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Castellanos v. Mariner Finance, LLC

United States District Court, D. Maryland

January 18, 2018

LETICIA T. CASTELLANOS Plaintiff
v.
MARINER FINANCE, LLC Defendant

          MEMORANDUM & ORDER RE: ARBITRATION

          MARVIN J. GARBIS UNITED STATES DISTRICT JUDGE.

         The Court has before it Defendant's Motion to Compel Arbitration and to Stay Action [ECF No. 7] and the materials related thereto. The Court has reviewed the materials provided by the parties and finds that a hearing is not needed.

         As detailed herein, Defendant, Mariner Finance, LLC (“Mariner Finance”) sued Plaintiff on a loan in small claims court, an action that was excluded from the parties' arbitration agreement. Plaintiff sued Mariner Finance in state circuit court alleging claims that are within the scope of the arbitration agreement. Defendant is entitled to enforce the arbitration agreement with regard to Plaintiff's claims and is not required to arbitrate the separate dispute pending in the small claims court.

         I. BACKGROUND

         The instant case relates to a loan made by Mariner Finance to Plaintiff Leticia T. Castellanos (“Castellanos”) pursuant to a Note, Security Agreement & Arbitration Agreement (“the Agreement”). According to Mariner Finance's records, Castellanos failed to make the required monthly payments on the loan. In July 2017, Mariner Finance sought to recover the debt plus interest and late fees by asserting a collection action against Castellanos in the District Court of Maryland for Baltimore City.[1] Thereafter, Castellanos notified the small claims court of her intention to defend, stating that she would be filing a separate lawsuit involving other issues against Mariner Finance in state circuit court.

         On October 10, 2017, Castellanos brought the instant action against Mariner Finance in the Circuit Court for Baltimore City, claiming common law fraud and violations of: the Maryland Credit Grantor Closed End Credit Provisions, Md. Code Ann., Com. Law § 12-1001 et seq.; Maryland's Consumer Debt Collection Practices Act, Md. Code Ann., Com. Law § 14-201 et seq.; Maryland's Consumer Protection Act, Md. Code Ann., Com. Law § 13-101 et seq.; usury statute at Md. Code Ann., Com. Law § 12-1003(a); and Truth in Lending Act, 15 U.S.C. § 1601 et seq. and Regulation Z. See Compl., ECF No. 2.

         Mariner Finance timely removed the case to this Court, and by the instant motion, seeks the Court to compel Castellanos to arbitrate her claims pursuant to the Agreement.

         II. LEGAL SETTING

         The Federal Arbitration Act (“FAA”) reflects a strong federal policy favoring arbitration. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011). “[C]ourts must place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms.” Id. (citations omitted). However, this liberal policy does not operate to compel arbitration of issues that do not fall within the scope of the parties' arbitration agreement.

         Before compelling an unwilling party to arbitration, a court must “engage in a limited review to ensure that the dispute is arbitrable-i.e., that a valid agreement to arbitrate exists between the parties and that the specific dispute falls within the substantive scope of that agreement.” Murray v. United Food and Commercial Workers Int'l Union, 289 F.3d 297, 302 (4th Cir. 2002). A court must compel arbitration if “(i) the parties have entered into a valid agreement to arbitrate, and (ii) the dispute in question falls within the scope of the arbitration agreement.” Chorley Enters., Inc. v. Dickey's Barbecue Rests., Inc., 807 F.3d 553, 563 (4th Cir. 2015), cert. denied, 136 S.Ct. 1656 (2016).

         The party seeking to arbitrate must establish only two facts: “(1) [t]he making of the agreement and (2) the breach of the agreement to arbitrate.” Mercury Constr. Corp. v. Moses H. Cone Mem'l Hosp., 656 F.2d 933, 939 (4th Cir. 1981). The Court must particularly “avoid reaching the merits of arbitrable issues.” Id. (citing Drivers, Chauffeurs, etc. v. Akers Motor Lines, 582 F.2d 1336, 1342 (4th Cir. 1978)).

         III. DISCUSSION

         Castellanos does not dispute that there is a valid arbitration agreement or that her claims are within the scope of the Agreement's covered claims.[2] By filing the instant lawsuit against Mariner Finance, Castellanos has breached the arbitration agreement. However, Castellanos contends that Mariner Finance waived its right to arbitrate by choosing to prosecute its collection action against Castellanos in the District Court of Maryland for Baltimore City.

         Fourth Circuit precedent has consistently applied the FAA's “default” doctrine to cases involving potential waivers of arbitration agreements. See, e.g., Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d 690, 702 (4th Cir. 2012)(finding that the district court erred by not applying the FAA when the transaction including the arbitration agreement related to interstate commerce); Forrester v. Penn Lyon Homes, Inc., 553 F.3d 340, 342 (4th Cir. 2009)(“Under section 3 of the FAA, a party loses its right to a stay of court ...


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