The Ohio Supreme Court has ruled in Alexander v. Wells Fargo Financial Ohio 1, Inc. that statutory claims for failure to timely satisfy a mortgage are covered by an agreement between a borrower and a lender to arbitrate any claim "arising out of or relating to" the loan agreement. According to the court, in determining whether a claim is covered by an arbitration provision containing such language, the proper standard is whether the claim "can be maintained without reference to" the underlying agreement. The court found that a satisfaction claim requires reference to the loan agreement because the borrower must establish the existence of the loan itself.

The court consolidated its decision in Alexander, issued June 30, 2009, with its decision in Coleman v. American General Financial Services, Inc. (which involved an alleged failure to timely terminate a financing statement). In both cases, the lower court had ruled that the borrowers' claims were not subject to arbitration because the filing of a mortgage satisfaction or termination was not "an integral part of the lending process." On behalf of the American Financial Services Association and the Consumer Bankers Association, Ballard Spahr lawyers filed an amicus brief in each case in support of the lenders' appeals. (We had previously filed amicus briefs on behalf of these groups urging the court to grant review in the two cases.) Our briefs noted the widespread use in the consumer financial services industry of arbitration agreements with the same "arising out of or relating to" language that was before the court. Our briefs likewise noted that industry members rely on the numerous judicial decisions broadly interpreting such language to cover statutory claims. They argued that the lower court’s narrow construction of this language was inconsistent with the Federal Arbitration Act's mandate that the scope of an arbitration agreement be construed liberally in favor of arbitration. This argument resonated with the Ohio Supreme Court, which found the analysis used by the lower court to be inconsistent with the "presumption in favor of arbitration."

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its skill in defending banks and other consumer financial services providers in class actions filed in state and federal courts throughout the country and in litigation avoidance (including pioneering work in pre-dispute arbitration programs). For further information, please contact Alan S. Kaplinsky, partner-in-charge of the group, 215.864.8544 or kaplinsky@ballardspahr.com; or Mark J. Levin, 215.864.8235 or levinm@ballardspahr.com


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