Griffin v. Country Credit, LLC (In re Griffin), CASE NO. 17–01858–NPO
| Decision Date | 09 March 2018 |
| Docket Number | ADV. PROC. NO. 17–00048–NPO,CASE NO. 17–01858–NPO |
| Citation | 585 B.R. 794 |
| Parties | IN RE: Joseph D. GRIFFIN, Debtor. Joseph D. Griffin, Plaintiff v. Country Credit, LLC, Defendant |
| Court | U.S. Bankruptcy Court — Southern District of Mississippi |
Richard R. Grindstaff, Bryce Kunz, Byram, MS, for Plaintiff.
Jackie Ray Bost, Kaytie M. Pickett, Adam Stone, Jones Walker LLP, Jeffrey Ryan Barber, Jackson, MS, for Defendant.
This matter came before the Court for hearing on December 15, 2017 (the "Hearing"), on the Defendant Country Credit, LLC's Motion to Compel Arbitration and to Dismiss or Stay Claims Pending Arbitration (the "Motion to Compel Arbitration or Stay Claims") (Adv. Dkt. 13)1 filed by Country Credit, LLC ("Country Credit"), the Defendant Country Credit, LLC's Memorandum in Support of Motion to Compel Arbitration and to Dismiss or Stay Claims Pending Arbitration ("Country Credit's Brief") (Adv. Dkt. 14) filed by Country Credit, the Response to Defendant's Motion to Compel Arbitration and to Dismiss or Stay Claims Pending Arbitration (the "Debtor's Response") (Adv. Dkt. 16) filed by the debtor, Joseph D. Griffin (the "Debtor"), the Memorandum in Support of Response to Defendant's Motion to Compel Arbitration and to Dismiss or Stay Claims Pending Arbitration (the "Debtor's Brief") (Adv. Dkt. 17) filed by the Debtor, and the Defendant Country Credit, LLC's Reply to Debtor's Response to Motion to Compel Arbitration ("Country Credit's Reply") (Adv. Dkt. 18) filed by Country Credit in the Adversary. At the Hearing, Bryce Kunz represented the Debtor, and Adam Stone, Kaytie M. Pickett, and Jeffrey Ryan Barber represented Country Credit. During the Hearing, the Debtor and Country Credit (collectively, the "Parties") introduced into evidence three (3) stipulated exhibits. The issues in the Adversary are: (1) whether the Parties formed an agreement to arbitrate, (2) whether the arbitration agreement actually contains a delegation clause requiring the Parties' claims to proceed to arbitration, (3) whether compelling arbitration presents an inherent conflict between the Federal Arbitration Act ("FAA") and the purposes of the Bankruptcy Code (the "Code"), and (4) whether Country Credit waived the right to compel arbitration. The Court, having considered the pleadings, evidence, and arguments of counsel, finds as follows:2
Jurisdiction
This Court has jurisdiction over the parties to and the subject matter of this Adversary pursuant to 28 U.S.C. § 1334. For the reasons discussed later in the Opinion, this is a non-core proceeding. Notice of the Motion to Compel Arbitration or Stay Claims was proper under the circumstances.
1. On May 2, 2016, the Debtor entered into the Disclosure Statement, Promissory Note and Security Agreement (the "Loan Agreement") with Country Credit (Ex. 1). The Debtor financed $2,025.04 with a 43.47% annual rate of interest to be paid in fifteen (15) equal installments of $178.00 for a total payment to Country Credit of $2,670.00. (Id. ) Additionally, the Debtor obtained from Country Credit credit life insurance at $53.75 per annum, credit disability insurance at $101.46 per annum, and credit property insurance at $131.02 per annum. (Id. )
2. The Loan Agreement consists of two (2) pages. The Debtor's signature appears at the bottom of the first page. On the second page, the following language (the "Arbitration Disclaimer") appears beneath the "Arbitration Agreement" heading: "The parties have this day entered into a separate arbitration agreement which affects certain rights of the borrower which is incorporated herein by reference and made a part hereof as if fully copied herein." (Ex. 1). The Debtor's initials appear at the bottom of the second page of the Loan Agreement.
3. The Alternative Dispute Resolution (Arbitration) Agreement (the "Arbitration Agreement") consists of two (2) pages and follows the Loan Agreement. (Ex. 1). The Arbitration Agreement "is entered into as part of the Loan Agreement." (Id. ) Additionally, the Arbitration Agreement "covers claims that ... arise out of or relate to this Agreement or the Loan Agreement." (Id. )
4. In Country Credit's Brief, Country Credit asserts that the Arbitration Agreement contains a delegation clause.
5. On May 18, 2017, the Debtor filed a petition for relief under chapter 13 of the Code. (Bankr. Dkt. 1).
6. On August 4, 2017, the Debtor filed the Complaint (the "Complaint") in this Adversary alleging that Country Credit violated the Truth in Lending Act, 15 U.S.C. § 1601 et seq. , and Regulation Z by providing misleading and incorrect disclosures on the Loan Agreement (Adv. Dkt. 1 at 4–5). For example, the Debtor alleges that Country Credit did not pay to the appropriate insurance company the amounts required for the Debtor's life insurance, disability insurance, and property insurance (Adv. Dkt. 1 at 3, ¶ 15). The Debtor further asserts that Country Credit "received and/or retained an undisclosed portion of these funds." (Id. ) The Debtor also alleges that Country Credit violated MISS. CODE ANN. § 83–17–21 because it is not appropriately licensed to sell or provide insurance.
7. On September 5, 2017, Country Credit filed the Answer and Affirmative Defenses to Complaint [Adv. Proc. Dkt. # 1 ] (the "Answer") (Adv. Dkt. 5). On September 21, 2017, Country Credit filed the Amended Answer and Affirmative Defenses to Complaint [Adv. Proc. Dkt. # 1 ] (the "Amended Answer") (Adv. Dkt. 8). On October 30, 2017, Country Credit filed the Second Amended Answer and Affirmative Defenses to Complaint [Adv. Proc. Dkt. # 1 ] (the "Second Amended Answer") (Adv. Dkt. 12), denying that it violated the Truth in Lending Act and demanding "a jury trial on all of the claim [sic ] raised in the Adversary Proceeding Complaint." (Id. )
8. On November 1, 2017, Country Credit filed the Motion to Compel Arbitration or Stay Claims. In support of compelling arbitration, Country Credit asserted that the Debtor signed the Loan Agreement containing the Arbitration Disclaimer and signed the Arbitration Agreement, "thereby acknowledging the existence of the Arbitration Agreement with Country Credit and specifically agreeing to be bound by its terms." (Adv. Dkt. 13).
9. On November 27, 2017, the Debtor filed the Debtor's Response. In support of litigation, the Debtor asserted (1) that Country Credit waived the right to enforce the Arbitration Agreement; (2) that the Arbitration Agreement, if enforced, would negatively impact the Debtor's estate; (3) that granting the Motion to Compel Arbitration or Stay Claims would allow Country Credit to engage in forum shopping; (4) that the Arbitration Agreement contains waiver provisions that may be triggered in this Adversary; and (5) that procedural and substantive unconscionability preclude enforcement of the Arbitration Agreement. The Debtor attached to the Debtor's Response the Defendant Country Credit, LLC's Responses to Requests for Admission (the "Responses to Requests for Admission") (Adv. Dkt. 16–1) and Defendant Country Credit, LLC's Supplemental Responses to Requests for Admission (the "Supplemental Responses to Requests for Admission") (Adv. Dkt. 16–2).
10. On December 11, 2017, Country Credit filed Country Credit's Reply asserting (1) that the Debtor agreed to arbitrate the claims at issue, and the Debtor's claims do not fall within the "Small Claims Exception" to the Arbitration Agreement because the Debtor seeks attorneys' fees and punitive damages; (2) that the Debtor did not meet his burden of overcoming the presumption against waiver of the right to arbitrate; (3) that seeking to compel arbitration is not forum shopping; (4) that the Code does not bar enforcement of the Arbitration Agreement; and (5) that the Arbitration Agreement is not unconscionable.
11. At the Hearing, the Parties presented to the Court the Loan Agreement; the Schedule of Insurance (the "Life Insurance Agreement") (Ex. 2), which includes arbitration provisions;3 and the Schedule of Insurance (the "Property Insurance Agreement") (Ex. 3), which includes arbitration provisions.4
The Supreme Court of the United States has long acknowledged "a national policy favoring arbitration when the parties contract for that mode of dispute resolution." Preston v. Ferrer , 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008). Indeed, the FAA provides that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... 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. With this policy in mind, however, "courts must place arbitration agreements on an equal footing with other contracts ... and enforce them according to their terms." AT & T Mobility LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011) ; see Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006) ; Volt Info. Scis., Inc. v. Bd. of Trs. of the Leland Stanford Junior Univ. , 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).
Thus, the enforcement of an arbitration agreement is a matter of both contract formation and contract interpretation. Kubala v. Supreme Prod. Servs., Inc. , 830 F.3d 199, 201 (5th Cir. 2016). The Fifth Circuit Court of Appeals has established a two-prong test for courts to follow when ruling on a motion to compel arbitration: (1) "whether the parties entered into any arbitration agreement at all " and (2) "whether this claim is covered by the arbitration agreement." Id. When an "arbitration agreement contains a delegation clause giving the arbitrator the primary power to rule on the arbitrability of a specific claim ... the court's...
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