Lyons v. PNC Bank, N.A.
| Decision Date | 06 January 2021 |
| Docket Number | Civil No. 1:20-cv-02234-SAG |
| Parties | WILLIAM T. LYONS JR., Plaintiff, v. PNC BANK, N.A., Defendant. |
| Court | U.S. District Court — District of Maryland |
William Lyons, Jr. ("Plaintiff"), filed suit against PNC Bank, N.A. ("Defendant"), alleging violations of the Truth in Lending Act ("TILA") and the Real Estate Settlement Procedures Act ("RESPA"). Currently pending is Defendant's Motion to Compel Arbitration, to Strike Class Action Demand, and to Stay Litigation ("the Motion"). ECF 10. I have reviewed the Motion, the opposition, the reply, and the parties' supplemental filings. ECF 10-1, 13, 16, 18, 19. No hearing is necessary. See Local Rule 105.6 (D. Md. 2018). For the reasons stated below, as to the compulsion of arbitration and the striking of Plaintiff's class action demands in Count One of his Complaint, the Motion will be granted in part and denied in part. The Motion will be denied insofar as it seeks to stay litigation of Count Two pending arbitration.
At this stage, there appears little dispute as to the basic facts of this case.1 Plaintiff obtained a Home Equity Line of Credit ("HELOC") from National City Bank ("National City")2 on or about February 4, 2005. ECF 3 ¶ 13. At the closing, Plaintiff and National City signed an Equity Reserve Agreement ("HELOC Agreement"), which did not contain an arbitration clause or a class action waiver. ECF 9-4. The HELOC set a ten-year loan term and allowed Plaintiff to take draws up to a maximum amount of $149,650.00. Id.
Separately, Plaintiff opened two deposit accounts at PNC: one on May 3, 2010, ECF 9-1, and one on July 6, 2016, ECF 9-2. As part of each transaction, Plaintiff signed a statement "agreeing to be bound by the terms and conditions of PNC Bank's Account Agreement for Checking Accounts and Savings Accounts[.]" Id. The Account Agreement included a set-off provision authorizing Defendant to charge the deposit accounts for "any loans, overdrafts, obligations, or other indebtedness . . . now or hereafter owing to us by you . . . ." ECF 9-3. The Account Agreement also specifies that Plaintiff granted PNC a security interest in his deposit accounts. Id. While the Account Agreement did not, when first agreed to by Plaintiff in 2010, include an arbitration clause or class action waiver, it did include a change-in-terms provision allowing Defendant "to amend this Agreement . . . from time to time," with such amendments becoming "effective 30 days . . . after notice of the amendment is posted in our branches, or by such other method of notice as we may deem appropriate or as may be specifically required by applicable law." Id. In February 2013, Defendant used this change-in-terms provision to amendthe Account Agreement to include an arbitration clause and class action waiver. ECF 18-1 ¶ 6. As part of the amendment process, Defendant posted the 2013 amendments in its branches, highlighted the change on each customer's monthly statement, and also provided its customers, including Plaintiff, the right to opt out of the arbitration clause. ECF 18-1 ¶¶ 6-8. Plaintiff never did so, despite opportunities in February 2013, June 2014, November 2015, and November 2017. ECF 18-1 ¶¶ 6, 11, 12, 15, 16.
On September 26, 2019, PNC used the set-off provision to make a payment due on the HELOC in the amount of $1,396.97. ECF 3 ¶ 17. To make this payment, PNC debited Plaintiff's deposit account ending 2553, which Plaintiff had opened with PNC on May 3, 2010. ECF 9 ¶ 17. On February 26, 2020, PNC used the set-off provision to apply another payment due on the HELOC, in the amount of $1,589.00. ECF 3 ¶ 25. To make this payment, PNC debited Plaintiff's deposit account ending 6411, which Plaintiff had opened with PNC on July 6, 2016. ECF 9 ¶ 25.
"Motions to compel arbitration exist in the netherworld between a motion to dismiss and a motion for summary judgment," and "[w]hether the motion should be treated as a motion to dismiss or a motion for summary judgment turns on whether the court must consider documents outside the pleadings." PC Const. Co. v. City of Salisbury, 871 F.Supp. 2d 475, 477-78 (D. Md. 2012); see also Iraq Middle Mkt. Dev. Found. v. Harmoosh, 848 F.3d 235, 241-42 (4th Cir. 2017) (). Because resolution of this dispute requires consideration of contracts and other materials outside the pleadings, this Court will consider those documents and will apply the summary judgment standard—though, as previously noted, there do not appear to be any significant disputes of fact at this stage.
In general, under the Federal Arbitration Act ("FAA"), court must stay any proceeding that involves an issue subject to arbitration under a written arbitration agreement. See 9 U.S.C. § 3. The FAA makes written arbitration agreements "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. Congress enacted the FAA for the purpose of "revers[ing] the longstanding judicial hostility to arbitration agreements . . . and to place arbitration agreements upon the same footing as other contracts." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225-26 (1987). Under the FAA, a court must compel arbitration where (1) interstate commerce exists, (2) a valid written arbitration agreement exists, and (3) the dispute falls within the scope of the agreement. See Glass v. Kidder Peabody & Co., 114 F.3d 446, 453 (4th Cir. 1997); see also 9 U.S.C. §§ 3-4.
"[H]aving made the bargain to arbitrate, [a] party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Gilmer, 500 U.S. at 26 (internal citations omitted). "That is the case even when the claims at issue are federal statutory claims, unless the FAA's mandate has been overridden by a contrary congressional command." CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012) (internal citations omitted). The burden is on the party challenging arbitration to show that "Congress intended to preclude a waiver of a judicial forum" for the claim at issue. See Gilmer, 500 U.S. at 26 (internal citations omitted). "If such an intention exists, it will be discoverable in the text of the [statute], its legislative history, or an inherent conflict between arbitration and the [statute's] underlying purposes." Id. (internal citations omitted).
Defendant attempts to compel arbitration using the Account Agreement governing Plaintiff's two different deposit accounts with the bank, which contain 1) a term permitting Defendant to garnish deposit accounts to pay off outstanding debts and 2) arbitration agreements for all matters that "arise[] out of or relate[] to" the Account Agreement. Plaintiff responds that federal law prohibits arbitration clauses in the context of mortgage-related transactions like the HELOC and that, regardless, the specific arbitration agreements at issue here are invalid for lack of consideration and mutuality.
The disputed statutory provisions became law as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). While the FAA enshrines a general presumption in favor of arbitration, the Dodd-Frank Act "imposes, among its many initiatives, the refinement and restriction of" the policy favoring arbitration of certain claims. Pezza v. Investors Capital Corp., 767 F.Supp.2d 225, 226 (D. Mass. 2011) (quoting Preston v. Ferrer, 552 U.S. 346, 353 (2008)). Specifically, Dodd-Frank added 15 U.S.C. § 1639c(e) and 12 C.F.R. § 1026.36(h) to the Truth in Lending Act ("TILA"), the statute under which Plaintiff brought his first claim. The relevant statutory language regarding arbitration states as follows:
15 U.S.C.A. § 1639c. The implementing regulation, meanwhile, states:
(1) Arbitration. A contract or other agreement for a consumer credit transaction secured by a dwelling (including a home equity line of credit secured by the consumer's principal dwelling) may not include terms that require arbitration or any other non-judicial procedure to resolve any controversy or settle any claims arising out of the transaction. This prohibition does not limit a consumer and creditor or any assignee from agreeing, after a dispute or claim under the transaction arises, to settle or use arbitration or other non-judicial procedure to resolve that dispute or claim.
12 C.F.R. § 1026.36.
There is limited precedent interpreting the scope of the foregoing provisions. It is clear from the plain language that, at the very least, mortgage notes and other...
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