Briggs v. Nationstar Mortgage LLC et al
Filing
36
MEMORANDUM OPINION AND ORDER DENYING 33 PLAINTIFFS MOTION TO RESTORE CASE TO ACTIVE DOCKET OR, IN THE ALTERNATIVE, TO REQUIRE DEFENDANTS TO INITIATE ARBITRATION. The Plaintiff is ORDERED to initiate arbitration with the AmericanArbitration Associat ion and pay the initial administrative fees, along with any other applicable filing fees, within thirty (30) days of entry of this Order.All proceedings in this case are STAYED pending the completion of arbitration. Signed by Chief Judge Gina M. Groh on 5/9/16. (njz)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
MARTINSBURG
CHRISTINE M. BRIGGS,
Plaintiff,
v.
CIVIL ACTION NO.: 3:15-CV-24
(GROH)
NATIONSTAR MORTGAGE, LLC,
and NEWCASTLE MORTGAGE
SECURITY TRUST 2006-1,
Defendants.
MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF’S MOTION TO
RESTORE CASE TO ACTIVE DOCKET OR, IN THE ALTERNATIVE,
TO REQUIRE DEFENDANTS TO INITIATE ARBITRATION
Currently before the Court is the Plaintiff’s Motion to Restore Case to Active Docket
or, in the Alternative, to Require Defendants to Initiate Arbitration [ECF No. 33], filed on
March 22, 2016. The Defendants filed their response in opposition on April 8, 2016, and
on April 15, 2016, the Plaintiff filed her reply. For the following reasons, the Court DENIES
the motion.
I. Background
This case arises out of a mortgage loan transaction in which the Plaintiff alleges
breach of contract and violations of the West Virginia Consumer Credit and Protection
Act, W. Va. Code §§ 46A-1-101 through 46A-8-102. The Plaintiff originally filed her
complaint in the Circuit Court of Berkeley County, West Virginia, and on March 5, 2015,
after approximately seven months of discovery in state court, the Defendants removed
the case to this Court. Following removal, the Plaintiff filed a motion to remand, which
was denied on May 15, 2015. On July 8, 2015, the Defendants filed a motion for leave
to file an amended answer, a motion to compel arbitration and a motion to stay discovery.
On August 24, 2015, the Court granted the Defendants leave to file an amended answer,
and the following day the Court granted the motion to stay discovery, pending its ruling
on the Defendants’ motion to compel arbitration.
Upon review of the arbitration
agreement entered into by the parties, and after thoughtful consideration of the Federal
Arbitration Act, 9 U.S.C. §§ 1-16, on October 9, 2015, the Court granted the Defendants’
motion to compel arbitration and stayed all proceedings pending the completion of the
arbitration process.
Five and one-half months later, the Plaintiff filed a motion to restore the case to the
Court’s active docket or, in the alternative, to require the Defendants to initiate arbitration,
which is currently pending before the Court. In her motion, the Plaintiff avers that by
failing to initiate arbitration, the Defendants defaulted, or waived, their right to arbitration
in this case. As such, the Plaintiff requests that the above-styled matter be reinstated to
the Court’s active docket. In the alternative, the Plaintiff requests that the Court compel
the Defendants to initiate arbitration and require them to pay the initial administrative fees
imposed by the American Arbitration Association (“AAA”). In response, the Defendants
assert that because the Plaintiff instituted the instant civil action, she should bear the
burden of initiating the arbitration process and paying the associated fees. In reply, the
Plaintiff points to the ambiguity within the arbitration agreement, which was drafted by the
Defendants. The Plaintiff submits that because the agreement is silent as to who is
responsible for initiating arbitration, it is thus ambiguous, and any uncertainty regarding
this issue must be resolved in her favor.
2
II. Applicable Law
A.
Contract Interpretation
Because this Court’s jurisdiction over the above-styled matter rests on principles
of diversity, state law governs the interpretation of the arbitration agreement in this case.
Legally enforceable agreements that utilize plain and clear language “must be construed
according to their . . . natural meaning.” Fraternal Order of Police, Lodge No. 69 v. City
of Farimont, 468 S.E.2d 712, 716 (W. Va. 1996). Any portion of a contract that is
ambiguous will be construed against the drafter. Nisbet v. Watson, 251 S.E.2d 774, 780
(W. Va. 1979); see also Krazek v. Mountain River Tours, Inc., 884 F.2d 163, 165 (4th Cir.
1989). Ambiguity arises where an “agreement is inconsistent on its face,” or when the
“parties can have reasonable differences in construing [its] terms.” Mountain State Coll.
v. Holsinger, 742 S.E.2d 94, 102 (W. Va. 2013) (per curiam). Silence, however, does not
equate to ambiguity. Id.
B.
Default of Arbitration
A party may lose its right to stay court proceedings in order to engage in arbitration
if it is “in default in proceeding with such arbitration.” Forrester v. Penn Lyon Homes, Inc.,
553 F.3d 340, 342 (4th Cir. 2009) (internal quotation omitted) (quoting 9 U.S.C. § 3
(2006)). The party opposing arbitration bears the “heavy burden” of proving default, id.
at 343, and courts do not “lightly infer the circumstances constituting waiver,” Patten
Grading and Paving, Inc. v. Skanska USA Bldg., Inc., 380 F.3d 200, 204 (4th Cir. 2004)
(internal quotation omitted) (quoting Am. Recovery Corp. v. Computerized Thermal
Imaging, Inc., 96 F.3d 88, 95 (4th Cir. 1996)). Arguments in support of default may include
evidence of delay and ongoing participation in litigation, but this evidence alone does not
3
constitute a showing of default. Forrester, 553 F.3d at 343. Furthermore, simply failing
to assert arbitration as an affirmative defense is not, in and of itself, conclusive of default.
Id. To prove default, the party opposing arbitration must show that he has suffered actual
prejudice. Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 702 (4th Cir.
Actual prejudice may be demonstrated when the moving party “actively
2012).
participates in [the] lawsuit or takes other action inconsistent with the right to arbitration.”
In re Mercury Constr. Corp., 656 F.2d 933, 939 (4th Cir. 1981) (internal quotation omitted)
(quoting N&D Fashions, Inc. v. DHJ Indus., Inc., 548 F.2d 722, 728 (8th Cir. 1976)).
Delay, extent of discovery and the number and nature of motions filed by the moving party
should be considered. Rota-McLarty, 700 F.3d at 702-04.
III. Discussion
A.
Initiation of Arbitration and Payment of Filing Fees
The mortgage loan agreement entered into between the Plaintiff and the
Defendants gives either party the right to elect arbitration as a form of dispute resolution.
The relevant sections of the agreement provide as follows:
You and We agree that if any Dispute arises, either You
or We may choose to have the Dispute resolved by binding
arbitration. The arbitration shall be administered by the
American Arbitration Association under the Commercial
Arbitration rules then in effect, including any supplemental
procedures. . . . The election to arbitrate may be made even
if an action has been filed in court, so long as no judgment
has been rendered. . . .
The arbitration hearing shall be held in the county of
Your residence. The arbitration hearing shall commence
within sixty (60) days of the demand for arbitration, unless
otherwise agreed to by the parties. . . .
4
At your request, We will advance the first $250 of the
filing and hearing fees for any claim that You may file against
us.
ECF No. 33-1 at 5.
The Plaintiff avers that because the arbitration agreement “is silent as to who must
initiate arbitration when that forum is requested,” this “ambiguity” must be resolved
against the Defendants as the drafters of the agreement. ECF No. 35. However, this
misconstrues general principles of contract interpretation. A contract is ambiguous where
an “agreement is inconsistent on its face,” or when the “parties can have reasonable
differences in construing the terms of the agreement.” Mountain State Coll., 742 S.E.2d
at 102. However, a contract is not ambiguous where it is silent. Id. Here, there is no
inconsistency with regard to who must make the demand for arbitration or who must pay
the AAA filing fee. Rather, the agreement is completely devoid of this information.
Because the arbitration agreement is silent, rather than ambiguous, as to who must
initiate the arbitration process and pay the associated costs, the Court will look to the
AAA’s Commercial Arbitration Rules. The AAA Rules relevant to the present issue are
as follows:
R-47. Scope of Award
....
(c) In the final award, the arbitrator shall assess the
fees, expenses, and compensation provided in Sections R-53,
R-54, and R-55. The arbitrator may apportion such fees,
expenses, and compensation among the parties in such
amounts as the arbitrator determines is appropriate.
....
5
R-53. Administrative Fees
As a not-for-profit organization, the AAA shall prescribe
administrative fees to compensate it for the cost of providing
administrative services. The fees in effect when the fee or
charge is incurred shall be applicable. The filing fee shall be
advanced by the party or parties making a claim or
counterclaim, subject to final apportionment by the arbitrator
in the award.
Commercial Arbitration Rules and Mediation Procedures, American Arbitration
Association (Oct. 1, 2013), https://www.adr.org/aaa/ShowProperty?nodeld=/UCM/ADR
STG_004103&revision=latestreleased.
In this instance, Rule 53 of the AAA’s Commercial Arbitration Rules appears to
place the burden of paying the initial filing fee on the Plaintiff. The Rule states that “[t]he
filing fee shall be advanced by the party or parties making a claim or counterclaim.” The
drafters of this Rule could have stated that the filing fee must be advanced by the party
demanding arbitration, or by the party exercising his right to arbitration under an
enforceable arbitration agreement. Instead, the drafters specifically chose to place this
burden on “the party or parties making a claim or counterclaim,” and the words “claim”
and “counterclaim” have special meaning in the context of litigation. Such words, as
applied in this case, point to the Plaintiff. Furthermore, because the Rules allow for the
apportionment of filing fees following the conclusion of the arbitration process, the Court
does not find this obligation upon the Plaintiff to be inconsistent with the administration of
justice. Upon review of the AAA’s Commercial Arbitration Rules and in accordance with
this Court’s October 9, 2015 Order, the Court finds that the Plaintiff must initiate the
arbitration process and pay the initial administrative fees, and any related filing fees,
associated with commencing an arbitration proceeding with the AAA.
6
B.
Default of Arbitration and Actual Prejudice
The Plaintiff avers that, in light of their dilatory conduct and prejudicial litigation
practices, the Defendants defaulted their right to arbitration. The Court finds that two
cases in particular provide guidance in assessing whether the Defendants waived their
right to arbitration. In Forrester, the Fourth Circuit found actual prejudice where the
defendant filed a motion to compel arbitration the night before trial. 553 F.3d at 343. In
considering whether the plaintiffs suffered actual prejudice, the Court looked to the age
of the case, the nature and number of motions filed and decided by the district court, the
existence of pretrial filings and whether, by filing a delayed request for arbitration, the
defendant gained a strategic advantage. Id. at 343-44. Prior to the defendant’s motion
to compel arbitration, over two years of litigation had occurred, during which a motion for
summary judgment was decided, multiple motions in limine were filed and the plaintiffs’
trial strategy was revealed. Id. Taking these factors into consideration, the Court held
that the defendant defaulted its right to arbitration. Id. at 343.
Contrarily, in Patten, the Fourth Circuit declined to find actual prejudice where the
defendants filed a motion to compel arbitration after a four-month delay and subsequent
to the district court’s ruling on three motions by the plaintiff. 380 F.3d at 205-09. Similar
to Forrester, the Court in Patten considered the extent and nature of discovery and motion
practice, the length of the delay in bringing the motion to compel arbitration and whether
any trial strategy was revealed. Id. at 205-08. The Court found the delay in asserting
arbitration minimal and noted that discovery had not exceed the exchange of
interrogatories and requests for production of documents. Id. at 205-06. The Court also
articulated that no strategic advantage was gained by the moving party and the motions
7
did not address the merits of the plaintiff’s claims. Id. at 206-07. Thus, the Court found
no actual prejudice and, consequently, no waiver of the right to arbitration. Id. at 207.
In this case, the Plaintiff argues the delay of the Defendants in asserting their right
to arbitration. Following their answer in state court, approximately eleven months passed
before the Defendants filed their motion to compel arbitration.1 This delay is much longer
than delays analyzed in similar cases. See Rota-McLarty, 700 F.3d at 703 (six and onehalf months); Patten, 380 F.3d at 205 (four months); MicroStrategy, Inc. v. Lauricia, 268
F.3d 244, 250 (4th Cir. 2001) (less than six months); Maxum Founds., Inc. v. Sauls Corp.,
779 F.2d 974, 982 (4th Cir. 1985) (three months). However, delay alone does not
demonstrate actual prejudice. Forrester, 553 F.3d at 343. Therefore, the Court will look
to other factors in evaluating prejudice to the Plaintiff.
In addition to delay, the Plaintiff claims that the Defendants’ ongoing participation
in discovery, response to the Plaintiff’s motion to remand and participation in the initial
planning meeting are all examples of actions inconsistent with an intent to arbitrate.
However, a party asserting its right to compel arbitration does not waive this right by
engaging in discovery “in the face of a court-ordered deadline.” Am. Recovery, 96 F.3d
at 96 (internal quotation omitted) (quoting Maxum Founds., 779 F.2d at 982)).
Furthermore, the motion to remand was filed by the Plaintiff, and “activity that the moving
party did not initiate [is not a factor] in assessing that party’s default.” Patten, 380 F.3d
at 206. The Defendants’ participation in litigating this matter has been limited. After
removal to this Court, the Defendants filed only one motion prior to filing their motion to
1
From the date of removal to this Court, approximately four months passed before the Defendants filed
their motion to compel arbitration.
8
compel arbitration.2 Notably, no dispositive motions have been filed in this case, which
is a factor weighing against the Plaintiff’s argument in favor of default. See Wheeling
Hosp, Inc. v. Health Plan of the Upper Ohio Valley, Inc., 683 F.3d 577, 590-91 (4th Cir.
2012) (opining that whether the party opposing arbitration was required to respond to
dispositive motions, although not absolute evidence of prejudice, may be considered in
evaluating prejudice).
The Plaintiff also claims that she has suffered actual economic damages as a
result of the Defendants’ dilatory litigation tactics. The Court notes that the party opposing
arbitration bears the burden of proving expenses incurred as a result of the other party’s
allegedly improper litigation activity, id. at 590, and such expenses must be backed by
evidentiary support, Rota-McLarty, 700 F.3d at 703. The economic damages to which
the Plaintiff refers are the continuous increases in her mortgage arrearages. The Plaintiff
avers that as of June 11, 2014, the Defendants demanded payment in the amount of
$28,450.55, and that figure continues to increase by $2,024.20 every month. The Plaintiff
claims that if the Defendants had “properly handled her mortgage account” in the first
place, her payments would be “approximately $800.00 less than the amount now
demanded.” ECF No. 33 at 8. However, these expenses are not expenses “incurred in
responding to the moving party’s litigation activities,” Wheeling Hosp., 683 F.3d at 589,
but rather prospective damages in relation to the Plaintiff’s underlying claims. Thus, these
expenses are immaterial to the Court’s inquiry into whether the Defendants defaulted or
waived their right to arbitration.
2
The motion filed by the Defendants prior to their motion to compel arbitration was a motion for leave to file
an amended answer.
9
Upon review, the Court finds that the Plaintiff has failed to meet the heavy burden
required to prove default of arbitration. At most, the Plaintiff has provided evidence of
delay and expenses generally incurred in the litigation process. Because the Plaintiff has
failed to put forth evidence demonstrating actual prejudice, the Court finds that the
Defendants did not default, or waive, their right to arbitration.
IV. Conclusion
Accordingly, the Court ORDERS that the Plaintiff’s Motion to Restore Case to
Active Docket or, in the Alternative, to Require Defendants to Initiate Arbitration [ECF No.
33] is hereby DENIED. The Plaintiff is ORDERED to initiate arbitration with the American
Arbitration Association and pay the initial administrative fees, along with any other
applicable filing fees, within thirty (30) days of entry of this Order.
All proceedings in this case are STAYED pending the completion of arbitration.
The Clerk is DIRECTED to transmit copies of this Order to all counsel of record
herein.
DATED: May 9, 2016
10
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?