Borrower sanctioned for frivolous arbitration argument

Where a mortgage borrower’s argument that loan servicing companies tacitly consented to arbitration by their silence was frivolous, and he refused to withdraw a motion to confirm an “arbitration” award after receiving a Rule 11 safe harbor letter, he was sanctioned $9,000.

Background

This dispute arises out of a mortgage obtained by petitioner. At some point, petitioner apparently defaulted on the mortgage. On Feb. 12, 2019, petitioner sent a document to respondents, titled “Show of Cause Proof of Claim Demand,” that contained a litany of difficult to comprehend legal and factual assertions. It provided that respondents will have consented to arbitration through “tacit acquiescence” should they not respond within 10 days.

Then, on Feb. 25, 2019, petitioner sent a “Notice of Default” that stated, “you are now a party to the contract that you have received and you have not complied to the terms of the contract.” The notice further detailed that failure to respond within three days would result in “default and we will proceed to get a judgment against you through arbitration.”

On May 18, 2019, Sitcomm Arbitration Association purported to enter a

“Notice of Arbitration Hearing,” setting a hearing for June 4, 2019. On May 23, 2019, Lakeview Loan Servicing LLC sent a cease and desist letter to petitioner.

On June 20, 2019, an arbitrator allegedly awarded petitioner $1,079,700 from respondents. On July 10, 2019, petitioner filed his motion to confirm, along with a copy of the award, in this court.

On Dec. 30, 2019, the court denied petitioner’s motion to confirm and vacated the award on both statutory and common law grounds. The court ordered petitioner to show cause, directing petitioner to “address the legal basis for his argument that Respondents agreed to arbitration, including any legal support for his argument that ‘tacit acquiescence’ can form a contract.”

After petitioner filed a response, two respondents (Lakeview and LoanCare LLC) jointly filed a motion for sanctions, asking for an award of reasonable attorneys’ fees in the amount of $40,979. The third respondent, RoundPoint Mortgage Servicing Corporation, also filed a petition for attorneys’ fees, requesting an award of $9,256.76 in attorneys’ fees and costs.

Analysis

Petitioner bases his claim on the assertion that he sent a document to respondents that contained an agreement to arbitrate. The argument that this document constituted a binding contract contradicts basic contract law. The law clearly states that petitioner cannot rely on respondents’ lack of response to claim that they agreed to arbitrate.

After the court ordered petitioner to set forth the legal support for his argument that “tacit acquiescence” could form a contract, petitioner responded with a reference to section 69 of the Restatement (Second) of Contracts. That section allows for silence to operate as acceptance of a contract only in limited circumstances. Petitioner offers no facts to support any of the elements of the acceptance-by-silence rule here. Moreover, petitioner does not cite any caselaw that would support application of the acceptance-by-silence rule here.

Pro se litigants deserve leniency in the construction of their pleadings. However, no amount of permissible leniency can excuse the baseless motion to confirm filed by petitioner. Moreover, petitioner failed to withdraw his frivolous motion even after RoundPoint sent him the safe harbor letter warning him of his violation of Rule 11.

With petitioner clearly having violated Rule 11, the court must next determine the appropriate sanction. Although the court finds respondents’ fees reasonable, other factors counsel against awarding the full amount of fees. The court believes that a $9,000 sanction — $3,000 each to RoundPoint, Lakeview and LoanCare — will sufficiently deter petitioner and those similarly situated to him from filing similar frivolous motions to confirm based on sham arbitration awards.

Defendants’ motions for sanctions granted in part, denied in part.

Meekins v. Lakeview Loan Servicing LLC, Case No. 19-cv-501, April 21, 2020. EDVA at Richmond (Novak). VLW 020-3-224. 14 pp.