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Butler v. Mariner Finance, LLC

United States District Court, D. Maryland

December 6, 2017




         The plaintiffs, Catherine and James Butler, sued the defendant, Mariner Finance, LLC, (“Mariner”) in state court claiming Mariner violated the Truth in Lending Act and committed four state law violations: violation of Maryland's Credit Grantor Closed End Credit Provisions, Md. Code Ann., Com. Law § 12-1001, et seq.; Maryland's Debt Collection Act, Md. Code Ann., Com. Law § 14-202(8); Maryland Consumer Protection Act, Md. Code Ann., Com. Law § 13-301, et seq.; and fraud. Mariner successfully removed the case to federal court and now moves to compel arbitration under a contract signed by the parties.


         In December 2006 the plaintiffs Catherine and James Butler entered into a retail installment contract with Deer Automotive Group, LLC for the purchase of a 2003 Mercury Mountaineer. (Compl. ¶ 7). The original purchase price for the truck was $23, 900 but the total financed amount over a six-year loan was $28, 569.60. (Id.). The Butlers first payment was due on January 23, 2007. (Id.).

         The installment contract was assigned to Wells Fargo Auto Finance, Inc., to which the Butlers made payments until around June 2012, when the defendant Mariner Finance contacted the Butlers indicating that it had been assigned the rights under the contract. (Id. at ¶ 8-10). Mariner asked the Butlers to enter into a “Note, Security Agreement & Arbitration Agreement” dated June 7, 2012. (Id. at ¶ 11). The agreement gave Mariner a security interest in the truck and detailed the terms of the installment contract between the parties. (Id. at ¶ 12-17). In addition to the original loan amount, Mariner charged the Butlers for life insurance on its interest, non-filing insurance, and vendor's single interest insurance. (Id. at ¶ 15).

         Almost yearly, for the next three years, Mariner asked the Butlers to enter new agreements.[1] (Id. at ¶ 18-33). Despite at least three of the four agreements between the parties including insurance costs, [2] the Butlers never received the insurance policies or certificates for which they were purportedly paying. (Id. at ¶ 34). In fact, the Butlers allege that they “do not recall separately applying for these insurances and it is unclear if these insurances were ever purchased.” (Id.). The plaintiffs further allege that because the Fourth Agreement included a refinance charge that was not prepaid “but . . . made part of the principal amount of the loan” it should have been, but was not, included within Mariner's Truth in Lending disclosure. (Id. at ¶ 37). They also assert that they were not refunded for the amount they paid in credit life insurance “even though the loans were refinanced or defaulted prior to the scheduled maturity date of the indebtedness.” (Id. at ¶ 39).

         Sometime in October 2016, the Butlers informed Mariner that their truck was no longer working. (Id. at ¶ 41). The parties agreed that Mariner would transfer title of the truck to the Butlers in exchange for $300. (Id.). The Butlers believed that this agreement extinguished their obligations under the Fourth Agreement. (Id.). Mariner disagreed; it filed suit in the District Court of Maryland for Baltimore City in February 2017 alleging that the Butlers breached the fourth loan agreement, (id. at ¶ 43), and seeking to collect principal and interest totaling approximately $3, 200. (Pls.' Opp., ECF No. 9, 2).

         Three months later the Butlers filed this suit in the Circuit Court for Baltimore City on May 24, 2017. (Notice of Removal, ECF No. 1). The following month Mariner removed the suit to federal court, (id.), and now moves to compel arbitration. (ECF No. 7).

         Standard of Review

         “Motions to compel arbitration exist in the netherworld between a motion to dismiss and a motion for summary judgment” and “[w]hether the motion should be treated as a motion to dismiss or a motion for summary judgment turns on whether the court must consider documents outside the pleadings.” PC Const. Co. v. City of Salisbury, 871 F.Supp.2d 475, 477-78 (D. Md. 2012); see also Iraq Middle Mkt. Dev. Found. v. Harmoosh, 848 F.3d 235, 240-41 (4th Cir. 2017) (adopting the summary judgment standard used by the district court). Because the court need not consider documents outside the pleadings, Mariner's motion to compel will be treated as a motion to dismiss.[3]

         To survive a motion to dismiss, the factual allegations of a complaint “must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). “To satisfy this standard, a plaintiff need not ‘forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements.” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). “Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is ‘probable, ' the complaint must advance the plaintiff's claim ‘across the line from conceivable to plausible.'” Id. (quoting Twombly, 550 U.S. at 570).


         The parties do not contest that their dispute is subject to arbitration under the terms of their underlying contract but they do disagree over whether Mariner's right to compel arbitration was waived after it brought a state court suit to collect on its loan agreement with the Butlers. They also disagree about which waiver law, federal or state, the court should apply to decide the motion.

         Because the Federal Arbitration Act (“FAA”) controls this case, federal waiver law applies. Applying that law, the court will grant Mariner's motion to compel arbitration because the ...

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