Allen v. Regions Bank

• Decision Date: 10 September 2009
• Docket Number: Civil Action No. 2:09cv70KS-MTP.
• Citation: 654 F.Supp.2d 523
• Parties: Kenneth ALLEN and Wife, Minnie Allen, Plaintiffs v. REGIONS BANK as Successor of First American National Bank, Operating as Deposit Guaranty National Bank, a Foreign Corporation, and Union Security Life Insurance Company, a Foreign Corporation, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

654 F.Supp.2d 523

Kenneth ALLEN and Wife, Minnie Allen, Plaintiffs v. REGIONS BANK as Successor of First American National Bank, Operating as Deposit Guaranty National Bank, a Foreign Corporation, and Union Security Life Insurance Company, a Foreign Corporation, Defendants.

Civil Action No. 2:09cv70KS-MTP.

United States District Court, S.D. Mississippi, Hattiesburg Division.

September 10, 2009.

COPYRIGHT MATERIAL OMITTED

Wayne Dowdy, Dowdy & Cockerham, Magnolia, MS, for Plaintiffs.

Emerson Barney Robinson, III, Benjamin McRae Watson, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Kevin A. Rogers, Walter D. Willson, Wells, Marble & Hurst, PLLC, Jackson, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

KEITH STARRETT, District Judge.

This matter is before the Court on a Motion to Compel Arbitration and To Stay All Proceedings filed by Defendant Regions Bank ("Regions"), as Successor of First American National Bank, Operating as Deposit Guaranty National Bank [Doc. #9] and joined in by Defendant Union Security Life Insurance Company ("USLIC") [Doc. # 16]. The Court, having reviewed the Motion, the various responses and replies, all matters made a part of the record of this case as well as applicable law, and thus being fully advised in the premises, finds that the Motion should be denied. The Court specifically finds as follows:

I. BACKGROUND

On October 7, 1999, Kenneth and Minnie Allen entered into a loan agreement with First American National Bank ("First American"), operating as Deposit Guaranty, in the amount of $54,219.51, which was secured by a deed of trust. At the time the loan was made, First American reserved $5,177.32 and $7,042.19 to be held in trust by the bank to purchase disability insurance and credit life insurance, respectively.¹ (Compl. ¶ 3 [Doc. # 1].) In December 1999, AmSouth became the legal successor to First American. In November 2006, Regions became the legal successor of AmSouth.

Between the time of the loan and the current action, the Allens opened and maintained two other accounts with AmSouth. On or about January 31, 2001, the Allens opened a Demand Deposit Account, and on or about February 13, 2007, Minnie Allen along with Cameron Allen opened a second Demand Deposit Account.² (Def's Mot. to Compel Arbitration, Ex. A at 12-13 [Doc. # 9-2].) For both accounts, the Allens signed a signature card expressly binding them to the terms of the AmSouth Customer Agreement ("AmSouth Agreement") which contained the following arbitration agreement:

ARBITRATION. Any controversy, claim, or dispute between us (or between you and any of our employees, agents, representatives, parent or affiliated companies, or any of their employees) shall be settled by arbitration as set forth below. Such arbitration shall include, without limitations, any dispute or controversy regarding or pertaining in any way to any of the following: (a) this Agreement; (b) the Account; (c) any charge or cost incurred under this Agreement or the Account; (d) the collection of any amounts due under this Agreement or the Account; (e) any contract or alleged tort related to or arising out of your business or relationship with us; and (f) any statements or representations made to you.

(Def's Mot. to Compel Arbitration, Ex. A1-A3 [Doc. #9-3, 9-4, 9-5].) Upon the merger of AmSouth and Regions, Regions amended the AmSouth account terms through the Regions Deposit Agreement, which was mailed to account holders as a part of the Regions Consumer Disclosure Booklet ("Regions Agreement"). This agreement, effective as of October 26, 2007, contained this revised arbitration agreement:

ARBITRATION AND WAIVER OF JURY TRIAL. Except as expressly provided below, you and we agree that either party may elect to resolve by BINDING ARBITRATION any controversy, claim, counterclaim, dispute, or disagreement between you and us, whether arising before or after the effective date of this Agreement (any "Claim"). This includes, but is not limited to, any controversy, claim, counterclaim, dispute or disagreement arising out of, in connection with or relating to any one or more of the following: (1) the interpretation, execution, administration, amendment or modification of the Agreement; (2) any account; (3) any charge or cost incurred pursuant to the Agreement; (4) the collection of any amounts due under the Agreement or any account; (5) any alleged contract or tort arising out of or relating in any way to the Agreement, any account, any transaction, any advertisement or solicitation, or your business interaction or relationship with us; (6) any breach of any provision of the Agreement; (7) any statements or representations made to you with respect to the Agreement, any account, any transaction, any advertisement or solicitation, or your business, interaction, or relationship with us; or (8) any of the foregoing arising out of, in connection with or relating to any agreement which relates to the Agreement, any account, any transaction or your business, interaction or relationship with us.

(Def's Mot. to Compel Arbitration, Ex. A4 [Doc. # 9-6 at 33].)

In 2004, after suffering severe heart problems, Mr. Allen requested disability coverage under the loan's disability insurance policy, but AmSouth denied the existence of the coverage. In 2008, Mr. Allen again contacted Regions and the insurer, USLIC, to request coverage under his disability policy after being diagnosed with a cancerous condition. Regions and USLIC denied the existence of the insurance policy and refused to pay. (Compl. ¶¶ 4-7 [Doc. # 1].)

Plaintiffs filed a Complaint in this Court on April 9, 2009, seeking actual and punitive damages, asserting that Regions' and USLIC's failure to pay benefits under the loan's disability insurance constituted breach of trust, fraud and misrepresentation, breach of contract, and bad faith. [Doc # 1]. On June 8, 2009, Regions filed a Motion to Compel Arbitration, arguing that the loan fell within the scope of the arbitration clause contained in the Regions Agreement. [Doc. # 9]. USLIC joined this motion on June 18, 2009. [Doc. # 13]. In their rebuttal, the Allens allege that there is no valid binding arbitration agreement covering the parties' dispute over the loan insurance under the terms of either the AmSouth or Regions Agreements. (Pls.' Resp. in Opp'n to Def.'s Mot. to Compel 5 n. 1 [Doc. # 23].) Because the AmSouth and Regions Agreements do not unambiguously modify the loan agreement, the Court finds that the parties did not agree to arbitrate a claim arising under the loan agreement, and thus arbitration should not be compelled.

II. APPLICATION AND ANALYSIS

Section 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4, provides that where a party has refused to arbitrate under a written arbitration agreement, the other party may petition the court for an order compelling arbitration, and the court shall order the parties to arbitrate if it is satisfied that the making of the agreement is not in issue.³

A two-step analysis is applied to determine whether a party may be compelled to arbitrate. Sherer v. Green Tree Serv., 548 F.3d 379, 381 (5th Cir.2008) (citing J.P. Morgan Chase & Co. v. Conegie, 492 F.3d 596, 598 (5th Cir.2007)). First, we ask if the party has agreed to arbitrate the dispute. Id. If so, we then ask if "any federal statute or policy renders the claims nonarbitrable." Id. (quoting Wash. Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 263 (5th Cir.2004)). That first step itself contains two questions: (1) is there a valid agreement to arbitrate the claims and (2) does the dispute in question fall within the scope of that arbitration agreement. Id. These questions are decided according to state law. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir.2004) (quoting Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir.1996)). "While there is a strong federal policy favoring arbitration, the policy does not apply to the initial determination whether there is a valid agreement to arbitrate." Id. (citing Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir.2003)); see also Volt Info. Sciences, Inc. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ("[T]he FAA does not require parties to arbitrate when they have not agreed to do so."). "Nonetheless, once a court determines that an agreement to arbitrate exists, the court must pay careful attention to the strong federal policy favoring arbitration and must resolve all ambiguities in favor of arbitration." Banc One, 367 F.3d at 429 (citations omitted). Neither party contends that a federal statute or policy precludes enforcement of the arbitration clause. Therefore, our analysis focuses on whether the parties have agreed to arbitrate the dispute.

1. BECAUSE THE VERY EXISTENCE OF A VALID BINDING ARBITRATION AGREEMENT IS AT ISSUE, IT IS WITHIN THE COURT'S PROVINCE TO DETERMINE WHETHER AN AGREEMENT WAS REACHED.

Despite Regions Bank's argument that an arbitrator, not the court, should determine whether the claim is arbitrable, in this instance the issue is a matter for the courts. Generally, it is for the courts to decide the question of arbitrability, absent clear and unmistakable evidence that the parties agreed to arbitrate the question of arbitrability. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (citing AT & T Technologies, Inc. v. Communications Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986)). "Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute (citations omitted), so the question `who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter." Id. at 943, 115 S.Ct. 1920. "Where the very existence of any agreement is disputed, it is for the courts to decide at the outset whether an agreement was reached,...