Citifinancial, Inc. v. Newton

• Decision Date: 04 March 2005
• Docket Number: No. CIV.A. 3:03-CV-1272B.,CIV.A. 3:03-CV-1272B.
• Citation: Citifinancial, Inc. v. Newton, 359 F.Supp.2d 545 (S.D. Miss. 2005)
• Parties: CITIFINANCIAL, INC. and American Health and Life Insurance Company Plaintiffs v. Annie NEWTON Defendant
• Court: U.S. District Court — Southern District of Mississippi

Page 545

359 F.Supp.2d 545

CITIFINANCIAL, INC. and American Health and Life Insurance Company Plaintiffs v. Annie NEWTON Defendant

No. CIV.A. 3:03-CV-1272B.

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

March 4, 2005.

Richard C. Keller, Burr & Forman, LLP, Thomas Ernest Borton, IV, Burr & Forman, LLP, Birmingham, AL, for Citifinancial, Inc. as Iowa Corporation formerly known as Citifinancial of Mississippi, Inc. formerly known as Commercial Credit Corporation, American Health and Life Insurance Company, Plaintiffs.

Louis G. Baine, III, Page, Kruger & Holland, P.A., Brian Ashley Clark, Page, Kruger & Holland, P.A., Jackson, MS, for Annie Newton, Defendant.

OPINION AND ORDER

BARBOUR, District Judge.

Before the Court is Plaintiffs' Motion for Summary Judgment on their Complaint to compel to arbitration Defendant's claims against Plaintiffs. Having the considered the Motion, Response, Rebuttal, attachments to each and supporting and opposing authority, the Court finds that the Motion is well taken and should be granted.

I. Factual and Procedural History

The facts of this case are those of a typical consumer fraud action. On December 31, 2002, Defendant Annie Newton brought the underlying action in this case against CitiFinancial, Inc., American Health and Life Insurance Company and Mario Arellano in the Circuit Court of the First Judicial District of Hinds County, Mississippi, alleging that defendants improperly included insurance products as part of a loan transaction. Defendant filed this state court action along with co-plaintiffs Billy Harrison, Kim Harrison, and Bobby McLaurin.

On April 14, 2003, defendants removed the underlying state court suit to this Court. The case is currently pending before the undersigned, and is styled Harrison, et al. v. CitiFinancial Corp., et al., Civil Action No. 3:03-CV-523BN ("Harrison").

On November 17, 2003, in the United States District Court for the Southern District of Mississippi, Plaintiffs in this action (defendants in the underlying state court suit) filed independent actions to compel arbitration against three of the four plaintiffs, Billy and Kim Harrison and Annie Newton, from the underlying state court action.¹ The petitions to compel to arbitration the subject claims were based upon arbitration clauses included in the loan documents that were signed by the state court plaintiffs. The complaint to compel to arbitration the claims of Billy and Kim Harrison was assigned to Judge Henry T. Wingate, in a case styled Citifinancial, Inc., et al. v. Harrison, Civil Action No.: 3:03-CV-1275WS. The complaint to compel to arbitration the claims of Defendant, Anne Newton, was assigned to the undersigned.

On March 23, 2004, in Harrison, all proceedings except discovery were stayed pending the resolution of Smallwood v. Illinois Central Railroad Co., 385 F.3d 568 (5th Cir.2004), by the United States Court of Appeals for the Fifth Circuit. An outstanding Motion to Remand is currently before the Court in Harrison. The Fifth Circuit decided Smallwood on September 10, 2004, and Judge Wingate, in an Order dated September 14, 2004, compelled Billy and Kim Harrison's claims to arbitration. That Order is currently on appeal before the Fifth Circuit, No. 04-60979.

The decision of Judge Wingate leaves Defendant Anne Newton as the sole remaining plaintiff in Harrison. Before addressing the outstanding Motion to Remand in Harrison, the Court first addresses Defendant Newton in this Motion for Summary Judgment on Plaintiffs' Complaint to compel arbitration, as this decision will render moot the Motion to Remand in Harrison.

The facts specific to this action are more fully developed below under applicable sections.

II. Legal Standard for Summary Judgment

Rule 56 of the Federal Rules of Civil Procedure provides, in relevant part, that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56©). The United States Supreme Court has held that this language "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Moore v. Mississippi Valley State Univ., 871 F.2d 545, 549 (5th Cir.1989); Washington v. Armstrong World Indus., 839 F.2d 1121, 1122 (5th Cir.1988).

The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record in the case which it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The movant need not, however, support the motion with materials that negate the opponent's claim. Id. As to issues on which the non-moving party has the burden of proof at trial, the moving party need only point to portions of the record that demonstrate an absence of evidence to support the non-moving party's claim. Id. at 323-24, 106 S.Ct. 2548. The non-moving party must then go beyond the pleadings and designate "specific facts showing that there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548.

Summary judgment can be granted only if everything in the record demonstrates that no genuine issue of material fact exists. It is improper for the district court to "resolve factual disputes by weighing conflicting evidence, ... since it is the province of the jury to assess the probative value of the evidence." Kennett-Murray Corp. v. Bone, 622 F.2d 887, 892 (5th Cir.1980). Summary judgment is also improper where the court merely believes it unlikely that the non-moving party will prevail at trial. National Screen Serv. Corp. v. Poster Exchange, Inc., 305 F.2d 647, 651 (5th Cir.1962).

III. Analysis

Plaintiffs submitted the Petition for Order Compelling Arbitration ("Petition"), docket entry no. 1, pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4. Now before the Court is Plaintiffs' Motion for Summary Judgment on this Petition.

Generally a two-step inquiry applies to actions to compel.

The first step is to determine whether the parties agreed to arbitrate the dispute in question. This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. When deciding whether the parties agreed to arbitrate the dispute in question, `courts generally ... should apply ordinary state-law principles that govern the formation of contracts.' In applying state law, however, `due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself must be resolved in favor of arbitration.' The second step is to determine `whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.'

Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir.1996)(internal citations omitted).

III.A. Whether the parties agreed to arbitrate the dispute in question

Plaintiffs raise a less common argument. Plaintiffs argue that before the Court decides whether the parties agreed to arbitrate the merits of Defendant's consumer fraud action, the Court must first decide whether the parties "agreed to arbitrate the issue of arbitrability itself or whether the parties intended for arbitrability to be decided by a court, as in a motion to compel arbitration." Id. at 258 n. 3(stating in full that "[i]n some cases, an additional, threshold inquiry will be whether the parties agreed to arbitrate the issue of arbitrability itself or whether the parties intended for arbitrability to be decided by a court, as in a motion to compel arbitration"). Therefore, the threshold issue in this case is whether the parties agreed to arbitrate issues related to jurisdiction before the arbitrator.

The Supreme Court of the United States spoke to this issue in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). The Supreme Court stated:

When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally (though with a qualification we discuss below) should apply ordinary state-law principles that govern the formation of contracts....

This Court, however, has (as we just said) added an important qualification, applicable when courts decide whether a party has agreed that arbitrators should decide arbitrability: Courts should not assume that the parties agreed to arbitrate arbitrability unless there is `clea[r] and unmistakabl[e]' evidence that they did so. In this manner the law treats silence or ambiguity about the question `who (primarily) should decide arbitrability' differently from the way it treats silence or ambiguity about the question `whether a particular merits-related dispute is arbitrable because it is within the scope of a valid arbitration agreement' — for in respect to this latter question the law reverses the presumption.

But, this difference in treatment is understandable. The latter question arises when the parties have a contract that provides for arbitration of some issues. In such circumstances, the parties likely gave at least some thought to the scope of arbitration. And, given the law's permissive policies in respect to arbitration, one can understand why the law would insist upon clarity before concluding that the parties did not want to arbitrate a related matter. On the other hand, the former question...