Ware et al v. Santander Consumer USA, Inc.

Filing 13

MEMORANDUM OPINION AND ORDER denying 7 MOTION by Santander Consumer USA, Inc. to Dismiss Complaint or to Compel Arbitration. Signed by Judge Robert C. Chambers on 12/10/2015. (cc: attys; any unrepresented parties) (mkw)

IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION

LAURANNA WARE and
JEFFERY WARE,
Plaintiffs,
v.

CIVIL ACTION NO. 3:15-4285

SANTANDER CONSUMER USA, INC.,
a Texas corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending before the Court is a Motion to Dismiss or to Compel Arbitration by
Defendant Santander Consumer USA, Inc.’s (Santander). ECF No. 7. For the following reasons,
the Court DENIES the motion.

On April 9, 2015, Plaintiffs Lauranna and Jeffery Ware filed their Complaint
against Defendant, alleging that Defendant assessed illegal fees to a consumer loan. Specifically,
Plaintiffs assert that, in or around September of 2007, they obtained a $19,000 loan from
Citifinancial Auto Credit, Inc. (Citifinancial) to purchase a vehicle. 1 Thereafter, Defendant
acquired the loan and/or the servicing rights from Citifinancial in or around 2010. Plaintiffs allege
that Defendant then assessed excess fees and late fees in violation of West Virginia law and in
breach of contract. Plaintiffs further assert that hundreds, and perhaps thousands, of similarly

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Defendant asserts Plaintiffs executed the Security Agreement on or about July 2, 2007.

situated West Virginia consumers were assessed such fees and, therefore, Plaintiffs seek class
action status of their claims.

In lieu of filing an Answer to the Complaint, Defendant moves the Court to compel
arbitration and dismiss this action pursuant to 9 U.S.C. § 3.2 Defendant contends that Plaintiffs
are bound by an arbitration clause, mandating that their claims be resolved by arbitration.
Defendant contends that “[o]n April 11, 2011, at the request of the Plaintiffs, the parties entered
into a Temporary Modification Agreement (“Modification Agreement”) whereby [it] agreed to
modify temporarily the terms of the underlying Agreement.” Mem. of Law in Supp. of Def.
Santander Consumer USA, Inc.’s Mot. to Dis. or to Compel Arbitration, at 2, ECF No. 8. The
Modification Agreement is a three-page document addressed to both Plaintiffs on March 30, 2011.
Temp. Modification Agreement, ECF No. 7-1, at 1. The Modification Agreement provides that
payments will be reduced from $386.44 per month to $231.86 for a period of six months. In
addition, the Modification Agreement contains an arbitration provision that provides, in part:
As additional consideration for [Santander’s] agreement to modify
the terms of your Contract as set forth above and forbear from
exercising its remedies under the Contract, you and [Santander]
agree that upon written request by either party that is submitted
2

Section 3 provides:
If any suit or proceeding be brought in any of the courts of the
United States upon any issue referable to arbitration under an
agreement in writing for such arbitration, the court in which such
suit is pending, upon being satisfied that the issue involved in such
suit or proceeding is referable to arbitration under such an
agreement, shall on application of one of the parties stay the trial of
the action until such arbitration has been had in accordance with the
terms of the agreement, providing the applicant for the stay is not in
default in proceeding with such arbitration.

9 U.S.C.A. § 3.
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according to the rules for arbitration, any Claim, except those
specified below, shall be resolved by binding arbitration in
accordance with (i) the Federal Arbitration Act, (ii) the Rules of the
chosen Administrator, and (iii) the Arbitration Provision.
Id. at 2. The Modification Agreement defines a “Claim,” in part, as:
any claim, dispute, or controversy now or hereafter existing between
you and [Santander], including without limitation, any claims
arising out of, in connection with, or relating to the Contract, and
any modification, extension, application, or inquiry of credit or
forbearance of payment: . . . the closing, servicing, collecting or
enforcing of the Contract: whether the claim or dispute must be
arbitrated: the validity of this Agreement, except as relates to the
class action waiver . . . –the validity and effect of the class action
waiver may be determined only by a court and not by an arbitrator:
any negotiations between you and [Santander]: any claim or dispute
based on state . . . law . . . . You and [Santander] also agree to
submit to final, binding arbitration any claim or dispute that you or
[Santander] has against all persons and/or entities (i) who are
involved with the Contract, (ii) who signed or executed any
document relating to the Contract or any Claim, and (iii) who may
be jointly or severally liable to either you or [Santander] regarding
any Claim.3

3

The Exclusion from Arbitration provision states, in part, that the following matters are not
subject to arbitration:
Any Claim where all parties collectively (including multiple named
parties) seek, in the aggregate, $15,000 or less in total monetary
relief, including but not limited to compensatory, statutory and
punitive damages, restitution, disgorgement, and costs and fees
(including attorney’s fees); or any Claims brought in a small claims
court. If you attempt to assert any Claim on behalf of a putative
class of persons, in violation of other terms of this Agreement, the
value of such Claim will, for purposes of this exclusion, be deemed
to exceed $15,000. If any party fails to specify the amount being
sought for any relief, or any form or component of relief, the amount
being sought shall, for purposes of this exclusion, be deemed to
exceed $15,000.
Id.
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Id. Based upon this language, Defendant insists that Plaintiffs are contractually bound to arbitrate
their claims, including the issue of enforceability of the agreement. Plaintiffs argue, however,
that no contract was ever formed between the parties by virtue of the Modification Agreement.
Thus, Plaintiffs assert the Court, not the arbitrator, must determine the gateway issue of whether a
contract exists because they cannot be forced to arbitrate under a non-existent contract.

Initially, the Court finds it is clear that whether or not a dispute must be submitted
to “‘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.’” Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
79, 83 (2002) (quoting Steelworkers v. Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960) (other
citation omitted)).

Although federal policy favors agreements to arbitrate, “[t]he question

whether the parties have submitted a particular dispute to arbitration, i.e., the question of
arbitrability, is an issue for judicial determination [u]nless the parties clearly and unmistakably
provide otherwise.” Id. (emphasis original; internal quotation marks and citations omitted). In
other words, courts must decide gateway disputes “about whether the parties are bound by a given
arbitration clause[.]” Id. at 84 (citations omitted). “It is similarly well settled that where the
dispute at issue concerns contract formation, the dispute is generally for courts to decide.” Granite
Rock Co. v. Int’l Bro. of Teamsters, 561 U.S. 287, 296 (2010) (citations omitted). Thus, it is this
Court’s responsibility to first determine whether a contract existed between the parties by virtue
of the Modification Agreement.

Plaintiffs argue that the parties have no contractual relationship with each other
under the Modification Agreement because it was never executed. Plaintiffs point to the specific

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language on the first page of the Modification Agreement that states: “The effective date of the
modified terms shall be the date [Santander] accepts and signs this Agreement, provided you sign
and return this Agreement to [Santander] within 14 days of the date set forth above.” Id. at 1.
Although there is space for Defendant to sign and date the Modification Agreement, Defendant
did not sign or date the document. In fact, the only signature appearing on the document is that
of Lauranna Ware. Thus, by the Modification Agreement’s own terms, it was never properly
executed and never took effect.

In further support of their position that there was never a contractual relationship
with Defendant to modify the terms of the original loan, Plaintiffs state they never acted upon the
purported agreement. Plaintiffs provided the Court with their payment history showing they
never paid the modified amount of $231.86. Instead, the payments they made were either at or
near the original payment amount of $386.44. Furthermore, when Lauranna Ware requested a
copy of their contract, Defendant only faxed her a copy of the original contract with Citifinancial,
which does not contain an arbitration clause.

The facsimile did not contain the purported

Modification Agreement Defendant submitted in response to Plaintiffs’ Complaint.

Plaintiffs further point out that on each page of the Modification Agreement, it
clearly states in large font and in a separate box at the top of each page that the document is “Time
Sensitive! Return via fax to 214.237.8511 within 14 days of letter date.” Id. at 1, 2, & 3
(exclamation point and underlining original). In addition, as stated above, the language on page
one of the Modification Agreement provides that: “The effective date of the modified terms shall
be the date [Santander] accepts and signs this Agreement, provided you sign and return this

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Agreement to [Santander] within 14 days of the date set forth above.” Id. (italics added). Thus,
in four different places, Defendant emphasized that time was of the essence and Plaintiffs had to
return the document within fourteen days of March 30, 2011. However, the facsimile date stamp
on the top of the Modification Agreement submitted as Exhibit A to Defendant’s motion (ECF No.
7-1) clearly shows that the document was not faxed back to Defendant until May 20, 2011, far
outside the fourteen-day window.

In Reply, Defendant submitted the first and third pages of a different Modification
Agreement dated March 30, 2011. Although the Court was not provided page two, there are
notable differences on pages one and three from the other Modification Agreement Defendant
submitted. For instance, on page one of the more recently submitted March 30 document, the
reduced payment amount is typed as $231.12, but that number is circled and a handwritten note
states “231.86.” Temp. Modification Agreement, at 1 (ECF No. 11-1). On the first Modification
Agreement submitted by Defendant, there is no handwritten amount, but $231.86 is typed in as the
reduced payment amount. 4 Furthermore, the more recently submitted document attached to
Defendant’s Reply shows that Lauranna Ware signed that document on April 3, 2011, with a
facsimile date stamp of April 7, 2011. On the other hand, the first document submitted to the
Court is dated April 11, 2011, with a facsimile date stamp of May 20, 2011. Defendant insists
the Modification Agreement signed by Laurana Ware on April 3, 2011 is a valid agreement
because it was returned within fourteen days of March 30, 2011.

4

In addition, on both the first and third pages of the more recently submitted document
attached to Defendant’s Reply, the account number is provided in full, while on the Modification
Agreement attached to the motion, the account number is abbreviated.
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However, like the other Modification Agreement, Defendant never signed it, and,
thus, there was no agreement between the parties. Moreover, although the fact that neither of the
Modification Agreements were ever properly executed by Defendant is sufficient by itself to find
a contract did not exist, the Court further finds that it is obvious Defendant realized the first
Modification Agreement signed by Lauranna Ware reflected an inaccurate reduced payment
amount and Defendant sent Plaintiffs a revised version of the Modification Agreement for their
signature. Thus, it appears there was no meeting of the minds as to a critical term of the first
Modification Agreement Lauranna Ware signed, which resulted in the revised Modification
Agreement being offered to Plaintiffs. As stated above, the second Modification Agreement
Lauranna Ware signed was not returned within fourteen days of March 30, 2011, as expressly
required by Defendant, and Defendant never signed and dated it. Accordingly, the Court finds
Defendant cannot enforce the arbitration provision in either version of the Modification Agreement
because they were never executed and a contract was never formed.

In its Reply, Defendant also asserts that the check Plaintiffs used to finance their
vehicle referenced the Security Agreement. Specifically, printed on the check was the following
language: “By endorsing, using, or accepting the proceeds of this Check, I, the borrower(s) . . .
agrees [sic] to the terms of the Note & Security Agreement (including the Truth in Lending
Disclosure and the Arbitration Provision) . . . .” Check Payable to Crown Pontiac Buick GMC
(dated July 2, 2007), ECF No. 9-2, at 17. Defendant argues the fact both Plaintiffs signed the
check is sufficient to bind them to the Arbitration provision. However, as indicated by Plaintiffs,

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there was no Arbitration provision in the Security Agreement and Defendant has not pointed to
any Arbitration provision other than the one contained in the unexecuted Modification Agreement.

Accordingly, for the foregoing reasons, the Court finds there is no contractual
relationship between the parties by virtue of the Modification Agreement and, therefore, Defendant
cannot force Plaintiffs to arbitrate their claims or arbitrate the enforceability of the provision.
Likewise, for the reasons stated, the Court rejects Defendant’s argument that Plaintiffs are bound
to arbitration because they signed the check. Therefore, the Court DENIES Defendant’s Motion
to Motion to Dismiss or to Compel Arbitration.5 ECF No. 7.

The Court DIRECTS the Clerk to send a copy of this Order to counsel of record
and any unrepresented parties.
ENTER:

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December 10, 2015

The parties also disagree whether Jeffery Ware had to sign the Modification Agreement
in order for it to be valid, or whether Lauranna Ware had authority to create a binding contract,
irrespective of the fact he did not sign either document. Given the Court’s holding today, it finds
it unnecessary to resolve the issues and declines to address them.
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