Reed v. Rmbs Reo Holdings, LLC

Background

John K. Reed, proceeding without a lawyer, asked the court to enforce an arbitration award against RMBS REO Holdings, LLC. The opinion states that the award totaled $15.2 million, consisting of an initial $3.8 million award and an additional $11.4 million described as “punitive tremble damages” if RMBS did not comply within 30 days.

Reed alleged that letters he sent to RMBS concerning a dispute over real property created an agreement to arbitrate because RMBS did not respond. After RMBS did not attend the arbitration hearing, a three-member panel issued an award in Reed’s favor. The panel later modified the award to require RMBS to release claims against Reed’s properties. Reed then filed a petition asking the court to affirm the modified award.

RMBS moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim, and also moved to vacate the arbitration award. Reed opposed the motion and requested permission to amend his petition.

Court’s analysis

The court reviewed the portions of Magistrate Judge Cave’s report and recommendation that were properly challenged independently and reviewed the remainder for clear error. It overruled the parties’ objections and adopted the report in its entirety.

The court held that whether parties agreed to arbitrate is a question for the court, not the arbitrator. Because RMBS disputed agreeing to arbitrate the property dispute—or any dispute—with Reed, the arbitration panel lacked authority to decide that RMBS’s silence created an agreement to arbitrate. The court agreed that silence alone, without evidence of intent, did not create an enforceable contract under New York law.

The court also agreed that Reed had not satisfied the Federal Arbitration Act’s requirements for enforcing an arbitration award because he did not attach a copy of the purported agreement to arbitrate. It further found that Reed’s allegations and other submissions did not plausibly show that a binding arbitration agreement existed. The court concluded that amendment would be futile because Reed had not identified facts that would establish such an agreement.

Disposition

The court granted RMBS’s motion to dismiss the petition and denied Reed’s motion for leave to amend. The court’s analysis states that the petition should be dismissed with prejudice. The court also denied RMBS’s motion to vacate the arbitration award, but stated that it did not need to decide whether that motion was timely because the petition was properly dismissed. The opinion separately states that Reed’s request for affirmation of a default judgment concerning the arbitration award was denied and dismissed. The clerk was directed to close the motions and the case.