Sadler v. Green Tree Servicing, LLC

• Decision Date: 17 October 2006
• Docket Number: No. 05-3850.,05-3850.
• Citation: 466 F.3d 623
• Parties: Elsie SADLER, Terry Sadler, Appellees, v. GREEN TREE SERVICING, LLC, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

466 F.3d 623

Elsie SADLER, Terry Sadler, Appellees, v. GREEN TREE SERVICING, LLC, Appellant.

No. 05-3850.

United States Court of Appeals, Eighth Circuit.

Submitted: May 19, 2006.

Filed: October 17, 2006.

Matthew B. Uhrig (argued), Lake Law Firm, argued, Jefferson City, MO, for Appellees.

David G. Wasinger (argued), Murphy & Wasinger, argued, St. Louis, MO, for Appellant.

Before WOLLMAN, BOWMAN, and RILEY, Circuit Judges.

BOWMAN, Circuit Judge.

Green Tree Servicing appeals from the District Court's denial of its motion to compel arbitration of claims made by plaintiffs Elsie and Terry Sadler in this lawsuit. Our jurisdiction over the appeal from the arbitrability determination is invoked under the Federal Arbitration Act, 9 U.S.C. § 16(a)(1)(C) (2000) ("An appeal may be taken from ... an order ... denying an application ... to compel arbitration. ..."). We reverse and remand.

The genesis of this case is a thirty-year loan on a mobile home that BankAmerica Housing Services made to Elsie Sadler (then Smith) in 1997. She executed a Retail Installment Contract and Security Agreement¹ that included provisions for arbitration of disputes and waiver of jury trial. In December 2004, Green Tree took over servicing the loan. At that time, Elsie and Terry Sadler lived together in the mobile home and had made all required monthly payments. Nevertheless, in January 2005, Green Tree sent a notice of default and in April 2005, a notice of foreclosure. Unable to resolve the dispute, the Sadlers removed their possessions from the mobile home. In June 2005, Green Tree sent notice that the mobile home had been sold with a deficiency of over $18,000. Counsel for the Sadlers has represented to this Court that the couple never missed a payment before the foreclosure. In fact, at oral argument, counsel said that the Sadlers continued to make post-foreclosure monthly payments according to the terms of the Agreement.

The Sadlers filed a diversity suit in the District Court alleging conversion, negligent infliction of emotional distress (as to Elsie Sadler only), and violations of Missouri statutory law resulting from Green Tree's handling of the foreclosure. The complaint also included claims for punitive damages and attorney fees and a request for a jury trial.

Green Tree moved to dismiss the complaint or, in the alternative, to compel arbitration pursuant to the terms of the Agreement executed by Elsie Sadler. The District Court held, inter alia, that Terry Sadler could not be compelled to arbitrate the dispute because he was not a party to the Agreement. The court also concluded that the Sadlers' claims were not otherwise subject to arbitration because they were based on Green Tree's "self-help" remedy, that is, the foreclosure. In the court's view, because Green Tree exercised this remedy, which is allowed under the terms of the Agreement without first resorting to arbitration, it would be unconscionable to require the Sadlers to arbitrate claims that arise out of Green Tree's "self-help."

After briefing was completed in this case but before oral argument, we requested supplemental letter briefs from both parties. In our order, we noted that the Agreement's section on arbitration of disputes included this language: "Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s)." Order of April 26, 2006 (quoting Retail Installment Contract and Security Agreement at 5 (Arbitration of Disputes and Waiver of Jury Trial subpara b)). We asked, "Does that provision require that the arbitrability vel non of the Appellees' claims be determined in the first instance by arbitrators rather than the court?" Id. Having studied the terms of the Agreement and considered the parties' supplemental briefs and arguments on the question, we conclude that the answer must be "yes."

Lack of subject-matter jurisdiction of a lawsuit cannot be waived by the parties—or ignored by the courts—at any stage of the litigation. Hunter v. Underwood, 362 F.3d 468, 476 (8th Cir.2004). We are therefore obligated to assure ourselves that the District Court, by holding that the claims were not arbitrable, properly asserted subject-matter jurisdiction, regardless of whether the parties raised the question themselves. In this case, we took the further step of requesting supplemental briefing on the issue, giving the parties an opportunity to tell us their views before we addressed the question.

"Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question `who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (citations omitted). That is, we look to the Agreement to see if the parties affirmatively addressed the question of who decides arbitrability....