Magee et al v. Cooper et al
Filing
8
MEMORANDUM OPINION AND ORDER: The Court denies the Magees' motion to confirm with prejudice and grants Nationstar's motion to vacate. In doing so, the Court notes its concern with the extent and breadth of Sitcomm's seemingly fraudulen t activity. Arbitration documents involving Sitcomm have been filed in federal courts throughout the nation. Along with the Northern District of Texas, they have appeared in the Eastern District of Texas, Eastern District ofVirginia, Southern Distric t of Mississippi, Northern District of Oklahoma, Northern District of Illinois, and Federal Claims Court. Using the court system to file fraudulent claims burdens defendants, wastes judicial resources, and weakens the public's perception of the judicial branch. Accordingly, the Court will alert the United States Attorney's Office for the Northern District of Texas and the Attorney General Offices of Michigan, Mississippi, Hawaii, Virginia, Georgia, Wyoming, and Nevada to Sitcomm's activities by forwardingthis order. (Order has been forwarded to the listed parties) (Ordered by Judge James Wesley Hendrix on 3/11/2020) (krr)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
LUBBOCKDIVISION
RANCE MAGEE, et a1.,
Plaintiffs,
No. 5:19-MC-017-H
NATIONSTAR MORTGAGE, LLC,
Ct
al.,
Defendants
MEMORANDUMO PINION AND ORDER
On December 4, 2019, plaintiffs Rance and Michelle Magee moved to confirm a
purpofied arbitration award issued by the Sitcomm Arbitration Association.
,!ee
Dkt. No.
1.
Sitcomm's "arbitration" found that numerous financial institutions and govemment
officials-including Nationstar Mortgage, LLC-had breached a confract with the Magees.
See
Dkt. No. 1-1 at 2, 27. Subsequently, the Magees supplemented their filing by providing
additional documents required by the Federal Arbitration Act (FAA), including the alleged
arbitration agreement.
See
DkL No. 5. Nationstar Mortgage opposes the motion, arguing
that it never agreed to arbitrate with the Magees and that the award was obtained by fraud.
SeeDkl No. 3 at 5. Accordingly, it moved for the Court to deny the Magees' motion and
vacate the arbitration award.
Id. For
the reasons set forth below, the Court denies the
Magees' motion, vacates their award, and refers this order to the United States Attomey's
Office for the Northem District of Texas and to the Attomey General Offices ofMichigan,
Mississippi, Hawaii, Virginia, Georgia, Wyoming, and Nevada.
1.
Factual Background
This is one of the many cases in recent months where a court has repudiated an
arbitration award made by Sitcomm.
WL 61049 (S.D. Miss. Jan. 6,2020);
7
See, e.g.,
Nichols y. U.S. Bank, National Association, 2O2O
Meekins v. Lakeview Loan Senicing,
LLC,2019 WL
340300 (E.D. Va. Dec. 30, 2019); Kalmowitz v. Federal Home Mortgage Corporation, 2019
6249298 (E.D. Tex.
Ocl 22, 2019); Brown
Miss. Dec. 10, 2019);
U. S.
t
WL
Ally Financial, Inc., 2019 WL 6718672 (5.D.
Bank, National Association t. Nichols, 2019 WL 427 6995 G\.D.
Okla. Sept. 1,0,2019). These courts have expressed skepticism regarding whether Sitcomm
is a valid arbitration entlty, and the Court knows ofat least one lawsuit filed against
Sitcomm in the Southern District of Mississippi by a financial instirution alleging that
Sitcomm and its associates have engaged in a far-reaching, fraudulent arbitration scheme.
See
PennyMac Loan Senices, LLC y. Sitcomm Arbitration Associar,or,
No. 2:19-CV-193 (S.D.
Miss. Feb. 4,2020). Other courts that have dealt with arbitration awards {iom Srtcomm
have comprehensively detailed the contours ofthe scheme, and the Court notes that the
Magees'fllings are virtually identical to those made in other cases. For completeness, the
Court briefly recaps the events preceding the Magees' motion to confirm.
On January
17
, 2019 , the Magees allegedly mailed a document titled "Show of
Cause ProofofClaim Demand" to eleven "respondents," including numerous financial
institutions, the Attomey General of Michigan, the United States Department of Justice,
and the United States Supreme Court.
.9ee
Dkt. No. 5 at 3. The document purported to be
an acceptance and counteroffer to a previous, undisclosed offer. Id.
at4. It further
demanded that the respondents respond to the litany of claims in the document within ten
days or else admit to all of the Magees' ciaims by "tacit acquiescence." Id, at 12-13. The
2
document also contains an "arbiffation clause" calling for disputes to be settled by an
arbiffator selected by the Magees- Id. at 14.
After no answer was received, Sitcomm mailed "Notice of Arbitration Hearing,, to
various parfies on May 18,2019. Id. at 19-20. These parties did not participate in
Sitcomm's " arbitration, " which yielded a "Final Arbitration Award.,,
See
Dkt. No.
1-1.
The arbitration award contails no factual findings conceming the underlying ,,dispute,, and
includes a host ofbizarre assefiions.
See, e.g.,
id. at 5 ("The Respondents . . . have . . . acted
against the interest of the Claimant's [sic], depriving them of their right to properfy, their
right to conffact, the dght to The Pursuit of Happiness and the enjoyment of 1ife.,,). Much
of the award focuses on attempting to convince the reader of its "irrevocable" and ,,binding,,
nantre. Id. at22. The document awarded the Magees $558,406 from each respondent. 1/.
at2l.
,)
The Court denies the motion to confirm and v,rcates the purported arbitration
award,
A.
UnenforceableArbitrationAgreement
An arbitrator's power derives from an arbitration agreement.
See Timegate Studios,
Inc. tt. Southpeak Interactive, LLC,713 F.3d 797,802-03 (5th Cir.2013). Thus, an arbiffator
only has the power to grant an award if the parties have ageed to submit the matter to
arbitration. Id. Under Texas law, a contract must be based on "a meeting of the minds on
the essential terms of the contract, i.e., mutual assent." USAA Texas Lloyds Company
t,.
Menchaca,545 S.W.3d 479,502 n.21 (Tex. 2018). This means that there must be mutual
understanding and assent to the agreement regarding the subject mattet and the essential
terms of the conffact. Bandera County v. Hollingsworth, 419 S.W.3d 639,645 (Tex.
San
Antonio 2013, no pet.).
3
App.-
Here, the arbitration agreement submitted by the Magees does not evince any mufual
assent. SeeDkt.No.5
at3-18. It
is not signedby any of the parties named in the
arbitation award, and Nationstar maintains that it is "not
with the Magees" to arbittate any claims.
a
party to any written contract
Dkt. No. 3-1 at 4. Instead, the Magees
,Sae
contend that Nationstar and the other parties "tacitlly] acquies[ced]" to the tems of the
arbitration agreement by failing to respond to thet letter. SeeDkt. No. 5 at 12-i3. As other
courts have made clear, this theory ofcontract formation is "conffary to hombook contract
law" and
does not give rise to a
4276995, atx4;
see also
valid agreement to atbitration.
Meekins,2019
See
Nichols,2019
WL
WL 7340300, atx2.
Since Sitcomm Arbitration's award was not made pursuant to a valid arbitration
agleement, the Court denies the Magees' motion to confum.
B.
Awaril Procured Through Fraud
Nationstar asks for the Court to vacate the Magees' arbitration award under
Section 10(a) of the FAA, which allows arbitration awards to be vacated when it was
"procured by colruption, fraud, or undue means."
See
Dkt. No. 3 at 4--5. The Court
vacates the Magees' award under this provision.
As rn Meekins, the Magees "obtained an arbitration hearing by sending Respondents
an incomprehensible agreement to arbitrate and using their non-response to initiate an
arbrtration.
"
See
Meekins,2019
WL
7340300, at
*3. This arbitration agreement was
predicated on a "tacit acquiescence" theory of contract formation that flies in the face of
contract doctrine. The Court does not believe that a legitimate arbitrator would accept such
an agreement, and it joins other courts in expressing skepticism about the validity
of
Sitcomm as an arbitration entity.
WL
See
id. at*3;
4
see also
Schlihs v. United States,2020
46887 6, at *1 n.1 (Fed.
Cl. Jan. 29,2020) (noting the "tarradiddle and lack of clariry,, in
Sitcomm's decisions); Brown, 2019 wL 6718672, at *3
n.l
(referring to Sitcomm arbitrations
as "parts of a larger fraudulent enterprise"); Kalmowitz,2Oig
2019 WL 4276995, at
WL
6249298, atx2; Nichols,
*2. The Court finds that the Magees' arbitration award was procured
by comrpt, fraudulent, and undue means, and therefore orders that it is vacated under
Section i0(a).
3.
Conclusion
The Cout denies the Magees' motion to confum with prejudice and grants
Nationstar's motion to vacate. In doing so, the Court notes its concem with the extent and
breadth of Sitcomm's seemingly fraudulent activity. Arbitration documents involving
Sitcomm have been flled in federai courts throughout the nation. Along with the Northern
District of Texas, they have appearcd in the Eastem District of Texas, Eastem District of
Virginia, Southem District of Mississippi, Northem District of Oklahoma, Northem District
of Illinois, and Federal Claims Coun. Using the court system to file fraudulent claims
burdens defendants, wastes judicial resources, and weakens the public's perception of the
judicial branch. Accordingly, the Court will alert the United States Attomey's Office for the
Northern District of Texas and the Attomey General Offices of Michigan, Mississippi,
Hawaii, Virginia, Georgia, Wyoming, and Nevada to Sitcomm's activities by forwarding
this order.l
I
Aside from Michigan, these are the states where the plaintiffs in the ongoing Southern Distnct of
Mississippi litigation allege that Sitcomm and their associates are from. See PennyMac Loan Senices,
LLC v. Sitcomm Arbitration Associatioz, No. 2:19-CV-193, Pl. Compl. fl!1 7-13 (S.D. Miss. Dec. 11,
2019). Michigan is included because that is where the Magees say they live,
5
So ordered on March
,2020
JAM
6
WESLEYHENDRIX
D STATES DISTRICT JUDGE
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