Hagy et al v. Demers & Adams, LLC et al

Filing 44

OPINION AND ORDER granting 15 & 38 the MOTIONS to Stay Proceedings and Compel Arbitration. All claims against the Green Tree Defendants are stayed pending the completion of the arbitration. Signed by Magistrate Judge Terence P Kemp on 2/2/2012. (kk2) Modified on 2/2/2012 to correct text (kk2)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
James R. Hagy, III, et al.,
Plaintiffs,

:
:

v.

:

Case No. 2:11-cv-530

:
Demers & Adams, LLC, et al.,

Magistrate Judge Kemp
:

Defendants.
OPINION AND ORDER
On November 2, 2011, the Court denied (but without
prejudice) Defendants Green Tree Servicing LLC’s and Kevin
Winehold’s (the “Green Tree Defendants”) motion to stay the
claims against them and to compel the plaintiffs, James R. Hagy,
III and Patricia R. Hagy, to submit those claims to arbitration.
The basis of that order was that the arbitration clause relied on
by the Green Tree Defendants is found in a promissory note which
the Hagys executed in favor of Conseco Finance Service Corp., and
although Green Tree claimed to have succeeded to Conseco’s
interest in the mortgage, there was nothing in the record to
support that claim.
The Green Tree defendants then amended their motion,
submitting documents from the Delaware Secretary of State which
address the successorship issue.

Plaintiffs responded to the

motion, arguing both that the documents do not prove that Green
Tree is Conseco’s successor in interest, and that even if it is,
the Court should not enforce the arbitration clause.

For the

following reasons, this Court grants the Green Tree Defendants’
motion to stay proceedings and to compel arbitration.
I. Background
In September of 2002, the Hagys executed a fixed-rate note

and a mortgage securing payment of that note in favor of Conseco
Finance Servicing Corp.

The note, which is attached to the

amended complaint, contains this arbitration clause:
All disputes, claims, or controversies arising from or
relating to this contract or the relationships which
result from this contract, or the validity of this
arbitration clause or the entire contract, shall be
resolved by binding arbitration by one arbitrator
selected by you with my consent.
***
Notwithstanding anything hereunder to the contrary, you
retain an option to use judicial or non-judicial relief
to enforce a security agreement relating to the
collateral secured in a transaction underlying this
arbitration agreement, to enforce the monetary
obligation, or to foreclose on the collateral. Such
judicial relief would take the form of a lawsuit.
According to the amended complaint, on April 28, 2010,
Defendant Green Tree (acting through counsel, who are also
parties to this case) filed a foreclosure action against the
Hagys in the Carroll County Court of Common Pleas.

After

receiving the summons and complaint, Patricia Hagy called Green
Tree’s lawyers and asked whether the foreclosure case could be
settled.

On June 8, 2010, attorney David Demers sent the Hagys a

letter and warranty deed in lieu of foreclosure. (Amended
Complaint, #18, Ex.3).

Mr. Demers said that he had been advised

by Green Tree that in return for receiving a deed in lieu of
foreclosure, Green Tree would waive any deficiency balance that
the Hagys owed.

On June 24, 2010, the Hagys signed the warranty

deed in lieu of foreclosure. (Amended Complaint, #18, Ex. 4).

On

June 30, 2010, Mr. Demers wrote a letter to the Hagys’ counsel,
James Sandy, stating that he had received the deed and,
responding to Mr. Sandy’s question about what might happen should
the property be sold for less than the amount owed on the note,

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that Green Tree would not attempt to collect a deficiency balance
if one remained after Green Tree sold the property. (Amended
Complaint, #18, Ex. 5).
What happened next is the subject of this federal lawsuit.
According to the Hagys, the Green Tree Defendants began
contacting them by phone trying to collect a deficiency balance.
Believing that the Fair Debt Collection Practices Act (“FDCPA”),
15 U.S.C. §1692, et seq., the Ohio Consumer Sales Practices Act
(“OCSPA”), O.R.C. §1345.01 et seq., and Ohio common law
prohibited such conduct, the Hagys filed this case against both
Green Tree and its attorneys.

The merits of that claim, of

course, are not before the Court at this time; the current issue
is whether the Hagys are bound by the terms of the note to
arbitrate their claims against the Green Tree Defendants.
II. Discussion
A. Standard of Review
This case is governed by the Federal Arbitration Act
(“FAA”), which provides that a court may stay a case pending
arbitration in accordance with the terms of an arbitration
agreement once the court is satisfied that the issues involved
are referable to arbitration.

See 9 U.S.C. §3.

Under the FAA,

an arbitration clause contained in a commercial contract “shall
be valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.”
U.S.C. §2.

9

Although the enforcement of arbitration agreements

contained in contracts governed by state law is usually
determined under state law, if a federal statutory claim is the
subject of the proposed arbitration, and the district court is
exercising federal question rather than diversity jurisdiction,
federal law would appear to govern at least some aspects of the
question.

See Green Tree Financial Corp.-Alabama v. Randolph,

531 U.S. 79 (2000).

And the FAA itself can be a source of legal
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authority which trumps inconsistent state law.
v. Concepcion, 131 S.Ct. 1740 (2011).

AT&T Mobility LLC

However, as the AT&T

Mobility court observed,
The final phrase of § 2 ... permits arbitration
agreements to be declared unenforceable “upon such
grounds as exist at law or in equity for the revocation
of any contract.” This saving clause permits
agreements to arbitrate to be invalidated by “generally
applicable contract defenses, such as fraud, duress, or
unconscionability,” but not by defenses that apply only
to arbitration or that derive their meaning from the
fact that an agreement to arbitrate is at issue.
Even if federal common law supplies the rule for deciding
whether there are any generally applicable contract defenses
available to the party seeking to avoid arbitration of a federal
statutory claim, courts have nonetheless routinely looked to the
law of the States having an interest in the underlying contract
to inform their decision.
F.3d 369 (3d Cir. 2007).

See, e.g. Gay v. CreitInform,

511

This Court will therefore consider

whether Ohio law provides any defenses to the arbitration clause
at issue here, keeping in mind that the FAA “manifests ‘a liberal
federal policy favoring arbitration agreements.’”

Masco Corp. v.

Zurich Am. Ins. Co., 382 F.3d 624, 626 (6th Cir. 2004), quoting
Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
24 (1983).
A district court considering a motion to compel arbitration
has four tasks: “first, it must determine whether the parties
agreed to arbitrate; second, it must determine the scope of that
agreement; third, if federal statutory claims are asserted, it
must consider whether Congress intended those claims to be
nonarbitrable; and fourth, if the court concludes that some, but
not all, of the claims in the action are subject to arbitration,
it must determine whether to stay the remainder of the
proceedings pending arbitration.”
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Fazio v. Lehman Bros., Inc.,

340 F.3d 386, 392 (6th Cir. 2003), quoting Stout v. J.D. Byrider,
228 F.3d 709, 714 (6th Cir. 2000); see also Masco Corp., 382 F.3d
at 627 (holding a court must engage in a limited review to
determine whether the dispute is arbitrable before compelling a
party to arbitrate).
i. The Parties’ Agreement to Arbitrate
The Hagys do not dispute they agreed to arbitrate.

They

have not alleged they did not read the document, willingly sign
the document, or that they were deceived into signing something
other than a promissory note containing an arbitration agreement.
Because they have not disputed this issue, this Court finds the
Hagys agreed to resolve any disputes within the scope of the
arbitration clause through binding arbitration.
ii. The Scope of the Arbitration Agreement
District courts have the authority to decide whether an
issue is within the scope of an arbitration agreement. Some
issues, such as ones relating to the interpretation,
construction, or performance of the contract containing the
arbitration clause, typically fall within the scope of such a
clause; otherwise, it would be largely meaningless.

But

arbitration clauses are not always limited to matters pertaining
directly to the underlying contract, particularly if the clause
is broadly worded.

Most disputes over arbitration clauses raise

the question of where to draw the line between matters that the
parties agreed to arbitrate, and matters they did not.

In the

end, of course, it is the parties’ intent, expressed in the
language of the arbitration clause, that controls.
As far as matters which typically need not be arbitrated,
the Court of Appeals (as well as the Ohio courts) have held that
“if an action could be maintained without reference to the
contract or relationship at issue,” it is likely outside the
scope of the arbitration agreement.
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Fazio, 340 F.3d at 395;

Alexander v. Wells Fargo Financial Ohio, Inc., 122 Ohio St.3d
341, 345 (incorporating the holding of Fazio into Ohio law).

On

the other hand, not just contract matters, but tort claims, may
fall within the scope of an arbitration clause “if the [tort]
allegations ‘touch matters’” covered by the agreement.

Fazio,

340 F.3d at 395, quoting Genesco, Inc. v. T. Kakiuchi & Co.,
Ltd., 815 F.2d 840, 846 (2d Cir. 1987); Alexander, 122 Ohio St.3d
at 345.

Thus, in Fazio, the court held that customers’ claims

against their brokerage houses based on a broker’s
misappropriation of funds, which clearly are tort claims, had to
be arbitrated because “the lawsuit by necessity must describe why
[defendant] was in control of the plaintiffs’ money and what the
brokerage houses’ obligations were.

The plaintiffs therefore

cannot maintain their action without reference to the account
agreements...” Fazio, 340 F.3d at 395.
The arbitration agreement here covers “[a]ll disputes,
claims, or controversies arising from or relating to this
contract or the relationships which result from this
contract....”

Each of the Hagys’ claims against the Green Tree

Defendants, which claims arise under the FDCPA, the OCSPA, and
the Ohio common law of invasion of privacy, are premised on the
Hagys’ allegation that the Green Tree Defendants wrongfully
attempted to collect a debt which was initially created by the
promissory note containing the arbitration clause and purportedly
extinguished when the Hagys signed and delivered a deed in lieu
of foreclosure.

It would be impossible for the Hagys to prove

any of these claims without introducing into evidence, and
referring to, the promissory note and the debt relationship which
it created.

Consequently, all of these claims seem to fit neatly

within the language of the arbitration clause which includes, as
arbitrable disputes, matters “relating to ... the relationships
arising out of [the note]....”
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Were this Court to reach that result, it would not be alone.
Other courts have interpreted similar arbitration clauses in a
similar way.

See, e.g., Wilder v. Midland Credit Mgmt., 2010 WL

2499701, *4 (N.D. Ga. May 20, 2010)(holding that where
arbitration agreement covered claims “arising from or relating to
this Agreement or the relationships which result from this
Agreement,” the arbitration agreement was broad enough to cover
FDCPA claim involving actions undertaken in collecting a debt
that related to a credit account); Miller v. Northwest,2005 WL
1711131, *4 (E.D. Wash. July 20, 2005)(finding plaintiffs’ FDCPA
claims fell within the scope of a loan agreement because they
“arise from” the debt created by the note and the “relationships
which result from” the note).
In their responsive memorandum, the Hagys argue that the
arbitration agreement does not cover this dispute because their
note and mortgage contract with the Green Tree Defendants ended
when the foreclosure case was resolved.

In their view, the

arbitration agreement cannot apply to their claims because those
claims arose only after the note was extinguished.
While this argument has some facial appeal, it is ultimately
without merit.

Generally, “when a dispute arises under an

expired contract that contained a broad arbitration provision,
courts must presume that the parties intended to arbitrate their
dispute.

This is so even if the facts of the dispute occurred

after the contract expired.”

Riley Mfg. Co., Inc. v. Anchor

Glass Container Corp., 157 F.3d 775, 781 (10th Cir. 1998).

The

Ohio Supreme Court case of Alexander v. Wells Fargo Financial
Ohio 1, Inc., 122 Ohio St.3d 341 (2009) well-illustrates this
point.

There, the plaintiff entered into a mortgage agreement

with Wells Fargo and signed an accompanying mandatory arbitration
agreement.

She alleged, in her complaint, that she had paid off

the mortgage but that Wells Fargo failed to file the entry of
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satisfaction of the mortgage within the 90 days prescribed by
statute.

Wells Fargo filed a motion to compel arbitration on

this issue, and the plaintiff countered that because the mortgage
was extinguished before the statutory duty to file the mortgage
release arose, the claim did not “arise out of or relate to the
mortgage agreement.”

Id. at 344.

The Supreme Court of Ohio

disagreed, finding that her claim stemmed from her initial
signing of the mortgage document.

It noted that “[t]o recover,

[plaintiff] must prove that she paid off the loan and that the
mortgage release was not timely filed.” Id. at 344.

Because such

proof related to the parties’ relationship as established by the
promissory note, the claim fell within the scope of the
arbitration clause.
Similar reasoning applies here.

All of the Hagys’ claims

presuppose that the Green Tree Defendants had a legal duty to
refrain from further efforts to collect on the note.

In order

for that legal duty to have arisen, the Hagys would have to
“prove that [they] paid off the loan” by way of the deed in lieu
of foreclosure.

Because this type of proof is exactly the same

type of proof the plaintiff in Alexander had to offer, and
because the arbitration clauses in both cases read substantially
the same, including language requiring arbitration of any claims
either arising out of or “relating to” the underlying contract,
Alexander cannot be meaningfully distinguished.

This reasoning

has been applied in other cases where the debt created by the
note was purportedly extinguished prior to the events giving rise
to the plaintiff’s claim.

See, e.g., Alkenbrack v. Green Tree

Servicing, LLC, 2009 WL 4756349, *3-4 (Geauga Co. App. Dec. 11,
2009)(holding that although the plaintiff’s debt had been
discharged in bankruptcy, his claim that by sending him
statements after the date of discharge, Green Tree incurred tort
liability, arose out of the parties’ contract and was within the
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scope of the arbitration provision); see also Vanyo v.
Citifinancial, Inc., 183 Ohio App. 3d 612, 614-615 (Cuyahoga Co.
2009)(also involving a claim that the lender failed timely to
file a termination statement after the loan was paid).
The Hagys contend, however that this case cannot be
distinguished from Runion v. Am. Gen. Fin. Servs., 2008 WL
2468573 (Huron Co. App. June 20, 2008), a case where arbitration
was not ordered.

They are mistaken.

The facts of that case are

very different; the plaintiff property owner filed suit against
his lender, who had foreclosed on the property and bought it at a
foreclosure sale, as well as a contractor hired by the lender,
alleging that the two defendants had either converted or
destroyed certain personal property which had remained inside the
residence after the foreclosure sale.

The Runion court rightly

concluded that these events did not fall within the scope of the
arbitration agreement contained in the parties’ loan agreement (a
home equity line of credit) because the alleged conversion of the
personal property was completely unrelated to the loan agreement
and mortgage.

In order to prove that claim, the plaintiff would

not have had to prove anything at all about the parties’ prior
dealings, but simply that he owned the personal property in the
home and that the defendants unlawfully converted or destroyed
it.

Given the lack of similarity of the facts of Runion and the

strong parallel between this case and Alexander, the Court finds
the latter case the more persuasive.
The Hagys also argue that their claims are outside the scope
of the arbitration clause under the doctrine of merger by deed.
They argue that as soon as the deed was accepted by the Green
Tree Defendants, the parties’ contract was extinguished and none
of its terms could be enforced thereafter, supposedly because all
of the terms of the prior agreement were “merged” into the deed
in lieu of foreclosure, which does not contain an arbitration
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clause.

To the extent that this is a different argument than the

Hagys’ first argument (even though both are premised on the legal
proposition that the delivery of the deed in lieu of foreclosure
terminated the parties’ prior agreement), for the reasons that
follow, this Court disagrees that arbitration cannot be ordered
here due to the doctrine of “merger by deed.”
“The doctrine of ‘merger by deed’ holds that whenever a deed
is delivered and accepted ‘without qualification’ pursuant to a
sales contract for real property, the contract becomes merged
into the deed and no cause of action upon said prior agreement
exists. The purchaser is limited to the express covenants of the
deed only.”

37 Robinwood Associates v. Health Industries, Inc.,

47 Ohio App.3d 156, 157-158 (Franklin County 1988). See also
Fuller v. Drenberg, 3 Ohio St.2d 109, syllabus (1965). Agreements
collateral to and independent of the main purpose of the
transaction, however, are not merged into the deed.

Medeiros v.

Guardian Title & Guar. Agency, Inc., 57 Ohio App.2d 257, 259
(Cuyahoga County 1978); McGovern Builders, Inc. V. Davis, 12 Ohio
App.3d 153, 155-156 (Miami County 1983)(holding a real estate
vendee’s obligation to pay for the real estate arising from a
written real estate sale contract does not “merge” into the deed
or bar an action to recover any part of the purchase price).
The doctrine of merger by deed generally applies to the
relationship between a deed and a prior contract for the sale of
real estate.

See Mayer v. Sumergrade, 111 Ohio App. 237, 239

(Cuyahoga County 1960).

The Hagys have pointed this Court to no

cases where a promissory note (as opposed to a contract for sale)
was merged upon delivery of a deed.

Clearly, a promissory note

is not a contract for the sale of real estate.

Instead, it is

simply a written promise by one party to pay money to another
party.

See Burke v. State, 104 Ohio St. 220, 222 (1922) (a

“promissory

note is defined as a written promise to pay a
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certain sum of money at a future time ...”).

Even if the

doctrine of merger by deed applied to promissory notes, the Green
Tree Defendants’ motion for a stay and an order compelling
arbitration is not an action to recover under the terms of the
note.

Rather, the issue of arbitration is collateral to and

independent of the main purpose of the note and is not merged
into the deed because it does not concern the title, occupancy,
size, enjoyment, possession, or quantity of the parcel of land
conveyed.

See Mayer v. Sumergrade, 111 Ohio App. 237, 239

(Cuyahoga Co. 1960); Westwinds Dev. Corp. v. Outcalt, 2009 WL
1741978, *10 (Geauga Co. App. June 19, 2009).

Therefore, the

doctrine of merger by deed does not preclude arbitration of the
Hagys’ claims.
iii. Congress Did Not Intend the Hagys’ Claims To Be
Nonarbitrable
The third step in the inquiry of whether the Court may order
arbitration of a federal statutory claim is whether, when it
created the statutory cause of action, Congress expressed the
intent that the claim be pursued only through the Courts.
is not the case here.

That

Rather, “Congress did not intend FDCPA

claims to be non-arbitrable. Courts routinely permit arbitration
of such claims.” Hodson v. Javitch, 531 F. Supp. 2d 827, 831
(N.D. Ohio 2008); see also Lamb v. Javitch, Block & Rathbone,
L.L.P., 2005 WL 4137778, *3 (S.D. Ohio Jan. 24 2005).

Similarly,

the Ohio courts have held that claims brought under the OCSPA are
arbitrable.

Hawkins v. O’Brien, 2009 WL 50616, at *6 (Montgomery

Co. App. Jan. 9, 2009).

The Hagys do not contest this point, so

the third inquiry is also resolved in favor of arbitration.
iv. Which Claims Are Subject to Arbitration and Which Must be
Stayed
As the above discussion demonstrates, all three of the
Hagys’ claims against the Green Tree Defendants are subject to
arbitration because they are all related to Green Tree’s alleged
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attempt to collect a deficiency after the deed in lieu of
foreclosure was delivered. Therefore, there is no issue about
staying some claims against the Green Tree Defendants but
proceeding on others.

Consequently, the only remaining issue is

whether the Hagys have viable defenses against enforcing the
arbitration agreement.

The Court now turns to that question.
B. Unconscionability

First, the Hagys claim that the agreement to arbitrate, if
applicable, should not be enforced because it is unconscionable.
As noted above, the Court will examine Ohio law on this subject.
Under Ohio law, unconscionability is characterized by an “absence
of meaningful choice on the part of one of the parties to the
contract, combined with contract terms that are unreasonably
favorable to the other party.”

Collins v. Click Camera & Video,

Inc., 86 Ohio App.3d 826, 834 (Montgomery County 1993).

The

unconscionabilty doctrine is comprised of two components: “(1)
substantive unconscionabilty, i.e., unfair and unreasonable
contract terms, and (2) procedural unconscionabilty, i.e.,
individualized circumstances surrounding each of the parties to a
contract such that no voluntary meeting of the minds was
possible.

Both elements must be present to find a contract

unconscionable.”

Scovill v. WSYX/ABC, 425 F.3d 1012, 1017 (6th

Cir. 2005), citing Jeffrey Mining Prods., L.P. v. Left Fork
Mining Co., 143 Ohio App.3d 708, 718 (Cuyahoga Co. 2001) and
Dorsey v. Contemporary Obstetrics & Gynecology, 113 Ohio App. 3d
75, 80 (Montgomery Co. 1996); Collins, 86 Ohio App.3d at 834.
Substantive unconscionability involves factors relating to
the contract terms themselves and whether they are commercially
reasonable.

Dorsey, 113 Ohio App.3d at 80.

The Hagys argue that

the arbitration provision at issue in this case is substantively
unconscionable because it lacks mutuality - that is, it requires
the Hagys to arbitrate any disputes with Green Tree, but permits
Green Tree to go to court to “enforce a security agreement,”
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“enforce the monetary obligation,” or to “foreclose on the
collateral.”
The absence of an exact parallel between the parties’
obligations under an arbitration agreement does not require the
Court to find the agreement to be unconscionable.

The general

rule for contracts is that “the obligations of parties to a
contract need not be exactly the same if the contract is
supported by consideration.”

Taylor Bldg. Corp. of Am. v.

Benfield, 117 Ohio St. 3d 352, 367 (2008).

Applying that

principle to arbitration agreements, Joseph v. M.B.N.A. Am. Bank,
N.A., 148 Ohio App. 3d 660, 664 (Cuyahoga Co. 2002) held (albeit
under facts different from those presented here) that mutuality
is not a requirement of a valid arbitration clause, provided that
the underlying contract is supported by consideration.

In Fazio,

340 F.3d at 396-97, the Court of Appeals cited Joseph with
approval, noting that there was no indication that Ohio had
adopted a rule that arbitration agreements contain a “modicum of
bilaterality” (quoting Flores v. Transamerica HomeFirst, Inc., 93
Cal. App. 4th 846, 113 Cal.Rptr.2d 376, 382 (2001)) and that the
general trend in the case law was to uphold arbitration clauses
that did not contain mutual obligations so long as the underlying
contract was supported by consideration.

The Fazio court did

not, however, decide that precise issue, noting that “assuming
mutuality of obligation in the arbitration clause is a
requirement under Ohio law, the arbitration clauses here easily
satisfy that requirement.”

Id. at 397.

The decision in Glazer

v. Lehman Bros., Inc., 394 F.3d 444 (6th Cir. 2005) appears to
take that principle one step further, reasoning that because
arbitration clauses cannot be considered to be separate contracts
with separate requirements for consideration and mutuality, and
that any issues concerning mutuality of obligation are more
properly directed to the contract as a whole and not to the
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arbitration provisions it contains.

Because the Hagys do not,

and could not plausibly, argue that the note and mortgage fail
for want of mutuality of obligation, the mere fact that the
arbitration clause does not impose identical obligations on both
parties does not mean that its terms are substantively
unconscionable.
That does not mean, of course, that an arbitration clause
can never be so lacking in fairness, due to blatant onesidedness, that it can escape being deemed unconscionable.

For

example, in Williams v. Aetna Finance Co., 83 Ohio St.3d 464
(1998), one of the cases relied on by the Hagys, the court
refused to enforce an arbitration agreement on grounds that it
was too heavily weighted in favor of the lender.

There, however,

the prepayment provisions for the small consumer were so onerous
as to deny such consumers any meaningful chance to have their
claims heard at all, and the contract was one of adhesion,
leading the court to scrutinize the arbitration agreement more
closely.

The court did not invalidate the agreement just because

the ability of the parties to bring their claims to court, as
opposed to arbitration, were different depending upon which party
was asserting the claims; in fact, that did not appear to play
any role in the court’s decision.
There is authority from other jurisdictions, however, to the
effect that arbitration clauses found in contracts of adhesion
which preserve one party’s right to litigate almost any
conceivable claim which might arise under an agreement, while
forcing the other party to arbitrate such claims, are
unconscionable.
(Tenn. 2004).

See, e.g., Taylor v. Butler, 142 S.W. 3d 277

That court noted that a minority of courts -

including, interestingly, the Court of Appeals, in Stout v. J.D.
Byrider, 228 F.3d 709 (2000) - had reached the opposite
conclusion, but it declined to follow them.
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In Stout, the Court

of Appeals refused to invalidate an arbitration agreement under a
used vehicle purchase agreement which allowed the seller to sue
in court for non-payment, but relegated most of the buyer’s
claims to arbitration.

Given that Stout was decided by the Court

of Appeals for this circuit, and given the language found in
Fazio and Glazer, it is hard to regard Taylor v. Butler as
persuasive authority.
Relying on the Court of Appeals’ decisions, Price v. Taylor,
575 F. Supp. 2d 845, 853 (N.D. Ohio 2008), upheld an arbitration
agreement that, similar to the one involved here, excluded
judicial foreclosure and certain other claims from arbitration.
As that court conceived the issue, the question is not so much
one of mutuality but of consideration - that is, within the
arbitration clause, did each party agree to provide something of
value to the other, although not necessarily things of equal
value.

Thus, because the arbitration clause obligated each party

to bring certain claims only in arbitration, it was supported by
consideration, even if, as the plaintiff in that case argued, it
excluded from arbitration the claims the defendant was most
likely to bring.

Id.

clause in this case.

The same can be said of the arbitration
While it reserves some judicial remedies to

the Green Tree Defendants, including the ones they would be most
likely to bring, it still obligates them to arbitrate some
claims, and it is not lacking in consideration.
The Hagys also argue that, in Schaefer v. Allstate Ins. Co.,
63 Ohio St.3d 708 (1992), the Ohio Supreme Court invalidated an
arbitration clause for want of mutuality of obligation.

In fact,

the court invalidated an arbitration clause contained in an
automobile insurance policy which stated that awards under a
certain monetary amount were binding, but if an award exceeded
that amount either party could litigate the claim, on grounds
that such a clause “does not provide for the ‘arbitration’ of
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disputes as we have heretofore understood that term.”
714.

Id. at

That case provides no support for the Hagys’ position.

This Court agrees with the result reached in Price v. Taylor and
concludes that the arbitration clause is not substantively
unconscionable on grounds that it imposes differing obligations
on the Hagys and on the Green Tree Defendants.
The Hagys argue that the contract between themselves and the
Green Tree Defendants is a contract of adhesion and substantively
unconscionable for that reason.

Whether a contract is adhesive

in nature, however, is relevant to the relationships between the
parties and therefore is properly analyzed under procedural
unconscionability.

Regardless, a contract of adhesion (or an

arbitration clause found in such a contract) is not necessarily
unconscionable per se.

Taylor Bldg. Corp. of Am. v. Benfield,

117 Ohio St. 3d 352, 363 (2008).
Because both procedural and substantive unconscionability
are required before a contract provision can be rendered invalid
under Ohio law based on unconscionability (see Scovill v.
WSYX/ABC, 425 F.3d 1012, 1017 (6th Cir. 2005)) and because the
arbitration provision at issue here is not substantively
unconscionable, the Court need not address the Hagys’ procedural
unconscionability argument.

It concludes that the arbitration

clause is not unenforceable on grounds of unconscionability.
C. Authenticity of Attached Documents
This Court previously denied the Green Tree Defendants’
motion to stay because they had not demonstrated they were the
true owners or assigns of the Hagys’ promissory note. In order to
remedy that defect, the Green Tree Defendants have submitted a
“certificate of conversion” showing that Conseco Finance
Servicing Corp. changed its name to Green Tree Servicing LLC.
so, Green Tree LLC is the current holder of the Hagys’ note.
Accompanying that certificate is a document signed by the
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If

Delaware Secretary of State, and affixed with the seal of the
Delaware Secretary of State that states the following:
I, Harriet Smith Windsor, Secretary of State of the
State of Delaware do hereby certify that the attached
is a true and correct copy of the certificate of
conversion of a Delaware Corporation under the name of
‘Conseco Finance Servicing Corp.’ to a Delaware Limited
Liability Company, changing its name from ‘Conseco
Finance Servicing Corp.’ to ‘ Green Tree Servicing
LLC’, filed in this office on the Ninth Day of June
A.D. 2003, at 1:34 o’clock p.m.
The document is dated January 9, 2009.
Under Federal Rule of Evidence 902(4), a copy of an official
record or a copy of a document that was recorded or filed in a
public office as authorized by law can be self-authenticating and
require no extrinsic evidence if it is certified as correct by a
custodian or another person authorized to make the certification
(Fed. R. Evid. 902(4)(A)) or, inter alia, if it is certified as
correct by a certificate that bears a seal purporting to be that
of any state of the United States.
902(1)(A)).

(Fed. R. Evid. 902(4)(B) and

Copies of official records or of documents recorded

or filed in a public office as authorized by law are admissible
if these conditions are met and the document is otherwise
admissible.

Fed. R. Evid. 1005. See generally United States v.

Pent-R-Books, Inc., 538 F.2d 519, 527-528 (2d Cir. 1976)
(explaining application of Rule 902(4)); United States v. Beason,
690 F.2d 439, 444-445 (5th Cir. 1982) (same).
The Hagys argue that the “certificate of conversion” is not
properly authenticated and may not be accepted by this Court as
evidence that Green Tree Servicing LLC is the holder of the note.
However, the “certificate of conversion” is not only a document
recorded in a the Delaware Secretary of State’s office, but it
was also certified as correct by the Delaware Secretary of State
and bears the seal of the Delaware Secretary of State.

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Thus,

this document is self-authenticating.
The Hagys also argue that the Secretary of State’s
certificate is expired because they were not able to “validate”
it on-line more than one year from the date it was issued.

The

Hagys have not demonstrated that this document is expired.

In

fact, it does not contain an expiration date.

It is not

reasonable to conclude that simply because a document cannot be
validated on-line, it has expired.

The Green Tree Defendants

have submitted valid evidence to the contrary, and the Court
accepts that submission.

Thus, this Court will consider the

documents as evidence that Green Tree Servicing LLC is the
current holder of the note.
III. Order
For the foregoing reasons, the Court concludes that the
arbitration clause contained in the promissory note executed by
the Hagys in favor of the Green Tree Defendants is valid and
enforceable.

Therefore, the Court grants the motions to stay

proceeding and compel arbitration (Doc. #15, #38).

All claims

against the Green Tree Defendants are stayed pending the
completion of the arbitration.

This order has no effect on the

Hagys’ ability to proceed with their claims against the remaining
defendants.
/s/ Terence P. Kemp
United States Magistrate Judge

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