Bank of the Ozarks, Inc. v. Walker

• Decision Date: 17 March 2016
• Docket Number: No. CV–15–107,CV–15–107
• Citation: 487 S.W.3d 808,2016 Ark. 116
• Parties: Bank of the Ozarks, Inc., and Bank of the Ozarks, Appellants v. Robert Walker, Ann B. Hines, and Judith Belk, Appellees
• Court: Arkansas Supreme Court

2016 Ark. 116

487 S.W.3d 808

Bank of the Ozarks, Inc., and Bank of the Ozarks, Appellants

v.Robert Walker, Ann B. Hines, and Judith Belk, Appellees

No. CV–15–107

Supreme Court of Arkansas.

Opinion Delivered March 17, 2016

Rose Law Firm, A Professional Association, Little Rock, by: Richard T. Donovan, Amanda K. Wofford, and Betsy Turner–Fry, for appellants.

Carney Bates & Pulliam, PLLC, Little Rock, by: Randall K. Pulliam, Allen Carney, and John C. Williams, for appellees.

JOSEPHINE LINKER HART, Associate Justice

In Bank of the Ozarks, Inc. v. Walker,2014 Ark. 223, 434 S.W.3d 357, the circuit court denied the motion of appellants Bank of the Ozarks, Inc., and Bank of the Ozarks (Ozarks) to compel the arbitration of a class-action complaint filed by appellees, Robert Walker, Ann B. Hines, and Judith Belk on the ground that the arbitration provision in the account agreement between Ozarks and the appellees was unconscionable.This court reversed and remanded the circuit court's decision, holding that the circuit court must first determine, as a threshold issue, whether there was a valid agreement to arbitrate between Ozarks and appellees.

On remand, the circuit court concluded that there was not a valid agreement to arbitrate.Particularly, the circuit court found that there was neither a mutual agreement nor a mutual obligation.Ozarks appeals from the circuit court's decision.On appeal, Ozarks contends that the circuit court erred in concluding that neither mutual agreement nor mutual obligation was shown.We affirm the circuit court's decision to deny Ozarks's motion to compel arbitration.

Our jurisdiction is established by Rule 2(a)(12) of the Arkansas Rules of Appellate Procedure–Civil, which provides that an order denying a motion to compel arbitration is an immediately appealable order.On appeal, we review the circuit court's order denying the motion to compel de novo on the record and determine the issue as a matter of law.Walker,2014 Ark. 223, at 4, 434 S.W.3d at 360.The parties in this matter do not dispute that the Federal Arbitration Act applies to the agreement.Even though an arbitration provision is subject to the Act, courts look to state contract law to decide whether the parties' agreement to arbitrate is valid, and the same rules of construction that apply to agreements in general also apply to arbitration agreements.Id.,434 S.W.3d at 360.As we noted in Walker, the essential elements of a contract are (1) competent parties, (2) subject matter, (3) legal consideration, (4) mutual agreement, and (5) mutual obligation.Id.,434 S.W.3d at 360.

At issue here are the 2007, 2011, and 2013 versions of the account agreement between appellees, who are Ozarks's customers, and Ozarks, which holds the accounts.Those agreements included the following arbitration provision:

ARBITRATION.You or we may require that any controversy or claim relating to this agreement, or breach of it, be resolved through arbitration administered by the American Arbitration Association under its commercial rules.Judgment on any award rendered by the arbitrator may be entered in any court having jurisdiction.

The 2007 and 2011 agreements also contained several other provisions pertinent to the circuit court's ruling.

LAW, JURISDICTION, AND VENUE.The laws of Arkansas govern this agreement.The courts of that state have jurisdiction of any dispute in connection with this agreement.You agree that venue will be proper in the courts in the county and city of our office where you signed or delivered this agreement.

WAIVER OF JURY TRIAL.You waive your right to a jury trial in any dispute with us.Such disputes may be tried before a judge only.

...

EXPENSES.You will pay any expenses we incur in good faith related to this agreement, such as fees on items sent for collection, foreign exchange charges; and unreimbursed research and copying fees when someone requires records about our relationship, and attorneys' fees we incur in good faith because of concerns about the account, whether or not litigation has begun, including such fees through trial and all appeals, plus court costs.You also agree to pay any expense that we incur, including attorneys' fees in responding to any subpoena, writ, government agency or judicial order, search warrant, or other order which we may be required to respond to regarding your account or your relationship with us.

...

NO WAIVER.Failure to insist on your strict performance of any obligation under this agreement will not create any duty on our part to continue to do so.You will not claim that we waived our right to insist on proper performance.

Rather than a “NO WAIVER” provision, the 2013 agreement provided as follows:

OUR WAIVER OF RIGHTS.You understand and agree that no delay or failure on our part to exercise any right, remedy, power or privilege available to us under this Agreement shall affect or preclude our future exercise of that right, remedy, power or privilege.

With respect to expenses, the 2013 agreement provided as follows:

ATTORNEY FEES AND EXPENSES.You agree to be liable to us for any loss, costs or expenses, including reasonable attorneys' fees to the extent permitted by law, that we incur as a result of any dispute involving your account, and you authorize us to deduct any such loss, costs or expense from your account without prior notice to you.This obligation includes disputes between yourself and us involving the account and situations where we become involved in disputes between you and an authorized signer, another joint owner, or a third party claiming an interest in the account.It also includes situations where you, an authorized signer, another joint owner, or a third party takes action with respect to the account that causes us, in good faith, to seek the advice of counsel, whether or not we actually become involved in a dispute.

There were only minor differences in the following provision of the 2013 agreement as follows:

LAW, JURISDICTION, AND VENUE.This agreement and the account shall be governed by the laws of the state where the branch at which the account was opened is located.The courts of that state have jurisdiction of any dispute in connection with this agreement.You agree that venue will be proper in the courts in the county and city of our office where the branch at which the account was opened or located.

On remand, the circuit court found that the account agreements defining the parties' relationships did not establish either a mutual agreement or a mutual obligation.On the element of mutual agreement, the court noted that the account agreement provided that Arkansas courts have jurisdiction of any dispute and that any dispute was to be tried before a judge.The court also observed that Ozarks was also “seeking to enforce the arbitration provision in the same subject contract” and compel appellees to arbitrate.Based on this dissonance, the court found that mutual agreement was lacking.

On the element of mutual obligation, the circuit court found the element missing for two reasons.First, the court noted that the agreement provided that “[f]ailure to insist on your strict performance of any obligation under this agreement will not create any duty on our part to continue to do so.You will not claim that we waived our right to insist on proper performance.”Citing Alltel Corp. v. Rosenow,2014 Ark. 375, 2014 WL 4656609, the court concluded that there was no mutual obligation because this “NO WAIVER” provision extended to Ozarks, but not to its customers, appellees.Second, the court found that the account agreement required appellees to pay any expenses that Ozarks incurred in “good faith” when the disagreement or issue related to the account agreement, while not imposing the same obligation on Ozarks.

On appeal, Ozarks argues that the presence of the “LAW, JURISDICTION, AND VENUE” and the “WAIVER OF JURY TRIAL” provisions do not vitiate mutual agreement of the parties.Ozarks argues that these provisions are not inconsistent with the arbitration clause because the clause makes clear that either Ozarks or appellees can compel arbitration, but neither is required to do so.Further, Ozarks contends that granting the courts of Arkansas jurisdiction does not create an inconsistency with the arbitration clause because these courts would have jurisdiction if arbitration was waived and would have jurisdiction over certain matters if arbitration ensued.Ozarks asserts that these clauses can be read harmoniously to give effect to all the provisions of the agreement.

Ozarks further challenges the court's finding that there was no mutuality of obligation.Ozarks first contends that the “NO WAIVER” clause does not defeat mutuality of obligation because the arbitration clause provides that either party“may require” the other to arbitrate, and if a customer elected to arbitrate, Ozarks could not litigate.Second, Ozarks contends that the “EXPENSES” clause and its imposition of costs on appellees does not destroy mutuality of obligation.Ozarks asserts that mutuality of obligation does not require that the provisions of a contract treat the parties identically or that an expenses provision be mutual.Ozarks further submits that the expenses provision of the agreement does not specifically mention arbitration.Also, Ozarks asserts that invalidating the arbitration clause on this basis would result in a per se rule that singles out or disfavors arbitration, which would violate AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 131 S.Ct. 1740, 179 L.Ed.2d 742(2011), and would employ what Ozarks describes as a “bootstrapping” argument to avoid arbitration that was rejected in Buckeye Check Cashing, Inc. v. Cardegna , 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038(2006).

We first consider the circuit court's finding that there was no mutuality of obligation because the language in the agreement required appellees to pay the expenses that Ozarks incurred in good faith related to...