complaint pred mort lending

8/4/2019 Complaint Pred Mort Lending

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I N T H E CIRCUIT COURT OF KANAWHA COUN TY, WEST VIRGINIA

Plaintiff,

v.

COMlMUNITY HOM E MORTGAGE, LLC, d/b/aCOMM UNITY MORTGAGE GROUP, a limited liabilitycompany, O P T I O N ONE MORTGAGE CORPORATION,a nd B O N N I E SUE FLElMING,

Defendants.

COMPLAINT

INTRODUCTION

1, This action arises ou t of the practice characterized by the United States Department of

Housing and Urban Development as predatory len&ngy1 whereby a large national lender solicits

unsophisticated consumers with significant equity in their homts to enter into unwise high-interest

home loans. The defendant lender in.this case conspired with a broker to induce the plaintiff into a

high-interest home loan with an exploirive balloon payment and a prepayment penalty, and which

includes finance charges as principal, thereby compounding interest upon interest in violation of West

Virginia law.

PARTIES

2. Th e is a single mother on a fixed income with two children,

ages seven and six months. She is unsophisticated in financial matters.

See HUD-TREASURYATIONALREDATORYENDING ASKFORCE,OINTREPORT:C U R B I N G ~ R E D A T O R Y HOME M O RT G A G ELENDING, visited Apri l 13, 2002)


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3. Th e defendant, O ption O ne Mortgage Corpo ration ("Option One") is a California

Co rpora tion, licensed to do business in West Virginia. Its principal place o f business is3 ADA, Irvine,

California, 92618.

4. (a) Th e defendan t, Com munity H om e Mor tgage, LLC, is a Virginia limited Liability

com pany d oing business as Com munity Mortgage Gro up ("CMG"), and who is licensed to do business

in West V irginia asa cr ed t service organization and operating ou t offices, am ong othe r places,a t O ne

Stewart Plaza, SuiteB, Du nbar, West Virginia, 25064.

(b) A t all times relevant hereto, the defend ant, CM G , extended o r offered broker services,

an d/o r extended o r serviced consumer loans for which a finance charge is or maybe imposed or is

in m ore tha n four installments.

5 . The defendant, Bonnie Sue Fleming is a solo practioner, who conducts a real estate

closing practice. She is licensed in West Virginia and practices law out of her office at 414 11h Street,

Suite 100, ~ G n t i n ~ t o n ,est Virginia, 25701. T he defendant, Ms. Fleming, closed the loan the is the

subject o f this action.

STATEMENT O F FACTS

6. T h e plaintiff, owns her hom e. In the Summ er to Fall of 1999, her

hom e was financed witha thirty year fixed mortgage.

7. (a) I n or aro un d the Fall of 1999, the plaintiff was solicitedby Kimberly Hays, wh o

at the time worked asa loan agent for the defendant, CMG.

(b) Hays represented that the defendant, CMG, was "running a special," and she could

consolidate the plain tiffs bills and "save [the plaintifq mone y in the lon g run."

8. (a) Hays directed the plaintiff to com e into CM G's loan office in Princeton.

@) An application was taken, but the plaintiff did no t receive or sign any papers at that time.


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(c) Hays represented that shewould obtain a loan to pay o ff herbills and give the plaintiff

some money fora new roof.

9. (a) Weeks later Hays directed the plaintiff to com e do wn to CM G's office and to

close the loan.

(b) Th e closing took a bou t fifteen to twenty minutes. T h e defendan t, Bonnie Sue Fleming,

went o ver only one do cu me nt entitled "Closing Checklist,." rather than all the docum ents the plaintiff

was directed to sign. Th e defendant then flipped through the papers from acrossa table and had the

plaintiff sign them without si,pificant explanation o r oppo rtunity to fully review them .

(c) At no time did anyone mention that the loan included a balloon paym ent.

(d) At n o time did anyone mention the loan included a prepayme nt penalty.

(e) A t *o time did anyo ne mention the inclusion of an arbitration clause. Indeed,the. .

plaintiff d oes n ot even know w hat arbitration is.

10 . (a) T he plaintiff informed the defend ant, Bonnie Sue Fleming th at she received her

child sup por t payments in the middle of the mon th and told her that she'wo-uldhave to have a payment

date on the fifteenth of the month. ' .(b) Th e defendant, Bonnie Sue Fleming wrote the plaintiffs request o n a post it note and

stated that having payment o n the fifteenth of the mo nth would be "no problem."

(c) Included am ong the loan papers wasa typed up application backdated to Octo ber 2 2,

1999.

(d) Th e Settlement Statement provides a charge for six mo nths hazard insurance. How ever,

the defen dant, O ptio n O ne, did no t escrow insurance payments, and the plaintiff had insurance on the

hom e and was responsible for making her insurance payments independently.

(e) Th e plaintiff was provided only on e copy of the notice o f right to cancel.


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11 . Und er applicable West Virginia law, the "principal,"see W. V;i. CODES46A-1-1O2(36),

in the loan includes the following:

(a) the net am ount paid on behalf of the debtor:

First CenturyBankCity NationalFirst CenturyCash to borrowerTaxes - 1999

Total:

(b) plus additional charges permitted by the chapter,see K'. VA. CODE 5 46A-3-109(a)(5),

ie., reasonable closing costs,see W. VA .CODE$ 46A-1-102(7):

(a) Title examinationTitle insurance

(b) Closing fee(d) Reco rding fees(e) ' Appraisal fee

Subtotal:.. .

Total Principal:

(c) Defen dant canno t include in the principal the following charges:

Broker fee (CMG)Processing fee (CMG)Tax service contract (O ption One)Funding Fee (Option One)Underwriting fee (Option O ne)Flood certification fee (O ption One)Interest (1 4 days)Settlem ent fee (Bonnie Sue Fleming)Courier fee (Bonn ie Sue Fleming)

Total 3 2,962.90


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The charges listed immediately aboveFall within the definition of "loan finance charge."See M. V;\.

CODE 46A-1-1O2(26) ("[Clharges. . . mpose d directly or indirectly by the lender as an incident to the

extension of credit.").

(d) O n information a nd belief certain fees and charges were not re asonable or bona fide.

12. (a) Th e cont ract rate of interest is 11.150%.

(b) Application of the contract rate of interest to the principal yields a lower monthly and

total payment stated in the Note and &sclosures

(c) By including finance charges as principal, the defe ndan ts a re charging the plaintiff

interest uDon interest.

13. T h e loan docume nts the following contradictory and confusing disclosures:

DOCUMENT.

3-Day Good FaithEstimate

14. (a) After fifteen years of m ont hly pay ments of $ 368.61 (totaling $65,951.19), a

TIL DisclosureStateme nt (1 1 3/99)

Note

Deed o f Trust

TIL DisclosureStatement

massive balloon payment of $32,530.07, which is very close to the amount initial paid out for the

borrower's benefit, come s due.

@) T he plaintiff hasno ability to make such a payment an d would never have signed the

loan had she known she would be required to make sucha large payme nt.

-5 -

APR.

11.250%

12.392%

11.150%

None

12.336%

F IN A N C ECHARGE

None

$63,376.36

None

None

$63,242.1 6

A M O U N TF IN A N C ED

$38,250.00"loan amount"

TO TA L OFPAYMENTS

None

.$35,134.80..

$ 38,250.00"principal"

$38,250.00"principal"

$35,269.10

398,511.26

None

None

$698,511.26


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(c) Th e Note failsto provide th e appro priate disclosures required for balloon notesby West

Virginia law,

1 . Also included in the loan is a prepayment penalty, which penalizes the plaintiff six

months interest if she prepays the loan in the first five years.

16. Before the first paym ent was made, the plaintiff contac ted th e defenda nt, Option On e,

and explained b ecause she received her child support payments in the middle of the mo nth, she needed

to make payments o n the fifteenth of the month. Th e defendant, Option O ne , refused to accommodate

the plaintiff. T h e women the plaintiff spoke with respond ed curtly, "Are you gonn a pay this or not?"

17. The defendant, O ptio n On e, refused to except the plaintiffs paym ent unless transmitted

by Western Union, which unnecessarily cost the plaintiff additional time and expense.

18. (a) Because the plaintiff did no t receive her child sup po rt check until the fifteenth,

she had mfficultymaking the payment by th e eleventh o f the m onth, which, after the ten day grace

period, was when th e payment was due.

(b) T h e plaintiff contacted the defendant, Option One, in an effort to work this o ut and to

keep her payments current. Th e defendant, Op tion On e, refused to accommod ate the any

way.

19. (a) Th e defen dant, Option On e, repeatedly harassed the plaintiff and sent her

offensive and threatening letters.

(b) Th e defendant, Op tion On e, at times would call the plaintiff fifteen times a dayup to

as late as 11 :OO at night. Th e plaintiff would begin receiving calls three days after the first of the m on th,

even though the grace period for payments had no t expired.

(c) O n at least three occasions, the defendant, Op tion O ne, sent individuals ou t to the

plaintiffs h om e in an attempt to harass her.


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C O U N T I - LLEGAL MORTGAGE SOLICITAT ION

20. The plaintiff incorporates paragraphs one through nineteen by reference.

21 . Th e defendant CbIG- with respect to the extension of credit by others and in return

for the paymen t of money- has represented it can obtain an ex tension o f credit, within the meaning

of Ve ~ t 7i@wu Code section 46A-6C-2(a)(2).

22. (a) T he defen dant broker failed to provide the plaintiff w ith a written broker

agreement she could keep that was consistent with West Virginia law, and thereby failed to disclose

adequately to the plaintiff the following:

(i) T he services to be performed by the defendant broker;

(ii) Th e cost of the broker services to be perform ed; and

(iii) No tice o f cancellation rights of the bro ker services. . .

23. (a) Th e defendant lenders knew or should have known that the defendant brokers

had no t complied withWest Virg in iaCode section 46A-6C-5.

(b) T he d efenda nt lenders failed to seek or obtain any evidence that the defen dant b rokers

had complied with the requirementsof West Virginia law.

(e) Th e defendants brokeringand lending activities were in violation ofIVest Virg in iaCode

section 46A-6C-6& -7.

WHEREFORE, the plaintiff respectfully requests the following relief:

(a) A declaration that the defendants violatedVest Virg in iaCode section 46A-6C-1et seq.

(b) A declaration that because the defen dants violatedWest V i ~ i n i aode section 46A-6C-1

et seq., the loan agreement or the illegal portions thereof are void and unenforceable

pursuant to West Virg in iaCode section 46A-2-121;


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Civil penalties of $3,600 for each plaintiff pursuant toW e ~ t iryinh Code section

4GA-5-101(1)5( -106;

Actual damages, not less than the broker fees, and punitive damages, pursuant toI V ~ J J ~

Viginia Code sections 46A-2-101e( 46A-6C-9;

Reasonable attorney Fees and the cost of this litigation pursu ant toWest L7iginia Code

sections 46A-2-104& 46A-6C-9;and

Such othe r relief as this Court deem s equitable and just.

COUNT I1 - B R E A C H O F FIDUCIARY DUTY

T he plaintiff incorporates paragraph on e through tw enty-three by reference.

Th e defendant,CMG owed a fiduciary duty to the p laintiff as her b roke r (a) to disclose

the existence and terms of the bro ker relationship;@) to act on the plaintiff s behalf and to obtain and

pursue loans w ith the best available terms; (c) to providea wri'tten ag reem ent disclosing the services to

be performed and the total cost thereof;(d) to provide notice and an op portunity to cancel the broker

agreement; and (d) t o disclose to them the range of options and risks associated w ith their loanl'.

26. T he defen dan t broker breached its fiduciary'duty to the plaintiff by engagingira the

following activities (this list is not necessarily exhaus tive):

(a) failing to disclose adequately, and in compliance w ith We st Virginia law, the nature and

terms of the agreement between the plaintiff and the defendant broker;

(b) charging the plaintiff excessive broker fees;

(c) obtaining credit terms withou t regard forthe plain tiffs ability to pay; and

(d) suppressing terms o fth e loan, including the existence of a balloon payment, prepayment

penalty, and arbitration rider.


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2 7 . The plaintiff was injured by the defendant broker's breach o f its fiduciary duty when

she incurred excessive fees and costs and was induced intoa loan agreemen t on terms favorable to the

br ol m s and lenders without regard to terms mo re favorable to the plaintiff that may have been obtained

from other lenders.

28. As a direct and proxim ate result of the defe ndant broker's breach of its fiduciary duty,

the plaintiff suffered substantial mon etary losses and damages to her prop erty , including potential loss

of her home.


(a) A declaration that the defendant broker hada

fiduciary duty t o the plaintiff;

(b) A declaration that the defendan t broker breached its fiduciary duty to the plaintiff by,

inter alia, (i) failing to d isclose adeq uately, and co nsist ent w ith LVest Virginia law, the

nature a nd terms of the agreement between the plaintiff and the defendant broker;(ii)

failing to seek out and obtain credit for the plaintiff on the best terms available;(iii)

charging the plaintiff excessive broker fees; (iv) obtainin g credit terms w itho ut regard

for the p lainti ffs ability to pay; and(vi) slippressing certain terms of the loan agreement.

(c) A declaration that by brea chn g their fiduciary duty to the plaintiff, the defend ant broker

engaged in unconscionable conduct in the inducement of the loan agreement, and the

loan is therefore void and unenforceable pursuant t oVe s t Virgin ia Code section 46A-2-

121;

(d) Actual an d punitive damages;

(e) Reasonable atto rney fees and the costs of this litigation; and

(9 Such o ther relief as this C our t deems equitable and just.


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C O U N T I11 - FRAUD

29. Th e plaintiff incorporate s paragraphs one through twenty-eight by reference.

30. Th e plaintiff is ona fised income and is unsophisticated in financial matters.

31. (a) The defendants represented to the plaintiff that she could save her money on

her existing financing.

(b) Th e defenda nts represented that the plaintiff could make her monthly payments on the

fifteenth of every month.

32. (a) In fact, the defenda nts suppressed the fact that the loan obtained hada balloon

payment, which would require a large payment, which was close to the amount of her current

indebtedne ss, after fifteen years and over$65,000.00in payments.

(b) Th e defend ants suppressed the fact that the loan included a prepayment penalty.

(c ) Th e dsfendants refused to permit payments on the fifteenth o f every month , as

represented.

33 . The defendants".irisrepresentations nd suppressions of fact were material.

34. Th e defenda nts' misrepresentations and suppressions of fac t were intentional.-

35. The plaintiff reasonably relied upon the defendants' misrepresentations and suppressions

of fact when entering into the loan agreement.

36. The plaintiff was harmed by the defendants' misrepresentations and suppressions of

material facts.


(a) A declaration that the intentional suppression of material terms ofa consumer loan

agreement c onstitutes fraud under Wes t Virginia law;

(b) A declaration that the defendantsin this case engaged in fraud;


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(c) Actual and punitive damnges;

(d) Reasonable attorney fees and the cost of this litigation; and

(e) Such other relief as this Court deems equitable and just.

C O U N T IV - U N A U T H O RI Z E D PRA CT ICE O F LAW

3 7 . The plaintiff incorporates paragraphs one through thirty-six by reference.

38. On information and belief, the defendant, Option One, prepared the loan documents,

including the Deed of Trust, the Note, and the disclosures, in connection with the plaintiffs loan.

39 . O n information and belief, no lawyer licensed in West Virginia prepared the documents

used in the plaintiffs loan.40. The disclosures and the calculation of interest in the loan do not comply with West

Virginia law.

41. By preparing documents that do'not comport with West Virginia law for a real estate

transaction in West Virginia, the defendant, Option One , engaged in the unauthorized practice of law.

42. The defendant's unauthorized pracrice of law directly and proximately 'caused the

plaintiff to suffer actual damages, included but not limited to improper finance charges on their loan.


(a) A declaration that the failure to use a lawyer licensed in West Virginia to prepare loan

documents for a real estate transaction - which are not consistent with West Virginia

law - mounts to the unauthorized practice of law;

(b) Actual and punitive damages; and

(c ) Such other relief as the Court deems equitable and just.

C O U N T V - LLEGAL BALLOON PAYMEN T

43 . The plaintiff incorporates paragraphs one through forty-two by reference.


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(d) Civil penalties of $3,600 pursuant to West L'iqj~~k ode section 46A-5-101(1);

(e) Reasonable attorney's fees and the cqsts of this Litigation; and

(0 Such other relief the Court deems equitable and just.

C O U N T VI - PREDATORY L E N D I N G

47. The plaintiff incorporates paragraphs one through forty-six by reference.

45. The defendant broker and lender have engaged in a pattern o f predatory lending

practices to make illegal loans in order to transfer home equity from homeowners to the defendants.

49. The plaintiff is an unsophisticated consumer with little experience in financial matters.

50. The loan that is the subject of this action was closed in a hurried manner, with no

explanation to &e plaintiff of what she was signing.

51. Th e following substantively unfair'terms were included in the plaintiff's loan agreement,

without her knowledge, and constituted an unfair surprise to the plaintiff:

(a) Excessive fees and costs;

(b) Massive balloon payment;

(c) . Prepayment penalty; .

(d) Finance charges that were represented to the plaintiff to be principal, thereby mah ng

their interest charges higher than represented; and

(e) Payment for insurance escrow when the plaintiff already had insurance.

52. Th e loan issued by the defendants left the plaintiff far worse off than she was with her

existing home financing, and put her in jeopardy of losing her home.

53. The mortgage broker payments were illegal and unconscionable in violation of West

Virginia Code section 46A-2-121(b).


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58. Th e d efendant, Bonnie Sue Fleming, breached herduty to the plaintiffby, among other

things, the following acts or om issions:

(a) Failing to explain certain loan terms, such as the existence ofa balloon payment,

prepaym ent penalty, and arbitration clause;

(b) Including finance charges in the principal, thereby permitting the compounding of

interest in violation of West V irginia law;

(c) Having the plaintiff enter into a loan agreement in which the documents that were

prepared by an out-of-state finance company and that failed to comply with West

Virginia law;

(d) Charging the plaintiff for escrow of insurance when no such escrow existed; and

( e ) Representing payments could be made on the fifteenth.

59. T h e plaintiff was damaged as a pioxim ate result of the defendant's breach of her duty.

W H E R E F O R E , the plaintiff respectfully requests the following relief:

(a) A declaration that the defendant hada duty to the plaintiff and breached that'.duty;

(b) Actual damages; and .

(c) Such oth er relief as the C ourt deem s equitable and just.

COUNT VIII - BREACH O F DUTY OF GOOD FA I T H AND FAIR DEALING

6 0. T he plaintiff incorpor ates paragraphs one th rough fifty-nine by reference.

61. Th e defendant, Opti on O ne, had an implied duty to act in good faith in the performance

of th e con tract between the parties.

62. (a) T he defendant, O ption On e, refused to permit the plaintiff to make payments

on th e fifteenth of the m onth, despite representations to the contraryby its agents.


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) Allowing the plaintiff to make her payments on the f ifteenth of the mo nth would not

impose any significant burden or cost on the defendant, but would avoid substantial burden to the

plaintiff.

63 . * Th e defend ant, Op tion On e, demanded that the plaintiff submit payments via Western

Un ion, which im posed additional and unnecessary cost and hardship on the plaintiff.

64. (a) By refusing to adjust the plaintiffs paym ent date to the date consistent with the

representation of its agents, the defendan t breached its duty of good faith and fair dealing.

(b) By insisting that t he plaintiff make payments via Western U nion , the d efendant breached

its duty of good faith and fair d e a h g .

(c) O n information and belief, the defendant failed to service the plain tiffs loan in good

faith.

65. The defendant's breach of the its dutyof good faith was intentional, willful, and/or

wanton.

66 . T he plaintiff suffered damages proximately caused by th e defendant's breach of its duty

of goo d faith and fair dealing.

WHEREFORE, the plaintiff respectfully request the following relief:

(a) Actual and punitive damages;

(b) Reasonable attorney's fees and the cost of this litigation; and

(c ) Such oth er relief as the Court deem s equitable and just.

COUNT IX - UNLAWFUL DEBT COLLECTION

67. T he plaintiff incorporates paragraphs one through sixty-six by reference.


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68. (a) Th e defendant, Option On e, in attempting to collect a deb t, called the plaintiff

up to fifteen timesa day, sometimes as late as 11:00 atn igh t, with the intent to harass a nd /o r annoy the

plaintiff'.

(b) Th e defen dant, in attempting to collect a debt, sent threatening letters and during phone

conversations made threats to foreclose on the plaintiffs hom e.

(c) The plaintiff began its harassing and oppressive collection tactics in the first month of

the loan.

69. Th e defendant, Op tion On e, used unconscionable, oppressive, and unfair means to collect

a debt by repeatedly and continuously contacting the plaintiff with the intent to annoy , harass, and threatethe plaintiff violation ofW c ~ t itginirr Cod section46A-2-125.

W H E R E F O R E , plaintiff respectfully requests the following relief:

(a) Actual damages and a civil penalties of $3,600 for each violation pursuant toWest

Vi~girzia odesection 46A-2-101(1)& 106.

.. .(b) Reasonable attorneys fees and t he costs of this litigation; and

(c) . Such oth er relief as the C our t deems equitable and just.

C O U N T X - F R A U D A N DCONSPIRACY

70. Th e plaintiff incorporates paragraphs one though sixty-nine by reference.

71 . Th e defen dants intentionally sought and obtained a n appraisal indicating that the market

value of the property was$51,000.00.

72. This amount was false. T h e true market value of the home is si,@ficantly less than this

amount.

73. The defendants intentionally employed an appraiser to misrepresent the market value

of the plaintiffs property for the purpose of inducing the plaintiff into the contract.


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74. The defendant lenders and broker and the appraiser conspired to fraudi~lently

misrepresent the mar ket value of the plaintift's hom e.

75. T he defen dants' m isrepresentation of the market value of the prop erty was intentional

and material.

76 . The plaintiff reasonably relied upon the misrepresentations of the defendants when

entering into the loan agreement.

77. Th e plaintiff has been damaged by the defendants' fra udulen t appraisal.

W H E R E F O R E , the plaintiff respectfully requests the following relief:

(a) A declaration that t he defen dants' appraisal was fraudulent;

@) Actual and punitive damages;

(c) Reasonable attorneys fees and the cost of this litigation;

(d) Such o ther relief as the C ourt may deem equitable and just.

C O U N T X I - J O I N T VE NTU RE, CONSPIRACY, AND AGENCY

78. Eac h defendan t had.a pecuniary interest in the loan transaction with the plaintiff.

79 . T h e defen dant s com bined their money, skill, and knowledge to carry out the enterprise,

that is the home loan to the plaintiff.

80. O n information and belief, each defendant had an agreem ent- written, oral,

constructive, or otherwise- with one another to close the loan.

81. Eac h of the acts of th e defendants, hereinbefore and hereinafter alleged, were do ne in

furtherance of a joint venturein which each o f the acts of each of the defen dants was pursued with a

joint purpose.

82. Th e defendants conspired to com mi t the unlawful acts, or lawful acts by unlawful means,

hereinbefore and hereinafter alleged, and each is responsible for all acts alleged herein.


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83. Each of the defendants' acts were conducted as a part of the principal-agency

relationship between the defendants.

C O U N T XI1 - DENIAL OF IMPARTIAL T R I B U N A L

54. The plaintiff incorporates paragraphs one through eightythree by reference.

85 . Among the papers signed by the plaintiff was a document labeled "Arbitration

Agreement." T he so-called arbitration rider or clause contains an exclusion, w h c h permits the lende

to proceed with certain remedies in Court.

86 . (a) Said arbitra tion rider purpo rts to require all disputes, claims or controversies

arising from the loan to be resolved bya binding arbitration condu cted by the American A rbitration

Association(" M " ).

(b) T he judges are paid on a fee per case basis, receiving paym ent for their services based

solely on the nu mber of cases they handle. This system encourages judges to rule in favor of the

creditors in an attempt to garner future appoin tments from creditors. Th is system permits creditors to. . .

exercise significant influence overthe arbitrators in theM .

(c) Pursuan t to the Arbitration Agreement, the plaintiff would be required to arbitrate this

dispute under M s ommercia l Rules. Under the U ' sCommercial Rules, the minimum f h n g fee

for a claimant is 8500, and filing fees then quickly escalate as the am ou nt of th e claim increases.In this

case, it would be likely that th e plain tiffwo uld have to submit a $1250 filing fee and pay an additional

$750 in case service fees. She wo uld also have to pay o ne half of the fees of the arbitrator(s) handling

the case. AAA arbitrators frequently charge fees of $300 to$400per hour and m ore for each hour

spent on the matter, including research and preparation.

(d) T he total fees billed byAAA for arbitrations co nducted under its commercial rules are

often very hg h:


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(i) In one case, a claim ant was required to pay 3'18,260 toM . he n she did not prevail

on the claim, theA M Arbitrator assessed the claimant $207,271 for the defendant employer's

attorneys' fees.

(ii)' In another case, a claimant was required to pay$15,000 toAAA,even though she waited

for more than fo ur years for the arbitrator even to hold a hearing on the m erits of her claim.

(iii) In a dispute in M ississippi,A h l nformed the plaintiff he w ould be required to pay a

minimum of$12,000 to have his claim heard.

(iv) In a personal injury case in Con necticut, two hom eow ners were charged $7,000 each to

arbitrate their claims.

(e) As a result of such highAAA arbitration fees, many consum ers are unable to pursue

their claims against corpora tions such as the defen dant lender.

87. (a) T he plaintiff is entitled by th e state constitution and law to have any legal

disputes that they may have with the defendants resolved according to law bya genuinely unbiased,

neutral, independent decision maker.

(b) Th e defendant's fo rm agreement compels arbitration before an arbitrator- he AAA

- with very strong incentives to be biased in its favor.AL 4 is very sympathetic to and favorable

towards corp orate defendants.

(c) AAA's arbitrators know that there are numerou s othe r providers o f arbitration services,

and a ' s evelopment staff directly competes for corporate business with other providers such as

JAMS and the National Arbitration Foru m. All or nearly all of the business for AAA's for-profit

arbitrators comes from having corporations designateA AA as the arbitration service provider for the

corporation s' customers in their standard form contracts.AAA has a development team that focuses

up on convincing corporations to select it as the corpo rations' arbitration service providers.


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(d) A M ' S arbitrators know that if they were to rule for consumers too often by the

standards of the corporations selecting them or their defense lawyers, or enter awards for consumers

that were too large by the standards of these corporations and their defense lawyers, these companies

would cancel or not renew their contracts with the M A , nd the arbitrators would lose this lucrative

business.

(e) In addtion to the filing fees that AAA eceives when cases are lodged with it, and the

arbitrators' fees that its arbitrators receive for handling particular cases, A A A also receives regular and

substantial cash stipends, retainers, or payments from a large number of corporations.

(9 AAA regularly files amicus briefs with courts that support the efforts of corporate

defendants to force individuals to submit their claims to arbitration. In a series of cases before the

United States Supreme Court and other courts, AAA has filed supposedly "neutral" amhis briefs that

were purportedly in support of neither party. In each'of these cases, a corporate defendant was

attempting to compel an individual claimant to arbitrate his or her claims, and the individual claimant

was seeking to pursue his or her constitutional right to have his or her day in court and right tb a trial

by jury. In each case, despite M ' s chims of neutrality, M ' s amirtir brief set forth legal and/or

factual arguments in support of compelling arbitration in these cases, which was the ultimate position

sought by the corporate defendant and opposed by the inchidual plaintiff. After AAA filed an

ostensibly neutral brief with the Supreme Court in a recent case involving employment dsputes, one

A M rbitrator wrote AA A hat "Taking the strong position the Association took in this brief, where

half of its clients in the employment arena - claimants - take the opposing position, is not only

unseemly, but destroys M s ard earned neutrality." Michael Joe , Embattled Brit$ AA A Faces Ct;;ticism

from Two ( I t s Ownfi r Weighing In On a Mandatory A D R Case, THE RECORDER, eptember 27, 2000

(quoting Oakland arbitrator R. Elaine Leitner).


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might have with any corpora tion listed on an attachment to the mem o. This memorandum was

circu la ted despi te the fact that M ' sCod e o f Ethics, for Arbitrators in Comm ercial Disputes states,

Canon I at B, that "[ilt is inconsisten t with the integrity of the arb itration proces s for persons to solicit

appointment for themselves."

(k) AAA represen ts tha t individuals forced to arbitrate their claims before it will have their

rights protected by its Consume r Du e Process Protocol, a set of rules tha tAAA asserts will protect the

rights o f consum ers required to take part in mand atory arbitration. In fact, despite its representations

to th e contrary, AAA regularly administers arbitrations or otherwise end orses the validity of mandatory

pre-dispute arbitration clauses that do n ot comp ly with its Du e Proces s Protocol. In at least one case,

AAA refused to even respond to correspo nden ce from individuals facing a motion to compel arbitration

(or to c orrespo ndenc e from state and elected officials writing on the indv iduals' behalf) that requested

that AhA state that it would n ot administer arbiuation pu rsuant to an arbitration clause that did not

comply with M ' s Consumer Du e Process Protocol. In Februaryof 2000, one M A epresentative. . .

publicly a nn ou nc ed t h a t Mhad never yet refused to adm inister arbitration und er an arbitration clause

o n the grounds that it did not comply wish. its Dug ~ r o c e s s rotocol.

(l) AAA holds securities, stocks a nd /or othe r financial interests in a num ber o f finance

companies that appear before theAAA for arbitration.

88. Said compulsory arbitration form purpo rts to:

(a) take away the consume r's constitutio nal right to a jury trial;

(b) take away the consum er's right to pursue class claims;

(c) subject the consumer to creditor friendly arbitrator; and

(d) take away from th e con sum er any meaningful right to judicial review and a ppe al.


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89. A mutual and impartial decision maker is an essential element of due process and

fundam ental fairness implicit therein. W. V.i. COPU'ST.rt. I11 lo.

90 . Th e lcnders' form compulsory arbitration clause or rider- which mandates that all

claims arising ou t of a consum er transaction be submitted to a lender-designed decision maker lacking

neutrality and im partiality, when the co mpe nsation for individual decision makers encourages judgment

in favor of lenders is unconscionable and in violation ofWest Vi'ginin Code section 46A-2-121 and

therefor e un enforce able as a matte r of W est Virginia law.

WHEREFORE, the plaintiff respectfully prays for judgment as follows:

(a) Th at this Co urt enter declaratory judgment that the so-called arbitration clause

is void and unenforceable.

(b) Th at this Cou rt award a civil penalty in the a mo unt of$3500, as prescribed by

'West Vi~inio ode sections 46-A-2-101 (1)& (106).

(c) Th at this Co urt award attorney's fees and costs and such o the r relief as it may

.. .deem reasonable and just.

CO UN T XI11 - LACK OF MUTUALITY O R AGREEMENT

9 1. The plaintiff incorporates paragraphs one though ninety by reference.

92 . (a) Th e plaintiff had no understanding of tlus form compulsory arbitration

agreem ent or of its co ntents, let alone its drastic legal ramifications, such as waiver of her legal rights.

@) The re was never any discussion, negotiation, or even mention of the arbitration

agreem ent. Indeed , the plaintiff does no t even know what arbitration is.

93. The so-called arbitration rider purports to require the plaintiff to submit all claims to

arbitration but permits the defendants to pursue legal remedies without arbitration in certain

circumstances.


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94. Th e plaintiff does not possess equal bargaining powe r with the defendants. The

defe nda nts are sophisticated , predatory ho me-equity lcnders who use agents t o solicit long-term, low

risk hom e equity loans on terms clearly unfavorable to borrowers. Th e defe nda nts specifically targe

unsophisticated consum ers like the plaintiff.,

95 . There is no independent enforceable compulsory arbitration clause that is or was part

of the agreement between the parties.

W H E R E F O R E , the plaintiff respectfully prays for judgment as follows:

(a) Th at this Co urt en ter declaratory judgment that the so-called arbitration clause


@) Th at this Co urt award attorney's fees and costs an d such othe r relief as it may

deem reasonable and just.

COUNT XIII - UNCONSCIONABLE TERMS AND INDUCEMENT

96. Th e plaintiff incorpora tes paragraphs on e through ninety-five by reference.. .

,

97. Th e so-called co mpu lsory arbitration clause standing alone is unconscionableand in

violation of West Virginia Code section 46A-2-121 (l)(a) because of the unequal bargaining power

between the parties and othe r terms and conditions which were inducedby unconscionable conduct.

WHEREFORE, the plaintiff respectfully prays for judgment as follows:

(a) Th at this Cour t enter declaratory judgment thatth e compulsory arbitration clause


@) Tha t this Co urt award a civil penalty of $3500, attorney's fees and costs and su ch

oth er relief as it may deem reasonable an d just.

CO UN T XI11 - THE SO-CALLED ARBITRATION CLAUSECONTRA VENES PUBLIC POLICY

98. Theplaintiff incorporates paragraphs one through ninety-seven by reference.


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9 9 . Thc ctcfendants' so-called com pulsory arbitration clause stand ing alone is so one-sided

and is used in a context not involving consensual transactions between merchants of equal bargaining

power but rather transactions betweena large lender and much weaker and less knowledgenble

consum ers, and therefore it do es n ot further any policy favoring arbitration a nd itis' against the public

policy of the State of West Virginia and therefore void and unenforceable.

W H E R E F O R E , the plaintiff respectfully prays for judgment as follows:

(a) Th at this Co urt enter declaratory judgment that the so-called arbitrarion clause

is void an d u nenforceable;

(b)T ha t this Co urt award attorney's fees and costs an d such ot he r relief as it may

deem reasonable and just.

P L A I N T I F F D E l M A N D SA T R I AL BY JURY ON ALL ISSUES SO TRIABLE.

-By Counsel.

'BrenJ. Pomponio (WV Bar ID # 7774)Moun tain State Justice, Inc.922 Quarrier Street, Suite 525Charleston, W est Virginia 25301(304) 344-3144(304) 344-3 145 fax

complaint pred mort lending

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