Ware et al v. Santander Consumer USA, Inc.
Filing
91
MEMORANDUM OPINION AND ORDER granting in part Defendant Santander Consumer USA Inc.'s 62 MOTION for Partial Summary Judgment, as more fully set forth herein; granting Plaintiff's 89 MOTION to File Surreply; and dismissing this case without prejudice pending arbitration. Signed by Judge Robert C. Chambers on 9/29/2017. (cc: counsel of record; any unrepresented parties) (jsa)
IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
JEFFERY WARE, individually and
in his capacity as Administrator
of the Estate of LAURANNA WARE,
Plaintiff,
v.
CIVIL ACTION NO. 3:15-4285
SANTANDER CONSUMER USA, INC.,
a Texas corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant Santander Consumer USA Inc.’s Motion for
Partial Summary Judgment (ECF No. 62), and a Motion to File Surreply by Plaintiff Jeffrey Ware,
Individually and in his capacity as Administrator of the Estate of Lauranna Ware. ECF No. 89. For
reasons appearing before the Court, the Court GRANTS Plaintiff’s motion and, for the following
reasons, the Court GRANTS, IN PART, Defendant’s motion.
I.
FACTUAL AND
PROCEDUREAL BACKGROUND
This action was filed by Plaintiff and his mother Lauranna Ware on April 9, 2015.1
In the Complaint, Plaintiff asserts he and his mother obtained a $19,000 loan to purchase a vehicle
around September 2007 from Citifinancal Auto Credit, Inc. (Citifinancial). 2 Defendant later
1
After this action was filed, Lauranna Ware died, and Plaintiff now represents her as
Administrator of the estate.
2
Defendant asserts Plaintiffs executed the Security Agreement on or about July 2, 2007.
acquired the loan and the servicing rights from Citifinancial in or around 2010. In the Complaint,
Plaintiff claims, inter alia, that Defendant repeatedly charged illegal late fees in excess of $15.00
and charged fees within the ten-day statutory grace period.3
Initially, Defendant filed a Motion to Dismiss or to Compel Arbitration pursuant to
9 U.S.C. § 3. ECF No. 7. In its motion, Defendant asserted Plaintiff was bound by an arbitration
provision contained in a Modification Agreement for the loan. However, this Court denied
Defendant’s motion on December 10, 2015, finding Defendant failed to establish the parties ever
entered into the Modification Agreement. Ware v. Santander Consumer USA, Inc., Civ. Act. No.
3:15-4285, 2015 WL 8492762 (Dec. 10, 2015).
In its current motion, Defendant now argues the original loan documents contained
an enforceable arbitration agreement. Defendant concedes, however, that the documents
containing the arbitration provision cannot be found by either party. Nevertheless, Defendant
argues it can prove through extrinsic evidence that the original loan documents contained an
arbitration provision. In support, Defendant attached a Declaration of James Hart. ECF No. 62-10.
In his Declaration, Mr. Hart states he has worked for Defendant since 2010 and
currently serves as the Senior Vice President of Call Center Operations. Prior to that time, he was
employed by Citifinancial, and he worked as its Director of Operations. Based upon his experience,
Mr. Hart asserts he is familiar with Citifinancial’s records and practices during the time Plaintiff
originated his loan. He further states that, based upon his personal knowledge and review of
3
Plaintiff believes there are numerous similarly situated West Virginia consumers and
asserts class action claims in the Complaint.
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Defendant’s business records relating to Plaintiff’s loan and other loans made in West Virginia, it
was Citifinancial’s regular practice to use “Form Contracts” containing Note and Security
Agreements. Mr. Hart contends that the Form Contracts given to consumers contained
“substantially identical arbitration provisions, class action waivers, and choice of law provisions
selecting either Texas or Nevada law.” Decl. of James Hart, at ¶ 8.4
Based upon his experience and review of the documents related to Plaintiff’s loan,
Mr. Hart asserts Plaintiff and his mother “would have had to execute a Form Contract as part of
the process for obtaining their loan, and that the Form Contract would have included an arbitration
provision, class action waiver, and Nevada choice of law provision.” Id. at ¶12. According to Mr.
Hart, Plaintiff’s Form Contract would have contained the following arbitration provision:
ARBITRATION: This arbitration provision significantly affects
your rights in any claim or dispute with us. Please read this
arbitration provision carefully, before signing and negotiation your
Check.
Either you or we may choose to have any dispute between you and
us, except as provided below, decided by arbitration. If arbitration
is chosen, you and we will each give up the right to a trial by the
court and/or a jury trial. If arbitration is chosen, you may not serve
as a class representative or participate as a class member in any class
action against any party entitled to compel arbitration under this
provision.
Any claim or dispute, except as provided below, whether in contract,
tort or otherwise (including, without limitation, interpretation and
the scope of this provision, the arbitrability of any issue and matters
relating to the consummation, servicing, collection or enforcement
of this loan) between you and us or our employees, agents,
successors or assigns which arise out of or relate to this loan or any
resulting transaction or relationship including any such relationship
4
In early 2007, the choice of law provision switched from Texas to Nevada because
Citifinancial became a wholly owned subsidiary of Citi Bank, N.A., which was headquartered in
Nevada. Id. at ¶10.
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with third parties who do not sign the Check shall, at your or our
election (or the election of any such third party) be resolved by
neutral binding arbitration and not by court action. Any claim or
dispute is to be arbitrated on an individual basis and not as a class
action and you expressly waive rights you may have to arbitrate a
class action. The Federal Arbitration Act governs this arbitration
provision.
. . . This Arbitration provision is binding upon and inures to the
benefit of our respective heirs, successors and assigns.
Id. at ¶13 (ellipsis in Mr. Hart’s Declaration).
Although an executed copy of the Note and Security Agreement cannot be located
in Plaintiff’s case, Defendant attached a letter it sent to Plaintiff and his mother congratulating
them on being approved for their auto loan. The letter details the amount of the loan, the term of
the loan, and the interest rate. Ltr. from Citifinancial to Lauranna and Jeffery Ware (June 29,
2007), ECF No. 62-2. The letter also specifically provides that a borrower’s “endorsement of the
Check indicates agreement with the Note and Security Agreement included herein. . . . [and the]
Check will not be activated until all of the Conditions for Approval set forth in this package have
been met and verified. . . . Citifinancial Auto will only activate one Check, subject to the terms
and conditions stated.” Id. In addition, Defendant submitted a copy of the Check used to pay for
the vehicle. The front of the Check specifically states, in part, that “[b]y endorsing, using, or
accepting the proceeds of this Check, I, the Borrower(s) . . . agrees to the terms of the Note &
Security Agreement (including . . . the Arbitration Provision)[.]” Check, ECF No. 62-3.
Immediately beside this language, appears the signatures of Plaintiff and his mother. Id. Defendant
also attached to its motion the Security Agreement for State Specific Titling Requirements, which
Plaintiff and his mother both signed. This document states in all capital letters that “BY SIGNING
THIS SECURITY AGREEMENT, YOU AGREE TO AND ACKNOWLEDGE RECEIPT OF
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THE TERMS AND CONDITIONS OF THE CHECK, THE DISCLOSURE STATEMENT
ABOVE, THE TERMS AND CONDITIONS OF THE NOTE AND SECURITY AGREEMENT
AS SUPPLEMENTED BY THIS SECURITY AGREEMENT.” Sec. Agreement for State Specific
Titling Requirements, ECF No. 62-7.
Defendant also attached a copy of Plaintiff’s deposition. ECF No. 62-4. In his
deposition, Plaintiff recalled that both he and his mother reviewed and signed a contract at
Citifinancial. Dep. of Jeffery Ware, at 31-32. He further said his mother was given a copy of the
contract, but he has been unable to locate it. Id. at 33. In addition, Plaintiff stated he reviewed the
Check before he signed it, and he would not have signed it if he disagreed with it. Id. at 39-40. At
one point during his deposition, Plaintiff was presented with a document that was intended to be
an exemplar of the contract Plaintiff purportedly signed, which contained a full arbitration
agreement. When asked if the document was similar to what he recalled signing, Plaintiff
responded “[s]imilar to, this was my contract with CitiFinancial.” Id. at 109. However, Plaintiff
now states that the document he actually was shown was a refinance agreement and not a directto-consumer loan, which was the type of loan he obtained.
The Court held a hearing on the motion on March 6, 2017. In addition to arguing
each side’s respective positions on the motion, Plaintiff requested that he be able to depose Mr.
Hart. The Court agreed to the request. Thereafter, Mr. Hart was deposed, and the parties have
submitted supplemental briefing.
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Together with his supplemental brief opposing summary judgment, Plaintiff
submitted an Affidavit stating that he did not recall an arbitration agreement being included in the
document he signed. Aff. of Jeffrey Ware, ECF No. 84-7. In addition, he asserts that Mr. Hart’s
conclusory statements in his Declaration are not supported by his deposition testimony. Plaintiff
contends Mr. Hart based his conclusions on the fact that Citifinancial “systematically” printed
computer-generated unsigned forms. However, Plaintiff contends that there was little
accountability at Citifinancial to ensure that a full arbitration provision was in a customer’s file
before a direct-to-consumer loan was funded. Although loan processors had checklists to ensure
loan packages were complete, Mr. Hart was not in charge of quality control, auditing files, or
checking for errors. Dep. of Hart, at 100-01, ECF No. 87-1. Instead, he merely said he was aware
that managers would conduct periodic spot checks of associates, but he did not know how
frequently those checks occurred. Id. at 101. In addition, Plaintiff points out that, of all the files
Mr. Hart reviewed, there was only one initial purchase loan that contained a full arbitration
agreement in the file that could be read. Id. at 111. In light of these facts, Plaintiff argues Defendant
has failed to establish his contract contained an arbitration provision.
In its supplemental brief, Defendant insists Mr. Hart’s statements are based upon
his personal experience of overseeing the processing of consumer loan documents for Citifinancial
for six years. In his Declaration and at his deposition, Mr. Hart explained that Citifinancial used
form contracts for all direct loans and they all included arbitration provisions. Id. at 101; Dec. of
Hart, at 2. Mr. Hart explained the loan “package is all generated at one time, systemically,
prepackaged and overnighted to the customer.” Id. at 117. Mr. Hart stated the arbitration provision
was systemically generated as part of the form contract, and it was Citifinancial’s practice and
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procedure to have included the note and security agreement when it sent the loan documents. Id.
at 124, ECF No. 88-2.5 He further said that, in his experience, the note and security agreement,
containing the arbitration provision, always was included with the check in a direct-to-consumer
loan. Id. at 131. Mr. Hart further said a form contract “absolutely” would have been included with
the letter that was sent to Ms. Ware. Id. at 117.
Without doubt, Defendant’s individual loan files are in shambles. Of the fifty-one
“Direct-to-Consumer” contracts produced by Defendant that are similar to Plaintiff’s loan, only
one contained a completely legible arbitration provision. According to Plaintiff, twelve have
garbled arbitration provisions that cannot be fully read. Twenty-seven other files do not have a
copy of any arbitration provision from origination, and another eleven files have do not contain
copies of loan contracts or arbitration provisions. Pl.’s Corrected Suppl. Mem., at 3 n.5, ECF No.
87.
Upon examination of some of these documents by the Court, it appears that the
computer files are corrupted and various words have been replaced by symbols and blank spaces.
For instance, in one exhibit submitted by Defendant, the first paragraph of the arbitration provision
is gibberish, while the remaining arbitration paragraphs on that page are intact. ECF No. 88-1, at
8. In his deposition, Mr. Hart explained that, in his experience, documents sometimes are not
transferred or are missing when a portfolio of loans is acquired. Dep. of Hart, at 117. Mr. Hart said
that several direct-to-consumer files he reviewed had corrupted data and the entire arbitration
clauses could not be read. Id. at 138.
5
Portions of Mr. Hart’s deposition are found in attachments ECF Nos. 87-1 and 88-2.
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II.
DISCUSSION
When a contract is reported to be lost, state law controls the standard for proving
the contract’s existence. See Banks v. Mitsubishi Motors Credit of Am., Inc., 435 F.3d 538, 540
(5th Cir. 2005) (per curiam) (finding state law controls the burden of proof to show the existence
of a missing agreement); Drake v. Mallard Creek Polymers, Inc., No. 3:14-CV-00350-MOC, 2014
WL 6460242, at *1 (W.D. N.C. Nov. 17, 2014) (recognizing that “state law provides methods for
proving the existence of a contract or parts of it where the contract is lost”). Under West Virginia
law, “[t]he proponent of a lost or missing instrument must prove its existence and contents with
clear and conclusive evidence.” Syl. Pt. 2, Estate of Bossio v. Bossio, 785 S.E.2d 836 (W. Va.
2016). Upon consideration of the facts of this case, the Court finds Defendant has met its burden.
Here, the Court finds that Plaintiff’s testimony at his deposition and documentary
evidence is consistent with Mr. Hart’s Declaration. Plaintiff signed a form “Security Agreement
for State Specific Titling Requirements,” which provides that he “AGREE[[D] TO AND
ACKNOWLEDGE[D] RECEIPT OF THE TERMS AND CONDITIONS OF THE CHECK . . .
[AND] THE TERMS AND CONDITIONS OF THE NOTE AND SECURITY AGREEMENT[.]”
Sec. Agreement for State Specific Titling Requirements, ECF No. 62-7 (capitalization original).
The Check signed by Plaintiff also expressly contains a reference to the Note and Security
Agreement and its arbitration provision. When questioned, Plaintiff said he would not have signed
the Check if he disagreed with it, and he recalled reviewing and signing a contract. Dep. of Ware,
at 31-32, 39-40. Although Plaintiff now states in an Affidavit that he does not recall an arbitration
provision in the documents he signed, the Court is not persuaded that the fact he cannot remember
an arbitration provision being in the contract refutes its existence. Plaintiff signed the contract
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nearly ten years before he gave his Affidavit. The Court believes it highly likely that vast majority
of average consumers would not recall whether or not a contract contained an arbitration provision
after so many years.
It also is unrefuted that loan packages were systemically generated by a computer,
and Mr. Hart stated that those packages were sent by overnight mail to consumers. Although it is
true Mr. Hart did not review every document produced by Defendant, this fact does not undermine
his credibility or negate his ability to testify from his personal experience about the loan origination
process and Citifinancial’s business practices. Likewise, despite evidence that loan files are
missing documents and are incomplete, it is of little consequence to this case because Plaintiff
admits he signed a contract. As the contracts were computer-generated “form contracts,” which
contained arbitration provisions, the Court finds by clear and conclusive evidence in light of the
totality of the extrinsic evidence described above that the contract Plaintiff signed contained an
arbitration provision. In light of the arbitration provision, the Court further finds Defendant is
entitled to enforce arbitration,6 and the Court DISMISSES this case WITHOUT PREJUDICE
pending arbitration.7
Arbitration can be compelled upon establishing: “(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 defendant to arbitrate
the dispute.” Am. Gen. Life & Acc. Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005) (internal
quotation marks and citations omitted). The Court rejects Plaintiff’s argument that Defendant
waived its right to arbitrate as Defendant has diligently pursued arbitration and critical evidence
in support of Defendant’s motion was obtained only after considerable discovery.
6
7
Having decided the issue that Defendant has shown by clear and convincing evidence that
Plaintiff entered into the form contract, which contained an arbitration clause, the Court declines
to address Plaintiff’s remaining claims.
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III.
CONCLUSION
For the foregoing reasons, the Court GRANTS, IN PART, Defendant Santander
Consumer USA Inc.’s Motion for Partial Summary Judgment (ECF No. 62),8 and GRANTS the
Motion to File Surreply by Plaintiff Jeffrey Ware, Individually and in his capacity as Administrator
of the Estate of Lauranna Ware. ECF No. 89. Accordingly, the Court DISMISSES this case
WITHOUT PREJUDICE pending arbitration.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record
and any unrepresented parties.
ENTER:
September 29, 2017
ROBERT C. CHAMBERS
UNITED STATES DISTRICT JUDGE
8
Although styled as a summary judgment motion, Defendant requests in his Memorandum
that Plaintiff’s claims be dismissed because they are subject to arbitration.
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