Beard v. Santander Consumer USA, Inc.
| Decision Date | 13 April 2012 |
| Docket Number | CASE NO. 1:11-cv-11-1815 LJO-BAM |
| Parties | CHARLES BEARD, Plaintiff, v. SANTANDER CONSUMER USA, INC. and TRIAD FINANCIAL CORPORATION, Defendant. |
| Court | U.S. District Court — Eastern District of California |
(Doc. 18)
Defendants Santander Consumer USA and Triad Financial Corporation ("Defendants") move to compel arbitration of all claims made in this action by Plaintiff Charles Beard and similarly situated individuals.1 (Doc. 18). On March 30, 2012, a hearing on the motion was held. Counsel Sergei Lemberg appeared by telephone on behalf of Plaintiff. Counsel Felicia Yu and Eric Schaffer appeared by telephone on behalf of Defendants. Having considered the oral argument of counsel, the moving, opposition and reply papers, as well as the Court's file, the Court recommends that Defendants' Motion to CompelArbitration and to Stay Action should be GRANTED.
In the underlying action, Beard brings a putative class action against Defendants alleging violations of the Servicemembers Civil Relief Act, 50 U.S.C. App. §§ 501 et seq. Beard, a sergeant in the United States Army National Guard, entered into an agreement to finance the purchase of a 2007 Kia Sportage (the "Finance Agreement"), on or around September 25, 2007. Beard Aff'd. at 2, (Doc. 27-1). The Finance Agreement obligated Beard to make seventy-one installment payments over a period of six years. Approximately one year after signing the Finance Agreement, Beard was called into active military service. Beard was scheduled to report for duty in San Bernadino, California on August 16, 2008. Eight days before his departure, Beard notified Triad that he was subject to deployment and late on his car payments. As such, Beard requested a forbearance of his August 2008 and September 2008 car payments. Triad approved the two-month forbearance request and required Beard to sign a Modifications and Extension Agreement ("Modification Agreement"). The Modification Agreement contained an arbitration clause that required Beard to arbitrate all disputes "arising out of and in connection with, or relating to" the Finance Agreement.
The arbitration policy, as described in the "Modifications and Extension Agreement," provides in pertinent part:
Padilla Decl., Ex. B (Doc. 18-2).
Ultimately, Beard failed to keep up with his installment payments and while he was serving in Iraq, Triad repossessed his vehicle without a court order and sold it at auction. Beard now attempts to pursue a putative class action against Defendants Triad and Santander alleging that Defendants violated the Servicemembers Civil Relief Act of 2003 ("SCRA") by failing to obtain a Court order prior to repossessing his car and by charging more than a 6% interest rate on his loan.
Rather than answer Beard's complaint, Defendants moved to stay the proceedings in this Court and to compel Beard to arbitrate his claims under the Federal Arbitration Act, ("FAA"), 9 U.S.C. §§ 3, 4, as set forth in the arbitration clause of the parties' Modification Agreement. Beard raises two primary challenges to the arbitration provision in the Modification Agreement. First, Beard argues that because the arbitration clause waives the right to a court trial as guaranteed under the SCRA, the Modification Agreement must comply with the 12-point font requirements of 50 App. U.S.C § 517(c). Moreover, the arbitration clause in the Modification Agreement is not in 12-point font and it is therefore invalid. Second, the arbitration clause is unconscionable and therefore should not be enforced by the Court. Beard Opp'n at 16, (Doc 27).
In 2003, Congress amended the Servicemembers Civil Relief Act, 50 App. U.S.C. §§ 501 through 596 ("SCRA"). In doing so, Congress stated two purposes that the SCRA would further:
The SCRA acknowledges that a critical area of concern for many service members is the inability to attend to important legal matters and obligations during military service. To help alleviate such concerns, the SCRA provides certain protections in legal matters. Examples include: staying court hearings if military service materially affects service members' ability to defend their interests; reducing interest to 6% on pre-service loans and obligations; and requiring court action before a service member's family can be evicted from rental property or face repossession. Id. §§ 522, 527, 535(f).
Relevant to this action is 50 App. U.S.C. § 517, which discusses the waiver of protections granted by the SCRA. Protections granted by the SCRA may only be waived pursuant to a separate signed written agreement that meets the SCRA's specific requirements. Section 517 reads, in part:
(a) In general. A servicemember may waive any of the rights and protections provided by this Act. Any such waiver that applies to an action listed in subsection (b) of this section is effective only if it is in writing and is executed as an instrument separate from the obligation or liability to which it applies. In the case of a waiver that permits an action described in subsection (b) the waiver is effective only if made pursuant to a written agreement of the parties that is executed during or after the servicemember's period of military service. The written agreement shall specify the legal instrument to which the waiver applies and, if the servicemember is not a party to that instrument, the servicemember concerned.
(b) Actions requiring waivers in writing. The requirement in subsection (a) for a written waiver applies to the following:
The Federal Arbitration Act ("FAA") provides that an agreement to submit commercial disputes to arbitration shall be "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The purpose of the Act was to put arbitration agreements "upon the same footing as other contracts," thereby "reversing centuries of judicial hostility to arbitration agreements" and allowing the parties to avoid "the costliness and delays of litigation." Scherk v. Alberto-Culver Co., 417 U.S. 506, 510-11 (1974) (quoting H. R. Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)).
In applying the FAA, courts have developed a "liberal federal policy favoring arbitration agreements." CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). A court's role in enforcing arbitration agreements is 3 Chiron Corp. v. Ortho...
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