Car Credit, Inc. v. Pitts
| Decision Date | 24 August 2021 |
| Docket Number | WD84054 |
| Court | Missouri Court of Appeals |
| Parties | CAR CREDIT, INC., Respondent, v. CATHY L. PITTS, Appellant. |
APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI THE HONORABLE JENNIFER M. PHILLIPS, JUDGE
Before Edward R. Ardini, Jr., Presiding Judge, Mark D. Pfeiffer Judge and W. Douglas Thomson, Judge
Cathy Pitts ("Pitts") appeals the judgment of the Circuit Court of Jackson County confirming an arbitration award finding in favor of Respondent Car Credit, Inc. ("Car Credit"). This action arises from Pitts's 2011 automobile purchase and related financing from Car Credit. As part of that transaction, Pitts signed an arbitration agreement in which she and Car Credit agreed to arbitrate disputes before the National Arbitration Forum ("NAF"). Car Credit subsequently repossessed the vehicle due to Pitts's failure to remain current with the terms of the financing agreement and initiated a breach of contract action in the trial court. Pitts counterclaimed alleging Car Credit engaged in unlawful practices relating to vehicle repossession and collection of alleged deficiencies and sought class certification. Car Credit voluntarily dismissed its claim and moved to compel arbitration of Pitts's counterclaim. The trial court granted the motion and ordered Pitts's counterclaim be arbitrated before the American Arbitration Association ("AAA"), as NAF was unavailable.
We reverse the judgment of the trial court confirming the award entered by the AAA arbitrator. Because the parties agreed to arbitrate before-but only before-NAF, the AAA arbitrator was without authority to arbitrate Pitts's claims.
In July 2011, Pitts en.tered into a Retail Installment Contract and Security Agreement with Car Credit for the purchase and financing of an automobile. As part of that transaction Pitts executed an arbitration agreement, which provided that:
You and we [Car Credit] agree that if any Dispute arises either you or we may choose to have the Dispute resolved by binding arbitration under the rules then in effect of the Arbitration Organization shown below (if no Arbitration Organization is shown below, the Arbitration Organization shall be the National Arbitration Forum). If such rules conflict with this Arbitration Agreement, the terms of this Arbitration Agreement shall apply.
At the bottom of the one-page arbitration agreement was a blank line, under which the following was typed:
Arbitration Organization (If none listed, the Arbitration Organization is the National Arbitration Forum) See reverse side for addresses and phone numbers of arbitration organizations.[1]
No arbitration organization was identified on that line.
As relevant here, the term "Dispute" was defined in the agreement as "any controversy or claim . . . arising from or relating to the vehicle lease, loan or financing agreement (the 'Obligation') you have entered into with us on the date shown above," and included "any question regarding whether a matter is subject to arbitration under this Arbitration Agreement."
The parties agreed that "this Arbitration Agreement shall be subject to and governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16, as amended."
In 2015, Car Credit sent Pitts a Notice of Repossession and Plan to Sell Property, advising that her vehicle had been repossessed due to her failure to make payments, Car Credit intended to sell the vehicle after a lapse of ten days, and she could "get the collateral back" by paying Car Credit "the full amount [she] owe[d] (not just past due payments) including [Car Credit's] expenses." One month later, Car Credit sent Pitts a Notice of Deficiency Balance Due, stating that Pitts's vehicle had been sold for $800 and she owed Car Credit a "Net Deficiency Balance" of $4, 896.03.
In November 2015, Car Credit initiated this action by filing a Petition for Breach of Contract Damages against Pitts. Pitts filed an answer and counterclaim. In her First Amended Counterclaim, Pitts asserted a "consumer class action . . seeking relief to redress an unlawful and deceptive pattern of wrongdoing followed by Car Credit regarding collection, enforcement, repossession and disposition of collateral, and collection of alleged deficiencies." In May 2016, Car Credit filed a Notice of Dismissal, voluntarily dismissing its petition against Pitts without prejudice and leaving Pitts's counterclaim as the only pending claim in this action.
In June 2016, Car Credit filed a Motion to Compel Arbitration and Stay Trial Court Proceedings. Among other arguments raised in opposition, Pitts asserted that "[t]he forum designated by the arbitration agreement-the National Arbitration Forum (NAF)-is no longer available" and that "[arbitration should not be compelled due to [its] unavailability[]"[2] The trial court denied the motion to compel without stating its basis for the ruling.
In May 2017, Pitts filed a Motion for Class Certification, seeking to certify a class of Car Credit consumers and a Missouri subclass of such individuals. In December 2017, the trial court granted the motion and certified the class and Missouri subclass.
In April 2018, prior to the mailing of any class notice, Car Credit filed a Renewed Motion to Compel Arbitration, based on "[t]wo very recent cases since [the trial court's] prior ruling."[3]Car Credit argued that, pursuant to these recent decisions, "the language in the Pitts arbitration agreement unambiguously delegates to the arbitrator all the gateway issues of formation, interpretation, scope or validity of the arbitration agreement, and whether an issue is arbitrable[.]" In response, Pitts argued that "no arbitrator is available to decide issues delegated to the NAF and [Car Credit's] renewed motion must be denied." Pitts also advised that the Missouri Supreme Court had recently granted transfer in a case involving an arbitration agreement designating NAF as the arbitrator-A-l Premium Acceptance v. Hunter-and that argument was set to be heard in that case within a few days.[4]
On June 26, 2018, the trial court granted Car Credit's renewed motion. The trial court acknowledged that Hunter had been transferred to the Missouri Supreme Court, but found the reasoning of this Court's earlier Hunter opinion persuasive. The trial court ordered Pitts, "if she wishe[d] to proceed further on her claims, [to] . . . file a claim, as an individual claimant, in arbitration before the American Arbitration Association (AAA), pursuant to its consumer arbitration rules for arbitration[.]"
In October 2018, the Missouri Supreme Court handed down its decision in A-l Premium Acceptance v. Hunter, holding that because the parties agreed to arbitrate before-but only before-NAF, the trial court could not order arbitration before a different organization, notwithstanding NAF's unavailability. 557 S.W.3d 923, 929 (Mo. banc 2018).
In January 2019, the AAA arbitrator entered an order concluding that he had authority to arbitrate Pitts's claim, specifically finding that the arbitration agreement was valid and enforceable, the class claims were not subject to arbitration, [5] Car Credit had not waived its right to invoke arbitration, Pitts's claim was included within the term "Dispute" in the arbitration agreement, and that AAA could be substituted for NAF as the arbitration organization.
In April 2019, Pitts filed with the trial court a Motion to Reconsider Order Granting Renewed Motion to Compel Arbitration and a Motion to Vacate Order of Arbitrator Regarding Jurisdiction, citing the Hunter decision. The trial court denied the motions. Thereafter, Pitts sought writs of mandamus in this Court and the Missouri Supreme Court, which were denied.
In January 2020, the AAA arbitrator entered an award on the merits of Pitts's claims, finding in favor of Car Credit. Thereafter, Pitts filed in the trial court a Renewed Motion to Reconsider Order Compelling Arbitration and a Motion to Vacate the Arbitration Award, and Car Credit filed a Motion for Confirmation of Arbitration Award, Entry of Judgment Consistent with the Arbitration Award, and to Lift of [sic] the Stay to Decertify the Class. In June 2020, the trial court denied Pitts's motions and entered an order confirming the arbitration award and decertifying the class. In September 2020, the trial court entered its judgment confirming the arbitration award and finding in favor of Car Credit and against Pitts "on all issues, claims, counterclaims, and/or causes of action in accordance with the January 21, 2020, arbitration award." This appeal followed.
Pitts asserts on appeal-in three points relied on-that the trial court erred in entering the judgment confirming the AAA arbitrator's award. Although the arguments raised in her points overlap, the grounds for each point are essentially: (1) the trial court erroneously granted Car Credit's renewed motion to compel arbitration in that "if issues of arbitrability could be delegated to any arbitration forum, the National Arbitration [Forum] was the exclusive forum"; (2) the trial court erroneously denied Pitts's motion to reconsider in that Hunter "vindicated Pitts's opposition to the renewed motion"; and (3) the arbitrator exceeded his authority "in that he disregarded and modified the plain language of the arbitration provision" in finding arbitration by AAA permissible under the agreement.
We find Point III dispositive, and agree that the AAA arbitrator exceeded his authority, and thus the trial court erred in entering judgment confirming the arbitration award.
"The Federal Arbitration Act (FAA) sets forth the grounds for which a court may vacate an arbitration award." Groceman v. Pulte...
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