration Act (“FAA”) provides that an agreement to arbitrate
a dispute “shall be 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.
“Pursuant to the FAA, a claim is arbitrable if the following three criteria are
satisfied: (1) there is a valid agreement to arbitrate; (2) the claim falls within the
scope of the agreement to arbitrate; and (3) the claim, if a statutory one, must not
be one which the legislative body enacting it intended to be precluded from
arbitration.” Vanhorn v. Locklear Auto. Grp., Inc., No. 2:15-CV-467, 2015 WL
4470320, at *2 (N.D. Ala. July 22, 2015) (citing Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 26 (1991)). “By its terms, the Act leaves no place for the
exercise of discretion by a district court, but instead mandates that district courts
shall direct the parties to proceed to arbitration on issues as to which an arbitration
agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213,
218 (1985) (emphasis in Byrd).
When a party petitions for an order compelling arbitration, a court must
issue the order “upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue . . . .” 9 U.S.C. § 4. To
8

determine if parties have made an agreement to arbitrate a dispute, courts apply the
legal standards imposed on contracts generally. See AT & T Technologies, Inc. v.
Commc’ns Workers of Am., 475 U.S. 643, 648 (1986); see also McDougle v.
Silvernell, 738 So. 2d 806, 808 (Ala.1999) (“Whether a contract to arbitrate exists
must be determined under general state-law contract principles”). GFC and Ms.
Stevens agree that they executed an arbitration agreement in November 2012 with
regard to the purchase of another vehicle. (See Doc. 16, p. 3; Doc. 14, p. 7; Doc.
6-5). The question before the Court is whether that arbitration agreement covers
the transaction between Ms. Stevens and GFC that is the basis of this suit. The
Court finds that it does not.
A court should not deny “[a]n order to arbitrate the particular grievance . . .
unless it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.” AT & T
Technologies, 475 U.S. at 650 (quoting United Steelworkers of Am. v. Warrior &
Gulf Nav. Co., 363 U.S. 574, 582–83 (1960)). Even with the presumption in favor
of arbitrability in mind, the Court can find no basis for stretching the scope of the
GFC arbitration agreement that Ms. Stevens signed in 2012 to cover Ms. Stevens’s
unrelated application for credit in 2014. By its terms, the 2012 agreement is
focused on the transaction taking place in 2012.

The heading of the 2012

agreement contains spaces for entering the “Deal ID” and “Contract Number” to
9

which the agreement applies, and the agreement repeatedly refers to “the Contract”
and “the vehicle.” (Doc. 6-5, pp. 2–3). The 2012 agreement defines its own scope
in terms of a “Claim” and then specifies that a “‘Claim’ means any claim, dispute
or controversy . . . arising from or related to” a list of twelve items that are aspects
of the 2012 transaction. (Doc. 6-5, p. 3).
The 2012 agreement also defines “Contract” to include a “prior Retail
Installment Contract and Security Agreement,” but not a future one. (Doc. 6-5, p.
2). “‘The doctrine of expressio unius est exclusio alterius instructs that when
certain matters are mentioned in a contract, other similar matters not mentioned
were intended to be excluded.’” In re Celotex Corp., 487 F.3d 1320, 1334 (11th
Cir. 2007) (quoting Plumbers & Steamfitters Local No. 150 Pension Fund v.
Vertex Constr. Co., 932 F.2d 1443, 1449 (11th Cir.1991)).

Thus, the 2012

agreement’s reference only to prior contracts and agreements indicates that GFC
did not intend the 2012 arbitration agreement to cover future agreements. In cases
in which courts have concluded that an arbitration agreement extends to future
interactions between the parties, the arbitration agreement has contained express
language referencing future claims, agreements, or relationships.

See, e.g.,

Anderson v. Waffle House, Inc., 920 F. Supp. 2d 685, 687 (E.D. La. 2013)
(arbitration agreement explicitly covered “all claims and controversies (‘claims’),
past, present, or future”); Southland Health Servs., Inc. v. Bank of Vernon, 887 F.
10

Supp. 2d 1158, 1164 (N.D. Ala. 2012) (arbitration agreement covered all disputes
“based upon any prior, current, or future agreement, loan, account, service,
activity, transaction (proposed or actual), event or occurrence”); Wickersham v.
Lynch Motor Co. of Auburn, No. 3:11CV280, 2012 WL 715322, at *3 (M.D. Ala.
Mar. 6, 2012) (parties agreed to arbitrate any disputes that “arise out of or relate to
any past or future transactions or dealings between” them); CitiFinancial Corp. v.
Peoples, 973 So. 2d 332, 334 (Ala. 2007) (“‘Claim’ means any case, controversy,
dispute, tort, disagreement, lawsuit, or claim now or hereafter existing between
You and Us.”). Such language is notably absent from the 2012 agreement between
GFC and Ms. Stevens.
GFC contends that three provisions of the 2012 agreement establish its
continuing nature: the reference to “all disputes” in the notice section, the defining
of “Claim” to have “the broadest reasonable meaning,” and the survival provision.
(Doc. 6, pp. 7–8; Doc. 14, pp. 8–9; Doc. 6-5, pp. 2, 3, 5). As an initial matter,
“[w]ritten documents ‘are to be construed as a whole so as to harmonize their parts
whenever possible.’” Guardian Builders, LLC v. Uselton, 154 So. 3d 964, 972
(Ala. 2014) (quoting Dudley v. Fridge, 443 So. 2d 1207, 1211 (Ala. 1983)). While
each of the three provisions cited by GFC can be read in harmony with an
arbitration agreement that governs only the 2012 transaction, reading them to

11

govern all future transactions requires disregarding related provisions that narrow
the cited provisions’ scope.
In the sentence following the reference to “all disputes” in the notice section,
the 2012 agreement specifies that if either party elects to arbitrate a dispute, Ms.
Stevens will be giving up her right to go to court “to assert or defend [her] rights
under the Contract.”

(Doc. 6-5, p. 2) (emphasis supplied).

As is apparent

throughout the 2012 agreement, the “disputes” contemplated by the agreement are
those related to the 2012 transaction. Next, immediately after stating that “‘Claim’
has the broadest reasonable meaning,” the 2012 agreement elaborates that the term
“includes claims of every kind and nature” and then lists a variety of legal claims.
(Doc. 6-5, p. 3). In the context of the 2012 agreement, “the broadest reasonable
meaning” the Court could give to “Claim” is that it extends to any action Ms.
Stevens might bring with regard to the 2012 transaction. There is no reasonable
basis for interpreting that language to extend to future transactions between Ms.
Stevens and GFC.

Finally, the survival provision, found under the heading

“Miscellaneous,” provides that the 2012 agreement “survives payment of all you
owe under the Contract. It also survives your bankruptcy and any sale by us of
your Contract.” (Doc. 6-5, p. 5). The plain meaning of the provision is that Ms.
Stevens cannot avoid her obligation to arbitrate a claim arising from the 2012
transaction simply because she has paid everything she owed for the vehicle, she
12

has declared bankruptcy, or GFC has sold her contract. GFC’s attempt to broaden
the scope of the 2012 agreement’s narrow provisions through reference to more
general provisions runs counter to the rule of contract construction “that a specific
provision prevails over a general provision relating to the same subject matter.”
Ward v. Check Into Cash of Alabama, LLC, 981 So. 2d 434, 438 (Ala. Civ. App.
2007) (citing ERA Commander Realty, Inc. v. Harrigan, 514 So. 2d 1329
(Ala.1987)).
GFC essentially argues that the 2012 agreement constituted a lifelong
commitment on the part of Ms. Stevens to arbitrate any disputes she might have
with GFC. Given GFC’s business model, in which subprime auto financing is
provided through third-party automobile dealerships, Ms. Stevens would have little
advance warning that a particular potential future transaction was going to be
governed by the 2012 agreement under GFC’s theory. (See Doc. 13, ¶ 5). In
addition, GFC’s argument requires accepting that a lifelong commitment
potentially affecting numerous future transactions could be created sub silentio in
an agreement that never mentions future transactions. GFC’s argument asks too
much.

The presumption in favor of arbitration stops short of compelling

arbitration when a party did not agree to arbitrate. Jim Walter Res., Inc. v. United
Mine Workers of Am., 663 F.3d 1322, 1325 (11th Cir. 2011) (“[A]rbitration is a
matter of contract and a party cannot be required to submit to arbitration any
13

dispute which he has not agreed so to submit.”) (quoting Warrior & Gulf, 363 U.S.
at 582). Therefore, the 2012 arbitration agreement does not apply to Ms. Stevens’s
2014 application for credit.4
Conclusion
For the reasons discussed above, the Court DENIES GFC’s motion to
dismiss or compel arbitration, strike class allegations, and stay proceedings. The
Clerk is directed to please TERM Doc. 14.
DONE and ORDERED this September 30, 2015.

_________________________________
MADELINE HUGHES HAIKALA
UNITED STATES DISTRICT JUDGE
4

In its motion to dismiss or compel arbitration of the claims in Ms. Stevens’s original complaint,
GFC attempted to compel Ms. Stevens to arbitrate her claim because Ms. Stevens’s brother,
Dubar, signed an arbitration agreement with GFC in 2014. (Doc. 14, pp. 9–10; Doc. 6, pp. 14–
16). Ms. Stevens’s amended complaint limits its allegations to conduct that does not involve
Dubar. (Doc. 13, ¶¶ 10–16). Therefore, GFC’s arguments are misplaced. In addition, the Court
finds that the facts as alleged by Ms. Stevens do not fit any of the four situations in which “a
nonparty to an arbitration agreement may compel or be compelled to arbitration under Alabama
law . . .” Hanover Ins. Co. v. Atlantis Drywall & Framing LLC, 611 Fed. Appx. 585, 589 (11th
Cir. 2015). The four situations are as follows: First, the nonparty signed a contract that
incorporates the arbitration agreement by reference. Id. Second, the nonparty signed a
document that should be read together with the arbitration agreement because the documents
were part of a single transaction. Id. Third, “Alabama will enforce an arbitration provision in a
contract to which the party moving for arbitration is not a signatory if the party is a third-party
beneficiary of the contract containing the arbitration provision.” Id. at 590. Fourth, the doctrine
of “intertwining” applies. Id. Intertwining requires closely related arbitrable and nonarbitrable
claims and “that ‘the signatory to the arbitration agreement is or will be engaged in an arbitration
proceeding with the plaintiff.’” Id. (quoting Jenkins v. Atelier Homes, Inc., 62 So. 3d 504, 512
(Ala. 2010)). None of these situations describes the relationships among GFC, Dubar, and Ms.
Stevens. Ms. Stevens did not sign a document relating to the 2014 sales transaction. Assuming
arguendo that she is a third-party beneficiary of that transaction, she is not attempting to compel
arbitration; GFC, a signatory, is. And GFC has identified no related pending arbitration
proceedings to which the doctrine of intertwining might apply.
14