Alfortish v. Greensky, LLC

TODD ALFORTISH, ET AL. v. GREENSKY, LLC, ET AL.

CIVIL ACTION NO. 16-15084 SECTION "B"(1)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA

February 21, 2017

ORDER AND REASONS

Before the Court is "Defendants' Motion to Compel Arbitration and Stay Proceedings Pending Arbitration." Rec. Doc. 26. Plaintiff timely filed an opposition memorandum. Rec. Doc. 29. Defendants then requested (Rec. Doc. 30), and this Court granted (Rec. Doc. 31), leave to file a reply memorandum (Rec. Doc. 32). Thereafter, Plaintiffs requested (Rec. Doc. 33), and this Court granted (Rec. Doc. 35), leave to file a sur-reply memorandum (Rec. Doc. 36). For the reasons discussed below,

IT IS ORDERED that the motion to compel arbitration (Rec. Doc. 26) is GRANTED. Plaintiffs are directed to submit all of their claims to arbitration.

IT IS FURTHER ORDERED that this case is stayed and ADMINISTRATIVELY CLOSED. Either party may file a motion to reopen for good cause following the arbitration of the parties' claims. If the case is disposed of through arbitration, or any other means, Plaintiffs shall promptly file a motion to dismiss.

IT IS FURTHER ORDERED that the pending motions, including Plaintiffs' "Motion to Certify Class" (Rec. Doc. 19) and "Defendants' Alternative Motion to Dismiss Plaintiffs' First Amended Class Action Complaint" (Rec. Doc. 28) are DISMISSED AS MOOT.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case arises out of the marketing and sale of solar energy systems. Several Louisiana solar companies, including Joule, LLC, Southcoast Solar, A-1 Solar Source, and SunPro ("the Solar Companies"), sold energy systems to Todd and Sylvia Alfortish, James Fincher, and a class of similarly situated individuals ("Plaintiffs"). Rec. Doc. 13 at ¶¶ 1-3. These companies promised their customers "energy savings and guaranteed federal and Louisiana state income tax refunds," even though, by early 2015, they knew or should have known that the state income tax refunds were not guaranteed. Id. at ¶¶ 3-4. In fact, the companies were purportedly actively lobbying against legislation designed to cap the total amount of solar energy income tax credits—legislation that went into effect on June 19, 2015. Id. at ¶¶ 29-30. Ultimately, Plaintiffs' applications for state income tax credits were denied because of this legislation. Id. at ¶ 37.¹

The Solar Companies also presented Plaintiffs with eighteen-month "interest free" "bridge loans" from GreenSky, LLC ("Defendant GreenSky"). Id. at ¶ 6. However, these loans were "interest waivable," not "interest free," and carried an interest rate of at least 17.99%. Id. at ¶¶ 7, 9. The interest would only be waived "if the entire bridge loan was satisfied within 18 months of the purchase." Id. at ¶ 34. The "bridge loans" were "purportedly designed to act like gap financing in order to allow [customers] enough time to file their tax returns and receive their state income tax credits to satisfy the loans in full before they would ever have to pay interest." Id. at ¶ 33. According to the amended complaint, "[h]ad Plaintiffs known about the potential unavailability of the . . . tax credits, and therefore the . . . risk that Plaintiffs would have to pay onerous interest rates which began to accumulate from the date of purchase . . . Plaintiffs would not have purchased the solar energy systems." Id. at ¶ 38.

According to Plaintiffs, the Solar Companies were acting as agents on behalf of Defendant GreenSky, which gave the companies the authority to enter into finance agreements and represent the terms of the loans. Id. at ¶ 11. Plaintiffs allege that Defendant GreenSky knew that the Solar Companies were misrepresenting the terms of the loans. Id. at ¶ 36. Further, Plaintiff alleges that Synovus Bank ("Defendant Synovus") and SunTrust Bank ("Defendant SunTrust") partnered with Defendant GreenSky. Id. at ¶¶ 14-15.Specifically, Defendant Synovus was the lender for Plaintiffs Todd and Sylvia Alforish, while Defendant SunTrust was the lender for Plaintiff James Fincher. Id. at ¶ 25. Defendant GreenSky was merely the servicer of the loans. Rec. Doc. 26-2 at 4 n.2.²

On November 22, 2016, Plaintiffs filed an amended complaint, alleging a class action against Defendants GreenSky, Synovus, and SunTrust, on behalf of "all Louisiana residents who entered into finance agreements ('bridge loans') with GreenSky as a result of purchasing solar energy systems from the Solar Companies and who were denied the solar energy state income tax credit." Rec. Doc. 13 at ¶ 40. Plaintiffs estimate that the class consists of more than five hundred households. Id. at ¶ 41.³ Nonetheless, Plaintiffs asserted causes of action under the Louisiana Unfair Trade Practices and Consumer Protection Law ("LUTPA," LA. REV. STAT. Ann. §§ 51:1401-30); the Truth in Lending Act ("TILA," 15 U.S.C.A. § 1638); the Louisiana Consumer Credit Law ("LCCL," LA. REV. STAT. Ann. §§ 9:3510-77.5); as well as a common law claim for unjust enrichment. Id. at ¶¶ 48-73.

II. THE PARTIES' CONTENTIONS

Defendants assert that the contracts entered into by Plaintiffs contain an agreement to arbitrate all claims. Rec. Doc. 26-2 (citing Rec. Docs. 26-3, 26-4). On December 20, 2016, about a month after the amended complaint was filed, Defendants' counsel informed Plaintiffs' counsel that Defendants were invoking the arbitration clause. Id. at 6 (citing Rec. Docs. 26-5, 26-6). Defendants requested that the complaint be dismissed by January 10, 2017, but Plaintiffs neither dismissed the complaint nor responded to Defendants' letters. Id. at 7.

In response, Plaintiffs allege that

[i]t is only after the consumer is hoodwinked into financing a solar energy system through these onerous 'interest waivable' balloon loans that Defendants send the terms and conditions at issue in their pending Motion - terms and conditions that the consumer never saw before agreeing to the loan and that were never discussed with them, and perhaps most importantly, terms contained in a 10 page "Loan Agreement" that has never been signed by them.

Rec. Doc. 29 at 2. They explicitly deny signing the loan agreements relied upon by Defendants. Id. at 5. "GreenSky sends this Loan Agreement . . . after the consumers have already been approved for their loan and after the solar contractor receives the loan money as payment . . . so that it can later have the opportunity to limit consumers' rights once they have caught on to Defendants' deceptive lending scheme." Id. In essence, they argue that Defendants failed"to show that Plaintiffs actually consented to arbitrate their claims . . . ." Id. at 2.

In their reply, Defendants argue that (1) Plaintiffs' challenge should be decided by the arbitrator, but (2) even if it is considered here, the challenge lacks merit. Rec. Doc. 32 at 1. Plaintiffs address these arguments in their sur-reply. Rec. Doc. 36. To the extent that they help the Court resolve the issue before it, the parties' arguments will be discussed below.

III. LAW AND ANALYSIS

"Arbitration is favored in the law." Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 526 (5th Cir. 2000) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). Section 2 of the Federal Arbitration Act ("FAA") provides that "[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . 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. Thus, as a threshold matter, the FAA applies where the transaction at issue involves commerce. See, e.g. New Orleans Cold Storage & Warehouse Co., Ltd. v. Grenzebach Corp., No. 15-6642, 2016 WL 279012, at *4 (E.D. La. Jan. 22, 2016) (noting that "[t]he Fifth Circuit has held that '[c]itizens of different states engaged in performance ofcontractual operations in one of those states are engaged in a contract involving commerce under the FAA.'") (quoting Mesa Operating Ltd. P'ship v. La. Intrastate Gas Corp., 797 F.2d 238, 243 (5th Cir. 1986) (citing 9 U.S.C. § 2)).

According to the courts, § 2 "is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary." Moses H. Cone Mem'l Hosp., 460 U.S. at 24 (citing 9 U.S.C. § 2). It was "Congress's clear intent, in the Arbitration Act, to move the parties to an arbitrable dispute out of court and into arbitration as quickly and easily as possible." Id. at 22. Essentially, the FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration . . . ." Id. at 24-25.

"[W]here the contract contains an arbitration clause, there is a presumption of arbitrability." Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006) (quoting AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650 (1986)) (citing Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002) (noting that any doubts regarding arbitrability should be resolved in favor of arbitration) (citing Southland Corp. v. Keating, 465 U.S. 1, 10 (1984))). Nonetheless, § 2 of the FAA contains a savings clause, which provides that an agreement to arbitrate is "enforceable, save upon such grounds as exist at law or in equityfor the revocation of any contract." 9 U.S.C. § 2 (emphasis added). Thus, "[d]etermining whether the parties agreed to arbitrate the dispute in question involves two considerations: (1) whether a valid agreement to arbitrate between the parties exist; and (2) whether the dispute in question falls within the scope of that arbitration agreement." Pennzoil Expl. & Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1065 (5th Cir. 1998) (citing Webb v. Investacorp, Inc., 89 F.3d 252, 258 (5th Cir. 1996); In re Hornbeck Offshore (1984) Corp., 981 F.2d...