Green Tree Servicing, L.L.C. v. Earnest Cla
689 F. App'x 363
5th Cir.2017Background
- Earnest and Shelia Clayton contracted with Jim Walter Homes in 2001; the promissory note and deed of trust included an arbitration agreement incorporating JAMS rules (including a delegation clause).
- Clayton I: Claytons sued in state court (2015) alleging defective construction, fraud, and seeking equitable relief; lenders removed to federal court based on diversity; motion to compel arbitration briefing was stayed pending remand briefing.
- While remand briefing in Clayton I remained pending, lenders filed Clayton II (Jan. 2016) in federal court seeking to compel arbitration of the same claims and to stay Clayton I; both cases were before the same district judge.
- Claytons moved in Clayton II to dismiss or consolidate under the first-to-file rule and later argued lenders were judicially estopped from seeking arbitration because of their earlier agreement to stay briefing in Clayton I; they did not respond to the lenders’ motion to compel arbitration in Clayton II.
- Judge Barbour denied dismissal/consolidation, rejected judicial estoppel, found the arbitration agreement and delegation clause valid (applying JAMS rules), compelled arbitration, and stayed Clayton I; the Fifth Circuit affirmed, holding the district court did not err and that Claytons waived new arbitration-challenge arguments by failing to raise them below.
Issues
| Issue | Plaintiff's Argument (Clayton) | Defendant's Argument (Lenders) | Held |
|---|---|---|---|
| First-to-file rule — whether Clayton II should be dismissed/consolidated | Clayton II is later-filed and overlaps Clayton I; first-to-file requires dismissal/consolidation | Rule applies to related cases pending before two different federal courts/judges; both cases were before same judge so rule is inapplicable | District court did not abuse discretion; first-to-file rule inapplicable where same judge presides, so denial of dismissal/consolidation affirmed |
| Judicial estoppel — whether lenders are estopped from moving to compel arbitration in Clayton II | Lenders previously agreed to stay arbitration briefing in Clayton I and thus took an inconsistent position | Positions were consistent given different procedural postures; stay in Clayton I only reflected remand/jurisdiction concerns and local-rule priority | No abuse of discretion; judicial estoppel not applicable |
| Validity and enforceability of arbitration agreement/delegation clause | Delegation clause was extrinsic, not knowingly accepted by unsophisticated consumers; court should use 2001 JAMS rules and consider fraud-in-the-inducement | Arbitration agreement (with JAMS incorporation) is valid; parties delegated arbitrability to arbitrator; no jurisdictional bar in Clayton II | Court compelled arbitration; but these substantive challenges were waived because Claytons failed to raise them in district court |
| Preservation/waiver — whether Claytons preserved arbitration-challenge arguments | Their motion to stay sought extra time to respond and prior state-court fraud allegations preserved issues | Claytons did not timely respond or reurge time request; state-court complaint exhibits did not properly present arguments below | Arguments were forfeited; appellate court declined to consider new arguments |
Key Cases Cited
- Int’l Fid. Ins. Co. v. Sweet Little Mex. Corp., 665 F.3d 671 (5th Cir. 2011) (first-to-file rule discretionary; substantial-overlap test)
- Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599 (5th Cir. 1999) (first-to-file rule purpose and scope)
- Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947 (5th Cir. 1997) (limits application of first-to-file to cases before different judges/districts)
- Vaden v. Discover Bank, 556 U.S. 49 (U.S. 2009) (court must have subject-matter jurisdiction over underlying dispute before compelling arbitration)
- Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380 (5th Cir. 2008) (standard for applying judicial estoppel)
- DK Joint Venture 1 v. Weyand, 649 F.3d 310 (5th Cir. 2011) (judicial estoppel not applied where prior position involved distinct facts)
- AG Acceptance Corp. v. Veigel, 564 F.3d 695 (5th Cir. 2009) (issues not raised below are generally waived on appeal)
- Belt v. EmCare, Inc., 444 F.3d 403 (5th Cir. 2006) (to preserve an argument, litigant must press it so district court has an opportunity to rule)