Kenisha Brantley Greg Brantley, On Behalf of Themselves and All Others Similarly Situated v. Republic Mortgage Insurance Company, 424 F.3d 392, 4th Cir. (2005)
Kenisha Brantley Greg Brantley, On Behalf of Themselves and All Others Similarly Situated v. Republic Mortgage Insurance Company, 424 F.3d 392, 4th Cir. (2005)
Kenisha Brantley Greg Brantley, On Behalf of Themselves and All Others Similarly Situated v. Republic Mortgage Insurance Company, 424 F.3d 392, 4th Cir. (2005)
3d 392
This case arises from alleged violations by the defendant, Republic Mortgage
Insurance Company, of the Fair Credit Reporting Act, 15 U.S.C. 1681-1681t.
Republic Mortgage filed a motion to compel arbitration and dismiss the action
or, in the alternative, stay the action pending arbitration. The district court
denied Republic's motion, finding that Republic Mortgage, as a nonsignatory to
the arbitration agreement, could not enforce the agreement to arbitrate against
the plaintiffs, Kenisha and Greg Brantley. We affirm.
I.
2
In August 2003, the plaintiffs bought a home in Beaufort, SC. Because they
financed the entire cost of the home, their mortgage lender, SouthStar Funding,
L.L.C., required them to obtain private mortgage insurance. The plaintiffs
obtained mortgage insurance from Republic Mortgage, and their mortgage
insurance premium was set at $590.43 per month.1
The Brantleys contend that Republic Mortgage did not give them the lowest
premium available and that Republic Mortgage never informed them that their
premium was increased based on information contained in their consumer credit
reports. Further, the plaintiffs complain that Republic Mortgage never advised
them of the consumer reporting agency from which it received the information,
nor that they could obtain a copy of that report and dispute entries it contained
under the Fair Credit Report Act (FCRA). The plaintiffs allege that when
Republic Mortgage increased their insurance premium based on information in
their credit report, it was required to provide them with an "adverse action
notice" pursuant to the FCRA. 15 U.S.C. 1681m. Finally, the plaintiffs allege
that these actions constituted either willful, or negligent, or both, violations of
the FCRA.
In connection with the mortgage loan transaction, the plaintiffs entered into a
separate arbitration agreement with the mortgage lender, SouthStar, which
provided
The agreement further provided that the agreement would apply "no matter by
whom or against whom a claim is made."
The Brantleys filed this suit on March 15, 2004.2 On September 22, 2004,
Republic Mortgage, which had not signed the arbitration agreement, moved to
compel arbitration and to dismiss or stay the plaintiff's action. The district
court, on December 1, 2004, denied Republic Mortgage's motion to compel
arbitration and dismiss or stay the action. This appeal by Republic Mortgage
followed.
II.
8
Republic Mortgage claims that the district court erred in denying its motion to
compel arbitration and dismiss or stay the action. Specifically, it contends that,
despite being a nonsignatory to the arbitration agreement, its insurance contract
is so intertwined with the mortgage and arbitration contracts between the
plaintiffs and SouthStar that it should receive the benefit of the arbitration
agreement. Alternately, Republic Mortgage argues that it is a third-party
beneficiary of the arbitration contract, and is thus entitled to enforce arbitration
on those grounds.
The principal issue in this appeal is whether equitable estoppel allows Republic
Mortgage to claim the benefit of the arbitration agreement between the
plaintiffs and SouthStar.
10
11
However, in cases such as the present one, the arbitration order does not rest on
a term of the contract, rather upon the application of equitable estoppel. See
Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411,
417-18 (4th Cir.2000) (holding that a signatory to an arbitration agreement may
be bound by a nonsignatory through the doctrine of equitable estoppel). We
review such equitable estoppel decisions for abuse of discretion. See Grigson v.
Creative Artists Agency L.L.C., 210 F.3d 524, 528 (5th Cir.2000).
12
The district court determined that Republic Mortgage could only estop the
plaintiffs from avoiding arbitration if the case met the intertwined claims test.
See Long v. Silver, 248 F.3d 309, 320-21 (4th Cir.2001). The Eleventh Circuit
has provided a clear statement of the intertwined claims test, which we apply
here:
13
14
MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999)
(citations omitted).
15
In the present case, as the district court correctly concluded, Republic Mortgage
can satisfy neither of these requirements.
16
The lawsuit in the current case deals with Republic Mortgage's insurance
premiums, and an allegation that these premiums were increased due to
information contained in the plaintiffs' credit histories. This claim is a statutory
remedy under the Fair Credit Reporting Act and is wholly separate from any
action or remedy for breach of the underlying mortgage contract that is
governed by the arbitration agreement. Although the mortgage insurance
relates to the mortgage debt, the premiums of the mortgage insurance are
separate and wholly independent from the mortgage agreement. The district
court correctly found that the mere existence of a loan transaction requiring
plaintiffs to obtain mortgage insurance cannot be the basis for finding their
federal statutory claims, which are wholly unrelated to the underlying mortgage
agreement, to be intertwined with that contract.
17
Thus, the district court correctly concluded that the plaintiffs "never
attempt[ed] to rely on the contract to establish their claims, nor [did] they allege
concerted action between Republic and SouthStar." Because this conclusion is
appropriately drawn from the facts presented to the district court, we affirm the
district court's decision that the Brantleys are not equitably estopped from
denying a contractual obligation to arbitrate with the non-party (Republic
Mortgage) to the arbitration agreement.
III.
19
20
Examining this, the district court observed that "the underlying contract makes
no reference to Republic, nor does it mention the mortgage insurance
transaction.... Republic is not entitled to third-party beneficiary status because
`the language of the [contract] does not clearly indicate that, at the time of
contracting, the parties intended to provide [Republic] with a direct benefit.'"
(quoting Griffin, 384 F.3d at 165).
21
We are of opinion the district court correctly decided under Griffin that
Republic was not entitled to arbitration as a third-party beneficiary.
22
23
AFFIRMED.
Notes:
1
The plaintiffs styled this action as a class action. The district court, however,
has not ruled on class certification and only considered the allegations specific
to the Brantleys in its order. Our review does not decide anything with respect
to the claimed class action