Woody v. Nationstar Mortgage, LLC et al

Filing 29

MEMORANDUM OPINION. See for complete details. Signed by District Judge Henry E. Hudson on 01/30/2017. (nbrow)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division

ORLANDO C. WOODY,

Plaintiff,
Civil Action No. 3:16-cv-825-HEH

V.

NATIONSTAR MORTGAGE LLC,
etaL,
Defendants.

MEMORANDUM OPINION

(Denying Plaintiffs Motion to Remand and Granting Defendant's Motion to
Compel Arbitration)

THIS MATTER is before the Court on Plaintiff Orlando C. Woody's ("Woody" or

"Plaintiff) Motion to Remand (ECF No. 13, corrected in ECF No. 14), Defendant
Professional Foreclosure Corporation of Virginia's ("PFC") Motion to Dismiss Pursuant
to Federal Rule of Civil Procedure 12(b)(6) (ECF No. 23), and Defendants U.S. Bank,
National Association as Indenture Trustee for Springleaf Mortgage Loan Trust 2012-2

("U.S. Bank") and Nationstar Mortgage LLC's ("Nationstar," and together with U.S.
Bank, the "Defendants") Motion to Compel Arbitration and Dismiss or Stay this Action

Pending Binding Arbitration. (ECF Nos. 6, 7, 8).
Each side has filed memoranda supporting their respective positions. The Court

will dispense with oral argument because the facts and legal contentions are adequately
presented in the materials before the Court, and oral argument would not aid in the
decisional process. E.D. Va. Loc. Civ. R. 7(J).

For the following reasons, the Court will deny Plaintiffs Motion to Remand and
grant Defendants' Motion to Compel Arbitration. The Court will dismiss Count VII
against PFC with prejudice and dismiss PFC from this case. Since the Court is Granting
Defendants' Motion to Compel Arbitration, Counts I-VI against Defendants will be
dismissed without prejudice.
L

BACKGROUND

As required by Rule 12(b)(6) ofthe Federal Rules of Civil Procedure, the Court
assumes Plaintiffs well-pleaded allegations to be true and views all facts in the light
most favorable to him. T.G. Slater & Son v. Donald P. & Patricia A. Brennan LLC, 385

F.3d 836, 841 (4th Cir. 2004) (citing Mylan Labs, Inc. v. Matkari, 1 F.3d 1130, 1134 (4th
Cir. 1993)). At this stage, the Court's analysis is both informed and constrained by the

four comers ofPlaintiffs Complaint.' Viewed through this lens, the facts are as follows.
On September 25, 2003, Bertha Woody entered into a loan for $30,000 with
American General Financial Services Inc. ("American General"), evidenced by a note

signed by both parties. (Compl. ECF No. 1-1.) The loan was secured by a deed of trust,
encumbering property at 2295 Desha Road in Tappahannock, Virginia. {Id.

6-7.) The

deed of trust was duly recorded in the Essex County public land records in Deed Book
283, beginning at Page 702. (Id. H7.) American General subsequently assigned the note
to U.S. Bank in July 2015, who engaged Nationstar as its servicer. {Id. H 14-15.)

' "Ordinarily, a court may notconsider anydocuments thatare outside of thecomplaint, or not expressly
incorporated therein, on a motion to dismiss." Clatterbuck v. City ofCharlottesville, 708 F.3d 549, 557
(4th Cir. 2013). However, the Court may consider documents "attached or incorporated into the
complaint"—as well as those attached to a motion to dismiss—so long as they are "integral to the
complaint and authentic." Philips v. Pitt County Mem'I Hosp., 572 F.3d 176, 180 (4th Cir. 2009).

The Home Equity Line of Credit Agreement ("HELOC Agreement")

accompanying Bertha Woody's deed of trust contained an Arbitration Agreement that
encompassed all claims and disputes arising out of, in connection with, or relating to:
My loan from lender today ... all documents, promotions, advertising,
actions or omissions relating to this or any loan or Retail Contract made
by or assigned to Lender... whether the claim or dispute must be
arbitrated; the validity and enforceability of this Arbitration Agreement,
and the Agreement, my understanding of them, or any defenses as to the
validity of the Agreement and this Arbitration Agreement; any
negotiations between Lender and me; the closing, servicing, collecting,
or enforcement of any transaction covered by this Agreement; any
allegation of fraud or misrepresentation; any claim based on or arising
under any federal, state, or local law, statute, regulation, ordinance, or
rule; any claim based state or federal property laws; any claim or dispute
based on any alleged tort (wrong), including intentional torts; and any
claim for injunctive, declaratory, or equitable relief
(ECF No. 9-1, at 7.)

Moreover, the Arbitration Agreement "applies to and runs to the benefit of [both

parties'] assigns, successors, executors, heirs, and/or representatives.''^ (Id. at 8
(emphasis added).)

Bertha Woody died intestate on November 9,2014, leaving her only son, Orlando
C. Woody, as her sole heir. (Compl. H10.) On April 24, 2015, Nationstar—actingas
servicer of U.S. Bank—executed a document stating that it was appointing PFC as a
substitute trustee under the deed of Trust. (Id.

13.) Woody claims that this document

"did not, in fact, remove [the original trustee] and did not, in fact, appoint PFC as
substitute trustee on the deed of trust because U.S. Bank was not [the] holder of the note

on April 24, 2015." (Id.) In its capacity as substitute trustee, PFC placed an
advertisement in a newspaper with general circulation in Essex County, Virginia, giving

notice that it intended to conduct a foreclosure sale on the property encumbered by the

deed of trust. {Id. ^ 18.) And on February 16, 2016, PFC conducted the foreclosure sale
and sold the property to Herbert Reynolds ("Reynolds"), (fd. K20.)

Woody, who was living in the home on February 16, 2016, avers that he was
unaware that the foreclosure sale was taking place and that he was attempting to obtain a

loan from his credit union to pay off his mother's debt. {Id. H22.) Reynolds gave

Woody a date to move out, and Woodyremained in the home beyond that deadline. {Id.
^ 26.) Reynolds evicted Woody from the home and changed the locks but still allowed
him to return and pick up some of his personal property. {Id. ^ 28.) Nevertheless,

Woody was unable to retrieve all of his personal items, and some of the property that he
was able to obtain was damaged in the move. {See id.)

As a result. Woody filed a seven-count Complaint against Nationstar, U.S. Bank,
and PFC in the Circuit Court of Essex County, Virginia on September 8, 2016, seeking

damages from the foreclosure of his mother's home. In Count I, Plaintiff alleges that
Nationstar breached the deed of trust by failing to give Plaintiff notice of default prior to
foreclosure. {Id.

16-31.) Count II asserts that U.S. Bank wrongfully appointed PFC

to act as substitute trustee because U.S. Bank was not the holder of the note at the time

the substitution took place. {Id. UK 40-42.) In Counts III, IV, and V, Plaintiff alleges that
Nationstar committed actual or constructive fraud by misleading Plaintiff to prevent him

from pursuing Chapter 13 Bankruptcy and that U.S. Bank is vicariously liable for
Nationstar's fraudulent acts. {Id.

43-83.) Alternatively, Woody contends in Count VI

that the same fraudulent acts previously alleged in Counts III, IV, and V constituted a

breach of an implied covenant of good faith. {Id. f 84-88.) Finally, in Count VII,

Plaintiff alleges "[i]nterference by [PFC] with Contract Rights of [Plaintiff]." {Id.

89-

96.)

Woody seeks compensatory and punitive damages in the total amount of
$1,250,000, as well as attorney's fees as they pertain to Count II. {Id. Ifll 19-20.)

Nationstar is a limited liability company, and is a citizen of Texas and Delaware.

(Notice of Removal H26, ECF No. 1.) U.S. Bank is a national banking association with
its main office in Ohio. {Id. 127.) PFC is a Virginia Corporation with its principal place

of business in Virginia. {Id. H29.) And Plaintiff is a citizen of the Commonwealth of
Virginia. (Compl. ^1.)
Defendants, without PFC, removed the action to this Court pursuant to 28 U.S.C. §

1332(a) on October 7,2016, well within the thirty-day timeline required by 28 U.S.C. §

1446. {See Notice of Removal.) They argue that, although Plaintiff and PFC are both
citizens of Virginia, PFC was fraudulently joined in this action to prevent complete
diversity. {Id.) Woody filed a Motion to Remand (ECF No. 13, corrected in ECF No.

14), opposing removal. Defendants filed a Motion to Compel Arbitration pursuant to the
provisions in the HELOC Agreement. (ECF No. 6, 7, 8.) And PFC filed a Motion to
Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) on December 1, 2016.
(ECF No. 23.)
II.

STANDARD OF REVIEW
a. Motion to Remand

As the removing parties. Defendants bear the burden of demonstrating that this

Court has subject-matter jurisdiction. Pressl v. Appalachian Power Co., 842 F.3d 299,
302 (4th Cir. 2016). Additionally, Defendants must satisfy the requirements of 28 U.S.C.

§ 1446, which outlines the procedure for removal. See Marler v. Amoco Oil Co., 793 F.

Supp. 656,658-59 (E.D. N.C. 1992) ("Defendant bears the burden of establishing the
right to removal, including compliance with the requirements of [28 U.S.C.] § 1446(b).").
Removing proceedings from state court raises significant federalism concerns;

accordingly, "[i]f federal jurisdiction is doubtful, a remand is necessary." Mulcahey v.
Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994).
This Court has "original jurisdiction of all civil actions where the matter in

controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is
between ... citizens of different States

" 28 U.S.C. § 1332(a)(1). Diversity must be

complete"such that the state of citizenship of each plaintiff must be different from that of
each defendant" at the time an action commences. Athena Auto., Inc. v. DiGregorio, 166
F.3d 288,290 (4th Cir. 1999).

However, "[t]he fraudulent joinder doctrine provides an exception to the complete
diversity requirement." E.D. ex reI. Darcy v. Pfizer, Inc., 722 F.3d574, 578 (4th Cir.
2013). The doctrine "permits a federal court to disregard, for jurisdictional purposes, the
citizenship of non-diverse defendants." McFadden v. Fannie Mae, 525 Fed. App'x 223,
227 (4th Cir. 2013) (citations and quotation marks omitted).
The term "fraudulent joinder" is, in many ways, a misnomer. See id. More

accurately characterized, it is "a term of art, [which] does not reflect on the integrity of
plaintiff or counsel, but is merely the rubric applied when a court finds either that no

cause of action is stated against the non-diverse defendant, or infact no cause of action
exists." AIDS Counseling & Testing Ctrs. v. Group W Television, Inc., 903 F.2d 1000,

1003 (4th Cir. 1990) (citations and quotation marks omitted). "The removing party must

establish that there is no possibility the plaintiff could establish a cause of action against
the in-state defendant in state court, or that there has been outright fraud in the plaintiffs

pleading ofjurisdictional facts. A claim need not succeed to defeat removal; only a
possibility of a right need be asserted." Sherman v. Litton Loan Servicing, L.P., 796 F.
Supp. 2d 753, 759 (E.D. Va. 2011) (citations omitted).
The burden is on the party claiming fraudulent or improper joinder to show that a
claim could not be established against the non-diverse defendant, even after resolving all

issues of law and fact in the plaintiffs favor. Mayes v. Rapoport, 198 F.3d 457,464 (4th
Cir. 1999) (citing Marshall v. Manville Sales Corp., 6 F.3d 229, 232-33 (4th Cir. 1993)).
The Fourth Circuit counsels that the fraudulent joinder standard "is even more favorable

to the plaintiff than the standard for ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6)." Hartley v. CSX Trans., Inc., 187 F.3d 422,424 (4th Cir.1999) (citing Batoffv.
State Farm Ins. Co., 977 F.2d 848, 852 (3d Cir. 1992)). Consequently, the defendant

must shoulder a significant burden to establish fraudulent joinder. Marshall, 6 F.3d at
232-33.

b. Motion to Dismiss under Rule 12(b)(6)

"A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint;

importantly, it does not resolve contests surrounding the facts, the merits of a claim, or
the applicability of defenses." Republican Party ofN.C. v. Martin, 980 F.2d 943, 952

(4th Cir. 1992) (citation omitted). The Federal Rules of Civil Procedure "require[] only

'a short and plain statement of the claim showing that the pleader is entitled to relief,' in
order to 'give the defendant fair notice of what the ... claim is and the grounds upon

which it rests.'" BellAtl Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v.
Gibson, 355 U.S. 41, 47 (1957)). A complaint need not assert "detailed factual

allegations," but must contain "more than labels and conclusions" or a "formulaic
recitation of the elements of a cause of action." Twombly, 550 U.S. at 555 (citations

omitted). Thus, the "[f]actual allegations must be enough to raise a right to relief above

the speculative level" to one that is "plausible on its face," rather than merely
"conceivable." Id. at 555, 570.

In considering such a motion, a plaintiffs well-pleaded allegations are taken as

true and the Complaint is viewed in the light most favorable to the plaintiff. T.G. Slater,
385 F.3d at 841 (citation omitted). Legal conclusions enjoy no such deference. Ashcroft
V. Iqbal, 556 U.S. 662, 678 (2009).
c. Motion to Compel Arbitration

The Supreme Court has stated that there is "a liberal federal policy favoring
arbitration" and that "[t]he Arbitration Act establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration." Moses H. Cone Mem 7 Hosp. v. Mercury Constr. Corp., 460 U.S. 1,24-25

(1983). Nevertheless, whether a party has agreed to arbitrate a particular dispute is an
issue for judicial determination to be decided as a matter of contract. See AT&T Techs.,
Inc. V. Commc'ns Workers ofAm., AIS U.S. 643, 648^9 (1986); see also Arrants v.

Buck, 130 F.3d 636, 640 (4th Cir. 1997) ("Courts decide whether there is an agreement to
arbitrate according to common law principles of contract law.")- "In so deciding, the

court should apply 'ordinary state-law principles that govern the formation of contracts.'"
Johnson v. Circuit City Stores, Inc., 148 F.3d 373, 377 (4th Cir. 1998) (quoting First

Options ofChicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).
III.

ANALYSIS

To begin, the Court will address the merits of Woody's Motion to Remand
because it calls into question whether this Court has jurisdiction in this matter. The Court
will subsequently analyze Defendants' Motion to Compel Arbitration.
a. Motion to Remand & Motion to Dismiss

The doctrine of fraudulent joinder allows the Court to "disregard, for jurisdictional

purposes, the citizenship of certain nondiverse defendants, assumejurisdiction over a
case, dismiss the nondiverse defendants, and thereby retain jurisdiction." Mayes v.

Rapoport, 198 F.3d 457,461 (4th Cir. 1999). The Court can find that fraudulent joinder
applies either when "there has been outright fraud in the plaintiffs pleading of

jurisdictional facts" or when "there is nopossibility that plaintiff would be able to
establish a cause of action against the in-state defendant in state court." Marshall v.
Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993) (citations omitted). Because the
Defendants in this case do not suggest outright fraud, the Court will limit its inquiry to
whether there is a possibility that Plaintiff can recover against PFC.

In a fraudulent joinder analysis, the defendant bears the burden of demonstrating
that there is "no reasonable basis" to predict that a plaintiff could recover against the in-

state defendant. Linnin v. Michielsens, 372 F. Supp. 2d 811, 918 (E.D. Va. 2005)

(quoting Smallwoodv. III. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004)); see also
Boss V. Nissan N. Am. Inc., 228 Fed. App'x 331, 335 (4th Cir. 2007) ("[A] defendant is

fraudulently joined if there is 'no reasonable basis for predicting that state law might

impose liability on the facts involved.'") (unpublished per curiam opinion) (quoting
Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 312 (5th
Cir. 2002)). In determining whether a purported joinder is fraudulent, "the court is not

bound by the allegations of the pleadings but may instead 'consider the entire record, and
determine the basis ofjoinder by any means available.'" AIDS Counseling and Testing

Centers v. Group WTelevision, Inc., 903 F.2d 1000, 1004 (4th Cir. 1990) (quoting Dcxiof
V. Fawcett Publications, Inc., 329 F.2d 82, 85 (10th Cir. 1964)).

In Count VII, the only count where Plaintiff alleges any wrongdoing against PFC,

Woody alleges "Interference by [PFC] With Contract Rights of Woody." (Compl. 17.)

Specifically, Plaintiff alleges that PFC conducted an unlawful, non-judicial foreclosure
because the instrument purportedly appointing PFC as substitute trustee was invalid. {Id.

1194.) Consequently, Woody argues that PFC's actions pursuant to the allegedly invalid
appointment instrument interfered with Plaintiffs rights under the deed of trust. {Id, |
95.)

In response. Defendants contend that a substitute trustee does not have an

obligation to prove the validity of an appointment document prior to foreclosure. (Notice
of Removal 9 {citing Pham v. BankofN.Y., 856 F. Supp. 2d 804, 810 (E.D. Va. 2012)

("But just as a noteholder is not 'required to come to a court of law and prove its
10

authority or standing to foreclose on a secured property,' so too a nominal beneficiary or
a substitute trustee, for the same reason, should not be required to prove in court that it

has the noteholder's authority.") (quoting Gallant v. Deutsche Bank Nat'I Trust Co., 766
F. Supp. 2d 714, 721 (W.D. Va. 2011))).)
Moreover, Defendants assert that Plaintiff lacks standing to challenge the
foreclosure because he was not a party to the instrument appointing PFC as substitute

trustee. {See id. at 7-9; see also Morrison v. Wells Fargo Bank, N.A., 30 F. Supp. 3d 449,
453-54 (E.D. Va. 2014) (holding that a plaintiff must be a party to or an intended

beneficiary of the instrument in order to challenge the appointment of a substitute
trustee).)

Plaintiff counters that some Virginia Circuit Courts have found that a borrower

may have standing as a third-party beneficiary to challenge the appointment of a
substitute trustee. See, e.g., Burgest v. Commonwealth Trustees, CL 14008747-00, at *4-

7 (Va. Cir. Ct. Feb. 26, 2016). Therefore, Plaintiff asserts that there is a possibility that
he would be able to establish a cause of action against PFC in state court. (See generally
Mem. in Supp. of Mot. to Remand, ECF No. 15.)

Despite being framed as a tort action. Plaintiffs argument against PFC essentially
hinges on a finding that PFC lacked authority to conduct a non-judicial foreclosure—
otherwise known as a "show-me-the note" theory of liability. See Gallant, 766 F. Supp.

2d at 720-21 (characterizing a plaintiffs allegations that the defendant failed to provide
proof of the original note as a "show me the note" claim and dismissing the case).
However, Virginia's non-judicial foreclosure laws do not require a substitute trustee to
11

prove the validity of the appointment instrument. Cf. Va. Code § 55-59.1(B) ("If a note
or other evidence of indebtedness secured by a deed of trust is lost or for any reason

cannot be produced ... the trustee may nonetheless proceed to sale

"); Pham, 856 F.

Supp. 2d at 810-11 (finding that a "show me the note" theory has been widely rejected as
"contrary to Virginia's non-judicial foreclosure laws") (quoting Gallant, 766 F. Supp. 2d
at 720-21); Jesse v. Wells Fargo Home Mortg., 882 F. Supp. 2d 877, 880 (E.D. Va.
2012) (holding that a "show me the note" claim was contrary to Virginia state law);
Davis V. SamuelL White, P.C, No. 3:13cv780,2014 WL 1604270, at *21-23 (E.D. Va.

Apr. 21, 2014) (rejectingplaintiffs arguments that a defendant must prove in court that it
had the noteholder's authority to foreclose); Burgest v. HSBC Bank, USA, Case No.
CL14007847-00, at *7 (Va. Cir. Ct. Norfolk, Feb 26,2016) (holding that "the
nonexistence of a recorded instrument has no bearing on whether an assignment
occurred").

Accordingly, even assuming that Plaintiff has standing under Virginia law to
challenge the contract, there is "no possibility" that he could succeed on the merits by
basing his interference arguments against PFC on a "show me the note" theory. See
Pham, 856 F. Supp. 2d at 809.

Therefore, the Court finds that Woody would not have "a glimmer of hope" to

recover against PFC in state court. Id. at 809-10. Thus, the Court holds that it has
subject-matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a) because
Plaintiffs claims exceed $75,000 and because Woody is a resident of Virginia, while
Nationstar is incorporated in Delaware with a principal place of business in Texas, and
12

U.S. Bank has its principal place on business in Ohio. (ECF. No. 1 at 5.) Though PFC is

a Virginia resident, the doctrine of fraudulent joinder allows the Courtto "disregard, for
jurisdictional purposes," the citizenship of improperly joined parties. See Mayes, 198
F.3d at 461. Consequently, the Court will deny Plaintiffs Motion to Remand. Further,
the Court will dismiss Count VII against PFC with prejudice and will dismiss PFC from
this case.

b. Motion to Compel Arbitration

In order to succeed on a motion to compel arbitration, the moving party must

prove "(1) the existence of a dispute between the parties, (2) a written agreement that
includes an arbitration provision which purports to cover the dispute, (3) the relationship
of the transaction, which is evidenced by the agreement, to interstate or foreign

commerce, and (4) the failure, neglect or refusal of the [opposing party] to arbitrate the

dispute." Whiteside v. Teltech Corp.^ 940 F.2d 99, 102 (4th Cir. 1991).
It is well settled that "arbitration is a matter of contract and a party cannot be

required to submit to arbitration any dispute which he has not agreed so to submit." AT
& T Techs,, Inc. v. Commc'ns Workers ofAm., 475 U.S. 643, 648 (1986) (citation and

quotation marks omitted). Therefore, "the first task of a court asked to compel arbitration
of a dispute is to determine whether the parties agreed to arbitrate that dispute."
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985).

And "[a]n order to arbitrate the particular grievance should not be denied unless it can be
said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute." Peoples Sec. Life Ins. Co. v. Monumental
13

Life Ins. Co., 867 F.2d 809, 812 (4th Cir. 1989) (quoting UnitedSteelworkers ofAm. v.
Warrior & GulfNavigation Co., 363 U.S. 574, 582-83 (I960)).
In their Motion, Defendants argue that all four Whiteside factors are satisfied in
this case. First, Defendants contend that the current litigation over the terms of Bertha

Woody's loan is sufficient to prove the existence of a dispute between the parties. (Mem.

in Support of Mot. to Compel Arbitration 3-4, ECF No. 9.) Second, Defendants allege
that the claims in Woody's Complaint are subject to the Arbitration clause in the HELOC

Agreement accompanying his mother's loan. {Id. at 4-5.) Third, U.S. Bank and
Nationstar assert that mortgage loans are regulated by federal law and thus affect

interstate commerce, which is consistent with prior rulings of this Court. {Id. at 5. (citing
Nat'l Home Equity Mortg. Ass 'n v. Face, 64 F. Supp. 2d 584, 592 (E.D. Va. 1999)). And
fourth. Defendants urge the Court to compel arbitration because Plaintiffs counsel has
repeatedly refused to consent to it. {Id.)

In response, Plaintiff argues that Defendants did not comply with the Arbitration
Agreement's requirement that Defendants provide him notice prior to filing a claim for
arbitration. (Mem. in 0pp. to Mot. to Compel 1-2, ECF No. 25.) Further, he alleges
that this Court lacks subject matter jurisdiction to rule on this Motion because Defendants
improperly removed this case on the basis of diversity jurisdiction. {Id. at 4.)
Defendants' arguments persuade the Court to grant the Motion to Compel
Arbitration. To begin, the Court determines that the first element under Whiteside is met

because the parties are currently engaged in litigation over the legitimacy of the
Defendants' decision to foreclose on Woody's inherited home. {See generally Compl.)
14

Woody alleges, yet Defendants deny, that Defendants failed to give notice as required by
the deed of trust and committed fraud during the foreclosure proceedings. (See generally
id; Notice of Removal

8-20.) Due to the divergent views over the foreclosure, the

Court finds that a dispute clearly exists between the parties. See Whiteside, 940 F.2d at
102.

As to the second element, the Court finds that the Arbitration Agreement covers

this dispute and that Defendants complied with its conditions. Although neither Plaintiff
nor Defendants signed the original note and HELOC Agreement, the Arbitration
Agreement "applies to and runs to the benefit of [both parties'] assigns, successors,
executors, heirs, and/or representatives.''^ (ECF No. 9-1, at 8 (emphasis added).) As

previously stated, American General—^the original noteholder—assigned its rights to
Defendants, and Plaintiff is the son—and sole heir—of Bertha Woody. Additionally, and

perhaps more importantly, this dispute hinges on whether Plaintiff acquired his mother's
contractual rights and if Defendants complied with the terms of the deed of trust. {See

Compl.

9-96.) As a result, the dispute directly concerns the "closing, servicing,

collecting, or enforcement of any transaction covered by this Agreement." (ECF No. 9-1
at 7.)

Regarding the "conditions" that Plaintiff alleges Defendants violated, the Court
finds that Defendants did not owe a duty to notify Plaintiff prior to filing the present
Motion. The Arbitration Agreement states that Defendants "must write to [Bertha
Woody] at [her] billing address; describe its claim or dispute; state the dollar amount of
its claim or dispute; and give [her] a reasonable opportunity to resolve the claim or
15

dispute." (ECF No. 9-1, at 7.) However, it was Plaintiffs, not Defendants, who first filed
a Complaint. Moreover, a clear distinction exists between initiating arbitration and

simply filing a motion to compel it. Consequently, the Courtconcludes that Defendants
have taken no action that would trigger this condition precedent. As such, the Court finds
that the Arbitration Agreement is both enforceable and covers the dispute in question.
As for the third Whiteside element, the Court finds that Bertha Woody's loan—

subject to the Arbitration Agreement—^relates to interstate commerce. This Court has
previously held that "the borrowing and lending of money is commerce that falls within
Congress' broad commerce power." National Home Equity Mortg. Ass'n v. Face, 64 F.

Supp. 2d 584, 592 (E.D. Va. 1999). Therefore, the Court holds disputes arising firom the
loan clearly implicate interstate commerce.

Finally, the fourth element is satisfied because Plaintiff has refused to engage in
arbitration. Plaintiff has declined Defendants' offers to arbitrate his claims and thus has

neglected or refused to arbitrate the dispute. {See Mot. to Compel Arbitration 5; see
generally Resp. in 0pp. to Mot. to Compel Arbitration.)
As to Plaintiffs arguments that this Court lacks subject-matter jurisdiction to rule

on the present Motion, the Court finds that they are unavailing for the reasons stated
above. See supra Part Ill.a.
Therefore, the Court finds that the four factors under Whiteside have been met,

and will compel arbitration in this matter.
IV.

CONCLUSION

Based on the foregoing, Plaintiffs Motion to Remand will be denied. The Court
16

will dismiss Count VII against PFC with prejudice and dismiss PFC from this case.

Additionally, the Court will grant Defendants' Motion to Compel Arbitration and
will dismiss this case without prejudice.

An appropriate Order will accompany this Memorandum Opinion.
The clerk is directed to send a copy of this Opinion and the accompanying Order
to all counsel of record.

/s/

Henry E. Hudson
United States District Judge

Date:7an -;^a 2O/0
Richmond, Virginia

17