Richards v. Mark Gibson, HL & C Jackson, LLC et al
Filing
18
ORDER granting 14 Motion to Amend/Correct; granting 14 Motion for Reconsideration re 12 Order on Motion to Compel, Order on Motion to Stay Proceedings ; granting 14 Motion to Alter Judgment. The Court's Order 12 entered on Januar y 12, 2015 is set aside. The parties shall submit the claims against Tower to arbitration as provided by the Arbitration agreement and further proceedings against Tower are stayed pending arbitration. Signed by Chief District Judge Louis Guirola, Jr on 02/04/2015 (Guirola, Louis)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
KIMBERLY RICHARDS
PLAINTIFF
v.
CAUSE NO. 1:15CV7-LG-RHW
MARK GIBSON; HL & C JACKSON, LLC; and
TOWER LOAN OF MISSISSIPPI, LLC
DEFENDANTS
ORDER GRANTING MOTION TO ALTER OR AMEND AND
GRANTING MOTION TO COMPEL ARBITRATION AND STAY
PROCEEDINGS
BEFORE THE COURT is the [14] Motion to Alter or Amend Order Denying
Motion to Compel Arbitration and Stay Proceedings filed by Defendant Tower Loan
of Mississippi, LLC. Having considered the Motion and the applicable law, the
Court is of the opinion that the Motion should be granted. As set forth herein, the
Court is of the opinion that Richards must submit her claims against Tower to
arbitration.
BACKGROUND
Plaintiff Richards originally sued Defendants Tower, Mark Gibson, and HL &
C Jackson, LLC, in the Circuit Court of Jackson County, Mississippi. After
Richards amended her Complaint to state federal claims against the defendants,
Tower, with the consent of the co-defendants, removed the action to this Court.
After doing so, Tower filed the present Motion. On November 17, 2008, Tower made
a residential loan to Richards secured by a mortgage on Richards’ home. (See Am.
Compl. 2 (¶¶ 8-9), ECF No. 3-2). According to the allegations of her First Amended
Complaint, Richards refinanced the loan with Tower several times, which
refinances were secured by the original home mortgage and also by other property.
(See id. at 3 (¶¶ 10-12)). The final refinance agreement, which is the subject of this
action, was in the amount of $96,600.00 and took place on January 9, 2012. (See id.
(¶12)).
Richards alleges that when it became hard for her to continue making her
monthly payments to Tower, she contacted Tower about a loan modification, which
Tower refused. (See id. at 5 (¶29)). She claims that Tower told her that it “was
going to foreclose on her home[,]” and that this was “seemingly in retaliation for
merely asking about a loan modification. . . .” (See id. (¶30)). She contends that a
Tower employee then referred her to Gibson,1 who “told Richards he could help.” 1
(See id. at 5-6 (¶¶ 35-43)). Richards states that Gibson told her “that in order to
avoid the foreclosure [she] would have to sign an assumption warranty deed
whereby [Gibson] obtained title to Richards’ home.” (See id. at 6 (¶48)). She also
states that Gibson “assured her that he did not want her home[, but] stated he only
wanted the money he paid to Tower Loan for her mortgage.” (See id.). Richards thus
transferred title to her home to Gibson and/or HL & C and began making monthly
payments to Gibson at his request. However, Tower foreclosed a few months later
and purchased Richards’ home at the foreclosure sale. (See id. at 7 (¶¶ 49-55)).
Richards contends that the January 2012 loan from Tower violates provisions
of the Truth in Lending Act (TILA) and Home Ownership and Equity Protection Act
1
Richards alleges that “Gibson is the president, owner and sole shareholder 1
of HL & C.” (Am. Compl. 2 (¶5), ECF No. 3-2).
2
(HOEPA) and that the defendants induced her “into a foreclosure rescue scam.”
(See id. (¶57)). She includes the following Counts against the defendants in her
First Amended Complaint: accounting, equitable mortgage, fraud, tortious breach of
contract, breach of fiduciary duty, usury, violations of TILA/HOEPA, and
negligence. Tower has moved to compel arbitration of all claims based on the
Arbitration Agreement provision contained in Richards’ January 2012 refinance of
her mortgage loan with Tower.
On January 29, 2015, the Court denied a Motion to Compel Arbitration and
Stay Proceedings Pending Arbitration filed by Defendant Tower Loan of
Mississippi, LLC. The next day, Tower Loan filed the subject Motion, arguing (1)
that the Court denied it an opportunity to file a reply, and (2) that the controlling
provisions of the Dodd-Frank Act did not go into effect until 2013 – after the date of
the subject loan – and, thus, does not prohibit arbitration in this action.
DISCUSSION
“[A]ny order . . . that adjudicates fewer than all the claims . . . may be revised
at any time before the entry of a judgment adjudicating all the claims . . . .” Fed. R.
Civ. P. 54(b). When the Court “rules on an interlocutory order, it is free to
reconsider and reverse its decision for any reason it deems sufficient, even in the
absence of new evidence or any intervening change in or clarification of the
substantive law. Saqui v. Pride Cent. Am., LLC, 595 F.3d 206, 210 (5th Cir. 2010)
(citation and quotation marks omitted). Thus, the Court may revise a decision on a
ground raised for the first time in a reconsideration motion with respect to an
3
interlocutory order. See In re Elevating Boats LLC, 286 F. App’x 118, 122 (5th Cir.
2008). The Court’s decision to do so is reviewed for abuse of discretion only. See
Calpetco 1981 v. Marshall Exploration, Inc., 989 F.2d 1408, 1414-15 (5th Cir. 1993).
The Federal Arbitration Act (FAA) provides that arbitration agreements are
“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. The Fifth Circuit has
adopted a two-step inquiry for determining whether a party should be compelled to
arbitrate a dispute. See Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th
Cir. 2004). First, the Court must determine whether the parties agreed to arbitrate
the dispute. See id. This step has two components: (1) whether there is a valid
agreement to arbitrate between the parties and (2) whether the dispute between the
parties falls within the scope of the arbitration agreement.” See id.
“If both questions [of the first step] are answered in the affirmative, [the]
Court then asks whether any federal statute or policy renders the claims
nonarbitrable.” Jones v. Halliburton Co., 583 F.3d 228, 234 (5th Cir. 2009) (citation
and quotation marks omitted). The United States Supreme Court has made clear
that “[l]ike any statutory directive, the [FAA]’s mandate may be overridden by a
contrary congressional command.” Shearson/Am. Exp., Inc. v. McMahon, 482 U.S.
220, 226 (1987). “If Congress did intend to limit or prohibit waiver of a judicial
forum for a particular claim, such an intent will be deducible from the statute’s text
or legislative history, or from an inherent conflict between arbitration and the
4
statute’s underlying purposes.” Id. at 227 (citation, quotation marks, and brackets
omitted). “‘The relevant inquiry remains whether Congress precluded arbitration or
other nonjudicial resolution of claims.’” D.R. Horton, Inc. v. N.L.R.B., 737 F.3d 344,
360 (5th Cir. 2013) (citation, brackets, and ellipses omitted).
“When considering whether a contrary congressional command is present,
courts must remember ‘that questions of arbitrability must be addressed with a
healthy regard for the federal policy favoring arbitration.’” Id. (citation omitted).
“The party opposing arbitration bears the burden of showing whether a
congressional command exists.” Id. “Any doubts are resolved in favor or
arbitration.” Id.
(1)
Did Richards and Tower Agree to Arbitrate?
The Court had no reason to address this step in its previous Order. However
it is undisputed that the loan documents contain an Arbitration Agreement, which
both Richards and Tower attached to their filings with this Court. By its terms, the
Arbitration Agreement covers all claims and disputes between Richards and Tower,
including both contractual and tort claims, all claims or disputes based on federal or
state laws or regulations, disputes arising out of or relating to foreclosure, and all
claims and disputes arising out of, in connection with, or relating to the subject
loan. Thus, the language of the Agreement does appear to cover the claims against
Tower in this action. Moreover, Richards has never argued that she did not agree
to arbitrate the dispute or that the claims at issue are not covered by the language
of the Agreement. The Court is therefore of the opinion that there is an agreement
5
between Richards and Tower to arbitrate the claims against Tower in this action.
See, e.g., Anglin v. Tower Loan of Miss., Inc., 635 F. Supp. 2d 523, 527-28 (S.D.
Miss. 2009).
(2)
Is There Any Federal Statute or Policy That Renders the
Claims Non-Arbitrable?
The Court’s finding that Richards and Tower agreed to arbitrate does not end
the inquiry. See Jones, 583 F.3d at 234; Brown v. Pac. Life Ins. Co., 462 F.3d 384,
396 (5th Cir. 2006) (even if the Court determines that the parties agreed to
arbitrate, it must then “determine if any legal constraints foreclose arbitration”).
In its previous Order, the Court held that the Arbitration Agreement was
unenforceable under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). (See Order 5-8, ECF No. 12). In
particular, 15 U.S.C. § 1639c(e)2 is explicit that pre-dispute arbitration clauses in
residential mortgage loans, like the one at issue, are unenforceable. (See id.).
Tower does not dispute the Court’s interpretation of § 1639c(e) as barring
pre-dispute arbitration clauses in residential mortgage loans. Tower’s sole
argument is that § 1639c(e) is inapplicable to the loan between Richards and Tower
because that loan was entered into in 2012, and § 1639c(e) did not go into effect
until 2013, not in 2010 as the Court previously held.
2
“No residential mortgage loan . . . secured by the principal dwelling of the
consumer may include terms which require arbitration or any other nonjudicial
procedure as the method for resolving any controversy or settling any claims arising
out of the transaction.”
6
The Court has reviewed the authority cited by Tower in its Motion and is
persuaded that § 1639c(e) did not take effect until June 1, 2013. Although the Act
itself was enacted in 2010, certain provisions of the Act did not take effect until the
“date on which the final regulations implementing such . . . provision” took effect.
124 Stat. at 2136; see also Fowler v. U.S. Bank, Nat’l Ass’n, 2 F. Supp. 3d 965, 976
(S.D. Tex. 2014). The rule-making authority for § 1639c was transferred to the
Consumer Finance Protection Bureau in 2011. See Fowler, 2 F. Supp. 3d at 976.
The Bureau thereafter issued the final regulation implementing § 1639c on January
20, 2013, to take effect on June 1, 2013. See 78 Fed. Reg. 11,387 (February 15,
2013).
As a result, the Court must determine whether § 1639c(e) may be applied
retroactively to prohibit arbitration of the claims in this action. Richards cites to no
authority, and the Court is not aware of any, to suggest that § 1639c(e) may be
applied retroactively to the 2012 mortgage loan. See Fowler, 2 F. Supp. 3d at 977.
“‘The operative presumption, after all, is that Congress intends its laws to govern
prospectively only.’” Id. (citing Vartelas v. Holder, 132 S. Ct. 1479, 1491 (2012)).
“The essential inquiry in determining whether a statute applies retroactively is
whether the new provision attaches new legal consequences to events completed
before its enactment.” Id. (citation, quotation marks, and brackets omitted). In
conducting this inquiry, the Court agrees with other district courts that have that
have found that § 1639c(e) should not be applied retroactively. See Weller v. HSBC
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Mortg. Servs., Inc., 971 F. Supp. 2d 1072, 1077-79 (D. Colo. 2013); State ex rel.
Ocwen Loan Servicing, LLC v. Webster, 752 S.E. 2d 372, 379-86 (W. Va. 2013).
Accordingly, the Court finds that § 1639c(e) does not render Richards’ claims
against Tower non-arbitrable.
IT IS THEREFORE ORDERED AND ADJUDGED that the [14] Motion to
Alter or Amend Order Denying Motion to Compel Arbitration and Stay Proceedings
filed by Defendant Tower Loan of Mississippi, LLC is GRANTED.
IT IS FURTHER ORDERED AND ADJUDGED that the Court’s Order
[12] entered on January 12, 2015, is set aside. In accordance with this Order the
parties shall submit Richards claims against Tower to arbitration as provided by
the Arbitration Agreement. Any further proceedings against Tower are stayed
pending arbitration.3
SO ORDERED AND ADJUDGED this the 4th day of February, 2015.
s/
Louis Guirola, Jr.
LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE
3
See FAA, 9 U.S.C. § 3. Generally, this provision “applies only to parties to
the arbitration agreement.” See Adams v. Ga. Gulf Corp., 237 F.3d 538, 540 (5th
Cir. 2001).
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