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American General Finance v. Griffin

Court of Appeals of Ohio, Eighth District

July 3, 2013

AMERICAN GENERAL FINANCE, ET AL. PLAINTIFFS-APPELLANTS
v.
OPAL GRIFFIN DEFENDANT-APPELLEE

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-685562

ATTORNEYS FOR APPELLANTS Barbara Friedman Yaksic Maria C. Burnette James S. Wertheim McGlinchey Stafford, P.L.L.C.

ATTORNEYS FOR APPELLEE Ellen L. Keller Ronald I. Frederick Michael L. Berler Ronald Frederick & Associates John J. Roddy Elizabeth A. Ryan Bailey & Glasser, L.L.P.

BEFORE: Kilbane, J., Celebrezze, P.J., and McCormack, J.

JOURNAL ENTRY AND OPINION

MARY EILEEN KILBANE, J.

{¶ 1} Plaintiff and counter-defendant-appellant, American General Financial n.k.a. American General Finance Services, Inc. ("AGFS"), appeals from the trial court's opinion and order denying its motion to compel arbitration, stay court proceedings, and dismiss class claims. For the reasons set forth below, we affirm.

{¶ 2} This appeal arises from a collection action brought by AGFS against defendant and counter-plaintiff/third-party plaintiff-appellee, Opal Griffin ("Griffin"). Griffin entered into eight loans with AGFS from July 2003 to March 2008, each of which contained an arbitration agreement and waiver of jury trial provision. Each subsequent loan refinanced a balance due on a previous loan and extended additional credit. With each loan, Griffin purchased multiple credit insurance policies written by third-party defendants Merit Life Insurance Company ("Merit Life") and Yosemite Insurance Company ("Yosemite").[1] These policies protect the borrower's ability to repay the loan in the event of death ("credit life"), injury ("disability"), involuntary unemployment ("IUI"), or damage to any personal property securing the loan ("PPI"). The borrower then pays, in a single payment, a premium for each insurance product purchased and when the loan is paid in full, the borrower is entitled to a refund of any unearned insurance premium. With the March 2008 loan, the loan at issue, Griffin financed $6, 750.29, with a calculated APR of 28.30 percent for a term of 30 months. $5, 740.15 of the total amount financed was used to pay off the balance of a previous loan from AGFS and $1, 010.14 was applied as the single payment for the credit life, disability, IUI, and PPI premiums. Griffin claims that while her monthly payment on this loan was $316.57, which was $18.12 less per month than her previous loan, this benefit was illusory because the refinancing extended the loan agreement by many months, the APR increased, and she was assessed newly added costs in the amount of $260 ($250 loan origination fee and $10 credit investigation fee).

{¶ 3} When Griffin allegedly defaulted on the March 2008 loan agreement, AGFS filed its complaint in Bedford Municipal Court against her in August 2008. AGFS alleges that Griffin owes it $7, 289.48. In response, Griffin filed a series of answers and counterclaims. She initially filed an answer, pro se, in September 2008. In February 2009, Griffin, through counsel, filed an amended answer and counterclaim against AGFS seeking damages in excess of $61, 000. The case was then transferred to the Cuyahoga County Common Pleas Court. AGFS replied to Griffin's counterclaim in May 2009. In this reply, AGFS did not demand arbitration.

{¶ 4} Then in October 2009, Griffin filed a third amended counterclaim and third-party complaint against AGFS and added third-party defendants AGFC, AGFI, Merit Life, and Yosemite. Griffin brought a class action, raising claims for usury in violation of the Ohio Mortgage Lending Act ("MLA"), unconscionability, violation of the Truth in Lending Act ("TILA"), breach of contract, breach of fiduciary duty, and civil conspiracy. Griffin alleges that AGFS failed to properly credit insurance premium refunds each time she refinanced her loan. Griffin sought a refund on the total amount of interest paid on the loans, a refund on any unearned credit insurance premiums with finance charges, statutory damages, attorney fees, and costs. In response, AGFS and the affiliated companies removed the matter to federal court in December 2009, claiming subject matter jurisdiction under the Class Action Fairness Act of 2005. The matter was eventually remanded to the common pleas court in May 2010.

{¶ 5} In September 2010, AGFS and its affiliates filed an amended motion to compel arbitration, stay court proceedings, and dismiss class claims.[2] AGFS sought to compel Griffin to arbitration because each of the loan agreements she entered into contained an arbitration clause and all of her counterclaims fall within the scope of the agreement. AGFS further sought to dismiss Griffin's class action claims, arguing that the arbitration agreement prohibits class actions. Griffin opposed the motion, arguing that AGFS waived its right to arbitration by filing a lawsuit on a claim that its arbitration clause excludes and by continuing the litigation.

{¶ 6} Specifically, the arbitration agreement at issue provides that either AGFS or Griffin may file an "excluded damages lawsuit" for $5, 000 or less, and if faced with a counterclaim in excess of $5, 000, AGFS could demand that the counterclaim be arbitrated. AGFS replied to Griffin's brief in opposition, claiming that Griffin failed to demonstrate prejudice, which it argues is required under federal law to find that AGFS waived its right to arbitration. Griffin filed a surreply brief in response to AGFS's reply brief. Griffin argued that Ohio law applies, and under Ohio law a showing of prejudice is not required. She further argued that AGFS's 16-month delay in requesting arbitration and its filing for summary judgment in Bedford Municipal Court (which was withdrawn) resulted in prejudice and constitutes a waiver of its right to compel arbitration. The trial court found Griffin's argument more persuasive and denied AGFS's amended motion to compel arbitration. In its opinion, the court stated:

Ohio law will be applied to this case that is brought in state court. This is not contrary to the FAA [Federal Arbitration Act] as there is not express language in the FAA that requires federal law to be applied to arbitration clause challenges brought in state court.
Ohio courts recognize that the conduct of a party that is inconsistent with an arbitration provision may act as a waiver of that provision. Wishnosky v. Star-Lite Bldg. & Dev. Co., [8th Dist. No. 77245 (Sept. 7, 2000)]. In Checksmart v. Morgan, 8th Dist. No. 80856, 2003-Ohio-163, the Eighth District Court of Appeals found that Checksmart waived its right to arbitrate the dispute when it instituted its lawsuit against the defendant and acted inconsistently with its right to arbitrate.
[T]his Court agrees with Griffin that when AGFS chose to file a complaint seeking more than $5, 000.00, thus taking the case out of its self-defined category of an "Excluded Damages Lawsuit, " also set forth in "Matters Not Covered by Arbitration, " AGFS waived its right to arbitration. AGFS's conduct in litigating this suit indicates a waiver of any right to seek arbitration. The very specific language it used in the agreement shows that AGFS contemplated certain acts that would not constitute waiver. Therefore, AGFS cannot now claim where its conduct is inapposite of that specific language, the waiver would never apply. Here, AGFS expressly waived its right to arbitrate by filing suit on a claim excluded by its arbitration clause.
Also, this Court rejects AGFS's argument that Griffin failed to address the affiliated companies' request for arbitration and therefore, Griffin's claims against them must be arbitrated. First, when AGFS filed suit in Bedford Heights it did not name its affiliated companies as parties entitled to relief. Second, as previously mentioned[, ] AGFI owns AGFC and AGFC owns Yosemite, Merit Life and AGFS, therefore, all affiliated companies are owned and controlled by the same entity. Third, Griffin assigns any right to collect the insurance premiums to AGFS, thus, the arbitration clause applies to all of them and AGFS's waiver applies to all of them as well.
Finally, because this lawsuit does not fall within an "Excluded Damages Lawsuit" exception, the language pertaining to Griffin's inability to pursue class claims does not apply. This Court will not dismiss the class claims. However, the issue of whether Griffin may represent a class still remains to be decided. Parties may file supplemental briefs on this issue. AGFS's brief due on or before October 26, 2012. Griffin's brief due on or before November 26, 2012.
The Amended Motion to Compel Arbitration, Stay Court Proceedings and Dismiss [Class Claims] is denied.

{¶ 7} It is from this order that AGFS appeals, raising the following six assignments of error for review, which shall be discussed together and out of order where appropriate.

Assignment of Error One
The trial court erred in finding that the claims of [Griffin] against [AGFS] and Merit [Life], [Yosemite], [AGFC], [AGFI], were not subject to arbitration under the Arbitration Agreements between the parties, when there was no dispute that the ...

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