Willis v. Tower Loan of Miss., LLC (In re Willis)
| Decision Date | 12 December 2017 |
| Docket Number | CASE NO. 17–00160–NPO,ADV. PROC. NO. 17–00025–NPO |
| Citation | 579 B.R. 381 |
| Parties | IN RE: Chuck WILLIS, Debtor. Chuck Willis, Plaintiff v. Tower Loan of Mississippi, LLC, d/b/a Tower Loan of Crystal Springs, Defendant |
| Court | U.S. Bankruptcy Court — Southern District of Mississippi |
Richard R. Grindstaff, Bryce Kunz, Byram, MS, for Plaintiff.
Jeffrey Ryan Barber, Kaytie M. Pickett, Adam Stone, Jones Walker LLP, Jackson, MS, for Defendant.
This matter came before the Court for hearing on October 25, 2017 (the "Hearing"), on the Defendant Tower Loan's Motion to Dismiss or, Alternatively, to Compel Arbitration and to Dismiss or Stay Claims Pending Arbitration (the "Motion to Dismiss or to Compel Arbitration") (Adv. Dkt. 8)1 filed by Tower Loan of Mississippi, LLC ("Tower Loan"), the Defendant Tower Loan's Memorandum in Support of Motion to Dismiss or, Alternatively, to Compel Arbitration and to Dismiss or to Stay Pending Arbitration ("Tower Loan's Brief") (Adv. Dkt. 9) filed by Tower Loan, the Plaintiff's Response to Defendant's Motion to Dismiss and to Compel Arbitration (the "Debtor's Response") (Adv. Dkt. 17) filed by the debtor, Chuck Willis (the "Debtor"), the Memorandum Brief in Support of Plaintiff's Response to Defendant's Motion to Dismiss and to Compel Arbitration (the "Debtor's Brief") (Adv. Dkt. 18) filed by the Debtor, and the Defendant Tower Loan's Reply in Support of its Motion to Compel Arbitration and to Dismiss or to Stay Pending Arbitration ("Tower Loan's Reply") (Adv. Dkt. 21) filed by Tower Loan in the Adversary. At the Hearing, Bryce Kunz represented the Debtor, and Jeffrey Ryan Barber represented Tower Loan. During the Hearing, the Debtor and Tower Loan (collectively, the "Parties") introduced into evidence two (2) stipulated exhibits. The issues in the Adversary are: (1) whether the Parties formed an agreement to arbitrate and (2) whether the arbitration agreement actually contains a delegation clause requiring the Parties' claims to proceed to arbitration. The Court, having considered the pleadings, evidence, and arguments of counsel, finds that the Parties did not agree to arbitrate for the reasons set forth below.2
This Court has jurisdiction over the parties to and the subject matter of this Adversary pursuant to 28 U.S.C. § 1334. Notice of the Motion to Dismiss or to Compel Arbitration was proper under the circumstances.
1. On November 8, 2016, the Debtor entered into the Installment Loan Agreement and Disclosure Statement (the "Loan Agreement") with Tower Loan (Ex. 1). The Debtor financed $4,481.98 with a 37.36% annual rate of interest to be paid in twenty-six (26) equal installments of $254.00 for a total payment to Tower Loan of $6,604.00. (Id. ) Additionally, the Debtor obtained from Tower Loan credit life insurance at $228.94 per annum, credit disability insurance at $303.78 per annum, and credit property insurance at $429.26 per annum. (Id. )
2. The Loan Agreement consists of one (1) page and does not contain a merger clause.3 The Debtor's signature appears at the bottom of the document, and the following language, in all capital letters, appears directly above the Debtor's signature: (the "Arbitration Disclaimer") (Ex. 1).
3. The reverse side of the Loan Agreement contains the Arbitration Agreement (the "First Arbitration Agreement") (Ex. 1). The First Arbitration Agreement "applies to all claims and disputes between [b]orrower and [l]ender," including "[t]he loan [b]orrower is obtaining from [l]ender today and any other loans or retail installment contracts with [l]ender" and "[a]ny insurance purchased in connection with this loan or any previous loan or retail installment sales contract." (Ex. 1).
4. The Loan Agreement provides that "[t]he construction, validity, and enforcement of this loan agreement shall be governed by the laws of the State of Mississippi, without regard to the principles of conflicts of laws." (Ex. 1).
5. In Tower Loan's Brief, Tower Loan asserts that the First Arbitration Agreement contains a delegation clause.
6. On January 17, 2017, the Debtor filed a petition for relief under chapter 7 of the U.S. Bankruptcy Code (Bankr. Dkt. 1).
7. On May 12, 2017, the Debtor filed the Complaint in this Adversary alleging that Tower Loan violated the Truth in Lending Act, 15 U.S.C. § 1600 et seq. , and Regulation 2 by providing misleading and incorrect disclosures on the Loan Agreement (Adv. Dkt. 1 at 4–5). For example, the Debtor alleges that Tower Loan did not pay to the appropriate insurance company the amounts required for the Debtor's life insurance, disability insurance, and property insurance (Adv. Dkt. 1 at 3, ¶ 15). The Debtor further asserts that Tower Loan "received an undisclosed commission from these charges." (Id. )
8. On June 22, 2017, Tower Loan filed the Answer and Affirmative Defenses to Complaint [Adv. Proc. Dkt. # 3] [sic ] (Adv. Dkt. 6). Tower Loan filed the Amended Answer and Affirmative Defenses to Complaint [Adv. Proc. Dkt. # 3] [sic ] (the "Amended Answer") on October 30, 2017, denying that it violated the Truth in Lending Act (Adv. Dkt. 22).4
9. On July 6, 2017, Tower Loan filed the Motion to Dismiss or to Compel Arbitration. In support of dismissal, Tower Loan asserted that the chapter 7 trustee (the "Trustee") is the only party with standing to pursue the Debtor's claims against Tower Loan because those claims became property of the estate upon commencement of the Bankruptcy Case (Adv. Dkt. 9). In support of compelling arbitration, Tower Loan asserted that the Debtor signed the Loan Agreement containing the Arbitration Disclaimer. (Id. )
10. On September 26, 2017, the Trustee filed the Notice of Ratification of Real Party in Interest (Adv. Dkt. 16).
11. On September 26, 2017, the Debtor filed the Debtor's Response. In support of denying dismissal, the Debtor asserted that the Trustee, as the real party in interest, ratified the Adversary. In support of litigation, the Debtor asserted that it was unclear whether he actually agreed to the arbitration agreement and that procedural unconscionability precluded enforcing the First Arbitration Agreement. The Debtor attached the Affidavit of Chuck Wills to the Debtor's Response.
12. On October 10, 2017, Tower Loan filed Tower Loan's Reply withdrawing its contention that the Debtor lacked standing. Tower Loan further asserted that the Parties formed a valid agreement to arbitrate and that the First Arbitration Agreement is not unconscionable. Additionally, Tower Loan argued that unconscionability is an issue for the arbitrator to decide since the First Arbitration Agreement contains a delegation clause.
13. At the Hearing, the Parties presented to the Court, for the first time, the Endorsement to Require Binding Arbitration (the "Second Arbitration Agreement") (together with the First Arbitration Agreement, the "Arbitration Agreements") (Ex. 2). The Second Arbitration Agreement "applies to all claims and disputes between [b]orrower and the [c]ompany," including "the loan [b]orrower is obtaining from the lender today, any other loans or retail installment contracts with the [l]ender," and "any insurance purchased from the [c]ompany in connection with the loan or any previous loan or retail installment sales contract." (Ex. 2). Tower Loan explained that the Second Arbitration Agreement makes up the "additional pages" referenced in the Loan Agreement's Arbitration Disclaimer.5
14. The Arbitration Agreements contain conflicting arbitration provisions. The conflicts involve: (1) the number of arbitrators,6 (2) how the arbitrator(s) will be selected,7 (3) the notice required to arbitrate,8 (4) the location of the arbitration,9 (5) who pays the costs of the arbitration,10 (6) who would be entitled to attorneys' fees and on what showing,11 and (7) when arbitration proceedings need not be initiated.12 (Ex. 1; Ex. 2).
15. At the Hearing, the Debtor argued that because the Arbitration Agreements govern "all claims and disputes between the Parties" but contain different and conflicting terms, there was no meeting of the minds between the Parties with respect to arbitration.13 In response, Tower Loan asserted that the Parties reached a meeting of the minds with respect to arbitration.14 More specifically, Tower Loan argued that the First Arbitration Agreement governs the Loan Agreement, and the Second Arbitration Agreement relates only to disputes concerning insurance companies and policies.15 With respect to the Adversary, Tower Loan asserted that it would proceed only under the First Arbitration Agreement because the Complaint does not raise any insurance-related claims.16
The Supreme Court of the United States has long acknowledged "a national policy favoring arbitration when the parties contract for that mode of dispute resolution." Preston v. Ferrer , 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008). Indeed, the Federal Arbitration Act (FAA) provides that "[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... 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. With this policy in mind, however, "courts must place arbitration agreements on an equal footing with other contracts ... and enforce them according to their terms." AT & T Mobility LLC v. Concepcion , 563...
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Griffin v. Country Credit, LLC (In re Griffin), CASE NO. 17–01858–NPO
...Credit or define it as a party to the contract. Accordingly, the Adversary is distinguishable from this Court's recent opinion in Willis v. Tower Loan of Mississippi, LLC (In re Willis) , and the Court will disregard the Property Insurance Agreement for the purposes of this Adversary. See I......