Bess v. Check Express

• Decision Date: 19 June 2002
• Docket Number: No. 00-16479.,00-16479.
• Citation: 294 F.3d 1298
• Parties: Elizabeth BESS, Deborah George, Terry Stough, individually and as representatives of a class of similarly situated persons, Plaintiffs-Appellees, v. CHECK EXPRESS, d.b.a. Payday Now, Quik Pawn Shop Franchising, Inc., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

294 F.3d 1298

Elizabeth BESS, Deborah George, Terry Stough, individually and as representatives of a class of similarly situated persons, Plaintiffs-Appellees, v. CHECK EXPRESS, d.b.a. Payday Now, Quik Pawn Shop Franchising, Inc., et al., Defendants-Appellants.

No. 00-16479.

United States Court of Appeals, Eleventh Circuit.

June 19, 2002.

COPYRIGHT MATERIAL OMITTED

George W. Walker, III, Shannon L. Holiday, Copeland, Franco, Screws & Gill, P.A., Montgomery, AL, J. Mark White, William M. Bowen, Jr., White, Dunn & Booker, Birmingham, AL, for Defendants-Appellants.

Michael Skotnicki, Birmingham, AL, for Plaintiffs-Appellees.

Vaneta Lynne Windham, State Banking Dept., Montgomery, AL, for Alabama State Banking Dept., Amicus Curiae.

Appeal from the United States District Court for the Northern District of Alabama.

Before BIRCH, COX and ALARCON^*, Circuit Judges.

COX, Circuit Judge:

Express Check Services, Inc., doing business as PayDay Now ("PayDay"), and Quick Pawn Shop Franchising, Inc., Frank Evans, Charlotte Evans, and Jeffrey Evans (collectively referred to as "the other defendants"), appeal the district court's denial of their motion to compel arbitration of the claims against them by Luna Clifton Colburn. We vacate and remand for a trial on how many of Colburn's claims are subject to arbitration.

I. Background

This lawsuit was filed as a class action against PayDay and the other defendants for alleged violations of state and federal law arising out of "check advances" or "deferred payment transactions" between the plaintiffs and defendants. In such transactions, a customer writes a check to the vendor in exchange for an immediate cash payment in an amount less than the face value of the check. (R.1-52 at ¶ 1.) The vendor agrees to hold the check for a specified period of time, generally five to fourteen days. Upon the expiration of the agreed time, the customer may redeem the check by paying back the full face value, or the vendor will present the check for payment. (Id.) The plaintiffs allege that deferred payment transactions actually are loans governed by the Alabama Small Loan Act, Ala.Code § 5-18-1, et seq., and that PayDay and the other defendants violated this statute by making loans to the plaintiffs without the requisite license and at usurious rates of interest. The plaintiffs also allege that the collection of this usurious interest constituted the collection of an unlawful debt in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq.¹

Colburn was added as a named plaintiff by way of an amended complaint. The amended complaint alleges that Colburn engaged in three deferred payment transactions with PayDay: on January 11, 2000; on February 4, 2000; and on February 18, 2000. (R.1-16 at ¶¶ 19-21.) The record also indicates that Colburn engaged in two other deferred payment transactions with PayDay: on May 26, 2000 (R.1-9, Ex. B); and on June 9, 2000 (R.1-17, Evans Aff.). At some point, Colburn signed an arbitration agreement, which reads as follows:

I understand that if I have any dispute(s) with Express Check Services, Inc., including any of its past, present, and future officers, directors, agents, employees, representatives, parents, subsidiaries, affiliates, predecessors, successors, heirs and/or assigns (hereinafter referred to collectively as "Express Check Services, Inc.") arising out of or in connection with the Check Advance or any other aspect of my transaction with Express Check Services, Inc. (as defined above), including, but not limited to, the Check Advance transaction, the terms of the Check Advance, representations concerning any aspect of the Check Advance transaction, the money advanced, the Check Advance charges assessed, the payments made, or the recovery of any funds due Express Check Services, Inc. (as defined above), I HEREBY AGREE that any such dispute(s) shall be resolved only through binding arbitration. The arbitration will be conducted under the rules of the American Arbitration Association ("AAA") that are in effect at the time the arbitration is commenced. The arbitrator may, in his or her discretion, allow discovery as per the Alabama Rules of Civil Procedure. Although the arbitration shall be conducted pursuant to the rules of the AAA, the arbitration shall not be conducted through the AAA unless otherwise agreed to by the parties. I FURTHER UNDERSTAND THAT ARBITRATION SHALL BE THE EXCLUSIVE METHOD OF RESOLVING ANY AND ALL DISPUTES, AND I AM WAIVING MY RIGHT TO HAVE SUCH DISPUTES RESOLVED THROUGH A TRIAL BY JURY.

(R.1-17, Ex. A.) Although the arbitration agreement is signed, it is not dated. There is no evidence in the record as to whether Colburn signed any other arbitration agreements, nor is there evidence that any of the other named plaintiffs signed arbitration agreements.

Invoking the arbitration agreement, PayDay and the other defendants moved to compel arbitration of Colburn's claims pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq. Colburn opposed this motion, inter alia, on the following grounds: the arbitration agreement could not be enforced because the deferred payment transaction in general was void as illegal under Alabama law; the arbitration agreement was void on its face because it is undated; and the arbitration agreement is unconscionable. Without holding an evidentiary hearing, the district court denied the motion to compel arbitration simply by stamping "DENIED" on the motion, offering no reasons for the denial.

PayDay and the other defendants filed a notice of appeal from the denial of their motion to compel arbitration. After hearing oral argument, we remanded this case to the district court for the limited purpose of explaining its denial, retaining jurisdiction in this court over the appeal. Bess v. Check Express, 275 F.3d 52, No. 00-16479, unpublished (11th Cir. Oct. 2, 2001). On remand, the district court entered findings of fact and conclusions of law in support of its denial of the defendants' motion. After finding that the arbitration agreement fails to specify certain details about the method of arbitration, including the costs of such, the district court found that Colburn is unable financially to pay more than $150.00 to resolve his claim against PayDay and the other defendants. The district court also found that, should it appoint an arbitrator, the fee would be at least $150.00 per hour and the arbitration would require at least four hours. Based on these findings, the district court concluded that Colburn could not afford to pay his share of the arbitration costs, and it expressly relied on this court's decision in Randolph v. Green Tree Fin. Corp.-Alabama, 178 F.3d 1149 (11th Cir.1999), aff'd in part and rev'd in part, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), in refusing to enforce the arbitration agreement.

We ordered supplemental briefing on the issues presented by the district court's order following remand. Having reviewed the supplemental briefs, we proceed to consider the issues raised in this appeal.

II. Jurisdiction and Standard of Review

This court has jurisdiction over this appeal pursuant to 9 U.S.C. § 16(a). We review de novo the district court's denial of the motion to compel arbitration. See, e.g., Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1283 (11th Cir.2001).

III. Discussion

PayDay and the other defendants contend that the district court's reliance on Randolph v. Green Tree Fin. Corp.-Alabama, 178 F.3d 1149 (11th Cir.1999), which was reversed in relevant part by the Supreme Court, see Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), necessitates reversal of the district court's decision. Colburn, on the other hand, asserts that the district court's holding in this case is distinguishable from Randolph, and he additionally argues that we may affirm the district court on several alternative bases. We conclude that the district court's articulated reason for denying the motion to compel arbitration cannot be sustained in light of the Supreme Court's decision in Randolph. We also conclude that Colburn's alternative arguments concerning the illegality of the deferred payment transactions and the unconscionability of the arbitration agreement do not provide adequate grounds for affirming the district court. Colburn's argument that the arbitration agreement cannot be enforced because it is undated, however, raises unresolved questions of fact that necessitate a remand to the district court.

A. The District Court's Articulated Reason

As explained above, the district court expressly declined to enforce the arbitration agreement on the authority of this court's decision in Randolph. In that case, a panel of this court determined that an arbitration provision in a retail installment contract was unenforceable because it potentially gave rise to high costs to the party pursuing arbitration. See Randolph, 178 F.3d at 1158. Specifically, the arbitration clause said nothing about the payment of filing fees, the apportionment of the costs of arbitration, the ability to waive such fees and costs due to financial hardship, or the set of rules that would govern the arbitration. Id. The lack of specificity as to these matters meant that neither the court nor the parties possessed adequate information about how claimants would fare under the arbitration clause. Id. For this reason, the court determined that the clause potentially could lead to prohibitive costs and therefore failed to safeguard the plaintiff's ability to vindicate her rights. Accordingly, the court held that the clause was unenforceable. Id.

The Supreme Court reversed this holding because the record failed to show that the plaintiff in fact was likely to bear prohibitive costs if the dispute went to arbitration. See Randolph, 121 S.Ct. at 522. Although the plaintiff asserted that the American Arbitration Association ("AA...