Harris v. Green Tree Financial Corp.
| Decision Date | 01 July 1999 |
| Docket Number | Nos. 97-2029,s. 97-2029 |
| Citation | 183 F.3d 173 |
| Parties | (3rd Cir. 1999) CHARLES HARRIS; CHRISTINE HARRIS; WILLIE DAVIS; NORA WILSON, on behalf of themselves and all others similarly situated v. GREEN TREE FINANCIAL CORPORATION; GREEN TREE CONSUMER DISCOUNT COMPANY; LAWRENCE M. COSS; FREDMONT BUILDERS; P. ANGELO & SONS INC; FRANK R. LUCCI, JR.; TYRONE DENITTIS Green Tree Financial Corporation, Green Tree Consumer Discount Company, Lawrence M. Coss, Appellants in 97-2029 Frank R. Lucci, Jr., Tyrone DeNittis, Appellants in 98-1018 /98-1018 |
| Court | U.S. Court of Appeals — Third Circuit |
On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 97-cv-01128) District Judge: Honorable John P. Fullam
[Copyrighted Material Omitted]
Jeffrey L. Kodroff, Esquire, Anthony Chu, Esquire, Spector & Roseman, P.C., 2000 Market Street, 12th Floor, Philadelphia, PA Michael D. Donovan, Esquire (Argued), David A. Searles, Esquire, Donovan Miller, LLC, 1608 Walnut Street, Suite 1400, Philadelphia, Kenneth A. Jacobsen, Esquire, Chimicles, Jacobsen & Tikellis, One Haverford Centre, 361 West Lancaster Avenue, Haverford, PA Kenneth I. Trujillo, Esquire, Trujillo, Rodriguez & Richards, LLC, 226 West Rittenhouse Square, The Penthouse, Philadelphia, PA 19103, Attorneys for Appellees Charles Harris; Christine Harris; Willie Davis; Nora Wilson
David H. Pittinsky, Esquire (Argued), Alan S. Kaplinsky, Esquire, Burt M. Rublin, Esquire, Martin C. Bryce, Jr., Esquire, Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor, Philadelphia, PA 19103-7599, Counsel for Green Tree Financial Corporation; Green Tree Consumer Discount Company; Lawrence M. Coss: Appellants in 97-2029 and Appellees in 98-1018
Jeffry S. Pearson, Esquire, Solomon, Berschler, Warren, Schatz & Flood, P.C., 522 Swede Street, Norristown, PA 19401, Attorneys for Frank R. Lucci, Jr.; Tyrone Denittis: Appellees in 97-2029 and Appellants in 98-1018
Jeffrey S. Saltz, Esquire, Law Office of Jeffrey S. Saltz, P.C., 1515 Market Street, Suite 1000, Philadelphia, PA 19102, Attorney for Amici-Appellants in 97-2029
Cathy Ventrell-Monsees, Esquire, Deborah M. Zuckerman, Esquire, AARP Foundation Litigation, 601 E. Street, N.W., Washington, D.C. 20049, Attorneys for Amici-Appellees American Association of Retired Persons; National Association of Consumer Advocates; National Consumer Law Center; Public Citizen, Inc.
Alan M. White, Esquire, Irv Ackelsberg, Esquire, Community Legal Services, Inc., Law Center North Central, 3638 North Broad Street, Philadelphia, PA 19140, Attorneys for Amicus-Appellee Consumer Education Protective Association, Inc. in 97-2029
Before: STAPLETON and ROTH, Circuit Judges, and HOEVELER,1 District Judge
In this action, we consider the District Court's denial of a motion to compel arbitration and stay proceedings pending arbitration. We exercise jurisdiction over this matter under the Federal Arbitration Act ("FAA" or the "Act"), 9 U.S.C. S et seq., which permits appeal as a matter of right from orders denying motions to compel arbitration. Since this appeal presents a legal question concerning the applicability and scope of an arbitration agreement, our standard of review is plenary. See Pritzker v. Merrill Lynch, 7 F.3d 1110, 1113 (3d Cir. 1993). Because we find the arbitration clause at issue in this case enforceable, we will reverse the order of the District Court, denying the motion to compel arbitration.
This action was filed in the United States District Court for the Eastern District of Pennsylvania on February 14, 1997, by Charles Harris, Christine Harris, Willie Davis, and Nora Wilson (collectively, the "Harrises").2 The Harrises claim to be victims of a fraudulent home improvement scheme. This scheme allegedly was orchestrated and perpetrated by Green Tree Financial Corporation ("Green Tree"); Green Tree's subsidiary, Green Tree Consumer Discount Company ("GT Discount"); Lawrence M. Coss, the Chief Executive Officer of Green Tree; and several building contractors. These contractors include Fredmont Builders, P. Angelo & Sons, Inc., Frank R. Lucci, Jr., and Tyrone DeNittis.3
The home improvement scheme of which the Harrises claim to be victims worked as follows. Using direct marketing techniques, Green Tree allegedly recruited dozens of home improvement contractors, including those identified above. These contractors allegedly were enlisted for the purpose of obtaining high-interest rate secondary mortgage contracts from homeowners, which were to be sold and assigned to Green Tree or GT Discount. Green Tree allegedly instructed the contractors to obtain such mortgages by, inter alia: marketing themselves as Federal Housing Authority ("FHA") and U.S. Department of Housing and Urban Development ("HUD") approved home improvement dealers; targeting relatively unsophisticated, low- to middle-income, senior citizens; promising that the work would be performed at an affordable cost and that no payment would be required until the customer was satisfied completely with the workmanship; using standardized loan contracts that were generated by Green Tree or GT Discount; inserting a clause in these contracts that allowed the mortgagee to charge exorbitant amounts for collateral protection insurance ("CPI"); and employing high-pressure sales tactics to solicit customers, such as in-home sales and telemarketing. Cmplt. PP 1, 3, 9.
The contractors allegedly used all of these strategies in soliciting the Harrises. Cmplt. PP 29, 37-39, 50, 62. After the Harrises agreed to the home improvement work described by the relevant contractor in his sales presentation, the contractor allegedly presented to them several standardized loan contracts, including a secondary mortgage contract ("the standard form contract"). Cmplt. PP 4, 15, 40-45, 51-52, 66. The Harrises claim that they were told that they had to sign these standardized contracts before construction could begin or be completed on their homes; thus, the Harrises signed the forms. Cmplt. PP 46, 51-52, 66. Almost immediately after the loan papers were signed, the contractors allegedly sold and assigned the loans and mortgages to Green Tree or GT Discount. Cmplt. PP 4, 41, 53, 66.
Thereafter, the contractors performed home improvement work on the Harrises' homes. The Harrises contend, however, that the contractors either did not perform the work, specifically promised in the contracts, or performed the promised work, but in an unsatisfactory manner. Cmplt. PP 4, 46, 54-56, 74-75. On numerous occasions, the Harrises allegedly complained to Green Tree about the nature and quality of work performed by these contractors, but to no avail. Cmplt. PP 48, 56 57, 76.
Thus, the Harrises allege that they received little of value from the contractors, yet were saddled with a sizeable debt secured by mortgages on their homes. Cmplt. pp 4, 77. Rather than risk the loss of their homes, the Harrises have paid Green Tree according to the allegedly fraudulent and misleading terms outlined in the mortgage contracts. Cmplt. PP 4, 47, 77.
As a result of this sequence of events, the Harrises' brought suit against Green Tree, GT Discount, Coss, and the contractors identified above pursuant to the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. 1961 et seq., and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. 201-1 et seq. In addition, the Harrises alleged common law breach of contract, unjust enrichment, promissory estoppel, breach of fiduciary duty, tortious interference, fraudulent misrepresentation, and negligent misrepresentation claims.
In response to the Harrises' suit, Green Tree and the other defendants moved to compel arbitration and stay all proceedings in this action pending completion of arbitration. This motion was based on an arbitration clause that is contained in the secondary mortgage contracts signed by the Harrises. The clause, which appears in small print on the back and near the bottom of the one page form contract, provides as follows:
ARBITRATION - All disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract, or the validity of this arbitration clause or the entire contract, shall be resolved by binding arbitration by one arbitrator selected by us with consent of you. This arbitration contract is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. section 1. Judgment upon the award rendered may be entered in any court having jurisdiction. The parties agree and understand that they choose arbitration instead of litigation to resolve disputes. The parties understand that they have a right or opportunity to litigate disputes through a court, but that they prefer to resolve their disputes through arbitration, except as provided herein. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL, EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY US (AS PROVIDED HEREIN). The parties agree and understand that all disputes arising under the case law, statutory law, and all other laws including, but not limited to, all contract, tort, and property disputes, will be subject to binding arbitration in accord with this contract. The parties agree and understand that the arbitrator shall have all powers provided by the law and the contract. These powers shall include all legal and equitable remedies, including, but not limited to, money damages, declaratory relief, and injunctive relief. Notwithstanding anything hereunto the contrary, we retain an option to use judicial or non-judicial relief to enforce a mortgage, deed of trust, or other security agreement relating to the real property secured...
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