A-1 Premium Acceptance v. Hunter
| Decision Date | 18 July 2017 |
| Docket Number | WD79735 |
| Parties | A-1 PREMIUM ACCEPTANCE, Appellant, v. MEEKA HUNTER, Respondent. |
| Court | Missouri Court of Appeals |
Appeal from the Circuit Court of Jackson County, Missouri
The Honorable Joel P. Fahnestock, Judge
Before Special Division: Cynthia L. Martin, Presiding Judge, Gary D. Witt, Judge and Zel M. Fischer, Special Judge
A-1 Premium Acceptance, Inc. d/b/a "King of Kash" ("A-1") appeals from the trial court's denial of a motion to compel arbitration of all claims asserted by Meeka Hunter ("Hunter") that went beyond A-1's claim against Hunter for recovery of amounts alleged due on a loan. Because the parties' arbitration agreement required it to be interpreted pursuant to the Federal Arbitration Act ("FAA"),1 and because the FAA requires that a substitute arbitrator be named if there is a lapse or vacancy in the naming of an arbitrator,we reverse the trial court's judgment denying the motion to compel, and remand this matter for further proceedings consistent with this opinion.
Factual and Procedural Background
In June and July 2006, Hunter took out four loans from A-1 totaling $800. Each loan was documented by several agreements including a loan application.2 Each loan application form was one page in length, and was signed by Hunter. Relevant to this appeal, each loan application contained identical boiler plate language as follows:
(Emphasis added.)
On January 21, 2015, A-1 filed a petition against Hunter to collect the outstanding balance on one of the four loans, claimed to be $275 in principal, plus interest in the amount of $6,957.62 as of September 16, 2014, together with continuing interest, attorney's fees and costs. On March 31, 2015, Hunter filed an answer, and a counterclaim which alleged a violation of the Missouri Merchandising Practices Act. On August 4, 2015, Hunter filed an amended answer which asserted several additional counterclaims and a request for class action certification for those who had entered into similar loans. Hunter also asked that the matter be reassigned from the associate circuit court to the circuit court. On September 28, 2015, A-1 filed a motion to compel arbitration and for stay of proceedings ("Motion to Compel"). The Motion to Compel argued that arbitration of Hunter's counterclaims was required by the agreement set forth in the loan application. The Motion to Compel sought the appointment of a substitute arbitrator pursuant to section 5 of the FAA because the National Arbitration Forum ("NAF"), designated as the arbitrator in the arbitration agreement, was prohibited from involvement in "consumer arbitrations" as of a July 17, 2009 consent judgment.
Hunter opposed the Motion to Compel on several grounds. Hunter argued that: (i) whether an arbitration agreement had even been formed was an issue that had not been delegated to the arbitrator for determination; (ii) the arbitration agreement exclusively designated the NAF as the arbitrator, rendering the arbitration agreement unenforceable because the NAF was not available to arbitrate; (iii) a contract to arbitrate was never formed because of the doctrines of unconscionability and mutuality; and (iv) A-1 waived its rightto enforce the arbitration agreement. Hunter requested time to conduct discovery related to the merits of the Motion to Compel.
On May 20, 2016, the trial court entered its order ("Order") denying the Motion to Compel. The Order concluded that The Order noted that as a result of this finding, "it is not necessary for the Court to rule on the remaining issues related to delegation issues, unconscionability due to lack of mutuality, and waiver of the right to arbitration."
A-1 filed this timely appeal.
Standard of Review
"'Whether the trial court should have granted a motion to compel arbitration is a question of law decided de novo.'" Ellis v. JF Enterprises, LLC, 482 S.W.3d 417, 419 (Mo. banc 2016) (quoting Johnson ex rel. Johnson v. JF Enterprises, LLC, 400 S.W.3d 763, 766 (Mo. banc 2013)).
Analysis
A-1 raises three points on appeal. First, A-1 argues it was error to deny the Motion to Compel because the FAA required the appointment of a substitute arbitrator upon the NAF's unavailability. Second, A-1 argues it was error to deny the Motion to Compel because the Missouri Uniform Arbitration Act mandates the appointment of a substitute arbitrator. Third, A-1 argues that it was error to deny the Motion to Compel because the arbitration agreement contains a latent ambiguity that frustrates the intent of the parties toarbitrate. Because the first point on appeal is dispositive, we need not resolve the second and third points.
By its express terms, the arbitration agreement set forth in Hunter's loan application is subject to the FAA, as the agreement provides that it "shall be interpreted under the [FAA]."3 "[T]he FAA . . . governs what courts may consider in determining whether an agreement to arbitrate is enforceable." Ellis, 482 S.W.3d at 419. Section 1 of the FAA provides that:
A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Here, the Order refused to compel enforcement of the arbitration agreement because the written arbitration provision was "missing an integral term" given the NAF's inability to serve as the arbitrator. The trial court clearly erred in so concluding.
As the Order correctly observed, "[t]he terms of a contract are read as a whole to determine the intention of the parties and are given their plain, ordinary, and usual meaning." State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 859 (Mo. banc 2006). Though the arbitration agreement designated the NAF as the arbitrator, the agreement also directed in plain and ordinary terms that it shall be interpreted under the FAA.
The trial court was thus required by the plain language of the arbitration agreement to interpret the effect of the NAF's inability to serve as the designated arbitrator pursuant to the terms of FAA. Section 5 of the FAA addresses the appointment of substitute arbitrators:
If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement, the arbitration shall be by a single arbitrator.
By its plain terms, section 5 of the FAA requires a trial court to appoint a substitute arbitrator under any number of circumstances, including when there is a lapse or vacancy because a designated arbitrator becomes unable to serve.
In concluding that the NAF's inability to serve as the arbitrator rendered the arbitration agreement unenforceable for want of "an integral term," the trial court ignored that the agreement expressly required its interpretation pursuant to the FAA, and thus ignored that section 5 of the FAA unequivocally required the appointment of a substitute arbitrator. The trial court's ruling was clearly erroneous as it interpreted the agreement in a manner that rendered the provision requiring interpretation pursuant to the FAA meaningless. Dunn Indus. Group, Inc. v. City of Sugar Creek, 112 S.W.3d 421, 428 (Mo. banc 2003) ( that each term of a contract is to be construed to avoid rendering other terms meaningless).
In reaching its conclusion, the trial court relied on federal court cases which have created a framework for evaluating whether the designation of an arbitrator is "integral" or "ancillary" to the obligation to arbitrate. This judicially constructed dichotomy is not analytically developed or grounded in a generally recognized doctrine by which any contract can be revoked. Instead, it is a framework crafted exclusively in connection with arbitration agreements,...
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