Phillips v. Associates Home Equity Services

Juan Phillips (plaintiff) obtained a residential mortgage loan from Associates Home Equity Services, Inc. (Home Equity) (defendant). Home Equity offered various loans and services and specialized in providing credit to people with poor credit. Phillips was an individual with poor credit and was in severe financial straits. As part of the loan process, Phillips signed a variety of statements and agreements. Phillips also entered into a written arbitration agreement with Home Equity. The agreement provided that all disputes between Phillips and Home Equity in connection with the loan would be resolved through arbitration with the American Arbitration Association (association). The agreement also included a provision governing potential arbitration costs. Whichever party initiated arbitration would pay the filing fee and required deposit. If Phillips felt she was unable to pay the costs, she could ask the association to defer or lower them. If the association did not lower the fees, Home Equity would initially pay them but would have the arbitrator allocate the fees between the parties later. Other costs would be allocated according to the Commercial Arbitration Rules. The rules stated that the other costs of arbitration, such as arbitrator fees, travel costs, and room rentals, would be split equally by the parties, unless the parties agreed otherwise. A dispute over the loan eventually arose, and Phillips notified Home Equity that she wanted to rescind her loan agreement. Phillips then filed suit in federal district court, alleging violation of the Truth in Lending Act. Home Equity filed a motion to stay proceedings and compel arbitration under the Federal Arbitration Act (FAA). Phillips opposed the motion, claiming that arbitration was prohibitively expensive.