Summary
ordering arbitration of claims under Louisiana usury laws
Summary of this case from Bellizan v. McMahonOpinion
CIVIL ACTION No. 01-2756, SECTION: E, MAGISTRATE: Div. 5
October 24, 2001
ORDER AND REASONS
Pending before the Court is the motion of Defendant American General Finance, Inc., for stay of action pending arbitration and to compel arbitration. No opposition has been filed.
Factual Summary
Plaintiffs, Angelita Defreitas and Albert Montano, ("Defreitas" and "Montano") are the owners of real property located at 3217 Tulip Court, Marrero, Louisiana. Defendant American General Finance, Inc. ("American General"), is a financial lender and a foreign corporation licensed and conducting business in Louisiana. On February 22, 2001, Plaintiffs Defreitas and Montano executed a promissory note in favor of American General in the principal amount of $12,032.96, secured by a collateral mortgage note on the Tulip Court property. Included in the signed loan agreement are numerous arbitration provisions whereby both Plaintiffs and Defendant agreed to arbitrate any dispute not expressly excluded by the provisions.
In their Petition for Damages, plaintiffs allege that as part of the loan agreement, American General purchased premises liability insurance on the mortgaged property. American General was named as a co-payee on the policy. Plaintiffs assert that when the secured property was damaged by a fire, American General failed to ensure that the contractor hired to repair the damage obtained the necessary permits and completed the work. Plaintiffs further allege that the contractor was improperly paid the insurance proceeds in a lump sum rather than as the work was completed. plaintiffs assert that Defendant American General has violated the Federal Truth in Lending Act, the Louisiana Unfair Trade Practices Act, and the state usury laws.
Defendant American General has filed a motion for stay of action pending arbitration and to compel arbitration, asserting that this Court should refrain from considering the merits of Plaintiffs' claims because the arbitration provisions in the loan agreement require that all claims be submitted to binding arbitration.
Legal Analysis
The Fifth Circuit in Webb v. Investacorp., Inc., 89 F.3d 252 (5th Cir. 1996) outlined the steps to be considered in adjudicating a motion to compel arbitration under the Federal Arbitration Act. The first step is to determine whether the parties agreed to arbitrate the dispute in question. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353-54, 87 L.Ed.2d 444 (1985); Folse v. Richard Wolf Medical Instruments Corp., 56 F.3d 603, 605 (5th Cir. 1995); R.M. Perez Assoc., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir. 1992). This determination involves two considerations: (1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement. Webb, 89 F.3d at 257-58; Aslem Industries, Inc. V. M/V Nick, 1999 U.S. Dist. LEXIS 20109, 4 (E.D. La. 1999). When deciding whether the parties agreed to arbitrate the dispute in question, `courts generally . . . should apply ordinary state law principles that govern the formation of contracts.' Aslem Industries, 1999 U.S. Dist. LEXIS at 4. In applying state law, however, `due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself must be resolved in favor of arbitration.' Id see also Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76, 109 S.Ct. 1248, 1253-54, 103 L.Ed.2d 488 (1989).
The second step is to determine whether legal constraints external to the parties' agreement foreclosed arbitration to those claims. Webb, 89 F.3d at 258.
The initial inquiry is whether there is a valid agreement to arbitrate between the parties. Underlying an evaluation of the existence and validity of any such agreement is the strong "federal policy favoring arbitration requiring that [this court] rigorously enforce agreements to arbitrate." Shearson/American Express Inc. v. McMahon, 482 U.s. 220, 226, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185, 193 (1987). "Any doubt concerning the scope of an arbitration clause of a contract must be resolved in favor of arbitration." Cargill Ferrous International v. The M/V ANATOLI, 935 F. Supp. 833, 837 (E.D. La. 1996). The weight of presumption is heavy; arbitration must not be denied `unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue."Id.
In this case, Defendant American General included a page entitled "Arbitration Provisions" in its loan agreement with Plaintiffs. The Arbitration provisions contain a bold-face, capitalized notice that reads "YOU UNDERSTAND THAT YOU ARE VOLUNTARILY WAVING YOUR RIGHT TO A JURY OR JUDGE TRIAL FOR SUCH DISPUTES." The Arbitration Provisions also conspicuously notify Plaintiffs that "BY SIGNING YOUR LOAN AGREEMENT, YOU ACKNOWLEDGE THAT YOU HAVE READ AND RECEIVED A COPY OF THE ARBITRATION PROVISIONS AND AGREE TO BE BOUND BY ALL OF THE TERMS OF THE ARBITRATION AGREEMENT AND YOUR LOAN AGREEMENT." The record is devoid of any information indicating that these arbitration provisions are unfair, or that Plaintiffs did not understand or agree to these provisions at the time the loan agreement was signed.
The second inquiry is whether the dispute in question falls within the provisions of the arbitration agreement. In the Arbitration Provisions, both parties agreed to arbitrate "covered claims", which are defined in the agreement as follows:
"Covered claims" are any and all claims and disputes not expressly excluded by the Arbitration Provisions that have arisen or may arise between: you and Lender; you and Lender's affiliates; or you and the employees, agents, officers, or directors of Lender or its affiliates. Covered claims include, without limitation, all claims and disputes arising out of. in connection with, or relating to your loan from Lender today or any previous loan from Lender (including all amendments, modifications and refinancings); any previous retail installment sales contract or loan assigned to Lender; all documents, actions, or omissions relating to this or any previous loan or retail installment sales contract; any insurance product, service contract, or warranty purchased in connection with this or any previous loan or retail installment sales contract; whether the claim or dispute must be arbitrated; the validity of the Arbitration Provisions, your understanding of them, or any defenses as to the enforceability of the Loan Agreement or the Arbitration Provisions; any negotiations between you and Lender, any claim or dispute based on the closing, servicing, collection, or enforcement of any transaction covered by the Arbitration Provisions; any claim or dispute based on an allegation of fraud or misrepresentation; any claim or dispute based on or arising under an federal or state statute or rule, any claim or dispute based on a contract or an alleged tort; and any claim for injunctive or equitable relief.
Plaintiffs' asserts claims of unlawful conduct in supervising repair of the premises and using the proceeds of the insurance policy purchased in connection with the loan. plaintiffs further allege that Defendant was negligent in not requiring the contractor to obtain a permit and is responsible for the non-completion of work. Therefore, all of Plaintiffs' claims fall under the express definition of "covered claims." Seeing no reason to upset the agreement between the parties, this court will uphold the arbitration provisions as part of a valid contract.
The final step in this court's analysis is to determine whether legal constraints external to the parties' agreement foreclosed arbitration to those claims. In the present action, Plaintiffs assert violations of the Federal Truth in Lending Act, the Louisiana Unfair Trade Practices Act, and violations of state usury laws and tort law. Courts have conclusively decided that there is no legal impediment to arbitration agreements covering statutory claims arising under TILA. See Johnson v. West Suburban Bank, 225 F.3d 366, 374 (3d Cir. 2000); see also Goodwin v. Ford Motor Credit Co., 970 F. Supp. 1007 (M.D. Ala. 1997). As to the Defendants' alleged violations of LUTPA and Louisiana tort and usury laws, the Court is unaware of any legal impediment that would prevent the arbitration of Plaintiffs' claims in this case.
The proper remedy for compelling arbitration is a stay of the proceedings. 9 U.S.C. § 3 dictates that:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
Accordingly,
IT IS ORDERED that the motion of Defendant for Stay of Action Pending Arbitration and Motion to Compel Arbitration is hereby GRANTED.
IT IS FURTHER ORDERED that this action is hereby STAYED pending arbitration. The Clerk of the Court is directed to mark this action closed for statistical purposes while arbitration is proceeding.