Davies v. Green Tree Servicing, LLC

MARJORIE DAVIES and WAYNE DAVIES, Plaintiffs v. GREEN TREE SERVICING, LLC, Defendant

CIVIL ACTION NO. 3:14-1711

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF PENNSYLVANIA

June 18, 2015

(JUDGE MANNION)

MEMORANDUM

Presently before the court is the defendant's motion to compel arbitration and stay proceedings pending completion of arbitration. (Doc. 43). Also, pending is the plaintiffs' motion for leave to file a second amended complaint. (Doc. 58). Based upon the court's review of the defendant's motion to compel arbitration and stay, and the materials related thereto, the defendant's motion will be granted. The plaintiffs' motion to file a second amended complaint will be dismissed without prejudice.

I. PROCEDURAL BACKGROUND

By way of relevant background, on August 4, 2014, the plaintiffs Marjorie and Wayne Davies ("the Davies") brought the instant action against defendants Green Tree Servicing, LLC ("Green Tree") and Assurant, Inc., in the Court of Common Pleas of Wyoming County, Pennsylvania. Assurant timely removed this case to federal court pursuant to 28 U.S.C. §1331 and§1441(a). (Doc. 1).

The complaint alleged that Green Tree was liable for unfair collection of a debt arising from a residential mortgage loan under the Federal Fair Debt Collection Practices Act, 15 U.S.C. §§1692, et seq. The complaint further alleged that defendants jointly conspired and caused injuries as a result of lender-placed insurance. The complaint stated that defendants "derive improper financial benefits by imposing [lender]-placed hazard insurance policies on properties ...." The Davies also asserted several state law claims against defendants.

On October 7, 2014, the Davies filed an amended complaint to add putative class action allegations and to add American Security Insurance Company ("ASIC") as a defendant, and to dismiss Assurant, Inc.. Green Tree remained a defendant. (Doc. 33). The amended complaint basically alleges that the Davies entered into a home loan agreement with Green Tree's predecessor by merger. The Davies later defaulted on their contract and Green Tree commenced foreclosure proceedings. The Davies then filed the instant action challenging Green Tree's purchase of lender-placed insurance ("LPI") on their account.

On October 30, 2014, Green Tree filed a motion to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §1, et seq., and the written arbitration agreement entered into between the Davies and Green Tree. Green Tree also moved to stay the proceedings in this court until thearbitration was completed. (Doc. 43). Green Tree's motion was briefed. (Doc. 44, Doc. 47, Doc. 53, Doc. 60).

On February 11, 2015, defendant ASIC was dismissed from this case. (Doc. 56). Also, the Davies withdrew their putative class action allegations.

On April 22, 2015, the Davies filed a motion for leave of court to file a second amended complaint with the proposed pleading attached. (Doc. 58, Doc. 58-1). The Davies seek to eliminate their lender-placed insurance claims after 2006 as against the sole defendant Green Tree. The motion was untimely under the court's Scheduling Order directing amended pleadings to be filed by December 1, 2014, (Doc. 38), and the Davies failed to file a brief in support of their motion as required by Local Rule 7.5, M.D.Pa. In addition, the Davies did not attach a redline version highlighting the changes between the amended complaint and the proposed second amended complaint as required by Local Rule 15.1. Green Tree filed a brief in opposition to the Davies' motion on April 30, 2015. (Doc. 59). The Davies then filed a reply brief on May 14, 2015, in support of their motion with an attached redline version of their proposed second amended complaint as Exhibit A. (Doc. 61, Doc. 61-1).

II. FACTUAL BACKGROUND¹

In 2001, the Davies obtained a home loan secured by their real property in Factoryville, Pennsylvania. Green Tree serviced the Davies' loan since it originated and continues to service the loan at the present time. The agreement between the parties' requires the Davies to maintain adequate insurance coverage on their property. If the Davies do not have such coverage, Green Tree can obtain LPI from an insurer of its choice to protect its interest in the property. The loan's promissory note includes an arbitration clause mandating arbitration of any dispute that may arise out of or relate to the parties' agreement. Specifically, the promissory note provides:

All disputes, claims, or controversies arising from or relating to this Agreement or the relationships which result from this Agreement, or the validity of the arbitration clause or the entire Agreement, shall be resolved by binding arbitration before one arbitrator selected by Lender with Borrower's consent. This arbitration agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, Title 9 of the United States Code. Judgment upon the award rendered may be entered in any court having jurisdiction. The parties agree and understand that they choose arbitration instead of litigation to resolve disputes. The parties understand that they have a right or opportunity to litigate disputes in court, but that they prefer to resolve their disputes through arbitration, except as provided herein. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO JURY TRIAL, EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY LENDER (AS PROVIDED HEREIN). The parties agree and understand that all disputes arising under case law, statutory law, and all other laws including, but not limited to, all contract, tort, and property disputes, will be subject to binding arbitration in accord with this agreement. Borrower agrees that Borrower shall not have the right to participate as a representative or a member of any class or claimants pertaining to any claim arising from or relating to this Agreement. The parties agree and understand that the arbitrator shall have all powers provided by law and the Agreement. These powers shall include all legal and equitable remedies, including, but not limited to, money damages, declaratory relief, and injunctive relief. Notwithstanding anything hereunto the contrary, Lender retains an option to use judicial or non- judicial relief to enforce the security agreement relating to the collateral secured in a transaction underlying this arbitration agreement, to enforce the monetary obligation or to foreclose the collateral. Such judicial relief would take the form of a lawsuit. The institution and maintenance of an action for judicial relief in a court to foreclose upon any collateral, to obtain a monetary judgment or to enforce the security agreement, shall not constitute the waiver of the right by any party to compel arbitration regarding any other dispute or remedy subject to arbitration in this Agreement, including the filing of a counterclaim in a suit brought by Lender pursuant to this provision.

(Doc. 33, Ex. A, ¶ 9, Doc. 47-1) (emphasis original).

The Davies alleged that Green Tree and ASIC derived improper financial benefits by imposing force-placed hazard insurance policies on properties, some of which were already covered by homeowners insurance policies they purchased. Additionally, the Davies averred that Green Tree was charging consumers for the cost of procuring force-placed insurance from ASIC, and that a portion of such cost was returned, transferred, or paid to Green Tree and/or its related entities, i.e., an alleged "kickback" payment.

Green Tree states that it obtained a LPI policy from ASIC for the Davies'property in August of 2006, since it believed that the Davies failed to maintain adequate insurance coverage, but the policy was cancelled after the Davies showed they had coverage. The LPI charges were removed from the Davies' account. Green Tree notified the Davies on a few other occasions that it did not have proof of adequate insurance coverage on their property. However, no other LPI was purchased by Green Tree since the Davies provided proof of coverage on the other occasions. Green Tree represents that all LPI charges assessed to the Davies' account have been reversed, and that the Davies never paid Green Tree for any LPI premiums.

III. DISCUSSION

In response to the Davies' amended complaint, Green Tree has filed the instant motion to compel arbitration and stay this case, arguing that the loan documents specifically contain a valid arbitration clause. Green Tree argues that the Davies' claims are within the scope of the arbitration cause. Therefore, Green Tree seeks the court to grant its motion to compel arbitration and to stay these proceedings pending the conclusion of the arbitration.

In considering Green Tree's motion to compel arbitration, both Federal and Pennsylvania state law strongly favor the enforcement of arbitrationprovisions.² See Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009) ("It is well established that the FAA reflects a 'strong federal policy in favor of resolution of disputes through arbitration.'" (quoting Alexander v. Anthony Int'l, L.P., 341 F.3d 256, 263 (3d Cir. 2003)); Dodds v. Pulte Home Corp., 909 A.2d 348, 351 (Pa.Super.Ct. 2006) ("It is hornbook law that Pennsylvania favors the enforceability of agreements to arbitrate." (citing Quiles v. Fin. Exch. Co., 897 A.2d 281, 285 (Pa.Super.Ct. 2005)). Contracts with an arbitration clause are treated with a "presumption of arbitrability in the sense that '[a]n order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible to an interpretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.'" AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 650 (1986) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1...