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BOONE v. TOYOTA MOTOR CREDIT CORPORATION

United States District Court, Southern District of New York


March 31, 2003

ELSIE D. BOONE, PLAINTIFF,
v.
TOYOTA MOTOR CREDIT CORPORATION, DEFENDANTS.

The opinion of the court was delivered by: Richard Conway Casey, United States District Judge

OPINION AND ORDER

I. Introduction

This case involves a class-action complaint against Toyota Motor Credit Corporation "TMCC" on behalf of Plaintiff Elsie Boone, and similarly-situated African-Americans, alleging a violation of the Equal Credit Opportunity Act. 15 U.S.C. § 1691. et seq. (the "ECOA"). Plaintiff alleges that TMCC's lease finance system encourages and authorizes the issuance of leases with terms based on racially discriminatory criteria. Defendant TMCC moves to dismiss this action for failure to state a claim under F.R.C.P. 12(b)(6) and to compel arbitration under the Federal Arbitration Act, 9 U.S.C. § 2.

For the reasons stated below, TMCC's motion to compel arbitration is granted. Therefore, the court need not address either TMCC's motion to dismiss for failure to state a claim or Plaintiff's motion to certify her complaint as a class action.

II. Background*fn1

Plaintiff is an African-American woman residing in New York City. According to the Complaint, she received a letter from TMCC on July 10, 2000, informing her that she had been pre-approved for a $29,000 automobile loan. Plaintiff visited Hudson Toyota on July 15, 2000. The salesperson, Mr. Garcia, asked Plaintiff for her social security number so that he could run a credit check and quote her prices on various cars. Mr. Garcia subsequently informed Plaintiff that she did not qualify for the $29,000 loan as stated in the letter, but that she did qualify for a $15,000 package with no money down. Plaintiff indicated that she would take the car and signed the loan papers given to her.

The lease terms given to Plaintiff by Hudson Toyota required her to make sixty monthly payments of $339.97 to TMCC, for a car valued at $16,567.00. Plaintiff was required to pay a total of $20,760.95 over a period of sixty months, in addition to $7,331.00 if she decided to exercise the purchase option at the end of the lease.

Plaintiff alleges that she also signed a document entitled "Spot Instant Delivery Conditions," which stated that Plaintiff must promptly return the car to Hudson Toyota should her credit be unsatisfactory for obtaining lease financing, and that Hudson Toyota would accept the return of the car. Pursuant to this provision, Plaintiff asserts that she attempted to return the car to Hudson Toyota on July 17 because she feared she could not afford the payments. When she arrived, Hudson Toyota allegedly refused to accept the proffered return of the car.

Plaintiff claims that on July 30, 2000, she received a letter from TMCC, dated July 25, 2000, informing her that her credit application had been denied. Plaintiff immediately returned to Hudson Toyota and demanded that the car be accepted for return in accordance with the provisions of the "Spot Instant Delivery Conditions." According to Plaintiff, Hudson Toyota again refused to take possession, asserting that Plaintiff's application for lease financing had indeed been accepted.

The Complaint also alleges that on or about August 2, 2000, Mr. Garcia telephoned Plaintiff and told her that she had to come back to Hudson Toyota to sign additional papers in order to have the registration and license plates issued. Ms. Boone returned to Hudson Toyota and signed what she assumed was a document relating to the registration of the vehicle. Plaintiff now claims that what she actually signed was a new lease containing different, but substantially similar, lease terms. Although this second lease was purportedly signed on August 2, 2000, the document was dated July 15, 2000, the date of the original lease.

Hudson Toyota received a payment for the full price of the Corolla from TMCC, and assigned all its interests under the lease to TMCC. As of the time of the filing of her Complaint, Plaintiff was two months behind on her monthly lease payments.

Plaintiff filed suit against TMCC on January 30, 2001, alleging that TMCC's actions violated the Equal Credit Opportunity Act. Defendant filed a motion to compel arbitration, arguing, inter alia, that Plaintiff's claim is subject to binding arbitration pursuant to an arbitration clause in the lease agreement. Plaintiff argues that she did not effectively waive her right to a judicial forum, and that the arbitration clause in the lease agreement does not apply to her ECOA claim.

III. Discussion

The Court first addresses whether New Jersey or federal law governs the arbitration provision in the lease agreement. After deciding the federal law governs, the Court next addresses whether Plaintiff's claim is subject to arbitration under the Federal Arbitration Act.

A. Governing Law

In order to determine whether the parties must resolve their dispute through arbitration, the Court must first decide which law governs the arbitration clause contained in the lease agreement. The lease contains two different governing law provisions: (1) the choice of law clause in Section 42, which provides for the application of New Jersey law to the contract, and (2) Sections 21 and 44, which provide that the agreement to arbitrate shall be governed by the FAA. The Court finds that the plain language of the contract provides for the application of federal law to the arbitration clause in the lease.

Plaintiff argues that the agreement to arbitrate should be interpreted under New Jersey state law, pursuant to Section 42 of the contract. Section 42 of the contract contains an express choice of law provision, which states, in relevant part: Choice of Law and Severability. You agree that the law of the state in which this Lease is signed applies to the Lease.

Section 42, however, is not the sole choice of law clause in the contract. Other references to governing law appear in the arbitration provisions set forth in Sections 21 and 44. The arbitration provision found in Section 21 states:

By signing below, you agree that at the request of either you or us any controversy or claim (described in Section 44 of this Lease) between you and us shall be determined by neutral binding arbitration by either National Arbitration Forum ("NAF") or JAMS/Endispute("JAMS"), (the "Administrator") in accordance with (i) the Federal Arbitration Act; (ii) the Administrator's rules and procedures in effect at the time the claim is filed; and (iii) the rules set forth in Section 44 of this Lease. By initialing this Section, you acknowledge that you have read, understand and agree to the terms of this Section and Section 44.
Plaintiff's initials appear immediately below this clause. Section 44 appears on the next page and elaborates on the arbitration clause contained in Section 21. The relevant portion of Section 44 states:

This Arbritration Agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C. § 1-16 ("FAA").
Plaintiff argues that the court should interpret the arbitration clause in the contract in accordance with New Jersey law, pursuant to the general choice of law provision in Section 42, because that is the state in which the lease was signed. Defendant, on the other hand, argues for the application of federal law.

In evaluating a choice of law issue in a contract, a federal court applies the law of the forum. See Pescatore v. Pan American World Airways, Inc., 97 F.3d 1 (2d Cir. 1996) (applying New York choice of law to issue in claim based on Warsaw Convention). Therefore, New York law applies to the issue of contract interpretation. The Court finds that an interpretation of the plain language of the contract provides for the application of federal law to the arbitration provision at issue.

It is a general principle of contract construction that a document should be read to give effect to all its provisions and to render them consistent with each other. See Allstate Ins. Co. v. Hernandez, 723 N.Y.S.2d 65, 68-69 (N.Y.A.D. 2 Dept. 2001). It is in this context that the Court must determine whether federal law or New Jersey law applies to the arbitration provision. Section 21 of the Lease Agreement provides that any claim or controversy between the parties shall be resolved through binding arbitration "in accordance with the Federal Arbitration Act." Similarly, Section 44 provides that the arbitration provision "be governed by the Federal Arbitration Act."

An application of New Jersey law to the entire contract, including the arbitration provision, would contradict the explicit reference to the FAA in Sections 21 and 44. The Court therefore finds that the arbitration clause in the Lease Agreement specifically provides for the application of federal law, excepting the arbitration clause in Section 21 from the generic choice of law clause in Section 42. The Court thus concludes that federal law applies to the arbitration provision, while New Jersey law applies to the rest of the contract.

B. Evaluation of the Arbitration Clause under the FAA

In deciding a motion to compel arbitration under the FAA, a court must decide (1) whether the parties agreed to arbitrate; (2) the scope of that agreement; and (3) whether Congress intended Plaintiff's claim to be non-arbitrable. See Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116, 118 (2d Cir. 1991) (internal citations omitted). The parties do not dispute the fact that there is an arbitration agreement. Accordingly, the Court will address only the scope of the arbitration agreement and whether Congress intended Plaintiff's claim to be non-arbitrable.

1. Scope of the Arbitration Agreement

Under the FAA, there is a presumption in favor of arbitration, and "`any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration'." See Opals on Ice Lingerie v. Body Lines, Inc., 320 F.3d 362, 369 (2d Cir. 2003) (quoting Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Here, the arbitration provision states that "any controversy or claim (described in Section 44 of this Lease) between [the parties] shall be determined by neutral binding arbitration"

Section 44 of the Lease Agreement states:

Any claims arising out of or relating to the Lease or any related agreements or relationships resulting therefrom are subject to arbitration, including, but not limited to: claims relating to the negotiation of the Lease, advertising or solicitation to the Lease, Lease charges, Lease termination, violations of the Consumer Leasing Act, state leasing and disclosure laws, federal or state consumer protection statutes or regulations, enforcement of any obligation under the Lease; and whether a matter is subject to this Arbitration Agreement.
Such a broad arbitration clause, which refers to any claim arising out of or relating to the agreement, "creates a presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that [it] covers the asserted dispute." Oldroyd, 134 F.3d at 76 (emphasis and alteration in original) (internal citations and quotation marks omitted). Plaintiff's claim that Defendant discriminated against her and others similarly situated in violation of the ECOA constitutes a claim relating to a federal consumer protection statute that clearly falls within the scope of the arbitration agreement. Thus, the Court finds that Plaintiff's claim falls within the scope of the arbitration provision in the lease agreement.

2. Arbitrability of ECOA Claims

Finally, the Court must determine whether Plaintiff's ECOA claim is arbitrable or whether Congress intended to preclude such claims from arbitration under the FAA. An arbitration agreement may include federal statutory claims, such as those asserted by Plaintiff, absent a contrary congressional intent. See Oldroyd v. Elmira Sav. Bank, F.S.B., 134 F.3d 72, 77 (2d Cir. 1998).

ECOA claims are arbitrable as statutory claims under the weight of authority in the Second Circuit. See Howard v. Anderson, 36 F. Supp.2d 183, 184 (S.D.N.Y. 1999) (holding that agreements to arbitrate Title VII claims are enforceable); Rand v. J.C. Bradford & Co., 1998 WL 872421 (S.D.N.Y. 1998) (same). See also Williams v. First Federal Sav. & Loan Assoc., 554 F. Supp. 447, 448-49 (N.D.N.Y. 1981) (noting that "the legislative history is very clear that the protections afforded by the ECOA should be applied in the same manner as those created by Title VII"). Thus, the Court finds that Plaintiff's claim may be subject to arbitration pursuant to the FAA.

III. Conclusion

The Court finds that the parties agreed to arbitrate Plaintiff's ECOA claim and that Congress did not preclude the arbitration of that claim. Therefore, Defendant's motion to compel arbitration is granted and the Clerk of the Court is directed to close the case.

SO ORDERED


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