Rutledge v. Santander Consumer USA Inc.

• Decision Date: 14 July 2021
• Docket Number: C/A No. 6:20-cv-04214-DCC
• Parties: Kelso Rutledge, Plaintiff, v. Santander Consumer USA Inc., Mid Atlantic Asset Recovery LLC, and PAR Inc., Defendants.
• Court: U.S. District Court — District of South Carolina

Kelso Rutledge, Plaintiff, v. Santander Consumer USA Inc., Mid Atlantic Asset Recovery LLC, and PAR Inc., Defendants.

C/A No. 6:20-cv-04214-DCC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA GREENVILLE DIVISION

July 14, 2021

OPINION AND ORDER

This matter is before the Court on Motions to Compel Arbitration and to Dismiss filed by Defendants Santander Consumer USA Inc. ("Santander"), Mid Atlantic Asset Recovery LLC ("Mid Atlantic"), and PAR Inc. ("PAR"), respectively. ECF Nos. 13, 31, 34.

BACKGROUND

On May 6, 2014, Plaintiff entered into a loan agreement (titled "Retail Installment Sale Contract") with Koons Automotive, Inc., ("Koons Automotive") for the purchase of a personal vehicle. ECF Nos. 10 at ¶ 6, 13-2 at 5-6. Koons Automotive immediately assigned its interest in the contract, without recourse, to Defendant Santander. ECF No. 13-2 at 5. The Retail Installment Sales Contract ("RISC") provided for repossession in the case of default. Id. at 6. It also included the following:

ARBITRATION CLAUSE

PLEASE REVIEW - IMPORTANT - AFFECTS YOUR LEGAL RIGHTS

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS

MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Clause, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Clause shall not apply to such claim or dispute.

ECF No. 13-2 at 6. Pursuant to the arbitration clause, Plaintiff was permitted to choose between the National Arbitration Forum ("NAF"), the American Arbitration Association ("AAA"), "or any other organization . . . subject to [the Seller's] approval." Id.

Plaintiff alleges that in July 2018, Defendant Santander placed the loan account in collection status and entered into a contractual agreement with Defendant PAR to employ a local repossession company. ECF No. 10 at ¶ 9. Defendant PAR, in turn, contracted with Defendant Mid Atlantic to effect the repossession of Plaintiff's vehicle. Id. On or about July 19, 2019, Plaintiff paid the remaining balance in full and Santander released the lien on the vehicle shortly thereafter. Id. at 14. Plaintiff alleges, however, that repossession was nevertheless unlawfully attempted between October 31, 2019, and January 4, 2020. Id. ¶ 14. Plaintiff now brings six claims against Defendants based on their repossession attempts.

On January 14, 2021, Defendant Santander moved to compel arbitration and dismiss all claims against it based on the arbitration clause of the RISC. ECF No. 13. Defendants Mid Atlantic and PAR subsequently filed their own motions to compel arbitration. ECF No. 31, 34. All three motions are now before the Court.

APPLICABLE LAW

The Federal Arbitration Act ("FAA") establishes a "strong federal public policy in favor of enforcing arbitration agreements" and is designed to "ensure judicial enforcement of privately made agreements to arbitrate." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 217, 219 (1985). The FAA was enacted "in 1925 in order 'to reverse the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements on the same footing as other contracts.'" Snowden v. Checkpoint Check Cashing, 290 F.3d 631, 639 (4th Cir. 2002) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). "Underlying this policy is Congress's view that arbitration constitutes a more efficient dispute resolution process than litigation." Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002) (citation omitted).

The FAA provides that arbitration clauses in contracts involving interstate commerce "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. Under the FAA, a district court must compel arbitration and stay court proceedings if the parties have agreed to arbitrate their dispute. Id. §§ 2, 3. But, if the validity of the arbitration agreement is in issue, a district court must first decide if the arbitration clause is enforceable againstthe parties. Id. § 4. "[A]s a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Drews Distrib., Inc. v. Silicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).

A party seeking to compel arbitration must do so by establishing the following four elements: (1) the existence of a dispute between the parties; (2) a written agreement that includes an arbitration provision purporting to cover the dispute; (3) the relationship of the transaction, as evidenced by the agreement, to interstate or foreign commerce; and (4) the failure, neglect, or refusal of a party to arbitrate the dispute. Am. Gen. Life & Accident Ins. Co. v. Wood, 429 F.3d 83, 87 (4th Cir. 2005); see also Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991); Energy Absorption Sys. v. Carsonite Int'l, 377 F. Supp. 2d 501, 504 (D.S.C. 2005). "[E]ven though arbitration has a favored place, there still must be an underlying agreement between the parties to arbitrate." Adkins, 303 F.3d at 501 (internal quotations and citation omitted). "Whether a party agreed to arbitrate a particular dispute is a question of state law governing contract formation." Id. (citing First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). "[T]he party resisting arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration." Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 81 (2000). Where a valid arbitration agreement exists and covers the claims at issue, this Court has "no choice but to grant a motion to compel arbitration." Adkins, 303 F.3d at 500 (4th Cir. 2002).

ANALYSIS

Arbitration of Claims Against Defendant Santander

Defendant Santander, as assignee of Koons Automotive's interest in the RISC, moves to compel arbitration of all claims against it pursuant to the arbitration clause. Plaintiff opposes arbitration on the basis that (1) the arbitration clause is unconscionable and therefore invalid, and (2) the claims at issue are outside its scope.¹

Delegation Clause

Ordinarily, the question of arbitrability is decided by the court. Peabody Holding Co., LLC v. UMW, 665 F.3d 96, 102 (4th Cir. 2012) (quoting AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649 (1986)). However, it is well-established that parties "can agree to arbitrate arbitrability," so long as their agreement "clearly and unmistakably" delegates the arbitrability question to the arbitrator. Id. (citation omitted). Under these circumstances, "a court possesses no power to decide the arbitrability issue . . . even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless." Harry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524, 529 (2019). Moreover, "[t]he Supreme Court has concluded that when a litigant specifically challenges the enforceability of an arbitration agreement with a delegation clause, the challenge must be submitted to the arbitrator unless the plaintiff has lodged a specific objection to the delegation clause." Gibbs v. Sequoia CapitalOperations, LLC, 966 F.3d 286, 291 (4th Cir. 2020) (citing Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 68-69 (2010)). This requires, at the least, a specific reference to the delegation clause. Id. (quoting MacDonald v. CashCall, Inc., 883 F.3d 220, 226 (8th Cir. 2018)).

The RISC signed by Plaintiff contains a delegation clause, providing that "the interpretation and scope of this Arbitration Clause, and the arbitrability of the claim or dispute . . . shall . . . be resolved by neutral, binding arbitration." ECF No. 13-2 at 6. Plaintiff's brief makes no specific reference to the delegation clause; rather, his unconscionability arguments are directed at the arbitration clause as a whole. See generally ECF No. 18. Because Plaintiff has not "lodged a specific objection to the delegation clause," the Court must enforce it as written. Gibbs, 966 F.3d 286. This precludes judicial review of the scope of the arbitration agreement.

However, unlike many of the delegation clauses addressed in the case law, the RISC does not specifically provide for arbitration of the "validity" or "enforceability" of the arbitration clause. ECF No. 13-2 at 6; c.f. Gibbs, 966 F.3d at 290 ("Each of the arbitration agreements contained a delegation clause stipulating that the parties would arbitrate 'any issue concerning the validity, enforceability, or scope of this Agreement or this Agreement to Arbitrate.'"). Therefore, the Court finds that the threshold question of whether the arbitration agreement is valid and enforceable has not been clearly and unmistakably delegated to the arbitrator.² See Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302,305 (4th Cir....