In re Roberson, Case No. 08-12415 NVA (Bankr.Md. 3/29/2010)
| Decision Date | 29 March 2010 |
| Docket Number | Case No. 08-12415 NVA.,Adversary Proc. No. 08-0557 NVA. |
| Parties | In re: Maureen P. Roberson, (Chapter 13), Debtor. Maureen P. Roberson, Plaintiff, v. Ford Motor Credit Company LLC, Defendant. |
| Court | U.S. Bankruptcy Court — District of Maryland |
The Court has before it a motion to stay adversary proceedings in this bankruptcy case pending arbitration. As discussed herein, the Court denies the motion on two grounds. First, the movant waived its arbitration rights by the delay of its demand. Second, even if there were not waiver, the Court would deny the motion by virtue of the nature of the core bankruptcy issues presented. In the interest of completeness, the Court will address both grounds.
The debtor in this case, Maureen Roberson (Ms. Roberson or the "Debtor") filed a chapter 13 petition on February 21, 2008. According to Ms. Roberson, she filed her petition because Ford Motor Credit Company, LLC ("Ford" or the "Defendant") wrongfully repossessed her car in the wake of her prior chapter 7 case and she wanted to redress that wrong. Ford, on the other hand, has argued throughout this chapter 13 case and during the pendency of this adversary proceeding, that its repossession of Ms. Roberson's vehicle was lawful because Ms. Roberson failed to take steps in her previous chapter 7 case to reaffirm the debt owing to Ford. Accordingly, Ford claims, under Maryland state law and the contract between the parties, Ford was permitted to repossess Ms. Roberson's vehicle based on the ipso facto clause in the retail installment contract, i.e., based on nothing more than the fact that Ms. Roberson filed for bankruptcy protection.
In order to fully vet these potentially precedential issues, Ms. Roberson instituted the captioned adversary proceeding in this Court. The matter proceeded to hearing before this Court. After a full-day hearing, this Court determined that some of the core issues in this adversary proceeding turn on important and undecided issues of Maryland state law. This Court found that it would be appropriate to employ the procedure for Certification of Question to the Maryland Court of Appeals, and a date was set for the submission. As part of that procedure, the Court requested that the Debtor and Ford prepare a joint statement of facts to submit to the Court of Appeals. Ms. Roberson timely submitted a statement of facts. Ford filed instead a Motion [doc. 24] to Stay Proceedings Pending Arbitration (the "Motion to Arbitrate"). Ford had never before raised any issue about arbitration or made a demand to arbitrate. The Debtor filed an Opposition [doc. 26] (the "Opposition") to the Motion to Arbitrate.
In its Motion to Arbitrate, Ford argues that all of the claims that Ms. Roberson has against Ford arise from the July 11, 2004 Maryland Simple Interest Vehicle Retail Installment Contract (the "Vehicle Contract") between the parties. Ford points out that the Vehicle Contract contains an arbitration clause wherein the parties agreed "to have any claim related to this contract decided by arbitration." Specifically, the arbitration clause states, in relevant part, as follows:
ARBITRATION
Arbitration is a method of resolving any claim, dispute, or controversy (collectively, a "Claim") without filing a lawsuit in court. Either you or Creditor ("us" or "we") (each, a "Party") may choose at any time, including after a lawsuit is filed, to have any Claim related to this contract decided by arbitration. Such Claims include but are not limited to the following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims regarding the interpretation, scope or validity of this clause, or arbitrability of any issue; 3) Claims between you and us, our employees, agents, successors, assigns, subsidiaries, or affiliates; 4) Claims arising out of or relating to your application for credit, this contract, or any resulting transaction or relationship, including that with the dealer, or any such relationship with third parties who do not sign this contract.
Vehicle Contract at p. 2 [exhibit 1 to doc. 24].
Based on this arbitration clause in the Vehicle Contract, Ford seeks to stay the prosecution of this adversary proceeding, including the certification of questions, pending arbitration. Ford claims that its contractual right to arbitrate is protected pursuant to 9 U.S.C. §2.
In her Opposition, the Debtor alleges that (I) because the Debtor has made core claims against the Defendant, subjecting this case to arbitration would frustrate the purpose of bankruptcy protection and diminish the Bankruptcy Court's authority, and (ii) Ford waived its right to arbitration by litigating this matter and by failing to assert timely its right to arbitrate.
It appears to be undisputed that Ms. Roberson bought a 2005 Ford Focus and financed it through Ford. Subsequently, Ms. Roberson filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code on October 22, 2007. The vehicle was scheduled as an asset and Ford was scheduled as a secured creditor. Ms. Roberson did not, however, reaffirm the debt to Ford. Ms. Roberson received a discharge in her chapter 7 case on January 30, 2008. It also appears to be undisputed that at all times before, during and after her chapter 7 case, Ms. Roberson was current on her payments to Ford and, at all relevant times, she kept the vehicle properly insured and titled. Nonetheless, on February 19, 2008, about three weeks after Ms. Roberson received her chapter 7 discharge, Ford repossessed Ms. Roberson's vehicle on the basis that she had breached the ipso facto clause in the purchase/financing contract between the parties by virtue of having filed for bankruptcy protection.
Two days after the repossession of her vehicle, on February 21, 2008, Ms. Roberson filed the instant chapter 13 case. Ms. Roberson alleges that her sole motivation in filing this case is to redress her rights vis a vis Ford and to attempt to obtain her vehicle from Ford based on what she asserts was a wrongful taking under Maryland law. On July 14, 2008, Ms. Roberson filed the instant adversary proceeding against Ford. The complaint initiating this adversary proceeding contains six counts against Ford, summarized as follows: (I) violation of the discharge injunction pursuant to 11 U.S.C. § 524 by repossessing the vehicle, (II) violation of the federal Fair Debt Collection Practices Act by, inter alia, misrepresenting the imminence of pending legal action and making other false and misleading misrepresentations, attempting to collect amounts not allowed by law; and engaging in harassing, oppressive or abusive conduct, (III) violation of the Maryland Consumer Protection Act by engaging in unfair or deceptive loan practices by making representations that the acceptance of post-filing loan payments would allow the Debtor to retain the vehicle following the closure of her chapter 7 case, (IV) violation of the Maryland Debt Collection Act by threatening to enforce a right which Ford knew did not exist, (V) Breach of Contract based on Ford's wrongful repossession of the vehicle in reliance on the ipso facto clause, (VI) trespass and conversion based on the repossession of the car that was a wrongful act inconsistent with the Debtor's right of ownership. On November 24, 2008, Ms. Roberson amended her complaint. The amendment did not add or delete any counts against Ford. It was filed to make clear that the chapter 13 Trustee in this matter had declined to participate and that the Court has excused him as a party from this action. The amended Complaint also alleges that Ford waived any application of the ipso facto clause by its acceptance of payments after the Debtor's bankruptcy filing.
Ford has not yet filed an answer to the complaint. Ford timely filed a motion to dismiss counts I and II of the Complaint.
Based on the state-based nature of the underlying legal issue in this case, i.e., whether the repossession of a vehicle based on the ipso facto clause is permissible under Maryland law when there has been no other default under the applicable contract, this Court determined, after hearing argument at a lengthy hearing, to certify the question of law to the Maryland Court of Appeals pursuant to the procedure outlined in Md. Cts & Jud. Proc. § 12-603. As stated above, the Court was preparing to certify the question to the Maryland Court of Appeals, when Ford filed its Motion to Arbitrate, raising its arbitration demand for the first time.
It is with this procedural posture as backdrop that the Court considers the Motion to Arbitrate.
Section 3 of the Federal Arbitration Act1 states that:
§ 3. Stay of proceedings where issue therein referable to arbitration
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
Ford filed the Motion to Arbitrate on March 3, 2009. Ms. Roberson filed the complaint initiating this adversary proceeding on July 14, 2008. As stated, the Motion to Arbitrate was the first time that Ford asserted arbitration rights.
One of the primary goals of the bankruptcy system is the centralization of disputes related to a single debtor within a single forum. Under the Federal Arbitration Act (the "FAA"), courts are directed to...
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