In this week’s Alabama Law Weekly Update, we consider two recent decisions concerning potential lender/loan servicer defenses to suit in federal court.

Marrisette v. Green Tree-Al, LLC, 2014 WL 1653259 (S.D. Ala. Apr. 24, 2014) (dismissing challenge to state court foreclosure judgment underRooker-Feldman doctrine).

Woodie Marisette filed this suit to challenge a foreclosure against him by Green Tree-AL, LLC. Marisette filed for Chapter 13 bankruptcy protection in 2000, and successfully completed his repayment plan. Marisette alleged that, under the terms of that plan, he completely paid the remaining amount owed to Green Tree on a retail installment contract secured by Marisette’s mobile home.

In 2008, Green Tree initiated an action against Marisette to foreclose on its security interest in Marisette’s mobile home. Green Tree successfully obtained summary judgment on its claims, and later obtained a writ of execution to enforce its judgment. Marisette responded by filing a motion to set aside the writ of execution, which was granted. However, Marisette never challenged the entry of summary judgment.

In 2013, Marisette initiated this action against Green Tree and the judge that entered relief against him, James T. Baxter, alleging that the defendants stole his mobile home even though he had already satisfied the debt against it. The District Court dismissed these claims for lack of jurisdiction under the Rooker-Feldman doctrine.

The Rooker-Feldman doctrine holds that a federal district court cannot exert appellate jurisdiction over a state court judgment. Pursuant to Rooker-Feldman, federal district courts cannot hear cases brought by parties complaining of injuries caused by state court judgments.  In this case, the District Court found that Green Tree’s summary judgment, which was never appealed, prohibited federal court action on Marisette’s claims. Even though Marisette did not expressly seek to undo the state court’s summary judgment, his lawsuit implicitly did so by inviting the Court to review the final judgment entered against him in Green Tree’s state court foreclosure action. Finding that the present federal court case implicated the continuing validity of the prior state court judgment, the District Court was required, under the Rooker-Feldman doctrine, to dismiss the case.

Pittman v. Santander Consumer USA, Inc., 2014 WL 1652376 (M.D. Ala. Apr. 24, 2014) (compelling arbitration where subsequent agreement without arbitration provision did not completely supersede prior agreement containing arbitration provision).

The plaintiff, James Pittman, filed suit against Santander Consumer USA, Inc., alleging violations of the Fair Debt Collection Practices Act and related counts of fraud, negligence, wantonness and breach of contract. This decision, however, concerns the arbitration of those claims.

Pittman obtained a loan to purchase a vehicle, which was later assigned to Santander. In 2011, Pitman sued Santander for violations of the FDCPA and the Telephone Consumer Protection Act, arising from Santander’s loan servicing practices. That case was ordered to arbitration. Later, the parties settled, and entered into a settlement agreement memorializing their agreement. The settlement agreement did not contain an arbitration provision.

Santander subsequently attempted to collect the deficiency on Pittman’s loan, which prompted Pittman to file a second lawsuit. Santander again sought to enforce the arbitration agreement in the original loan agreement. Pittman, however, argued in response that the settlement agreement (devoid of an arbitration provision) superseded the loan agreement, such that no arbitration provision was present.

The District Court found in favor of Santander and ordered arbitration. The Court’s opinion turned on whether an “entire agreement” clause in the settlement agreement completely superseded the prior loan agreement. Particularly, Eleventh Circuit case law provides that an arbitration clause in an earlier agreement is ineffective if the parties enter into a later agreement that entirely supersedes the prior agreement. However, Alabama state courts have found that language to the effect that a later agreement is the “entire agreement” between the parties is not sufficient to completely supersede a prior agreement. Based on the application of that principle, the District Court found that the arbitration agreement in the loan agreement was not rendered ineffective by the failure to provide for arbitration in the new agreement. Accordingly, the District Court stayed the proceeding pending submission to arbitration by the parties.