IN THE UNITED STATES COURT OF APPEALS
FOR
THE ELEVENTH CIRCUIT
_______________
No. 98-6055 FF
LARKETTA RANDOLPH,
on behalf of herself
and
all others similarly situated,
Plaintiff-Appellant,
v.
GREEN TREE
FINANCIAL CORP. – ALABAMA;
and GREEN
TREE FINANCIAL CORPORATION,
Defendants-Appellees
-----------------------------------------------------------
On Appeal from the
United States District Court
for the
Middle District of Alabama
═══════════════════════════════════════════════════════
BRIEF AMICI
CURIAE OF AARP
AND TRIAL LAWYERS FOR
PUBLIC JUSTICE
IN SUPPORT OF
PLAINTIFF-APPELLANT
═══════════════════════════════════════════════════════
F. Paul Bland, Jr. Deborah
M. Zuckerman*
Michael Quirk Stacy
Canan
Trial Lawyers for Public
Justice Jean Constantine-Davis
Nina
Simon
1717 Massachusetts Ave., N.W. AARP Foundation Litigation
Washington, D.C. 20036
(202) 797-8600 Michael
Schuster
AARP
Counsel for Amicus Curiae 601
E Street, N.W.
Trial Lawyers for Public Justice Washington,
D.C. 20049
(202)
434-2060
Counsel
for Amicus Curiae AARP
*Counsel
of Record
CERTIFICATE OF
INTERESTED PERSONS
AND
CORPORATE DISCLOSURE STATEMENT
Pursuant to Fed. R. App. P. 26 and Eleventh Circuit Rule 26.1, Amici
Curiae AARP and Trial Lawyers for Public Justice hereby submit this
Certificate of Interested Persons and Corporate Disclosure Statement.
CERTIFICATE
OF INTERESTED PERSONS
The following is a list of trial judges, attorneys,
persons, associations of persons, firms, partnerships, corporations,
conglomerates, affiliates and other legal entities which have, or are believed
to have, an interest in the outcome of this case:
1. AARP (Amicus Curiae)
2. AARP Foundation
3. Bland, F. Paul (Counsel for Amicus
Curiae Trial Lawyers for Public Justice)
4. Canan, Stacy (Counsel for Amicus
Curiae AARP)
5. Cohen, Milstein, Hausfeld & Toll, P.L.L.C.
(Plaintiff-Appellant’s Counsel’s Firm)
6. Constantine-Davis, Jean (Counsel for Amicus
Curiae AARP)
7. DeMent, Hon. Ira (Trial Judge)
8. Green Tree Financial Corp. – Alabama
(Defendant-Appellee)
9. Green Tree Financial Corporation
(Defendant-Appellee)
10. Huffaker, Robert A. (Defendant-Appellee’s
Counsel)
11. Jinks, Daniel, Crow & Seaborn, L.L.C. (Plaintiff-Appellant’s
Counsel’s Firm)
12. Jinks, Lynn W. III (Plaintiff-Appellant’s Counsel)
13. Kimbrough, Angela L. (Plaintiff-Appellant’s Counsel)
14. Malveaux, Suzette M. (Plaintiff-Appellant’s Counsel)
15. McLaney & Associates, P.C. (Plaintiff-Appellant’s Counsel’s
Firm)
16. McLaney, C. Knox III (Plaintiff-Appellant’s Counsel)
17. Phillips, Carter G. (Defendant-Appellee’s
Counsel)
18. Quirk, Michael (Counsel for Amicus Curiae Trial Lawyers
for Public Justice)
19. Randolph, Larketta (Plaintiff-Appellant)
20. Rushton, Stakely, Johnston, & Garrett, P.A.
(Defendant-Appellee’s Counsel’s Firm)
21. Schuster, Michael (Counsel for Amicus
Curiae AARP)
22. Sellers, Joseph M. (Plaintiff-Appellant’s Counsel)
23. Sidley &Austin (Defendant-Appellee’s
Counsel’s Firm)
24. Simon, Nina (Counsel for Amicus Curiae
AARP)
25. Zuckerman, Deborah (Counsel for Amicus
Curiae AARP)
CORPORATE
DISCLOSURE STATEMENT
The Internal Revenue Service has determined that AARP
is organized and operated exclusively for the promotion of social welfare
pursuant to Section 501(c)(4)(1993) of the Internal Revenue Code and is exempt
from income tax. AARP is also organized
and operated as a non-profit corporation pursuant to the provisions of Title 29
of chapter 6 of the District of Columbia Code 1951.
Other legal entities related to Amicus Curiae
AARP are AARP Services, Inc., AARP Foundation, Andrus Foundation, and Legal
Counsel for the Elderly.
Trial Lawyers for Public Justice, P.C. (“TLPJ”) is a
private corporation that is organized under the laws of the District of
Columbia. TLPJ’s bylaws limit the use
of any TLPJ income to public interest litigation. TLPJ has no subsidiaries or parent corporations and it has no
financial interest in the outcome of this suit.
TABLE
OF CONTENTS
CERTIFICATE OF INTERESTED PERSONS...................................................... i
CORPORATE DISCLOSURE STATEMENT...................................................... iii
TABLE OF AUTHORITIES............................................................................... vi
INTEREST OF AMICI CURIAE.......................................................................... 1
STATEMENT OF THE ISSUE........................................................................... 2
SUMMARY OF ARGUMENT............................................................................. 2
ARGUMENT...................................................................................................... 2
I. CONGRESS
ENACTED TILA TO REGULATE CREDIT INDUSTRY PRACTICES AND PROTECT CONSUMERS.................................. 2
A. TILA’s
Text, Purpose, and Legislative History Reflect the Pivotal Role of Class Action
Enforcement........................................................ 4
B. The
Demise of Class Actions Would Create a Void in TILA Enforcement............................................................................................. 5
II. ARBITRATION
CANNOT PREVENT CONSUMERS FROM EFFECTIVELY VINDICATING THEIR RIGHTS UNDER TILA............................... 7
A. Clauses
That Bar Class Actions Undermine TILA Enforcement.. 8
B. Green
Tree’s Clause Is Designed to Bar TILA Class Actions.... 11
CONCLUSION................................................................................................. 12
CERTIFICATE OF COMPLIANCE .................................................................. 14
CERTIFICATE OF SERVICE ........................................................................... 15
APPENDIX
1. Letters to Dolores Smith, Director, Division of Consumer and
Community Affairs, Federal Reserve Board, from Robert Pitofsky, Chairman of the
Federal Trade Commission, dated January 15, 1999, and January 6, 2000.
2. Orders confirming Final Order and Award in Arbitration in Lackey
v. Green Tree Financial Corporation (Court of Common Pleas, County of
Barnwell, S.C. Dec. 19, 2000) and Bazzle v. Green Tree Financial Corporation
(Court of Common Pleas, County of Dorchester, S.C. Sept. 15, 2000)
3. Memorandum of Green Tree Financial Corporation in Opposition
to Class Arbitration in Lackey v. Green Tree Financial Corporation.
TABLE
OF AUTHORITIES
CASES
American
Centennial Ins. Co. v. National Cas. Co.,
951 F.2d 107
(6th Cir. 1991)........................................................................................... 9
Bantolina v. Aloha Motors, Inc., 419 F. Supp. 1116 (D. Haw. 1976) .................... 10
Barlow
v. Evans d/b/a Quik Pawn Shop, 992 F.
Supp. 1299
(M.D. Ala. 1997)....................................................................................... 6
Bazzle
v. Green Tree Fin. Corp., No.
00-CP-18-443 F/K/A/No. 97-CP-18-258
(Ct. Common Pleas Dorchester Cty. S.C. Sept. 15, 2000)
...................... 8, 10
Blue
Cross v. Superior Court, 78 Cal.
Rptr. 2d 779 (Ct. App. 1998),
cert. denied,
527 U.S. 1003 (1999) .......................................................... 10
Bowen v. First Family. Fin. Servs., Inc., 233 F.3d 1331 (11th Cir. 2000)................ 8
Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir. 1995)..................................... 9
Connecticut
Gen. Life Ins. Co. v. Sun Life Assurance Co., 210 F.3d 771
(7th Cir. 2000)........................................................................................... 8
Dickler
v. Shearson Lehman Hutton, Inc., 596
A.2d 860
(Pa. Super. Ct. 1991)............................................................................... 10
Dortman v. Cash, Inc., CA No. 96-CV-188 (R) (W.D. Ky. 1996) .......................... 6
Edwards v. Your Credit, Inc., 148 F.3d 427 (5th Cir. 1998).................................... 7
In re Fryer,
183 B.R. 322 (Bankr. S.D. Ga. 1995)................................................. 6
Gammaro
v. Thorp Consumer Discount Co., 828
F. Supp. 673
(D. Minn. 1993)......................................................................................... 9
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991)................................ 9
Goins v. Creditcorp, V-96-175 (Cir. Ct. Bradley Cty., Tenn. 1996) ....................... 6
Green Tree Fin. Corp. v. Holt, 171 F.R.D. 313 (N.D. Ala. 1997).......................... 12
Hamilton
v. York d/b/a/HLT Check Exch., 987 F.
Supp. 953
(E.D. Ky. 1997)......................................................................................... 6
Harris v. Green Tree Fin. Corp., 183 F.3d 173 (3d Cir. 1999).............................. 12
Izzi v. Mesquite Country Club, 231 Cal. Rptr. 315 (Ct. App. 1986) ...................... 10
Johnson v. Tele-Cash, 225 F.3d 366 (3d Cir. 2000)................................................ 9
Keating
v. Superior Court, 645 P.2d 1192
(Cal. 1982), rev’d sub nom.
on other grounds, Southland Corp. v. Keating, 465 U.S. 1 (1984)............... 10
In re Knepp,
229 B.R. 821 (Bankr. N.D. Ala. 1999)............................................. 11
Lackey
v. Green Tree, No. 96-CP-06-073 (Ct.
Common Pleas Barnwell
Cty. S.C. Dec. 19, 2000)...................................................................... 8,
10
Lackey v. Green Tree Fin. Corp., 498 S.E.2d 898 (S.C. Ct. App. 1998)................ 12
McCarthy
v. Providential Corp., No. C-94-0627
FMS, 1994 WL 387852
(N.D. Cal. July 19, 1994)........................................................................... 9
In re Miller,
215 B.R. 970 (Bankr. S.D. Ky. 1997)................................................ 6
Minnesota
v. First Alliance Mortgage Co.,
C9-98-11416 (Dist. Ct.,
2d Judicial Dist. Minn. Mar. 10, 1999)......................................................... 7
Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985).............................................................................. 9,11
Mumford
v. McKenzie Check Advance, Z-220-96
(Cir. Ct.
Knox Cty., Tenn. 1996)............................................................................. 6
Parker v. DeKalb Chrysler Plymouth, 673 F.2d 1178 (11th Cir. 1982).................... 3
Pridgen
v. Green Tree Fin. Servicing Corp.,
88 F. Supp. 2d 655
(S.D. Miss. 2000)..................................................................................... 12
Ratner v. Chem. Bank N.Y. Trust Co., 54 F.R.D. 412 (S.D.N.Y. 1972)................... 4
Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987).................... 11
Shields v. First Nat’l Bank, 56 F.R.D. 442 (D. Ariz. 1972)..................................... 4
In re Underwood,
66 B.R. 656 (Bankr. W.D. Va. 1986)......................................... 4
Van Jackson v. Check ‘N Go, Inc., 193 F.R.D. 544 (N.D. Ill. 2000)........................ 8
Walker v. Wallace Auto Sales, Inc., 155 F.3d 927 (7th Cir.1998)............................. 7
White v. Cash Emporium, No. 98-269 (E.D. Ky. Dec. 30, 1998)............................ 6
STATUTES
15 U.S.C. § 45(a)................................................................................................ 7
Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et
seq................................ passim
15 U.S.C. § 1605....................................................................................... 3
15 U.S.C. § 1606....................................................................................... 3
15 U.S.C. § 1607....................................................................................... 7
15 U.S.C. § 1631(a)................................................................................... 3
15 U.S.C. § 1637....................................................................................... 3
15 U.S.C. § 1637a..................................................................................... 5
15 U.S.C. § 1638....................................................................................... 3
15 U.S.C. § 1639....................................................................................... 3
15 U.S.C. § 1640....................................................................................... 4
15 U.S.C. § 1640(a)................................................................................... 5
15 U.S.C. § 1640(a)(1)............................................................................... 5
15 U.S.C. § 1640(a)(4)............................................................................... 5
Age
Discrimination in Employment Act , 29 U.S.C.
§§621-633 (2000)....................................................................................... 9
Consumer
Credit Protection Act, Pub. L. No. 90-321, § 130, 82 Stat. 146
(1968) (codified as amended at 15 U.S.C. §
1640)....................................... 4
LEGISLATIVE
HISTORY
109 Cong. Rec. 2027 (1963) (statement of Sen. Douglas)....................................... 3
H.R. Rep. No. 90-1040, reprinted in 1968
U.S.C.C.A.N. 1962.............................. 3
Predatory
Lending Practices in the Subprime Industry: Hearings
Before the House Comm. on Banking and Fin. Servs. (May 24, 2000) (testimony of Laura Borelli, Nat’l
Home Equity Ass’n; Ralph Rohner, Consumer Bankers Ass’n; David Bochnowski,
America’s Community Bankers; Neill Fendly, Nat’l Ass’n of Mortgage Brokers) 7
S.
Rep. No. 93-278 (1973) quoting 1972 FRB Ann. Rep.
on Truth in Lending................................................................................... 5
S. Rep. No. 94-590(1976), reprinted in 1976
U.S.C.C.A.N. 431............................ 5
REGULATIONS
AND RELATED AUTHORITY
Regulation Z, 12 C.F.R. § 226.18 (2000)............................................................... 3
Federal
Reserve Board, Official Staff Commentary on Regulation Z
§ 226.17(c)(1)-18, 61 Fed. Reg.14956 (1996).............................................. 6
Federal
Reserve Board, Official Staff Commentary on Regulation Z
§ 226.2(a)(14)-2, 65 Fed. Reg. 17129 (2000)............................................... 6
MISCELLANEOUS
1972 F.R.B. Ann. Rep. on Truth in Lending...................................................... 4,
5
1973 F.R.B. Ann. Rep. on Truth in Lending.......................................................... 4
Brief
of Chamber of Commerce of U.S. as Amicus Curiae in Support of
Petitioners before U.S. Supreme Court in Green Tree
Fin. Corp. -- Alabama, et al. v. Randolph (No. 99-1235)............................................................................................ 7
Jean
Ann Fox, Consumer Fed’n of Am., Safe Harbor for Usury:
Recent Developments in Payday Lending (1999).......................................... 6
FTC
Chairman Letters to Director of FRB’s
Division of
Consumer and Community Affairs (Jan. 15, 1999 &
Jan. 6, 2000)................. 7
Alan
S. Kaplinsky & Mark J. Levin, Excuse me, but who’s the predator?
Banks can use arbitration clauses as a defense, 7 Bus. L. Today
(May/June 1998)...................................................................................... 11
Ralph
I. Rohner and Fred H. Miller, Truth in Lending 865 (Robert A.
Cook, et al. eds., 2d ed. 2000).................................................................... 4
INTEREST
OF AMICI CURIAE/
As the largest membership organization serving people
50 and older, AARP is alarmed by the rampant fraud and deceptive practices
perpetrated in a range of marketplace transactions since they
disproportionately affect older consumers.
AARP supports laws and public policies designed to protect their rights
and to preserve the full range of enforcement tools, including class
actions. AARP was active in the passage
of recent amendments to the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et
seq., and participated in joint industry, agency, and consumer group
negotiations to enhance protections against abusive lending practices. AARP Foundation attorneys represent numerous
older homeowners victimized by abusive mortgage refinancings, many of which
violate TILA.
Trial Lawyers for Public Justice (“TLPJ”) is a
national public interest law firm specializing in precedent-setting and socially
significant civil litigation and is dedicated to pursuing justice for victims
of corporate and governmental abuses.
TLPJ was contacted by consumer attorneys from around the nation whose
clients were being subjected to binding arbitration and, after considerable
investigation, concluded that abuse of mandatory arbitration clauses denies
many consumers access to a neutral dispute resolution forum. TLPJ thus established its Mandatory
Arbitration Abuse Prevention Project, through which TLPJ attorneys represent
consumers, file amicus briefs, write and publish articles, and speak at
conferences.
Amici submit
this brief because Green Tree’s use of arbitration to eliminate TILA class
actions threatens to undermine the Act’s protections.
STATEMENT OF THE ISSUE
Whether an arbitration clause that is silent regarding
class actions under TILA affords plaintiff the ability to pursue her class
claims in any forum.
SUMMARY OF ARGUMENT
Congress enacted TILA to provide consumers the
essential terms of their credit transactions and to deter deception in the
marketplace. Classwide enforcement is
critical for consumers with small claims to vindicate their statutory rights
and promote compliance. If arbitration
clauses by their terms, or their silence, prevent consumers from vindicating
their TILA claims on a classwide basis in any forum, TILA’s protections will be
rendered illusory.
ARGUMENT
I. CONGRESS
ENACTED TILA TO REGULATE CREDIT INDUSTRY PRACTICES AND PROTECT CONSUMERS.
TILA has been a cornerstone of federal consumer
protection law since its
passage
in 1968. Congress enacted TILA in
response to the growing complexity in consumer credit and in recognition that
consumers were routinely victimized by misrepresentations and fraudulent
practices./ Creditors did not calculate or advertise
interest in a uniform way, and consumers confronted with seemingly similar
interest charges had no way to determine the least expensive product or to make
informed choices among products./
Congress sought to eliminate interest rate deception
by prescribing a uniform calculation of interest, the annual percentage rate
(“APR”), defining credit‑related charges to be included in the APR, and
requiring disclosure of these charges as a dollar amount in the “finance
charge.”/ In Ms. Randolph’s case, the creditor failed
to include an insurance premium in the finance charge which had the effect of
artificially lowering the APR and making the loan appear more attractive than
it was.
TILA confers private rights affecting the public
interest, creates a system of disclosure that improves the bargaining posture
of all borrowers, and requires strict technical compliance. Green Tree violated TILA’s mandatory
disclosure scheme by providing Ms. Randolph and other borrowers with inaccurate
credit terms./ TILA’s enforcement scheme was designed
precisely to enable consumers like Ms. Randolph, acting as class
representatives, to challenge creditors’ violations.
A. TILA’s
Text, Purpose, and Legislative History Reflect the Pivotal Role of Class Action
Enforcement.
After TILA’s enactment, most courts refused to certify
classes because of the massive potential liability that might result from
aggregating the mandatory minimum $100 statutory damages for all class members/
and the Act’s silence on class actions./
The Federal Reserve Board (“FRB”) reported to Congress that if disapproval of
class actions continued, “the deterrent of potential class action liability
which helps to ensure creditor compliance with the Act would be effectively
lost.” 1972 FRB Ann. Rep. on Truth in
Lending 13-14; 1973 FRB Ann. Rep. on Truth in Lending 9. The FRB saw class actions as a way to
elevate TILA suits “from the ineffective ‘nuisance’ category to the type of
suit which has enough sting in it to insure that management will strive with
diligence to achieve compliance.” 1972
FRB Rep. 13-14. Congress agreed
“‘potential class action liability is an important encouragement to the
voluntary compliance which is so necessary to insure nationwide adherence to
uniform disclosure.’” S. Rep. No.
93-278 at 15 (1973), quoting 1972 FRB Rep. 13.
Congress then specifically authorized class actions,
but limited damages, carefully balancing TILA’s purpose “to provide creditors
with a meaningful incentive to comply with the law without relying on an
extensive new bureaucracy,” with its concern that creditors not face enormous
penalties for technical violations. S.
Rep. No. 93-278 at 14-15. Far from
indicating disapproval of the class action remedy, the limitation on statutory
damages expressed Congress’ intent to promote class actions as critical
to enforcing TILA’s statutory scheme.
S. Rep. No. 94-590 at 8 (1976), reprinted in 1976 U.S.C.C.A.N.
431, 438. Indeed, through numerous
amendments to TILA, Congress never has deviated from this position./
B. The
Demise of Class Actions Would Create a Void in TILA Enforcement.
TILA class actions aggregating statutory damages
claims are a potent complement to government enforcement. Class actions successfully challenged the
payday loan industry, which aggressively expanded from small local businesses
to major national financial organizations that impose interest rates as high as
780% or more./ Lenders sought to disguise the true nature
of these loans by calling them “deferred presentments” or “cash leasing,” and
adamantly refused to provide TILA disclosures until class actions propelled
this to the foreground, and led the FRB to confirm that payday loans are
consumer credit transactions subject to TILA.
See, e.g., White v. Cash Emporium, No. 98-269 (E.D. Ky.
Dec. 30, 1998); Dortman v. Cash, Inc., CA No. 96-CV-188(R) (W.D. Ky.
1996); Mumford v. McKenzie Check Advance, Z-220-96 (Cir. Ct. Knox Cty.,
Tenn. 1996); Goins v. Creditcorp, V-96-175 (Cir. Ct. Bradley Cty., Tenn.
1996). /
The public purposes of classwide enforcement have been
evident from the outset. The TILA class
representative who shepherds a case through complex litigation and, due to the
cap on class action damages, receives lesser damages than she would in an
individual case, cannot be said to act other than in the public interest. TILA class actions effectively challenged
abusive lender practices such as deceptive insurance products, manipulating
TILA disclosures to hide credit costs, and burying grossly inflated charges in
the price of goods./ Absent classwide enforcement, such abusive
practices would continue unchallenged.
Nor do public enforcement actions suffice to police
industry practices. Contrary to
industry assertions, regulatory enforcement does not remove the need for class
actions./ The Federal Trade Commission has primary
authority over thousands of consumer finance companies such as Green Tree,/
but has limited resources for enforcement.
As a result, its Division of Financial Practices brought only twenty
eight TILA cases from January 1998 and December 1999./
II. ARBITRATION
CANNOT PREVENT CONSUMERS FROM EFFECTIVELY VINDICATING THEIR RIGHTS UNDER TILA.
Courts reviewing arbitration clauses must give due
regard to the importance
of
classwide TILA enforcement in preserving statutory rights. Courts must endeavor to effectuate both the
substantive rights created by TILA and the policies of the Federal Arbitration
Act. Authorization of classwide TILA
claims in arbitration would further both goals./ The Court thus should interpret clauses that
are silent on class proceedings to allow classwide arbitration,/
and refuse to enforce clauses that expressly prohibit classwide proceedings.
A. Clauses That Bar Class Actions Undermine TILA Enforcement.
TILA claims, such as Ms. Randolph’s, are brought for
small dollar amounts, to remedy deceptive practices aimed at the most
vulnerable consumers. Ms. Randolph’s is
“precisely the kind of case that class actions were designed for, with small or
statutory damages brought by impecunious plaintiffs who allege similar
mistreatment by a comparatively powerful defendant . . . .” Van Jackson v. Check ‘N Go, Inc., 193
F.R.D. 544, 547 (N.D. Ill. 2000). Since
a party subject to an arbitration clause does “not forgo the substantive rights
afforded by the statute; it only
submits to their resolution in an arbitral, rather than a judicial forum,” Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985); Gilmer
v. Interstate/ Johnson Lane Corp., 500 U.S. 20, 26 (1991), Green Tree
should not be permitted to use arbitration to avoid classwide liability.
Decisions reflexively prohibiting classwide
arbitration,/
even when this precludes enforcement of substantive legal rights, should not be
followed when a strong statutory policy favors class claims. The Court’s adoption of these holdings would
effectively deprive Ms. Randolph of her substantive TILA rights and run afoul
of the Supreme Court’s admonitions that parties should not be forced to forgo
statutory rights in arbitration and that “all statutory claims may not be
appropriate for arbitration.” Gilmer,
500 U.S. at 26./
A blanket prohibition of classwide arbitration would threaten to undermine
Congress’ intent to “encourage the use of class actions as an important tool in
enforcing Truth in Lending.” Bantolina
v. Aloha Motors, Inc., 419 F. Supp. 1116, 1120 (D. Haw. 1976).
Increasingly, state courts have ordered classwide
arbitration. In Dickler v. Shearson
Lehman Hutton, Inc., 596 A.2d 860 (Pa. Super. Ct. 1991), the court ordered
class certification because individual actions were infeasible where each class
member would be entitled to nominal damages.
A contrary ruling would allow a defendant to “discount the burdens of .
. . infrequent arbitrations and continue its allegedly improper policy.” Id. at 864. Classwide arbitration
best
serves the dual interest of respecting and advancing contractually agreed upon
arbitration agreements while allowing individuals who believe they have been wronged
to have an economically feasible route to get injunctive relief from large
institutions employing adhesion contracts. . . .
Id. at 867./
Congressional intent “to limit or prohibit waiver of a
judicial forum for a particular claim . . . ‘will be deducible from [the
statute’s] text or legislative history’ or from an inherent
conflict between arbitration and the statute’s underlying purposes.” Shearson/ American Express, Inc. v.
McMahon, 482 U.S. 220, 227 (1987) (citation omitted) (emphasis added),
quoting Mitsubishi, 473 U.S. at 628.
With this guidance, the Court should infer congressional intent to
preserve court access for TILA class claims if it reads Green Tree’s contract
to bar classwide claims. The failure to
interpret arbitration clauses to allow class actions in any forum would permit
creditors to avoid TILA compliance with impunity and diminish the Act’s
deterrent and remedial functions./
B. Green Tree’s Clause Is Designed to Bar TILA Class Actions.
The current trend of lenders and other businesses to
impose binding arbitration in order to prevent litigation is indisputable./ Green Tree’s success in adopting this
approach to avoid liability cannot be overlooked. Arbitration clauses have enabled Green Tree to avoid scrutiny of
its alleged deceptive practices in the financing of home improvement contracts
and mobile home sales./ Having forced many lawsuits into
arbitration, Green Tree vigorously opposed classwide prosecution of claims./ Despite Green Tree’s efforts, arbitrators
and courts in South Carolina consistently have allowed class claims in
arbitration. See App. 2 and 3.
Green Tree’s use of arbitration to avoid class
liability deprives consumers of substantive TILA rights. Green Tree bypassed legislatures and courts
to protect its bottom line despite -- or precisely because of -- the merits of
numerous customer claims. The Court
should not countenance this behavior.
CONCLUSION
For the foregoing reasons, the Court should interpret
Green Tree’s
arbitration
clause to allow Ms. Randolph to pursue classwide relief.
January 29, 2001 Respectfully
submitted,
F. Paul Bland, Jr. Deborah
Zuckerman*
Michael Quirk Stacy
Canan
1717 Massachusetts Ave., N.W. Jean
Constantine-Davis
Washington, D.C.
20036 Nina
Simon
(202) 797-8600 AARP
Foundation
Counsel for Trial Lawyers for Public Justice
Michael
R. Schuster
AARP
601
E Street, N.W.
Washington,
DC 20049
(202)
434-6045
Counsel
for AARP
*Counsel
of Record
CERTIFICATE
OF COMPLIANCE
I certify that the foregoing brief was prepared using Times New Roman Regular typeface in 14
point and contains 3180 words, excluding Tables of Contents and Authorities,
Corporate Disclosure Statement, and
Certificates of Interested Parties, Compliance and Service.
Deborah
M. Zuckerman
CERTIFICATE
OF SERVICE
I hereby certify that two copies of the foregoing
Brief Amici Curiae of AARP and Trial Lawyers for Public Justice, in
Support of Plaintiff-Appellant were sent by prepaid Federal Express for next
day delivery this 29nd day of January 2001 to all attorneys of record as
follows:
Robert
A. Huffaker
Rushton,
Stakely, Johnston & Garrett, P.A.
184
Commerce Street
Montgomery,
Alabama 36104
Carter
G. Phillips
Sidley
& Austin
1722
Eye Street, N.W.
Washington,
D.C. 20006
Joseph
Sellers
Cohen,
Millstein, Hausfeld & Toll, P.L.L.C.
1100
New York Avenue, NW, Suite 500
Washington,
DC 20005
_________________________
Deborah
M. Zuckerman
/ Letters from counsel for
the parties granting consent to the filing of an amicus brief have been
filed with the brief.
/ H.R. Rep. No. 90-1040,
at 3 (1968), reprinted in 1968 U.S.C.C.A.N. 1962, 1965; see also Parker
v. DeKalb Chrysler Plymouth, 673 F.2d 1178, 1181-82 (11th Cir. 1982).
/ See 109 Cong.
Rec. 2027 (1963) (statement of Sen. Douglas).
/ 15 U.S.C. §§ 1605,
1606, 1638.
/ See 15 U.S.C.
§§ 1631(a), 1637-39; Regulation Z, 12 C.F.R. § 226.18 (2000). See also In re Underwood, 66
B.R. 656, 660 (Bankr. W.D. Va. 1986).
/ See Ralph I.
Rohner and Fred H. Miller, Truth in Lending 865, 866 (Robert A. Cook, et
al. eds., 2d ed. 2000). See, e.g.,
Shields v. First Nat’l Bank, 56 F.R.D. 442, 446 (D. Ariz. 1972); Ratner
v. Chem. Bank N.Y. Trust Co., 54 F.R.D. 412, 416 (S.D.N.Y. 1972).
/ See Consumer
Credit Protection Act, Pub. L. No. 90-321, § 130, 82 Stat. 146 (1968) (codified
as amended at 15 U.S.C.§ 1640).
/ Congress added claims
enforceable through class actions for actual damages in 1974, 15
U.S.C.§ 1640(a)(1), statutory damages in connection with home equity lines
of credit in 1988, 15 U.S.C. §§ 1637a, 1640(a), and statutory damages for
consumers with “high cost” loans in 1994.
15 U.S.C. §§ 1640(a), 1640(a)(4).
/ See Jean Ann Fox,
Consumer Fed’n of Am., Safe Harbor for Usury: Recent Developments in Payday Lending 2, 4 (1999); see
also Hamilton v. York d/b/a/ HLT Check Exch., 987 F. Supp. 953, 955
(E.D. Ky . 1997); In re Miller, 215 B.R. 970 (Bankr. S.D. Ky. 1997).
/ Official Staff
Commentary on Regulation Z § 226.2(a)(14)-2, 65 Fed. Reg. 17129, 17130
(2000) (stating Commentary is not a change in the law). Consumer lawsuits also highlighted auto
finance industry’s use of “title pawn”loans to avoid TILA disclosures. See, e.g., Barlow v. Evans d/b/a
Quik Pawn Shop, 992 F. Supp. 1299 (M.D. Ala. 1997); In re Fryer, 183
B.R. 322 (Bankr. S.D. Ga. 1995). The
FRB amended its Commentary to emphasize that these pawn transactions are
consumer credit transactions under TILA.
Official Staff Commentary on Regulation Z § 226.17(c)(1)-18,
61 Fed. Reg.14956 (1996).
/ See Edwards v.
Your Credit, Inc., 148 F.3d 427 (5th Cir. 1998); Minnesota v. First
Alliance Mortgage Co., C9-98-11416 (Dist. Ct., 2d Jud. Dist. Minn. Mar. 10,
1999) (order for final judgment); Walker v. Wallace Auto Sales, Inc.,
155 F.3d 927 (7th Cir.1998).
/ See, e.g., Br. of
Chamber of Commerce of U.S. as Amicus Curiae in Support of Petitioners
at 18-19, before U.S. Supreme Court in Green Tree Fin. Corp. -- Alabama, et
al. v. Randolph (No. 99-1235). In
fact, the industry has argued to Congress that TILA regulatory enforcement is
insufficient. See Predatory
Lending Practices in the Subprime Industry:
Hearings Before the House Comm. on Banking and Fin. Servs. (May 24,
2000) (testimony of Laura Borelli, Nat’l Home Equity Ass’n; Ralph Rohner,
Consumer Bankers Ass’n; David Bochnowski, America’s Community Bankers; Neill
Fendly, Nat’l Ass’n of Mortgage Brokers).
/ 15 U.S.C. §§ 45(a),
1607.
/ See App. 1: Jan. 15, 1999 & Jan. 6, 2000 letters
from FTC Chairman to Director of FRB’s Division of Consumer and Community
Affairs.
/ Bowen v. First Family
Fin. Servs., Inc., 233 F.3d 1331, 1339 (11th Cir. 2000), left open the
question “whether arbitration agreements are generally unenforceable under the
TILA or whether the specific agreement in this case is unenforceable.”
/ See Lackey v. Green
Tree Fin. Corp., No. 96-CP-06-073 (Ct. Common Pleas Barnwell Cty. S.C. Dec.
19, 2000) (Order Confirming Award); Bazzle v. Green Tree Fin. Corp., No.
00-CP-18-443 F/K/A No. 97-CP-18-258 (Ct. Common Pleas Dorchester Cty. S.C.
Sept. 15, 2000) (Order Confirming Award).
Orders Attached at App. 2. See
generally Connecticut Gen. Life Ins. Co. v. Sun Life Assurance Co.,
210 F.3d 771, 774 (7th Cir. 2000) (court should use normal methods of contract
interpretation to determine permissibility of consolidation of claims in
arbitration; contract silence was not prohibitive).
/ See, e.g., Johnson
v. Tele-Cash, 225 F.3d 366, 369 (3d Cir. 2000); Champ v. Siegel Trading
Co., 55 F.3d 269, 275 (7th Cir. 1995); American Centennial Ins. Co. v.
National Cas. Co., 951 F.2d 107, 108 (6th Cir. 1991); McCarthy v.
Providential Corp., No. C-94-0627 FMS, 1994 WL 387852, *8 (N.D. Cal. July
19, 1994); Gammaro v. Thorp Consumer Discount Co., 828 F. Supp. 673, 674
(D. Minn. 1993).
/ Gilmer did not
decide the class arbitration issue, stating only that a plaintiff raising
individual claims could not raise the potential inability to represent a class
in order to avoid arbitration. Gilmer
also is distinguishable because unlike TILA,
the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-633 (2000),
among other things, allows only opt-in classes.
/ See also Keating
v. Superior Court, 645 P.2d 1192, 1209 (Cal. 1982), rev’d sub nom. on
other grounds, Southland Corp. v. Keating, 465 U.S. 1 (1984) (“If
the alternative in a case of this sort is to force hundreds of individual
[parties] each to litigate its cause . . . in a separate arbitral forum, then
the prospect of classwide
arbitration, for all
its difficulties, may offer a better, more efficient, and fairer
solution.”) ; Blue Cross v. Superior Court, 78 Cal. Rptr. 2d
779, 790 (Ct. App. 1998), cert. denied, 527 U.S. 1003 (1999); Izzi v.
Mesquite Country Club, 231 Cal. Rptr. 315, 321 (Ct. App. 1986) (“recognition
of a combined ‘classwide arbitration’ mechanism, if properly administered and
judiciously applied, might possibly preserve the essential values of both
devices.”); Lackey v. Green Tree, No. 96-Cp-06-073 (Ct. Common Pleas
Barnwell Cty. S.C. Dec. 19, 2000); Bazzle v. Green Tree Fin. Corp., No.
00-CP-18-443F/K/A/No. 97-CP-18-258 (Ct. Common Pleas Dorchester Cty. S.C. Sept.
15, 2000).
/ See In re
Knepp, 229 B.R. 821, 842 (Bankr.N.D. Ala. 1999) (“arbitration agreements in
consumer contracts could . . . eliminat[e] class actions as an option available
to aggrieved consumers. . . . [T]he
vast majority of consumer claims involving relatively small sums of money on an
individual basis will be left without a remedy.”)
/ Alan S. Kaplinsky &
Mark J. Levin, Excuse me, but who’s the predator? Banks can use arbitration clauses as a defense, 7 Bus. L.
Today, 24, 24-26, 28 (May/June 1998):
Arbitration is a
powerful deterrent to class action lawsuits against lenders because the great
weight of authority holds that arbitrations cannot be conducted on a class
basis unless the parties have agreed to do so. . . .