Bazzle v. Green Tree Financial Corp.

• Decision Date: 26 August 2002
• Docket Number: No. 25523.,25523.
• Citation: 351 S.C. 244,569 S.E.2d 349
• Court: South Carolina Supreme Court
• Parties: Lynn W. BAZZLE and Burt A. Bazzle, in a representative capacity on behalf of a class and for all others similarly situated, Respondents, v. GREEN TREE FINANCIAL CORP. a/k/a Green Tree Acceptance Corporation a/k/a Green Tree Financial Services Corporation n/k/a Conseco Finance, Inc., Appellant. Daniel B. Lackey, George Buggs, and Florine Buggs, in a representative capacity on behalf of a class and for all others similarly situated, Respondents, v. Green Tree Financial Corp., a/k/a Green Tree Financial Services Corp., a/k/a Green Tree Acceptance Corp., n/k/a Conseco Finance, Inc., Appellant.

351 S.C. 244

569 S.E.2d 349

Lynn W. BAZZLE and Burt A. Bazzle, in a representative capacity on behalf of a class and for all others similarly situated, Respondents, v. GREEN TREE FINANCIAL CORP. a/k/a Green Tree Acceptance Corporation a/k/a Green Tree Financial Services Corporation n/k/a Conseco Finance, Inc., Appellant.

Daniel B. Lackey, George Buggs, and Florine Buggs, in a representative capacity on behalf of a class and for all others similarly situated, Respondents, v. Green Tree Financial Corp., a/k/a Green Tree Financial Services Corp., a/k/a Green Tree Acceptance Corp., n/k/a Conseco Finance, Inc., Appellant.

No. 25523.

Supreme Court of South Carolina.

Heard March 21, 2002.

Decided August 26, 2002.

Herbert W. Hamilton, of Kennedy Covington Lobdell & Hickman, L.L.P., of Rock Hill; Wilburn Brewer, Jr. and Robert C. Byrd, of Nexsen Pruet Jacobs Pollard & Robinson, L.L.P., of Charleston; and Alan S. Kaplinsky and Mark J. Levin, of Ballard Spahr Andrews & Ingersoll, L.L.P., of Philadelphia, P.A., all for appellant.

Steven W. Hamm, of Richardson Plowden Carpenter & Robinson, P.A., of Columbia; D. Michael Kelly, Bradford P. Simpson and B. Randall Dong, all of Suggs & Kelly Lawyers, P.A., of Columbia; Mary Leigh Arnold, of Mary Leigh Arnold, P.A., of Mt. Pleasant; Charles L.A. Terreni, of Terreni Law Firm, of Columbia; and T. Alexander Beard, of Beard Law Offices of Mt. Pleasant, all for respondents.

Christopher R. Lipsett, Eric J. Mogilnicki, Christopher J. Mead, all of Wilmer, Cutler & Pickering, of New York City; and John T. Moore, B. Rush Smith, III and Thad H. Westbrook, all of Nelson, Mullins, Riley & Scarborough, L.L.P., of Columbia, all for Amicus Curiae American Bankers Association, American Financial Services Association, Consumer

Bankers Association, South Carolina Bankers Association, and South Carolina Merchants Association, in support of appellant.

John F. Hardaway, of Columbia; and Michael D. Donovan, of Donovan Searles, L.L.C., of Philadelphia, P.A., both for Amicus Curiae National Association of Consumer Advocates, in support of respondents.

Chief Justice TOAL:

Two classes of plaintiffs, represented by Lynn and Burt Bazzle, et. al. ("Bazzles") and by Daniel Lackey, et. al. ("Lackey"), were awarded damages pursuant to their respective class action arbitrations against Green Tree Financial Corporation ("Green Tree") for violations of the South Carolina Consumer Protection Code.¹ Green Tree appeals the arbitrator's² awards in both cases, on grounds that class-wide arbitration of the plaintiffs' claims was not authorized by the arbitration agreement.

FACTUAL/PROCEDURAL BACKGROUND

On February 22, 2001, this Court entered an Order withdrawing Green Tree's appeal from the Court of Appeals. By that order, this Court assumed jurisdiction and consolidated the Bazzle and Lackey cases for appeal. Although each case proceeded through arbitration independently, resolution of each appeal involves the same novel issue: whether class-wide arbitration is permissible when the arbitration agreement between the parties is silent regarding class actions.

Bazzle

The Bazzles (like their fellow class members) were approached by Patton General Contracting ("Patton"), a nonexclusive Green Tree dealer, in 1995, to perform home improvements. Patton provided the Bazzles with a Green Tree application for financing. The Green Tree application contained no attorney or insurance agent preference notice. On May 20, 1995, the Bazzles executed a Retail Installment Contract and Security Agreement for $15,000 which contained the arbitration clause at issue.³ The same day the Bazzles executed a number of other documents identifying Green Tree as the lender, including a mortgage stamped with directions to return it to Green Tree once executed. The Bazzles were never given an attorney or insurance preference form and no attorney was involved in the transaction or closing on their behalf.

On March 25, 1997, Lynn and Burt Bazzle commenced an action against Green Tree in the Dorchester County Court of Common Pleas based on Green Tree's alleged violations of the attorney and insurance agent preference provisions of the South Carolina Consumer Protection Code⁴ arising out of their home improvement financing agreement with Green Tree.

On April 21, 1997, the Bazzles filed an amended complaint incorporating class allegations and a Motion for Class Certification. A month later, Green Tree filed a Motion for Stay and to Compel Arbitration. On December 5, 1997, the trial court heard both motions. It granted the Motion for Class Certification. After the court granted class certification, Green Tree pursued its Motion to Compel Arbitration, and the trial court granted it.

The trial court issued two separate orders memorializing its rulings on December 5, 1997:(1) an order granting class certification; and (2) an order compelling arbitration. In its order compelling arbitration, the trial court stated that the order applied to the Bazzles and all members of their class who elected to be part of the action. In a supplemental order issued January 7, 1998, the trial court ordered that the class action in arbitration proceed on an opt-out basis.

On January 20, 1998, Green Tree filed a Motion for Reconsideration of the trial court's order granting class certification. After a hearing, the trial court denied Green Tree's Motion for Reconsideration, and Green Tree filed an appeal. On April 28, 1998, the Court of Appeals dismissed Green Tree's appeal on grounds that granting or denying class certification is interlocutory and non-appealable. Green Tree filed a Petition for Rehearing. The Court of Appeals denied rehearing and Green Tree filed a petition for certiorari with this Court. This Court denied Green Tree's petition and remitted the case to the trial court.

On February 24, 1999, the Bazzles filed a Motion to Compel Appointment of an Arbitrator. On May 6, 1999, Green Tree filed a Motion to Dismiss on grounds that the Bazzles were not the proper parties to pursue the claims asserted, as their interests were contrary to the interests of the class members. On May 20, 1999, the trial court heard both motions. The trial court appointed the Honorable Thomas Ervin as arbitrator and declined to hear the Motion to Dismiss for lack of jurisdiction.

All class action proceedings were thereafter administered by the arbitrator, without further involvement of the trial court. The arbitrator handled several motions by the parties before holding the final hearing on May 31, 2000. On July 24, 2000, the arbitrator issued a Final Order and Award, finding Green Tree liable for violating the attorney and insurance preference statute, S.C.Code Ann. § 37-10-102(a). The arbitrator found the remedies for such a violation to be in S.C.Code Ann. § 37-10-105 (Supp.1996 & 1997) and awarded relief to the class of 1,899 individuals in the amount of $10,935,000, and an additional $3,645,500 in attorney's fees and $18,242 in costs.

On July 25, 2000, the Bazzles filed a Motion to Confirm the Award in the trial court. On August 24, 2000, Green Tree filed a Motion to Remand the Award for Amendment and Clarification, an objection to the Motion to Confirm, and a Motion to Vacate the Award. On September 15, 2000, the trial court confirmed the award and denied Green Tree's motions to remand and vacate. Green Tree appealed and this Court assumed jurisdiction to hear the consolidated appeals.

Lackey

Daniel Lackey (and his fellow class members) entered into preprinted consumer installment contracts and security agreements with Green Tree for the purchase of mobile homes. These transactions were secured by real property and were subject to the South Carolina Consumer Protection Code. In each of these transactions, the consumer completed a Green Tree application for financing through a Green Tree dealer. The applications contained no attorney or insurance preference notice and no preference form was provided at any other time during the transaction.

Green Tree, not its dealers, notified the consumer whether credit had been granted or denied. If granted, Green Tree set the terms, including the interest rate, and prepared a mortgage and note. The mortgages were delivered to the consumer through the dealer, but were returned directly to Green Tree. The notes and mortgages were assigned to Green Tree. Green Tree funded the transaction after the consumer reported satisfaction with the set up of the mobile home and then issued checks to the dealer.

On May 28, 1996, Daniel Lackey and George and Florine Buggs commenced a class action against Green Tree in the Barnwell County Court of Common Pleas. The Lackey plaintiffs, like the Bazzles, alleged violations of the attorney and insurance preference provisions of the South Carolina Consumer Protection Code.

Green Tree filed its answer and the Lackey plaintiffs proceeded to file a Motion for Class Certification. Green Tree moved to Stay the Matter and to Compel Arbitration. The trial court denied Green Tree's Motion to Compel Arbitration, finding Green Tree's contract was an adhesion contract with an unconscionable and unenforceable arbitration clause. Green Tree appealed and the Court of Appeals reversed. Although the Court of Appeals agreed that the contracts were ones of adhesion, it found that the arbitration clause within them was not unconscionable. Lackey, et. al. v. Green Tree Fin. Corp., 330 S.C. 388, 498 S.E.2d 898 (Ct.App.1998).

Following remand, the parties entered into a Consent Order appointing the Honorable Thomas Ervin as arbitrator. Apparently, the arbitrator raised the issue of class action arbitration and held a hearing to determine whether a class action could proceed under Green Tree's arbitration clause.⁵ The Lackey Plaintiffs claim Green Tree sought a decision by the arbitrator at the hearing that the class action could not proceed in arbitration. Green Tree, however, claims its involvement was limited...