Brantley v. Republic Mortgage, 4th Cir. (2005)
Brantley v. Republic Mortgage, 4th Cir. (2005)
No. 05-1047
COUNSEL
ARGUED: Benjamin Rush Smith, III, NELSON, MULLINS, RILEY
& SCARBOROUGH, Columbia, South Carolina, for Appellant.
Kathleen Clark Knight, JAMES, HOYER, NEWCOMER & SMILJANICH, P.A., Tampa, Florida, for Appellees. ON BRIEF: Thadeous H. Westbrook, III, NELSON, MULLINS, RILEY &
SCARBOROUGH, Columbia, South Carolina; William L. Kirkman,
BOURLAND, KIRKMAN, SEIDLER, JAY & MICHEL, L.L.P., Fort
Worth, Texas, for Appellant. Terry A. Smiljanich, JAMES, HOYER,
NEWCOMER & SMILJANICH, P.A., Tampa, Florida; T. English
McCutchen, William E. Hopkins, Jr., MCCUTCHEN, BLANTON,
JOHNSON & BARNETTE, Columbia, South Carolina, for Appellees.
OPINION
WIDENER, Circuit Judge:
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 Republics 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.
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
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.
2004, Republic Mortgage, which had not signed the arbitration agreement, moved to compel arbitration and to dismiss or stay the plaintiffs action. The district court, on December 1, 2004, denied Republic
Mortgages motion to compel arbitration and dismiss or stay the
action. This appeal by Republic Mortgage followed.
II.
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.
District court decisions determining the scope of arbitration agreements are generally reviewed de novo since a review of orders compelling or refusing to compel arbitration is a matter of contract
interpretation. United States v. Bankers Ins. Co., 245 F.3d 315, 319
(4th Cir. 2001).
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 Intl 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).
The district court determined that Republic Mortgage could only
estop the plaintiffs from avoiding arbitration if the case met the inter-
twined 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:
Existing case law demonstrates that equitable estoppel
allows a nonsignatory to compel arbitration in two different
circumstances. First, equitable estoppel applies when the
signatory to a written agreement containing an arbitration
clause must "rely on the terms of the written agreement in
asserting [its] claims" against the nonsignatory. When each
of a signatorys claims against a nonsignatory "makes reference to" or "presumes the existence of" the written agreement, the signatorys claims "arise[ ] out of and relate[ ]
directly to the [written] agreement," and arbitration is appropriate. Second, "application of equitable estoppel is warranted . . . when the signatory [to the contract containing the
arbitration clause] raises allegations of . . . substantially
interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract."
Otherwise, "the arbitration proceedings [between the two
signatories] would be rendered meaningless and the federal
policy in favor of arbitration effectively thwarted.
MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.
1999) (citations omitted).
In the present case, as the district court correctly concluded,
Republic Mortgage can satisfy neither of these requirements.
The lawsuit in the current case deals with Republic Mortgages
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