Allied Title Lending, LLC v. Taylor

• Decision Date: 22 October 2019
• Docket Number: Civil No. 3:18cv845 (DJN)
• Citation: 420 F.Supp.3d 436
• Parties: ALLIED TITLE LENDING, LLC, d/b/a Allied Cash Advance, Appellant, v. Shirley Dean TAYLOR, et al., Appellees.
• Court: U.S. District Court — Eastern District of Virginia

420 F.Supp.3d 436

ALLIED TITLE LENDING, LLC, d/b/a Allied Cash Advance, Appellant,

v.Shirley Dean TAYLOR, et al., Appellees.

Civil No. 3:18cv845 (DJN)

United States District Court, E.D. Virginia, Richmond Division.

Signed October 22, 2019

Michael Gordon Matheson, William Daniel Prince, IV, Thompson McMullan PC, Richmond, VA, for Appellant.

Mark Clifton Leffler, Emily Connor Kennedy, Boleman Law Firm, Elizabeth W. Hanes, Consumer Litigation Associates, David Benjamin Irvin, Office of the Attorney General, Richmond, VA, Dale Wood Pittman, The Law Office of Dale W. Pittman, P.C., Petersburg, VA, Erin Elizabeth Witte, Office of the Attorney General, Fairfax, VA Thomas Dean Domonoske, Consumer Litigation Associates, Newport News, VA, for Appellees.

MEMORANDUM OPINION

David J. Novak, United States District Judge On January 15, 2018, Appellee Shirley Dean Taylor ("Taylor") initiated an adversary proceeding against Appellant Allied Title Lending, LLC ("Allied"), objecting to Allied's unsecured proof of claim against her bankruptcy estate. On March 29, 2018, Allied moved to compel arbitration of Counts II and III of Taylor's Amended Complaint, stay the adversary proceeding and declare Counts II and III as non-core claims pursuant to 28 U.S.C. § 157(b)(3). On November 20, 2018, the United States Bankruptcy Court for the Eastern District of Virginia (the "Bankruptcy Court") issued an order denying Allied's Motion, which Allied now appeals. Allied further appeals the Bankruptcy Court's December 6, 2018 Order granting the Motion to Intervene filed by Appellee the Commonwealth of Virginia (the "Commonwealth"). On January 28, 2019, Senior United States District Judge Henry E. Hudson consolidated Allied's appeals into the present action. (ECF No. 8.) This matter now comes before the Court on Allied's consolidated appeal and Taylor's Motion for Leave to File Supplemental Authority (ECF No. 18). For the reasons set forth below, the Court AFFIRMS the judgment of the Bankruptcy Court as to both Allied's Motion to Compel and the Commonwealth's Motion to Intervene and DENIES AS MOOT Taylor's Motion to File Supplemental Authority (ECF No. 18).¹

I. BACKGROUND

The Court reviews the factual findings of the Bankruptcy Court for clear error. Mar-Bow Value Partners, LLC v. McKinsey Recovery & Transformation Servs. US, LLC , 578 B.R. 325, 328 (E.D. Va. 2017) (citations omitted). Based on this standard, the Court accepts the following facts.

A. Allied Line of Credit

In July 2016, Taylor applied for a $1,500.00 loan from Allied, an issuer of short-term, small-dollar, open-end credit plans that resemble payday loans. Taylor v. Allied Title Lending, LLC (In re Taylor ) (Allied I ), 594 B.R. 643, 645 (Bankr. E.D. Va. 2018). Subsequently, on July 25, 2016, Taylor executed a line of credit agreement with Allied (the "Credit Agreement"), agreeing to repay a $1,500.00 line of credit with interest accruing at a rate of 0.75 percent per day, for an annualized interest rate of 273.75 percent.

Id. at 645-46. The Credit Agreement provided an interest-free grace period of twenty-eight days and required a $100.00 origination fee, to which the grace period did not apply. Id. at 646.

Relevant here, the Credit Agreement also contained an arbitration provision (the "Arbitration Provision"), which provided that:

Before signing this Agreement, you should carefully review the Arbitration Agreement located on pages 5 and 6. The Arbitration Agreement provides that all Claims arising from or relating to this Agreement or any other agreement that you and we have ever entered into must be resolved by binding arbitration if the person or entity against whom a Claim is asserted elects to arbitrate the Claim. Thus, if the person or entity against whom you assert a Claim elects to arbitrate the Claim, then you will not have the following important rights:

• You may not file or maintain a lawsuit in any court except small claims court.

• You may not join or participate in a class action, act as a class representative or a private attorney general, or consolidate your Claim with the claims of others.

• You will have to pay the arbitration firm certain fees in order to commence an arbitration proceeding, unless you ask us to pay those fees to the arbitration firm for you.

• You give up your right to have a jury decide your Claim.

• You will not be afforded the procedural, pre-trial discovery and appellate rights in an arbitration proceeding.

If you do not want to arbitrate all Claims as provided in the Arbitration Agreement, then you have the right to reject the Arbitration Agreement. To reject arbitration, you must deliver written notice to us at the following address within 30 days following the date of this Agreement: Allied Cash Advance, Attn: Arbitration Opt-Out, P.O. Box 36381, Cincinnati, Ohio 45236. Nobody else can reject arbitration for you; this method is the only way you can reject the Arbitration Agreement. Your rejection of the Arbitration Agreement will not affect your right to credit, how much credit you receive, or any contract term other than the Arbitration Agreement.

Id.

B. Bankruptcy Proceeding

On January 17, 2017 (the "Petition Date"), Taylor filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code (the "Bankruptcy Case"). Allied I , 594 B.R. at 646. On March 21, 2017, Allied filed proof of claim 8-1 ("Claim 8-1") in the Bankruptcy Case, asserting an unsecured claim totaling $2,756.92 against Taylor's bankruptcy estate. Id. In response, on August 29, 2017, Taylor filed her initial objection to Claim 8-1, alleging that Allied had " ‘neither attached a copy of the writing upon which the claim is based nor a statement of the circumstances of the loss or destruction of such writing’ in contravention of Rule 3001 of the Federal Rules of Bankruptcy Procedure." Id. (quoting (Obj. to Claim No. 8-1 & Mem. in Supp. Thereof ¶ 13, In re Taylor , No. 17-30142-KRH, ECF No. 29)). Thereafter, on September 1, 2017, the Bankruptcy Court entered an order confirming Taylor's Chapter 13 plan. Id. (citing (Order Confirming Plan (No. 17-30142-KRH, ECF No. 31))).

On September 28, 2017, Cerastes, LLC ("Cerastes"), filed a transfer of claim, indicating that Allied had transferred Claim 8-1 to Cerastes. Id. at 647 (citing (Transfer of Claim Other Than Security (No. 17-30142-KRH, ECF No. 38))). Cerastes also filed both an amended proof of claim ("Claim 8-2"), which included the writing upon which Claim 8-1 was based, and a response to Taylor's initial objection, arguing that Claim 8-2 mooted Taylor's objection to Claim 8-1. Id. (citing (Resp. to Obj. to Claim No. 8-1 (No. 17-30142-KRH, ECF No. 40) ¶ 11)).

C. Adversary Proceeding

On January 15, 2018, Taylor filed a complaint against Allied and Cerastes. Allied I , 594 B.R. at 647 (citing (Compl. Objecting to Claim No. 8-1 & 8-2 (Taylor v. Allied Title Lending, LLC , Adv. Pro. No. 18-03003-KRH, ECF No. 1))). In response, on January 25, 2018, Allied filed notice that Cerastes had transferred Claim 8-2 back to Allied. Id. (citing (Transfer Claim Other Than Security (17-30142-KRH, ECF No. 57))). Allied and Cerastes also filed motions to dismiss or, in the alternative, to stay the adversary proceeding. Id. (citations omitted).

On March 15, 2018, Taylor filed her Amended Complaint, setting forth five counts for relief against Allied and Cerastes. Id. ; (Am. Compl. Objecting to Claim No. 8-1 & No. 8-2 ("Am. Compl.") (Adv. Pro. No. 18-03003-KRH, ECF No. 23).) In Count I, Taylor objected to Claims 8-1 and 8-2 (the "Claims"), because: (1) Allied charged fees and interest on Taylor's credit line after the Petition Date; (2) Allied failed to identify the Claims as open-end credit lines; and, (3) Claim 8-2 falsely asserted that no interest or fees had been assessed on the credit line after the Petition Date. (Am. Compl. ¶ 77.)

In Count II, Taylor argued that the Claims should be disallowed pursuant to 11 U.S.C. § 502(b)(1), because Allied and Cerastes "knowingly filed Proofs of Claim on null and void loans, or loans on which interest cannot be charged." (Am. Compl. ¶ 87.) Specifically, Taylor alleged that the Credit Agreement violated Virginia's usury statute, voiding the Agreement and precluding Allied or Cerastes from collecting on the debt underlying their Claims. (Am. Compl. ¶¶ 89-101.) Taylor further alleged that the Claims violated Bankruptcy Rule 3001, because Allied failed to provide the writing or the information required for a claim based on open-end credit. (Am. Compl. ¶ 102.) Taylor raised her objection in Count II on behalf of herself and a putative class of "[a]ll debtors in the Bankruptcy Court ... who, before filing bankruptcy, entered into a credit agreement with Allied based upon a purportedly open-end credit basis, and a claim was filed regarding that agreement." (Am. Compl. ¶ 79.)

In Count III, Taylor brought a claim against Allied on behalf of herself and a putative class of debtors who, before filing for bankruptcy in the Bankruptcy Court, "entered into a credit agreement with Allied based upon a purportedly open-end basis," alleging that Allied's open-end credit plans violated Virginia's usury and consumer finance statutes. (Am. Compl. ¶ 105-16.) In Count IV, Taylor alleged that Cerastes violated the Fair Debt Collection Practices Act by using false, misleading and deceptive representations in the collection of a debt. (Am. Compl. ¶ 129.) Taylor raised Count IV on behalf of herself and a putative class of debtors in the Bankruptcy Court in whose bankruptcy case Cerastes asserted that "it was the assignee of a claim based on an Allied extension of credit." (Am. Compl. ¶ 118.) Finally, in Count V, Taylor requested equitable relief pursuant to 11 U.S.C. § 105 and Bankruptcy Rule 3001. (Am. Compl. ¶ 138-49.)

Based on these Counts, Taylor asked the Bankruptcy Court to: (1) disallow the Claims; (2) certify the classes in her three class claims (Counts II, III and IV) and appoint her and her counsel as representatives of...