Anders v. Hometown Mortg. Services, Inc.

• Decision Date: 25 September 2003
• Docket Number: No. 02-14448.,02-14448.
• Citation: 346 F.3d 1024
• Parties: Jonah P. ANDERS, and all others similarly situated, Plaintiff-Appellant, v. HOMETOWN MORTGAGE SERVICES, INC., Mortgage Brokers Group of Tuscaloosa, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1024

346 F.3d 1024

Jonah P. ANDERS, and all others similarly situated, Plaintiff-Appellant, v. HOMETOWN MORTGAGE SERVICES, INC., Mortgage Brokers Group of Tuscaloosa, Defendants-Appellees.

No. 02-14448.

United States Court of Appeals, Eleventh Circuit.

DECIDED: September 25, 2003.

COPYRIGHT MATERIAL OMITTED

Steven P. Gregory, Steven P. Gregory, P.C., James D. Smith, Leon R. Storie, Tuscaloosa, AL, for Plaintiff-Appellant.

Leslie Miller Klasing, Joseph Paul Schilleci, Jr., Gorham & Waldrep, Birmingham, AL, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before EDMONDSON, Chief Judge, CARNES, Circuit Judge, and CARNES,^* District Judge.

CARNES, Circuit Judge:

This is another arbitration dispute in which the parties are litigating whether or not they should be litigating. The familiar scenario is that the parties agree in writing to arbitrate any disputes between them, but then one party files a lawsuit taking the position that the agreement to arbitrate is inapplicable, invalid, or unenforceable for one reason or another. Here the plaintiff contends the agreement to arbitrate does not cover his federal statutory claims, is unenforceable because he cannot afford to arbitrate, and is invalid because it does not afford him the remedial relief to which he is entitled under the statutes.

Based on the agreement, the district court compelled arbitration and dismissed the lawsuit. We conclude that the agreement is broad enough to cover the dispute; any problem involving whether the plaintiff can afford the cost of arbitration is no problem in light of the defendant's stipulation to pay the plaintiff's costs of arbitration; and because any impermissible restrictions on the remedies are severable from the other parts, the agreement itself is not invalid. As a result, we affirm the district court's decision to send the case to arbitration where, if the plaintiff establishes his right to relief, the arbitrator will decide the remedies issues.

I.

To finance the purchase of his home, Jonah Anders borrowed funds from Hometown Mortgage Services in a transaction brokered by Mortgage Brokers Group of Tuscaloosa. At the closing, Anders signed a number of documents including an arbitration agreement.¹ The agreement specifically refers all disputes between Hometown Mortgage and Anders to arbitration. And it limits the remedies available to Anders, stating that "the arbitrator(s) may not award punitive damages, treble damages, penalties, or attorney's fees." Just in case that or some other part of the agreement does not hold up, the agreement includes a severability or savings clause specifying that if a court declares part of the agreement invalid or unenforceable, the remainder of the agreement will not be affected.

Anders sued both Mortgage Brokers and Hometown Mortgage alleging that they violated the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). Mortgage Brokers failed to respond to the complaint, and the district court issued a default against it. Hometown Mortgage, on the other hand, filed a motion to compel arbitration based on the arbitration agreement. In response, Anders asserted that he could not afford arbitration, to which Hometown Mortgage replied with a stipulation that if the trial court found Anders unable to afford the costs associated with arbitration and found that his inability to pay voided the agreement, Hometown Mortgage would bear the costs of arbitration that Anders otherwise would have had to pay. Based on that stipulation, the district court issued an order compelling arbitration and dismissing the case without prejudice. Anders then brought this appeal.

II.

Anders presents three reasons why he should not be forced to arbitrate his claims against Hometown Mortgage: the agreement to arbitrate does not reach his claims; the agreement is unenforceable because he cannot afford arbitration; and the agreement is invalid because of its remedial restrictions. Each of these contentions, through which Anders attempts to avoid arbitration entirely, falls within the category of "gateway matters" which the Supreme Court has instructed us that courts and not arbitrators should decide, Green Tree Financial Corp. v. Bazzle, 539 U.S. ___, ___, 123 S.Ct. 2402, 2407, 156 L.Ed.2d 414 (2003) (holding that courts must decide "certain gateway matters, such as whether the parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy"); see also Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S.Ct. 588, 592, 154 L.Ed.2d 491 (2002) ("[A] gateway dispute about whether the parties are bound by a given arbitration clause raises a `question of arbitrability' for a court to decide.").

Anders first contention is that because the agreement to arbitrate contains remedial limitations, and because he is entitled to the full remedies afforded by the federal statutes under which his claims arise, the agreement must not reach the disputes involving his claims. TILA and RESPA do provide for relief and remedies that may be excluded by the agreement, which does not permit the arbitrator to award punitive damages, treble damages, penalties, or attorney's fees. For example, Anders alleges that Hometown Mortgage paid referral fees or kickbacks to Mortgage Brokers, in violation of Section 8 of RESPA, 12 U.S.C. § 2607(a), for which the statute provides treble damages, id. § 2607(d). Anders also alleges that Hometown Mortgage failed to disclose certain finance charges and understated the annual percentage rate it charged, all in violation of TILA, 15 U.S.C. § 1638, and Regulation Z, 12 C.F.R. §§ 226.4, 226.18, and 226.22. TILA entitles successful plaintiffs to statutory damages as well as any actual damages. 15 U.S.C. § 1640(a). Anders seeks attorney's fees, which both TILA and RESPA allow prevailing plaintiffs to recover, TILA, 15 U.S.C. § 1640(a)(3); RESPA, 12 U.S.C. § 2607(d)(5).

Anders contends that because the arbitrator cannot award the full relief that is permitted by the statutes, the parties must not have intended for the arbitration agreement to cover these statutory claims. The clear words of the agreement, however, foreclose that position. It says:

[A]ny action, dispute, claim, counterclaim or controversy ("Dispute" or "Disputes"), between us, including any claim based on or arising from an alleged tort, shall be resolved in Birmingham, Alabama by ARBITRATION as set forth below. The term "Disputes" shall include all actions, disputes, claims, counterclaims or controversies arising in connection with the Loan, Note or the Security Instrument, any collection of any indebtedness owed to Lender, any security or Collateral given to Lender, any action taken (or any omission to take any action) in connection with any of the above, any past, present and future agreement between or among us (including the Security Instrument), and any past, present or future transactions between or among us.²

The agreement could not have been broader. Any disputes means all disputes, because "`any' means all." Merritt v. Dillard Paper Co., 120 F.3d 1181, 1186 (11th Cir.1997) (citing United States v. Gonzales, 520 U.S. 1, 5, 117 S.Ct. 1032, 1035, 137 L.Ed.2d 132 (1997)). And so, of course, does the word "all" itself. The agreement reaches this dispute because the agreement reaches any and all disputes.

Having decided that gateway issue against Anders, we turn to his next contention, which is that the agreement should not be enforced because he cannot afford the costs of arbitration. It may be that an agreement to arbitrate is unenforceable if the cost of arbitration precludes the effective vindication of statutory rights in arbitration. Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 522, 148 L.Ed.2d 373 (2000). But "where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." Id. at 92, 121 S.Ct. at 522. Anders submitted an affidavit in which he said: "I simply cannot afford to pay the $3,500.00 to $6,000.00 that I have determined will be required to arbitrate my claims," and in that affidavit he substantiated his inability to do so by detailing his assets, debts, income, and expenses; he even attached a copy of his credit report. That is not enough, in view of the circumstances.

The agreement provides that arbitration will be in accordance with the American Arbitration Association Rules for Commercial Financial Disputes. Those rules specify that "the AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees." AAA Rules for Commercial Financial Disputes, Rule 46. They also provide that all other expenses of the arbitration, including travel, costs of witnesses, and fees of the arbitrator, while ordinarily "borne equally by the parties" may be assessed by the arbitrator against any specified party. Id. Rule 47. We need not decide if those provisions of the AAA rules alone are enough to preclude a finding that arbitration would be prohibitively expensive for Anders, because there is more.

The more is that Hometown Mortgage stipulated in the district court that if Anders was unable to pay for arbitration and his inability would preclude arbitration, Hometown Mortgage "would agree to bear the administrative fees which Anders would otherwise be required to pay in the institution of an arbitration action." At oral argument before us, Hometown Mortgage's counsel said the stipulation means her client will pay "what we need to pay to make it fair for Mr. Anders," and the arbitrator will decide how much Hometown Mortgage should pay of Anders' costs. Counsel agreed that Hometown Mortgage's stipulation should be construed expansively, and we...