Donley v. Sallie Mae, Inc. et al
Filing
18
MEMORANDUM OPINION AND ORDER DENYING THE PLAINTIFF'S MOTION TO REMAND AND GRANTING THE DEFENDANTS' MOTION TO COMPEL ARBITRATION AND TO STAY THE CIVIL ACTION: Granting 5 Motion to Compel and to Stay the Case; Denying 7 Motion to Remand to State Court ( Status Report due by 10/15/2015.) Signed by Senior Judge Frederick P. Stamp, Jr on 4/14/15. (soa)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
ASHLEY DONLEY,
Plaintiff,
v.
Civil Action No. 5:14CV165
(STAMP)
SALLIE MAE, INC.,
SLM CORPORATION,
NAVIENT CORPORATION and
NAVIENT SOLUTIONS, INC.,
Defendants.
MEMORANDUM OPINION AND ORDER DENYING THE
PLAINTIFF’S MOTION TO REMAND AND GRANTING THE DEFENDANTS’
MOTION TO COMPEL ARBITRATION AND TO STAY THE CIVIL ACTION
I.
Background
This civil action involves the collection of student debt that
the plaintiff owed the defendants. The plaintiff alleges that when
she became unable to pay her student loan payments, the defendants
engaged in a series of allegedly illegal methods of collection.
Count I claims that the defendants violated the West Virginia
Consumer Credit and Protection Act (“CCPA”) by engaging in phone
calls, correspondence, and other methods to contact the plaintiff
concerning her delinquent payments. Count II alleges that the
defendants violated the West Virginia Computer Crime and Abuse Act
(“CCAA”)
by
using
electronic
correspondence
to
harass
the
plaintiff. Count III asserts that the defendants intentionally
inflicted
emotional
distress
on
the
plaintiff
through
their
harassing methods. Finally, in Count IV, the plaintiff claims that
the defendants violated her right to privacy under the common law.
The plaintiff seeks compensatory damages, punitive damages, damages
for emotion distress, and attorney’s fees.
Currently at issue are the plaintiff’s motion to remand and
the defendants’ motion to compel arbitration and to stay the civil
action. ECF Nos. 7 and 5, respectively. Those motions are discussed
below.
A. Motion to Remand
In her motion to remand, the plaintiff disputes that the
amount in controversy requirement has been satisfied. ECF No. 7. In
that motion, the plaintiff asserts that the defendants made “no
effort to quantify the value of [her] claim and fail to offer any
specific evidence” as to the amount in controversy requirement.
Here, the plaintiff refers to two items: (1) the outstanding loan
balance of her loans, and (2) the number of phone calls that the
defendants made to the plaintiff in violation of the CCPA. Because
the
defendants
only
provide
conclusions
instead
of
specific
evidence of the amount in controversy, the plaintiff believes that
this civil action should be remanded.
The defendants then filed a response in opposition. ECF No.
14. In that response, the defendants seek to refute the plaintiff’s
claims
regarding
the
amount
in
controversy
requirement.
The
defendants first point to the plaintiff’s claims under the CCPA.
Based
on
the
number
of
alleged
2
violations
of
the
CCPA,
the
defendants argue that the penalties for those violations would
likely
exceed
$75,000.
In
addition
to
those
penalties,
the
defendants note that the plaintiff may recover actual damages and
attorney’s fees. The defendants next point out that the plaintiff
seeks cancellation of her debt, which currently equals $98,256.63.
As evidence of that amount, the defendants attached not only an
affidavit by a Navient Customer Advocate associated with the
plaintiff’s
loans,
but
also
copies
of
the
plaintiff’s
loan
documents. Based on the amount of damages sought and the evidence
provided, the defendants believe that they clearly satisfy the
amount in controversy requirement.
The plaintiff then filed her reply. ECF No. 15. In that reply,
the plaintiff states that the amount in controversy requirement is
determined by the facts and evidence at the time of removal. With
that in mind, the
provide
any
plaintiff’s
removal.
plaintiff argues that the defendants failed to
specific
evidence
outstanding
Further,
the
of
student
plaintiff
the
loan
alleged
balance
believes
amount
at
that
of
the
the
time
of
the
argument
concerning “attempted contacts” and the CCPA is insufficient to
prove the amount in controversy requirement. Finally, the plaintiff
asserts that the defendants failed to offer evidence as to the
other damages the plaintiff seeks, and therefore those amounts for
other damages should not be considered for jurisdictional purposes.
B. Motion to Compel Arbitration and to Stay the Civil Action
3
In
addition
to
the
plaintiff’s
motion
to
remand,
the
defendants filed a motion to compel arbitration and to stay the
civil action. ECF No. 5. In that motion, the defendants first argue
that the Federal Arbitration Act (“FAA”) governs the parties’
arbitration agreements, which are found in each of the student loan
agreements. The defendants point out that the plaintiff executed
the loan agreements, which each contain the arbitration agreements.
Further, under the FAA, the defendants believe that
this Court
must stay the civil action while the arbitration proceedings
continue. Second, the defendants argue that the arbitration clauses
are unambiguous as stated in the loan agreements, and that courts
almost uniformly enforce such clauses, including West Virginia
courts. Therefore, the defendants argue that this Court should
grant its motion and thus compel the plaintiff to submit her claims
to arbitration.
The plaintiff then filed her response in opposition. ECF No.
9.
The
plaintiff’s
primary
argument
is
that
the
arbitration
agreements are unconscionable and thus unenforceable. The plaintiff
stresses the “unequal bargaining power” between the two parties.
Next, the plaintiff believes that the arbitration
agreements are
unconscionable because they allegedly abridge the plaintiff’s
statutory rights and remedies. Regarding those rights and remedies,
the plaintiff points to language in the loan agreements that
requires the appealing party to pay all costs of any appeal that
4
may be filed. Because that provision allegedly “strips Plaintiff of
her ability to pursue the statutory remedy of attorney’s fees and
costs when they are the prevailing party,” the plaintiff argues
that the arbitration agreements are substantively unconscionable
and unenforceable. The plaintiff also claims that the arbitration
agreements demand prohibitive costs that render the agreements
unconscionable. In the alternative, if this Court finds that the
arbitration agreements are enforceable, then the plaintiff requests
that
additional
determine
discovery
whether
this
be
permitted
in
action
should
civil
order
be
to
further
subject
to
arbitration.
The defendants then filed their reply. ECF No. 13. In that
reply, the defendants first argue that arbitration agreements are
not contracts of adhesion. Here, they claim that the arbitration
clause contained a provision that allowed the plaintiff to reject
the arbitration agreements if she responded within 60 days. The
defendants point out that the plaintiff did not file a rejection.
Next, the defendants reject the plaintiff’s argument concerning the
abridging of statutory rights. The defendants contend that the
arbitration agreements do not prohibit the awarding of attorney’s
fees.
In
addition,
the
defendants
argue
that
even
if
the
arbitration agreements were unconscionable, the promissory notes
would still be enforceable. Finally, the defendants believe that
additional discovery in this civil action regarding arbitration
5
would
be
unnecessary
and
inconsistent
with
the
goals
of
arbitration.
For the reasons set forth below, the plaintiff’s motion to
remand is denied and the defendants’ motion to compel arbitration
and to stay the civil action is granted.
II.
Applicable Law
A. Removal
A defendant may remove a case from state court to federal
court in instances where the federal court is able to exercise
original jurisdiction over the matter.
28 U.S.C. § 1441.
Federal
courts have original jurisdiction over primarily two types of
cases: (1) those involving federal questions under 28 U.S.C.
§ 1331, and (2) those involving citizens of different states where
the
amount
in
controversy
exceeds
$75,000.00,
interests and costs pursuant to 28 U.S.C. § 1332(a).
exclusive
of
However, if
federal jurisdiction arises only by virtue of the parties’ diverse
citizenship, such an action “shall be removable only if none of the
. . . defendants is a citizen of the State in which such action is
brought.”
Tomlin
v.
Office
of
Law
Enforcement
Tech.
Commercialization, Inc., 5:07CV42, 2007 WL 1376030, at *1 (N.D. W.
Va. May 7, 2007).
The party seeking removal bears the burden of
establishing federal jurisdiction.
See In re Blackwater Security
Consulting, LLC, 460 F.3d 576, 583 (4th Cir. 2006); Mulcahey v.
Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir.
6
1994).
Removal jurisdiction is strictly construed, and if federal
jurisdiction is doubtful, the federal court must remand.
Hartley
v. CSX Transp., Inc., 187 F.3d 422 (4th Cir. 1999); Mulcahey, 29
F.3d at 151.
Further, the court is limited to a consideration of facts on
the record at the time of removal.
See Lowrey v. Alabama Power
Co., 483 F.3d 1184, 1213–15 (11th Cir. 2007) (“In assessing whether
removal was proper . . . the district court has before it only the
limited universe of evidence available when the motion to remand is
filed.”); O’Brien v. Quicken Loans, Inc., 5:10CV110, 2011 WL
2551163 (N.D. W. Va. June 27, 2011);
Marshall v. Kimble, No.
5:10CV127, 2011 WL 43034, at *3 (N.D. W. Va. Jan. 6, 2011) (“The
defendant’s removal cannot be based on speculation; rather, it must
be based on facts as they exist at the time of removal.”);
Fahnestock v. Cunningham, 5:10CV89, 2011 WL 1831596, at *2 (N.D. W.
Va. May 12, 2011) (“The amount in controversy is determined by
considering the judgment that would be entered if the plaintiff
prevailed on the merits of his case as it stands at the time of
removal.”)
(internal
citations
omitted).
Regarding
punitive
damages, the mere likelihood of punitive damages, without more,
does not give rise to federal jurisdiction.
Cunningham, 2011 WL
1831596, at *2 (citing Landmark Corp. v. Apogee Coal Company, 945
F. Supp. 932 (S.D. W. Va. 1996)).
B. Unconscionability
7
West
Virginia
law
provides
that
“[t]he
doctrine
of
unconscionability means that, because of an overall and gross
imbalance, one-sidedness or lop-sidedness in a contract, a court
may be justified in refusing to enforce the contract as written.”
Brown v. Genesis Healthcare Corp. (“Brown II”), 729 S.E.2d 217, 226
(W. Va. 2012).
Analyzing a claim under that doctrine requires an
“inquiry into the circumstances surrounding the execution of the
contract and the fairness of the contract as a whole.”
Syl. Pt. 3,
Troy Min. Corp. v. Itmann Coal Co., 346 S.E.2d 749 (W. Va. 1986).
When assessing a claim of unconscionability, a court “must focus on
the
relative
positions
of
the
parties,
the
adequacy
of
the
bargaining positions, the meaningful alternatives available to the
plaintiff, and the existence of unfair terms in the contract.”
Syl. Pt. 4, Art’s Flower Shop, Inc. v. Chesapeake and Potomac
Telephone Co. of West Virginia, Inc., 413 S.E.2d 670 (W. Va. 1991)
(internal quotations omitted). The doctrine of unconscionability
may be used in attempting to invalidate an arbitration agreement.
Brown I, 724 S.E.2d at syl. pt. 9; see Johnson Controls, Inc. v.
Tucker, 729 S.E.2d 808, 815 (W. Va. 2012). The application of
traditional contract law defenses, such as unconscionability, makes
sense,
considering
that
it
is
a
“fundamental
principle
that
arbitration is a matter of contract.” Rent-A-Center, West, Inc. v.
Jackson, 561 U.S. 63, 67 (2010). Further, “where a party alleges
that the arbitration provision was unconscionable . . . the
8
question of whether an arbitration provision was bargained for and
valid is a matter of law for the court to determine by reference to
the entire contract, the nature of the contracting parties, and the
nature of the undertakings covered by the contract.” Syl. Pt. 3,
State ex rel. Wells v. Matish, 600 S.E.2d 583 (W. Va. 2004).
More specifically, West Virginia law separates a claim of
unconscionability into two components: procedural and substantive.
Brown II, 729 S.E.2d at 227 (internal citations omitted).
contract
term
becomes
unenforceable
substantive unconscionability exist.
if
both
Id.
procedural
A
and
In assessing whether
those two components have been proven, courts “apply a ‘sliding
scale’
in
oppressive
making
a
this
contract
determination:
term,
the
less
the
more
evidence
unconscionability is required” to prove that claim.
citations and quotations omitted).
substantively
of
procedural
Id. (internal
Those two components are
discussed and analyzed below.
III.
Discussion
As stated earlier, currently at issue are the plaintiff’s
motion to remand and the defendants’ motion to compel arbitration
and to stay the civil action.
A. Motion to Remand
The facts show that the plaintiff is a resident of West
Virginia. Defendants Sallie Mae, Inc. and Navient Solutions, Inc.
are citizens of Delaware with their principal place of business in
9
Virginia. Defendants SLM Corporation and Navient Corporation are
also citizens of Delaware with their principal place of business
located there as well. Thus, the parties are diverse. The only
issue in dispute regarding the plaintiff’s motion to remand,
however,
is
whether
the
defendants
satisfy
the
amount
in
controversy requirement.
Based on the record before this Court, the plaintiff’s motion
to
remand
must
be
denied.
As
stated
earlier,
the
amount
in
controversy requirement cannot be based on speculation or “what
ifs”
that
may
occur.
Rather,
the
court
is
limited
consideration of facts on the record at the time of removal.
Lowrey, 483 F.3d at 1213–15.
to
a
See
Speculation regarding the amount in
controversy requirement fails to satisfy the burden that the
removing party bears.
See In re Blackwater Security Consulting,
LLC, 460 F.3d at 583. The defendants in this civil action, however,
provide more than “what ifs” or simple speculation.
In their response in opposition, the defendants provide both
the plaintiff’s loan documents and an affidavit of a Navient
Customer Advocate who is associated with the plaintiff’s loans.
Those documents demonstrate that the loan balance at issue, which
the plaintiff wants cancelled, is at least $98,000.00 ECF No. 14.
That figure alone clearly satisfies the amount in controversy
requirement. The plaintiff contends, however, that the defendants
did not adequately discuss that amount in their notice of removal.
10
Because they did not provide specific evidence of that loan balance
at the time of removal, and because this Court must consider the
facts at that time, the plaintiff believes that her motion to
remand must be granted.
That argument, however, is misplaced.
In Dart Cherokee Basin Operating Company, LLC, et al. v.
Owens, the Supreme Court of the United States held that, pursuant
to § 28 U.S.C. 1446(a)(“§ 1446”), “a defendant’s notice of removal
need include only a plausible allegation that the amount in
controversy exceeds the jurisdictional threshold.”
555 (2014).
135 S.Ct. 547,
Although a plausible allegation of the amount in
controversy may satisfy § 1446, that assumes that the plaintiff
does not contest the amount in controversy allegation.
plaintiff
does
contest
the
defendant’s
plausible
If the
allegation,
however, removal will be proper “by the defendant ‘if the district
court finds, by the preponderance of the evidence, that the amount
in controversy exceeds’ the jurisdictional amount.”
(quoting 28 U.S.C. § 1446(c)(2)(B) (2012)).
Id. at 553-54
If a “defendant’s
assertion of the amount in controversy is challenged, . . . both
sides submit proof and the court decides, by a preponderance of the
evidence, whether the amount-in-controversy requirement has been
satisfied.”
Id. at 554.
As a more general matter, the removing party “bears the burden
of establishing the jurisdictional amount by a preponderance of the
evidence.”
Lowery, 483 F.3d at 1208; see Ellenburg v. Spartan
11
Motors Chassis, Inc., 519 F.3d 192, 200 (4th Cir. 2008) (“On a
challenge
of
jurisdictional
allegations,
[t]he
party
seeking
removal bears the burden of demonstrating that removal jurisdiction
is
proper.”)
(internal
quotations
omitted);
Strawn
v.
AT&T
Mobility, L.L.C., 530 F.3d 293, 296-97 (4th Cir. 2008) (“If a
plaintiff files suit in state court and the defendant seeks to
adjudicate the matter in federal court through removal, it is the
defendant who carries the burden of alleging in his notice of
removal and, if challenged, demonstrating the court’s jurisdiction
over the matter.”).
Here, the defendants have met that burden.
Pursuant to the above holding in Dart, the defendant at the
time of removal did provide a plausible allegation that the loan
balance exceeded the amount in controversy requirement. ECF No. 1
*2-3, Ex. A. The plaintiff then contested that claim by filing her
motion to remand, which is currently at issue. In response to that
motion, the defendants proffered not only an affidavit, but also
the plaintiff’s loan documents. Those pieces of evidence clearly
show that the plaintiff’s loan balance exceeds the amount in
controversy,
and
rise
conclusions.
Further,
well
giving
beyond
weight
speculative
to
the
or
“what
later-filed
if”
loan
documents comports with the previous practice where “[c]ourts have
observed that the propriety of treating later-filed documents as
amendments to a notice of removal depends on the content of the
notice of removal and the record as a whole.”
12
Carter v. Monsanto
Co., 635 F. Supp. 2d 479, 487 (S.D.W. Va. 2009)(citing USX Corp. v.
Adriatic Ins. Co., 345 F.3d 190, 206 n. 12 (3d Cir.2003); Buell v.
Sears, Roebuck & Co., 321 F.2d 468, 471 (10th Cir.1963)).
That
means the defendants, as the removing party, have satisfied their
burden.
The defendants’ contention as to the CCPA violations also
satisfies the amount in controversy requirement. Under the CCPA, if
a
creditor
violates
its
provisions,
then
statutory
penalties
ranging from $100 to $1000 may be awarded.1 W. Va. Code § 46A-5101(1). Those amounts
may also be adjusted for inflation. Id. at
106. Currently, the maximum amount of those penalties when adjusted
for inflation equals $4,737.57 per violation. Id.; see Thomas v.
FIA Card Services, Nat. Ass’n, 5:14CV79, 2014 WL 4954389 (N.D.W.
Va. Oct. 2, 2014). When a maximum penalty exists as dictated by
statute, it is appropriate to measure the amount in controversy by
the maximum penalty and not by how much the plaintiff is likely to
be awarded. See Brill v. Countrywide Home Loans, Inc., 427 F.3d
446, 449 (7th Cir. 2009); Korn v. Polo Ralph Lauren Corp., 536 F.
Supp. 2d 1199 (9th Cir. 2008). Furthermore, the plaintiff demands
the maximum statutory penalties amount in her complaint. Based on
1
On March 31, 2015, several provisions of the CCPA were
amended. One of which is that statutory damages no longer have a
minimum of $100, but still retain a maximum of $1,000. However, to
this Court’s knowledge, it appears that the relevant amendments to
the CCPA will not apply until June 2015. See 2015 W. Va. S.B. 542
(West’s No. 178).
13
the maximum, inflation-adjusted penalty amount, and applying that
to the sixteen alleged violations of the CCPA, that results in
penalties of $75,801.12. That amount, not including the loan
balance amount as earlier discussed, exceeds the amount in contr
oversy requirement. Therefore, the defendants have satisfied the
amount in controversy requirement, and thus the plaintiff’s motion
to remand must be denied.
B. Motion to Compel Arbitration and to Stay the Civil Action
This Court will now address the second motion at issue, which
is the defendants’ motion to compel arbitration and to stay the
civil action. The defendants argue that the arbitration agreements
are unambiguous and are not considered contracts of adhesion. The
plaintiff
contends
that
the
arbitration
agreements
are
unconscionable and thus unenforceable. Regarding that argument, the
plaintiff claims that the arbitration agreements are contracts of
adhesion, and that the agreements’ fee allocation for appeal costs
abridges the plaintiff’s statutory rights. In the alternative, the
plaintiff
requests
that
if
this
Court
deems
the
arbitration
agreement enforceable, then additional discovery on the matter
should
be
permitted.
As
stated
earlier,
West
Virginia
law
separates the doctrine of unconscionability into two components:
procedural and substantive. Those two components are discussed
below.
1.
Procedural Unconscionability
14
Procedural
improprieties,
unconscionability
or
unfairness
formation of the contract.”
in
refers
the
to
any
bargaining
“inequities,
process
and
Brown II, 729 S.E.2d at 227; see
Pingley v. Perfection Plus Turbo-Dry, L.L.C., 746 S.E.2d 544, 551
(W. Va. 2013).
It requires an examination of certain inadequacies
that, when viewed together, “result in a lack of a real and
voluntary meeting of the minds of the parties.”
Pingley, 746
S.E.2d at 551 (quoting Syl. Pt. 17, Brown v. Genesis Healthcare
Corp. (“Brown I”), 724 S.E.2d 250 (W. Va. 2011)).
Those certain
inadequacies include “the age, literacy, or lack of sophistication
of a party; hidden or unduly complex contract terms; the adhesive
nature of the contract; and the manner and setting in which the
contract was formed, including whether each party had a reasonable
opportunity to understand the terms of the contract.” Pingley, 746
S.E.2d at 551 (quoting Brown I, 724 S.E.2d at syl. pt. 17).
After analyzing the language of the arbitration agreements and
the facts, it is clear that those agreements are not procedurally
unconscionable. Regarding the sophistication of the parties, it
appears that the plaintiff is a legal adult who either pursued or
completed a college education.2 As to the complexity and length of
the documents, although the loan documents could be considered
2
The record before this Court is slightly unclear as to
whether the plaintiff actually received her college degree. The
facts do show, however, that the plaintiff completed loan
applications from January 2008 to November 2011, which corresponds
to the time she appeared to attend college.
15
lengthy, each loan application stated the following on the first
page: “I [the plaintiff] have read the Promissory Note accompanying
this application and each application Notice to Cosigner and agree
to the terms therein.” Id. at Ex. A. To the left of that statement,
it states in bold, capital letters the following: “CAUTION - IT IS
IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT.
I, THE COSIGNER, HAVE READ THE APPLICABLE COSIGNER NOTICE(S).” Id.
The plaintiff executed those loan applications, including the all
capital-letter provision quoted above. Therefore, the plaintiff
confirmed
that
she
reviewed
the
loan
application
documents.
Regarding the adhesion of the contract, the plaintiff had the right
to reject the arbitration agreement. The arbitration agreements,
located within the documents for each loan, state the following:
To the extent permitted under federal law, [the lender]
and [the plaintiff] agree that either party may elect to
arbitrate - and require the other party arbitrate - any
Claim under the following terms and conditions. This
Arbitration Agreement is part of the Signature Student
Loan Promissory Note (“Note”).
1. RIGHT TO REJECT: I [referring to the plaintiff]
may reject this Arbitration Agreement by mailing a
rejection notice to P.O. Box 147027 Gainesville, FL
32608 within 60 days after the date of my first
disbursement. Any Rejection Notice must include my
name, address, telephone number and loan or account
number.
ECF No. 5 Ex. A. That same provision of the arbitration agreements
was listed in each loan agreement. Id. at Exs. A-M. The plaintiff
did not reject that provision. West Virginia law defines a contract
of adhesion as “one drafted and imposed by a party of superior
16
strength that leaves the subscribing party little or no opportunity
to alter the substantive terms, and only the opportunity to adhere
to the contract or reject it.” Brown II, 729 S.E.2d at 228. Simply
reading
the
definition
of
a
contract
of
adhesion
clearly
demonstrates that the arbitration agreement at issue does not
satisfy that definition. Here, the plaintiff could have rejected
the
arbitration
agreements.
agreements
Those
without
arbitration
also
rejecting
agreements
do
not
the
prevent
loan
any
alteration to their terms, or place the plaintiff in a situation of
either
accepting
Therefore,
the
or
rejecting
inadequacies
the
contract
necessary
to
in
its
prove
entirety.
procedural
unconscionability are not present.
2.
Substantive Unconscionability
Notwithstanding the lack of procedural unconscionability, this
Court
will
address
unconscionability.
the
second
component
for
a
claim
of
Substantive unconscionability relates to the
“unfairness in the contract itself and whether a contract term is
one-sided and will have an overly harsh effect on the disadvantaged
party.” Pingley, 746 S.E.2d at 551 (quoting Brown I, 724 S.E.2d at
syl. pt. 19).
When assessing substantive unconscionability, the
factors that a Court must analyze “vary with the content of the
agreement.”
omitted).
Pingley,
746
S.E.2d
at
551
(internal
citations
Therefore, courts should “assess whether a contract
provision is substantively unconscionable on a case-by-case basis.”
17
Brown I, 724 S.E.2d at 262.
Nonetheless, relevant factors to
consider include “the commercial reasonableness of the contract
terms, the purpose and effect of the terms, the allocation of the
risks between the parties, and public policy concerns.”
Pingley,
746 S.E.2d at 551; see also Dan Ryan Builders, Inc. v. Nelson, 737
S.E.2d 550 (W. Va. 2012); Johnson Controls, Inc., 729 S.E.2d at
808.
Regarding substantive unconscionability, the plaintiff asserts
four arguments. First, the plaintiff contends that the arbitration
agreement abridges her statutory rights. Here, the plaintiff points
to the arbitration agreements’ fee allocation for appeals that a
party may file of the arbitration award. Regarding costs of
arbitration
generally,
the
arbitration
agreements
state
the
following:
Any arbitration hearing that [the plaintiff attends] will
take place in a location that is reasonably convenient to
[the plaintiff]. [The defendants] will consider (and
generally honor) any good faith request to bear the fees
charged. Each party must pay the expense of that party’s
attorneys, experts and witnesses, regardless of which
party prevails in the arbitration. Despite the foregoing,
[the defendants] will pay any fees [the defendants] are
required to bear: (1) under applicable law; or (2) in
order to enforce this Arbitration Agreement.
ECF
No.
5,
Ex.
A.
The
arbitration
agreements
then
contain
provisions regarding an appeal of the arbitration award by either
party. As to the costs associated with any appeal, it states that
the “appealing party will pay the Administrator’s and arbitrator’s
costs
of
the
appeal.”
Id.
The
18
plaintiff
claims
that
those
provisions mean that she cannot obtain attorney’s fees in either
the initial arbitration proceeding or on appeal, as permitted under
the
CCPA,
thus
allegedly
abridging
her
statutory
right
to
attorney’s fees. Therefore, the alleged abridging of her statutory
rights for attorney’s fees means that the arbitration agreements
are unconscionable. Second, the plaintiff claims that although the
arbitration agreements permit remedies under applicable substantive
law, they still limit statutory remedies under the CCPA. According
to the plaintiff, that alleged conflict among the provisions
renders the arbitration agreements unconscionable.
plaintiff
contends
unconscionable
and
that
the
arbitration
prohibitive
costs.
Third, the
agreements
Finally,
the
impose
plaintiff
believes that the unconscionable arbitration agreements taint all
of the loan agreements in their entirety, and thus renders the loan
agreements unenforceable.
The plaintiff’s arguments, however, do not properly apply the
standard for satisfying a claim of unconscionability.
Rather, the
conduct of the defendants must be analyzed under the applicable
standard provided by West Virginia law.
Applying the above legal
standard, the plaintiff has not sufficiently demonstrated that the
arbitration
agreements
were
substantively
unconscionable.
Regarding commercial reasonableness, the facts do not show any
commercially unreasonable terms.
The plaintiff received a loan
from the defendants to pursue her education.
19
In exchange, the
plaintiff would pay the principal sum plus interest and fees to the
defendants. The facts regarding that arbitration agreement display
nothing unfair about the transaction and fail to raise concerns as
to
commercial
unreasonableness
or
a
public
policy
violation.
Further, nothing about such an exchange and agreement demonstrates
an unfair allocation of risk as to either party.
As stated earlier, the plaintiff appears to argue that the fee
arrangement violates the plaintiff’s statutory rights under the
CCPA.
Further,
the
plaintiff
asserts
that
the
arbitration
agreements will require the plaintiff to incur costs so excessive
that
they
are
substantively
unconscionable.
The
standard
for
whether terms of a contract are substantively unconscionable is not
proven simply by alleged violations of a statute.
Rather, the
plaintiff needs to demonstrate that the arbitration agreements
between the plaintiff and the defendants are overly “one-sided” or
unfair, as provided above.
As stated earlier, the plaintiff could
have rejected the arbitration agreement, including its terms and
provisions. The record, however, shows that she did not do so. The
plain language of the arbitration agreements require that the
plaintiff pay her costs associated with an appeal she may seek of
the arbitration award, with the exception that she may be able to
request that the defendants pay the appeal costs. Further, the
plaintiff only quotes various cases that discusses arbitration
costs generally, rather than the specific costs that the plaintiff
20
will
incur
unsupported
as
and
a
result
of
arbitrating
this
speculative
contentions
do
matter.
not
Such
render
the
arbitration agreements unenforceable. Matish, 600 S.E.2d at 590;
see Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 92
(2000). In fact, the Supreme Court of the United States has held
that where “a party seeks to invalidate an arbitration agreement on
the ground that the arbitration would be prohibitively expensive,
that party bears the burden of showing the likelihood of incurring
such costs.” Randolph, 531 U.S. at 92. Finally, courts maintain the
power to award attorney’s fees and costs for claims under the CCPA.
W. Va. Code § 46A-5-104(2014). That awarding of fees, however, is
discretionary, not mandatory. Chevy Chase Bank v. McCamant, 512
S.E.2d
217,
227
(W.
Va.
1998)(“By
using
the
word
‘may’
in
conferring upon courts the power to award attorney’s fees, the
[West Virginia] Legislature clearly made the granting of [awards of
attorney’s fees and costs under the CCPA] discretionary.”). After
reading the language of the arbitration agreements, an award of
attorney’s fees is not precluded. Rather, that provision discussing
appeal costs only relates to the costs of the appeal, not the
awarding of attorney’s fees. In addition to that distinction, the
arbitration agreements discussion of attorney’s fees does not
explicitly prohibit such an award to the plaintiff.
arbitration
agreement
requires
the
parties
to
In fact, the
pay
for
their
respective attorney’s fees and related costs, but then states that
21
“[the defendants] will pay any fees [the defendants] are required
to bear: (1) under applicable law; or (2) in order to enforce this
Arbitration agreement.” Therefore, the language of the arbitration
agreement
does
not
automatically
prohibit
the
awarding
of
attorney’s fees, and thus does not abridge the plaintiff’s right to
pursue such fees. Thus, the defendants motion to compel arbitration
must be granted. In regards to the plaintiff’s alternative request
for additional discovery to determine the “arbitrability” of the
plaintiff’s claim, that request must be denied. Granting the
plaintiff’s alternative request would hinder, rather than further,
“arbitration’s goal of ‘resolving disputes in a timely and cost
efficient manner.’” Hay Group, Inc. v. E.B.S. Acquisition Corp.,
360 F.3d 404, 409 (3d Cir. 2004)(quoting Painewebber, Inc. v.
Hofmann, 984 F.2d 1372, 1380 (3d Cir. 1993)).
This Court will also grant the defendants’ request that this
civil action be stayed while the arbitration proceeds.
District
courts possess inherent power to stay litigation proceedings.
See
Landis v. N. Am. Co., 299 U.S. 248, 254-55 (1936) (“The power to
stay proceedings is incidental to the power inherent in every court
to control disposition of the causes on its docket with economy of
time and effort for itself, for counsel, and for litigants.”); Reed
v. Health and Human Services, 774 F.2d 1270, 1277 (4th Cir. 1985)
(holding that a district court may defer ruling on a petition for
attorneys’ fees
pending a final resolution of the merits); see
22
also Clinton v. Jones, 520 U.S. 681, 706, 117 S. Ct. 1636, 137 L.
Ed. 2d 945 (1997) (“The District Court has broad discretion to stay
proceedings
as
an
incident
to
its
power
to
control
its
own
docket.”). Based on the above findings and conclusions, this Court
believes that this civil action should be stayed.
After reviewing the arguments and facts above, the plaintiff
has not proven that the arbitration agreements are substantively
unconscionable. Moreover, she did not prove that those agreements
were procedurally unconscionable. Therefore, she has not satisfied
her burden under West Virginia law. Accordingly, the defendants’
motion to compel arbitration and to stay the civil action is
granted.
IV.
Conclusion
For the reasons set forth above, the plaintiff’s motion to
remand is DENIED, and the defendants’ motion to compel arbitration
and stay the civil action is GRANTED. Accordingly, this civil
action is STAYED. The parties are DIRECTED file a status report by
October 15, 2015, informing the Court of what has occurred in
arbitration and the progress of the parties.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
23
DATED:
April 14, 2015
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
24
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