Kelley v. Sallie Mae, Inc., Civil Action No. 5:14cv138 (STAMP)

• Decision Date: 14 April 2015
• Docket Number: Civil Action No. 5:14cv138 (STAMP)
• Court: U.S. District Court — Northern District of West Virginia
• Parties: PATTY KELLEY, Plaintiff, v. SALLIE MAE, INC.; SLM Corporation; and NAVIENT SOLUTIONS INC., Defendants.

PATTY KELLEY, Plaintiff, v. SALLIE MAE, INC.; SLM Corporation; and NAVIENT SOLUTIONS INC., Defendants.

Civil Action No. 5:14cv138 (STAMP)

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

April 14, 2015

MEMORANDUM OPINION AND ORDER DENYING MOTION TO REMAND, GRANTING MOTION TO COMPEL ARBITRATION, AND STAYING ACTION DURING ARBITRATION

I. Procedural History

This civil action was removed to this Court from the Circuit Court of Marshall County, West Virginia. In her complaint, the plaintiff, Patty Kelley, alleges that the defendants, Sallie Mae, Inc. ("Sallie Mae"), SLM Corporation ("SLM"), and Navient Solutions, Inc. ("Navient")(collectively, "the defendants"), improperly attempted to collect a debt from her after the defendants were aware that the plaintiff was represented by counsel. The plaintiff asserts causes of action for (1) violations of the West Virginia Consumer Credit and Protection Act ("WVCCPA"), (2) violations of the West Virginia Computer Crime and Abuse Act ("WVCCAA"), (3) intentional infliction of emotional distress, and (4) invasion of privacy. The underlying debt arose from two Smart Option Student Loans for which the plaintiff was a cosigner for herdaughter who was attending Bethany College in Bethany, West Virginia.

The defendants thereafter removed the action to this Court. In support of the amount in controversy, the defendants state in the notice of removal that "the action is one that may be removed to this Court by the Defendants pursuant to the provisions of Title 28 U.S.C. §§ 1441 and 1446, because the amount in controversy, if proven, appears to exceed the sum or value of $75,000.00, exclusive of costs and interest . . . ." After removal, the defendants filed a motion to compel arbitration. The plaintiffs followed that motion with a motion to remand. Both motions are fully briefed and ripe for review.

II. Facts

A. Motion to Remand

In her motion to remand, the plaintiff argues that the defendants have not shown that the amount in controversy exceeds $75,000.00, exclusive of interests and costs. The plaintiff indicates that in her complaint she did not state the value of her claim. The plaintiff contends that the defendants assertion that the amount in controversy exceeds $75,000.00 without any evidence to support it, is a conclusory allegation which is insufficient to meet the defendants' burden.

In response, the defendants assert that the amount in controversy is met. Based on the allegations in the complaint, thedefendants argue that there were at least 16 violations of the WVCCPA from which the plaintiff could recover damages. The defendants assert that, given inflation, the accepted amount for a WVCCPA claim is $4,737.57 per violation. Thus, the defendants argue that this figure alone would meet the amount in controversy requirement. Further, the defendants assert that this must be considered along with the plaintiff's request for the cancellation of her debt which totals $31,506.41. The defendants provided an affidavit from a Navient customer advocate to support the figures they have provided.

In her reply, the plaintiff asserts that the defendants' affidavit should not be considered because it was not provided by the defendants at the time of removal. The plaintiff argues that this Court should not adopt a "remove first, provide evidence later" approach because such an approach is inefficient for (1) the Court, who must now consider a motion to remand and (2) the plaintiff, who must file a motion to remand based on the evidence that exists at the time the notice of removal is filed.

B. Motion to Compel Arbitration

In their motion, the defendants argue that this action is governed by the Federal Arbitration Act ("FAA") because the two promissory notes and applications that the plaintiff cosigned contained valid arbitration agreements. The defendants assert thatthe agreements must be upheld unless they are both procedurally and substantively unconscionable.

In response, the plaintiff asserts that the arbitration agreements are unconscionable and should be invalidated. In the alternative, the plaintiff argues that she is entitled to discovery into arbitrability if the Court finds that the agreements are not facially unenforceable. However, for the following reasons, she argues that the agreements are facially unenforceable:

(1) The underlying notes are adhesion contracts because the plaintiff is an unsophisticated consumer, the terms of the contracts were not explained to her, the contracts were presented on a "take ir or leave it" basis under which the plaintiff was unable to negotiate any of the terms, and they are pre-printed form contracts with arbitration agreements buried at the end of the 8th and 9th pages in small print.

(2) The arbitration agreements are substantively unconscionable because they strip the plaintiff of her statutory right under the WVCCPA to seek attorneys' fees and costs. According to the arbitration agreements, if the plaintiff appeals the administrator's decision, then she would have to pay the administrator's and arbitrator's costs fo the appeal thus stripping away part of her statutory right to attorneys' fees and costs.

(3) The arbitration agreements contain conflicting clauses as to what the plaintiff may recover and thus the defendants cannot show that there was a meeting of the minds because plaintiff could not have formed an intent to agree to conflicting terms. Further, the conflict between these clauses is procedurally unconscionable as a layperson such as the plaintiff would not be able to reconcile the ambiguous agreements.

(4) The arbitration agreements impose unconscionable and burdensome costs on the plaintiff. The appeal costs would require the plaintiff to advance all filing and appeal fees and also be responsible for paying the fees for three arbitrators which discourages the plaintifffrom seeking an appeal. Also, it is unclear from the arbitration agreements what fees and costs the plaintiff will be responsible for if the defendants' motion is granted. The plaintiff argues that the remedial effect of the WVCCPA would be lost because the plaintiff would be forced to pay exorbitant arbitration costs.

In their reply, the defendants first argue that the arbitration agreements are not contracts of adhesion because the plaintiff had the right to reject the arbitration agreements while preserving the other terms of the promissory notes. The defendants assert that the weight of controlling authority supports this argument. Further, the defendants contend that the arbitration agreements only require the plaintiff to pay attorneys' fees and costs if she is not successful on her claims and even then the defendants would be required to consider any good faith request to cover those costs. As such, the defendants assert that the plaintiff's statutory rights are not abridged and in fact she will have greater rights to recover attorneys' fees in arbitration than in court. Additionally, the defendants argue that the arbitration costs are not unconscionable as the plaintiff will only pay an up-front fee of $200-$250, less than court fees, and the defendants must give her request to pay fees a good faith consideration. For the reasons stated above, the defendants contend that the arbitration agreements, or even the loan agreements themselves, should not be invalidated.

Based on the analysis that follows, this Court finds that the plaintiff's motion to remand is denied and the defendants' motion to compel arbitration is granted.

III. Applicable Law

A. Motion to Remand

A defendant may remove a case from state court to federal court in instances where the federal court is able to exercise original jurisdiction over the matter. 28 U.S.C. § 1441. Federal courts have original jurisdiction over primarily two types of cases: (1) those involving federal questions under 28 U.S.C. § 1331, and (2) those involving citizens of different states where the amount in controversy exceeds $75,000.00, exclusive of interest and costs pursuant to 28 U.S.C. § 1332(a). The party seeking removal bears the burden of establishing federal jurisdiction. See Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994). Removal jurisdiction is strictly construed, and if federal jurisdiction is doubtful, the federal court must remand. Id.

Although courts strictly construe the statute granting removal jurisdiction, Doe v. Allied Signal, Inc., 985 F.2d 908, 911 (7th Cir. 1993), the court is not required "to leave common sense behind" when determining the amount in controversy. Mullens v. Harry's Mobile Homes, 861 F. Supp. 22, 24 (S.D. W. Va. 1994). When the amount in controversy is not apparent on the face of theplaintiff's complaint, the federal court must attempt to ascertain the amount in controversy by considering the plaintiff's cause of action as alleged in the complaint and any amendments thereto, the notice of removal filed with a federal court, and other relevant materials in the record. 14C Charles Allen Wright & Arthur R. Miller, Federal Practice and Procedure § 3725 at 73 (3d ed. 1998). However, the court is limited to examining only evidence that was available at the moment the petition for removal was filed. Chase v. Shop 'N Save Warehouse Foods, 110 F.3d 424, 428 (7th Cir. 1997).

B. Motion to Compel Arbitration

The Federal Arbitration Act ("FAA") applies to "[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof . . . ." 9 U.S.C. § 2. When a party seeks enforcement of the arbitration clause of an agreement during proceedings in a district court, a party sufficiently "invoke[s] the full spectrum of remedies under the [Federal Arbitration Act, 9 U.S.C. § 1, et seq. ("FAA")]." Choice Hotels Intern., Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 710 (4th Cir. 2...