Moore v. General (In re Moore )
| Decision Date | 01 September 2011 |
| Docket Number | Adv. Proc. No. 10-92,Case No. 10-1303 |
| Court | U.S. Bankruptcy Court — Northern District of West Virginia |
| Parties | In re: GEORGE L. MOORE and LYDIA M. MOORE, Debtors. GEORGE L. MOORE and LYDIA M. MOORE, Plaintiffs, v. AMERICAN GENERAL, Defendant. |
United States Bankruptcy Judge
American General filed a $56,674.90 proof of claim in the Chapter 7 bankruptcy case of George and Lydia Moore (the "Debtors"). The Debtors did not object to the claim but filed this adversary proceeding asserting that American General violated the West Virginia Consumer Credit Protection Act and that the note held by American General is void. American General answered the complaint and seeks to compel arbitration.
The Debtors contend that the arbitration agreement is unconscionable, and, therefore, unenforceable. American General asserts that the arbitration agreement is not unconscionable, and challenges to the enforceability of the agreement are to be arbitrated.
Generally, "an agreement to arbitrate is valid, irrevocable, and enforceable[] as a matter offederal law." Perry v. Thomas, 482 U.S. 483, 492 (1987). In fact, § 2 of the Federal Arbitration Act ("FAA") states a written arbitration agreement "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. This "heavy presumption of arbitrability required that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration." Levin v. Alms and Associates, 634 F.3d 260, 266 (4th Cir. 2011) (citing Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 812 (4th Cir. 1989)).
Although the FAA favors arbitration, "generally applicable contract defenses, such as . . . unconscionability, may be applied to invalidate arbitration agreements without contravening § 2 of the FAA." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996); see also, Wince v. Easterbrook Cellular Corp., 681 F.Supp.2d 679, 683 (N.D.W. Va 2010) (same). When determining whether a ground exists to avoid the agreement, courts look to state law. See Perry, 482 U.S. at 492 n.9.
In West Virginia, a finding of unconscionability requires both "gross inadequacy in bargaining power" and "terms unreasonably favorable to the stronger party." Adkins v. Labor Ready, Inc., 303 F.3d 496, 502 (4th Cir. 2002) (citing Troy Mining Corp. v. Itmann Coal Co., 176 W.Va. 599 (1986)). The test is conjunctive; thus, "[a] litigant who complains that he was forced to enter into a fair agreement will find no relief on grounds of unconscionability." Adkins, 303 F.3d at 502. Because the court finds the arbitration terms not unreasonably favorable to American General, the court need not address whether inadequacy in bargaining power existed.
Here, the Debtors complain that the arbitration agreement is unreasonably favorable to American General on the basis that it: (a) was buried in the packet of loan closing documents they received and was not explained to them; (b) requires arbitration in a forum in which the arbitrators have a pecuniary interest in the outcome of the arbitration; (c) imposes heavy costs on the Debtors; and (d) does not bind both parties to a mutual obligation to arbitrate.
The arbitration agreement begins on the third page of the Loan Agreement and Disclosure Statement executed by the Debtors at closing, and the Debtors acknowledged reading and receiving a copy of the arbitration agreement before signing it. The agreement provides, in pertinent part, that:
Lender does not have to initiate arbitration before exercising lawful self-help remedies orjudicial remedies . . . .
. . .
The arbitration will be conducted under the rules and procedures of the National Arbitration Forum . . . . In the event that NAF is either unable, unwilling, or deemed not appropriate by a court to resolve a Covered Claim, or I object to the NAF for good cause, then Lender and I agree to submit all disputes to the American Arbitration Association ("AAA") . . . . If there is a conflict between the rules of the NAF (or the AAA) and this Arbitration Agreement, this Arbitration Agreement will govern.
. . .
NAF will provide . . . a list of seven (7) possible arbitrators. Lender and I will each have an opportunity to strike three (3) persons from that list.
. . .
[N]othing in this Arbitration Agreement shall limit the arbitrator's ability to enforce any of my rights or impose any remedies available to me under any applicable consumer protection laws or regulations.
. . .
I may have to bear some of these fees; however, if I am not able to pay such fees or think they are too high, Lender will consider any reasonable request to bear the cost . . . . Each party will also pay for its own costs, including fees for attorneys, experts, and witnesses, unless otherwise provided by law . . . .
. . .
[T]he arbitrator shall be bound by the Federal Rules of Evidence . . . . The arbitrator's findings, reasoning, decision, and award shall be . . . consistent with the law of the jurisdiction that applies to the loan . . . .
. . .
The arbitrator's (or panel's) findings, decision, and award shall be subject to judicial review on the grounds set forth in 9 U.S.C. § 10, as well as on the grounds that the findings, decision, and award are manifestly inconsistent with the terms of this Arbitration Agreement and any applicable law or rules.
. . .
The arbitrator may award punitive damages only under circumstances where a court of competent jurisdiction could award such damages . . . . [In doing so], the arbitrator must abide by all applicable state and federal laws regarding the amount of such damages . . . .
. . .
The arbitration will take place in the county where I live . . . .
(Exhibit 1, American General's Reply Brief).
Contrary to the Debtors' assertion, the arbitration agreement is not buried in the packet of loan closing...
To continue reading
Request your trial