Richards v. Gibson
| Decision Date | 04 March 2015 |
| Docket Number | CAUSE NO. 1:15CV7-LG-RHW |
| Parties | KIMBERLY RICHARDS PLAINTIFF v. MARK GIBSON; HL & C JACKSON, LLC; and TOWER LOAN OF MISSISSIPPI, LLC DEFENDANTS |
| Court | U.S. District Court — Southern District of Mississippi |
BEFORE THE COURT is the [22] Motion to Alter and Amend Order and For Reconsideration filed by Plaintiff Kimberly Richards. Defendant Tower Loan of Mississippi, LLC, filed a Response in Opposition to the Motion, and Richards filed a Reply. Having considered the parties' submissions and the applicable law, the Court is of the opinion that the Motion should be denied. Richards must submit her claims against Tower to arbitration.
The facts of this case were set out in the Court's Order entered in this action on February 4, 2015. (ECF No. 18). By Order dated January 29, 2015, the Court denied Tower's Motion to Compel Arbitration and Stay Proceedings Pending Arbitration. The next day, Tower filed a Motion to Alter or Amend the Court's Order, arguing that the controlling provision of the Dodd-Frank Act did not go into effect until 2013 - after the date of the subject loan - and, thus, does not apply to prohibit arbitration in this action.
On February 2, 2015, the Court entered a Text Only Order requiring Richards to respond to Tower's Motion to Alter or Amend on or before February 9, 2015. Richards filed a Response in Opposition to the Motion on February 3, 2015.After reviewing the submissions of the parties and the law, the Court granted the Motion to Alter or Amend and ordered that Richards must submit her claims against Tower to arbitration. Richards now asks the Court to reconsider that Order.
Although Richards requests that the Court give "her the opportunity to brief issues belatedly raised by Tower[,]" (Mot. 1 (¶4), ECF No. 22), the Court already did so when it ordered Richards to respond to Tower's Motion. Richards' argument that she was prevented from briefing the issue of the effective date of the Dodd-Frank Act is unpursuasive. Even so, Richards has extensively briefed the issues for which she seeks Court review. (See Pl.'s Mem., ECF No. 23). The Court has also exhaustively reviewed the law in this area and is of the opinion that no additional briefing or oral argument is necessary.
Richards has never disputed that there is a 2012 agreement between she and Tower to arbitrate the claims against Tower in this action. (See Order 5-6, ECF No. 18); Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5th Cir. 2004). She makes three arguments in the present Motion: (1) that 15 U.S.C. § 1639c(e) was effective in 2010, not 2013; (2) that § 1639c(e) should be applied retroactively to the 2012 agreement in any event; and (3) that the arbitration agreement between she and Tower is unconscionable. The Court addresses each argument in turn below.
(1) Effective Date of Title XIV of the Dodd-Frank Act
15 U.S.C. § 1639c(e), part of Title XIV of the Dodd-Frank Wall Street Reformand Consumer Protection Act, states that "[n]o residential mortgage loan . . . secured by the principal dwelling of the consumer may include terms which require arbitration . . . as the method for resolving any controversy or settling any claims arising out of the transaction." There has never been any dispute that the arbitration agreement at issue is part of a residential mortgage loan. The parties dispute whether § 1639c(e) was effective in 2010 - thus rendering the 2012 agreement between the parties unenforceable - or 2013.1
The Dodd-Frank Act was enacted in 2010, but certain provisions of the Act did not take effect until the "date on which the final regulations implementing such . . . provision" took effect. 124 Stat. at 2136. Richards argues that § 1639c(e) took effect in 2010, not 2013, because the later effective date "only applies to those portions of Title XIV that require administrative regulations to be implemented[,]" and § 1639c(e) "does not require any regulations to be promulgated." (Pl.'s Mem. 3, ECF No. 23). The Court thoroughly researched this very issue prior to entering its February 4 Order, and is persuaded by the express mandate of the Consumer Financial Protection Bureau (CFPB), the federal agency in charge of implementing Title XIV:
The provisions on mandatory arbitration and waiver are contained in the Dodd-Frank Act. Absent action by the Bureau, they would take effect on January 21, 2013. The Bureau believes that it is necessary and appropriate to provide implementing language to facilitate compliance with the statute. At the same time, the Bureau recognizes the point made by several commenters regarding the importance of these consumer protections. The fact that the Bureau is implementing the provisions by regulation does not require the Bureau to delay the provisions' effective date for an extended period, as the commenters may have assumed. Instead, the Bureau is providing an effective date of June 1, 2013.
78 Fed. Reg. 11280, 11387 (emphasis added). Richards claims that 78 Fed. Reg. 11280 is inapplicable because it "does not even mention a 'designated transfer date' for Title XIV." (Pl's. Mem. 4, ECF No. 23). But it did not have to, since the CFPB was explicit on when the prohibition on mandatory arbitration found in § 1639c(e) became effective - in 2013, after the 2012 mortgage loan at issue in this action.
Finally, the Court is unpersuaded by Richards' argument that Tower improperly relied on 75 Fed. Reg. 57252, which Richards claims does not apply to Title XIV. 78 Fed. Reg. 11280, the Federal Register section on which the Court relied (and which Tower also cited), specifically applies to Title XIV.
(2) Retroactive Application of § 1639c(e)
Richards claims that retroactivity is not an issue because the Dodd-Frank Act was enacted before Richards filed her suit, and retroactivity is measured from the date of a statute's enactment. Taking Richards' argument to its logical conclusion, retroactivity would never be an issue for statutes with an effective date after their enactment date. This argument is one of semantics, not substance. Seegenerally, e.g., Vartelas v. Holder, 132 S. Ct. 1479 (2012) (); Landgraf v. USI Film Prods., 511 U.S. 244 (1994) ().
Richards next contends that the Court should retroactively apply § 1639c(e) in any event. None of the authority cited by Richards stands for the proposition that that section may be applied retroactively to the 2012 mortgage loan. The Fifth Circuit has not yet had occasion to address the issue of the retroactivity of the Dodd-Frank Act. See Holmes v. Air Liquide USA, L.L.C., 498 F. App'x 405, 406 n.2 (5th Cir. 2012). Regardless, "[t]he operative presumption . . . is that Congress intends its laws to govern prospectively only." Vartelas, 132 S. Ct. at 1491. "The essential inquiry . . . is whether the new provision attaches new legal consequences to events completed before its" effective date. See id. (citation and quotation marks omitted). "That is just what occurred here." Id. Moreover, the district courts that have considered the issue have found that § 1639c(e) should not be applied retroactively. See Weller v. HSBC Mortg. Servs., Inc., 971 F. Supp. 2d 1072, 1077-79 (D. Colo. 2013); State ex rel. Ocwen Loan Servicing, LLC v. Webster, 752 S.E. 2d 372, 379-86 (W. Va. 2013).
Richards argues that retroactive application of the statute "would not impair any rights Tower possessed (right to arbitration) because that right was eliminated by Congress" in 2010, and, thus, "Tower was aware of the arbitration ban as of" thatdate. (Pl's. Mem. 5, ECF No. 23). This argument merely restates her previous argument that the statute became effective in 2010. A party's awareness of a statute's prohibition is not the test for whether the statute should be applied retroactively. If anything, Tower was well aware that it could rely on its arbitration agreement with customers until 2013, when the prohibition actually became effective. To apply the prohibition retroactively would no doubt impair Tower's contractual rights, as discussed in further detail below. See AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011) () (citation and quotation marks omitted).
Richards also argues that § 1639c(e) is merely jurisdictional. (Pl's. Mem. 5, ECF No. 23). It is true that courts "have regularly applied intervening statutes conferring or ousting jurisdiction, whether or not jurisdiction lay when the underlying conduct occurred or when the suit was filed." See Landgraf, 511 U.S. at 274. This is because "[a]pplication of a new jurisdictional rule usually 'takes away no substantive right but simply changes the tribunal that is to hear the case.'" See id. (citation omitted). However, Richards' same argument was made by the party opposing arbitration in Weller, and the Court rejects the argument for the same reason that court in Weller (and other courts) have rejected it.
In particular, not only is there a well-settled presumption against applying statutes retroactively, see Landgraf, 511 U.S. at 263-65, but also "arbitration is primarily a contractual matter governed by the law of contracts . . . ." See Weller,971 F. Supp. 2d at 1079. Thus, the Court agrees with the numerous courts that "have concluded that the right to insist on arbitration is not just a matter of where the claims may be heard but a question of vested, contractual rights, which may not be retroactively withdrawn absent clear congressional intent to that effect[,]" which is lacking here. See id. "An arbitration agreement creates a right, one that under the [Federal Arbitration Act] is 'irrevocable.'" Id. (quoting 9 U.S.C. § 2). Furthermore, the Supreme Court has...
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