Richards v. Mark Gibson, HL & C Jackson, LLC et al

Filing 27

ORDER denying 22 Motion for Reconsideration Signed by Chief District Judge Louis Guirola, Jr on 03/04/2015 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
KIMBERLY RICHARDS
v.

PLAINTIFF
CAUSE NO. 1:15CV7-LG-RHW

MARK GIBSON; HL & C JACKSON, LLC; and
TOWER LOAN OF MISSISSIPPI, LLC

DEFENDANTS

ORDER DENYING PLAINTIFF’S MOTION TO ALTER AND
AMEND ORDER AND FOR RECONSIDERATION
BEFORE THE COURT is the [22] Motion to Alter and Amend Order and For
Reconsideration filed by Plaintiff Kimberly Richards. Defendant Tower Loan of
Mississippi, LLC, filed a Response in Opposition to the Motion, and Richards filed a
Reply. Having considered the parties’ submissions and the applicable law, the
Court is of the opinion that the Motion should be denied. Richards must submit her
claims against Tower to arbitration.
The facts of this case were set out in the Court’s Order entered in this action
on February 4, 2015. (ECF No. 18). By Order dated January 29, 2015, the Court
denied Tower’s Motion to Compel Arbitration and Stay Proceedings Pending
Arbitration. The next day, Tower filed a Motion to Alter or Amend the Court’s
Order, arguing that the controlling provision of the Dodd-Frank Act did not go into
effect until 2013 – after the date of the subject loan – and, thus, does not apply to
prohibit arbitration in this action.
On February 2, 2015, the Court entered a Text Only Order requiring
Richards to respond to Tower’s Motion to Alter or Amend on or before February 9,
2015. Richards filed a Response in Opposition to the Motion on February 3, 2015.

After reviewing the submissions of the parties and the law, the Court granted the
Motion to Alter or Amend and ordered that Richards must submit her claims
against Tower to arbitration. Richards now asks the Court to reconsider that
Order.
DISCUSSION
Although Richards requests that the Court give “her the opportunity to brief
issues belatedly raised by Tower[,]” (Mot. 1 (¶4), ECF No. 22), the Court already did
so when it ordered Richards to respond to Tower’s Motion. Richards’ argument that
she was prevented from briefing the issue of the effective date of the Dodd-Frank
Act is unpursuasive. Even so, Richards has extensively briefed the issues for which
she seeks Court review. (See Pl.’s Mem., ECF No. 23). The Court has also
exhaustively reviewed the law in this area and is of the opinion that no additional
briefing or oral argument is necessary.
Richards has never disputed that there is a 2012 agreement between she and
Tower to arbitrate the claims against Tower in this action. (See Order 5-6, ECF No.
18); Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). She
makes three arguments in the present Motion: (1) that 15 U.S.C. § 1639c(e) was
effective in 2010, not 2013; (2) that § 1639c(e) should be applied retroactively to the
2012 agreement in any event; and (3) that the arbitration agreement between she
and Tower is unconscionable. The Court addresses each argument in turn below.
(1)

Effective Date of Title XIV of the Dodd-Frank Act

15 U.S.C. § 1639c(e), part of Title XIV of the Dodd-Frank Wall Street Reform
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and Consumer Protection Act, states that “[n]o residential mortgage loan . . .
secured by the principal dwelling of the consumer may include terms which require
arbitration . . . as the method for resolving any controversy or settling any claims
arising out of the transaction.” There has never been any dispute that the
arbitration agreement at issue is part of a residential mortgage loan. The parties
dispute whether § 1639c(e) was effective in 2010 – thus rendering the 2012
agreement between the parties unenforceable – or 2013.1
The Dodd-Frank Act was enacted in 2010, but 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. Richards argues that § 1639c(e) took
effect in 2010, not 2013, because the later effective date “only applies to those
portions of Title XIV that require administrative regulations to be implemented[,]”
and § 1639c(e) “does not require any regulations to be promulgated.” (Pl.’s Mem. 3,
ECF No. 23). The Court thoroughly researched this very issue prior to entering its
February 4 Order, and is persuaded by the express mandate of the Consumer
Financial Protection Bureau (CFPB), the federal agency in charge of implementing
Title XIV:

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Richards mentions multiple times that Tower did not raise the effective
date of the Dodd-Frank Act when it moved to compel arbitration. This is not a valid
reason to grant Richards’ Motion, as the Court is always free to review and revise a
decision on a ground raised for the first time in a reconsideration motion with
respect to an interlocutory order. See In re Elevating Boats LLC, 286 F. App’x 118,
122 (5th Cir. 2008); see also Saqui v. Pride Cent. Am., LLC, 595 F.3d 206, 210 (5th
Cir. 2010).
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The provisions on mandatory arbitration and waiver are contained in
the Dodd-Frank Act. Absent action by the Bureau, they would take
effect on January 21, 2013. The Bureau believes that it is necessary
and appropriate to provide implementing language to facilitate
compliance with the statute. At the same time, the Bureau recognizes
the point made by several commenters regarding the importance of
these consumer protections. The fact that the Bureau is
implementing the provisions by regulation does not require
the Bureau to delay the provisions’ effective date for an
extended period, as the commenters may have assumed.
Instead, the Bureau is providing an effective date of June 1,
2013.
78 Fed. Reg. 11280, 11387 (emphasis added). Richards claims that 78 Fed. Reg.
11280 is inapplicable because it “does not even mention a ‘designated transfer date’
for Title XIV.” (Pl’s. Mem. 4, ECF No. 23). But it did not have to, since the CFPB
was explicit on when the prohibition on mandatory arbitration found in § 1639c(e)
became effective – in 2013, after the 2012 mortgage loan at issue in this action.
Finally, the Court is unpersuaded by Richards’ argument that Tower
improperly relied on 75 Fed. Reg. 57252, which Richards claims does not apply to
Title XIV. 78 Fed. Reg. 11280, the Federal Register section on which the Court
relied (and which Tower also cited), specifically applies to Title XIV.
(2)

Retroactive Application of § 1639c(e)

Richards claims that retroactivity is not an issue because the Dodd-Frank
Act was enacted before Richards filed her suit, and retroactivity is measured from
the date of a statute’s enactment. Taking Richards’ argument to its logical
conclusion, retroactivity would never be an issue for statutes with an effective date
after their enactment date. This argument is one of semantics, not substance. See

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generally, e.g., Vartelas v. Holder, 132 S. Ct. 1479 (2012) (applying retroactivity
analysis based on statute’s effective date); Landgraf v. USI Film Prods., 511 U.S.
244 (1994) (discussing the retroactive application of the Civil Rights Act of 1991
based on its effective date).
Richards next contends that the Court should retroactively apply § 1639c(e)
in any event. None of the authority cited by Richards stands for the proposition
that that section may be applied retroactively to the 2012 mortgage loan. The Fifth
Circuit has not yet had occasion to address the issue of the retroactivity of the
Dodd-Frank Act. See Holmes v. Air Liquide USA, L.L.C., 498 F. App’x 405, 406 n.2
(5th Cir. 2012). Regardless, “[t]he operative presumption . . . is that Congress
intends its laws to govern prospectively only.” Vartelas, 132 S. Ct. at 1491. “The
essential inquiry . . . is whether the new provision attaches new legal consequences
to events completed before its” effective date. See id. (citation and quotation marks
omitted). “That is just what occurred here.” Id. Moreover, the district courts that
have considered the issue have found that § 1639c(e) should not be applied
retroactively. See Weller v. HSBC Mortg. Servs., Inc., 971 F. Supp. 2d 1072, 107779 (D. Colo. 2013); State ex rel. Ocwen Loan Servicing, LLC v. Webster, 752 S.E. 2d
372, 379-86 (W. Va. 2013).
Richards argues that retroactive application of the statute “would not impair
any rights Tower possessed (right to arbitration) because that right was eliminated
by Congress” in 2010, and, thus, “Tower was aware of the arbitration ban as of” that

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date. (Pl’s. Mem. 5, ECF No. 23). This argument merely restates her previous
argument that the statute became effective in 2010. A party’s awareness of a
statute’s prohibition is not the test for whether the statute should be applied
retroactively. If anything, Tower was well aware that it could rely on its arbitration
agreement with customers until 2013, when the prohibition actually became
effective. To apply the prohibition retroactively would no doubt impair Tower’s
contractual rights, as discussed in further detail below. See AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740, 1745 (2011) (discussing “the fundamental principle
that arbitration is a matter of contract”) (citation and quotation marks omitted).
Richards also argues that § 1639c(e) is merely jurisdictional. (Pl’s. Mem. 5,
ECF No. 23). It is true that courts “have regularly applied intervening statutes
conferring or ousting jurisdiction, whether or not jurisdiction lay when the
underlying conduct occurred or when the suit was filed.” See Landgraf, 511 U.S. at
274. This is because “[a]pplication of a new jurisdictional rule usually ‘takes away
no substantive right but simply changes the tribunal that is to hear the case.’” See
id. (citation omitted). However, Richards’ same argument was made by the party
opposing arbitration in Weller, and the Court rejects the argument for the same
reason that court in Weller (and other courts) have rejected it.
In particular, not only is there a well-settled presumption against applying
statutes retroactively, see Landgraf, 511 U.S. at 263-65, but also “arbitration is
primarily a contractual matter governed by the law of contracts . . . .” See Weller,

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971 F. Supp. 2d at 1079. Thus, the Court agrees with the numerous courts that
“have concluded that the right to insist on arbitration is not just a matter of where
the claims may be heard but a question of vested, contractual rights, which may not
be retroactively withdrawn absent clear congressional intent to that effect[,]” which
is lacking here. See id. “An arbitration agreement creates a right, one that under
the [Federal Arbitration Act] is ‘irrevocable.’” Id. (quoting 9 U.S.C. § 2).
Furthermore, the Supreme Court has explicitly stated that “courts must place
arbitration agreements on an equal footing with other contracts, . . . and enforce
them according to their terms . . . .” Concepcion, 131 S. Ct. at 1745; see also Weller,
971 F. Supp. 2d at 1079. For all these reasons and those discussed previously, the
Court finds that § 1639c(e) does not apply retroactively.
(3)

Unconscionability

Finally, Richards argues that the arbitration agreement is unconscionable,
both substantively and procedurally. Richards only made a passing footnote
reference to unconscionability in her original brief. Regardless, the Court looks to
Mississippi state law to determine whether the agreement is unconscionable. See
Hill, 367 F.3d at 431.
a.

Procedural Unconscionability

“Procedural unconscionability is established by showing a lack of knowledge,
lack of voluntariness, inconspicious print, the use of complex legalistic language,
disparity in sophistication or bargaining power of the parties and/or a lack of

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opportunity to study the contract and inquire about the contract terms.” Smith v.
Express Check Advance of Miss., LLC, 153 So. 3d 601, 609 (Miss. 2014) (citation and
quotation marks omitted). Here, the print of the agreement was the same font as
the rest of the loan documents. In addition, Richards signed the documents directly
below a bold all capitalized statement that stated: “ARBITRATION
AGREEMENT: BY SIGNING BELOW AND OBTAINING THIS LOAN,
BORROWER AGREES TO THE ARBITRATION AGREEMENT ON THE
REVERSE SIDE OF THE AGREEMENT. YOU SHOULD READ IT
CAREFULLY BEFORE YOU SIGN BELOW.” (Loan Docs., ECF No. 22-1). The
Court cannot conclude that the agreement contains inconspicious print. See Smith,
153 So. 3d at 609-10; Pridgen v. Green Tree Fin. Servicing Corp., 88 F. Supp. 2d
655, 658 (S.D. Miss. 2000).
The one case Richards cites to argue that “the language in the arbitration
provision is not easily understandable by the average citizen[,]” (Pl’s. Mem. 7, ECF
No. 23), did not deal with unconscionability, but, rather, whether the parties
entered into an arbitration agreement in the first place. While the agreement “does
contain some legalistic language, its keys terms relating to arbitration are
unmistakeable” and gave Richards “substantial notice that she was agreeing to
forego any right to judicial review.” See Smith, 153 So. 3d at 610; see also Horton,
926 So. 2d at 178; Forest Hill Nursing Ctr., Inc. v. McFarlan, 995 So. 2d 775, 785
(Miss. Ct. App. 2008). The agreement is clear that, by signing, Richards is

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foregoing the right to a jury trial. It states that the parties
understand that under this arbitration agreement, they lose their right
to a jury trial, their pretrial discovery is more limited, the dispute
shall be heard and decided by someone who may not be a judge, the
arbitrator is not required to state the reasons for his decision, and the
right of appeal is very limited.
(Loan Docs., ECF No. 22-1).
Furthermore, while Richards contends that “[n]o one at Tower explained that
she was giving up her right to a trial by a jury[,]” (Pl’s. Mem. 6-7, ECF No. 23), she
does not dispute that she signed the loan documents and could have read them. See
Smith, 153 So. 3d at 610; see also Horton, 926 So. 2d at 177-78. Tower did not have
an inherent duty to explain the terms of the agreement to her and “she cannot
attribute [any] lack of knowledge to [Tower]’s failure to explain.” See Horton, 926
So. 2d at 177-78; see also Nw. Fin. Miss., Inc. v. McDonald, 905 So. 2d 1187, 1194
(Miss. 2005). Again, the loan documents themselves contained a bold, all
capitalized admonition that Richards should read the arbitration agreement
carefully before signing. See Smith, 153 So. 3d at 610 (Mississippi law “imposes a
duty on a contracting party to read what . . . she signs”). “Any reasonable person
reading [the] loan documents prior to signing [them] would expect to be subject to
arbitration and would know that they were waiving their right to a jury trial.” See
McDonald, 905 So. 2d at 1194. “There is also no evidence that a reasonable person
would not sign this document in return for a desired loan.” Id.
“That leaves only the disparity in sophistication or bargaining power of the

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parties as a potential factor in favor of procedural unconscionability.” Smith, 153
So. 3d at 610. Richards’ contention that “[a]t the time she signed the documents,
[she] was struggling financially and needed solutions[,]” (Pl’s. Mem. 6-7, ECF No.
23), is contradicted by her Complaint allegations. The loan at issue was signed in
2012, and Richards’ allegations of financial trouble all relate to events in 2014. (See
generally First Am. Compl., ECF No. 1-2).
But “[e]ven if [the Court] were to assume that [Tower] possesses an inherent
advantage in sophistication and bargaining power over [Richards], that imbalance
did not result in oppressive terms.” See Smith, 153 So. 3d at 610. “This Court could
hardly employ a rule which required the parties to every contract to be of exactly
equal sophistication. One party or the other will always be more or less
sophisticated in business matters than the other.” Horton, 926 So. 2d at 179.
“Here, however, there is no evidence in the record that [Richards] attempted to
negotiate the terms of the arbitration agreement or have it removed.” Id. And
“[n]othing in the record indicates [that she] could not have obtained a loan with
another financial institution, had she so desired.” Id. Richards makes allegations
about attempting to get a loan with Hancock Bank in 2014, but there are no similar
allegations for any prior loans, including the 2012 loan. In short, Richards “has
failed to demonstrate lack of sophistication sufficient to render the arbitration
agreement unenforceable.” See id.; see also Kisner v. Bud’s Mobile Homes, 512 F.
Supp. 2d 549, 556 (S.D. Miss. 2007).

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b.

Substantive Unconscionability

“Substantive unconscionability is proven by oppressive contract terms such
that there is a one-sided agreement whereby one party is deprived of all the benefits
of the agreement or left without a remedy for another party’s nonperformance or
breach.” Smith, 153 So. 3d at 607 (citation, quotation marks, and ellipses omitted).
Richards claims that the arbitration agreement is one-sided because “Tower
reserves five alternatives to resolving disputes with Richards . . . . Richards, on the
other hand, gets one option: arbitration. Additionally, in the arbitration clause,
Tower is not required to arbitrate matters under $5,000. In contrast, Richards is
required to submit all claims to arbitration.” (Pl’s Mem. 8, ECF No. 23).
The Court agrees with the analysis of the district court in Anglin v. Tower
Loan of Mississippi, Inc., 635 F. Supp. 2d 523 (S.D. Miss. 2009), discussing the
arbitration agreement challenged here,2 that “[c]ontrary to plaintiff’s urging, these
provisions are not so ‘lop-sided’ as to render the agreement unconscionable and
hence unenforceable.” See id. at 530. Namely, “[t]he agreement does permit Tower
to repossess or foreclose prior to arbitration, in recognition of the rights afforded it
in its security agreement. However, the agreement further states that ‘disputes
arising out of or relating to foreclosure or repossession of collateral shall be
arbitrated.’” See id. Moreover, “while the security agreement between the parties

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Richards claims “it is impossible to know if Richards’ arbitration agreement
is the same agreement ruled upon in Anglin . . . .” (Pl’s. Reply 3, ECF No. 26).
However, the contract provisions cited by the Anglin court are the exact provisions
Richards challenges here.
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purports to authorize Tower to file suit for default in payment, its right to do so is
limited by the arbitration agreement which provides that ‘[i]f either party files a
lawsuit involving a dispute covered by this agreement, the other party can have the
suit stayed and the plaintiff shall be required to arbitrate under this provision.’”
See id.3 (See also Loan Docs., ECF No. 22-1).
The primary case on which Richards relies for her argument of substantive
unconscionability, Caplin Enterprises, Inc. v. Arrington, 145 So. 3d 608 (Miss. 2014),
is distinguishable. There, the Mississippi Supreme Court concluded that the
defendant’s “arbitration clause and the limitation-of-liability clause, taken together,
effectively deny the plaintiffs an adequate remedy against” the defendant. See id.
at 616-17. It further found the arbitration clause unconscionable because it
permitted defendant “to pursue judicial remedies while relegating the plaintiffs’
claims to arbitration . . . .” See id. at 617; see also Covenant Health & Rehab. of
Picayune, LP v. Estate of Moulds ex rel. Braddock, 14 So. 3d 695, 700 (2000). As
discussed in Anglin, however, that is not the case here. Had Tower instituted suit
against Richards, Richards could have compelled Tower to arbitrate, as Tower has
admitted. The Court does not find the agreement’s provision that Tower is not
required to arbitrate matters under $5,000 to be so one-sided that it causes the
agreement to be void as unconscionable.

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In Anglin, Tower admitted that “under this provision of the arbitration
agreement, if it had commenced a collection action, plaintiff would have the right to
insist on arbitration.” 635 F. Supp. 2d at 530.
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Richards’ last argument is that the agreement “effectively exonerates Tower
from all liability for its unlawful business practices under” the Truth in Lending Act
(TILA) and Home Ownership and Equity Protection Act (HOEPA). (Pl’s. Mem. 8,
ECF No. 23). The Court is aware of no authority that would prohibit an arbitrator
from adjudicating Richards’ claims related to violations of TILA and/or HOEPA,
especially where the agreement applies to “[a]ll claims or disputed based upon
Federal or State laws or regulations . . . .” (Loan Docs., ECF No. 22-1).
CONCLUSION
For the foregoing reasons, the Court finds that Richards’ Motion is not welltaken and that Richards must submit her claims against Tower to arbitration.
IT IS THEREFORE ORDERED AND ADJUDGED that the [22] Motion to
Alter and Amend Order and For Reconsideration filed by Plaintiff Kimberly
Richards is DENIED. Richards’ requests for additional briefing and oral argument
are also DENIED. Richards is cautioned that the Court will not entertain any
additional motions or briefing on these issues.
SO ORDERED AND ADJUDGED this the 4th day of March, 2015.

s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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