Ellis v. JF Enters., LLC, SC 95066
Decision Date | 12 January 2016 |
Docket Number | No. SC 95066,SC 95066 |
Parties | Lashiya D. Ellis, Respondent, v. JF Enterprises, LLC d/b/a Jeremy Franklin's Suzuki of Kansas City, Appellant. |
Court | Missouri Supreme Court |
JF Enterprises was represented by Gary J. Willnauer and Deborah F. O'Connorof Morrow, Willnauer, Klosterman, Church LLC in Kansas City, (816) 382–1382.
Ellis was represented by Kate E. Noland, Douglass F. Noland and Jennifer N. Wettstein of the Noland Law Firm LLC in Liberty, (816) 781–5055.
JF Enterprises, LLC, appeals the circuit court's judgment denying JF Enterprises' application to compel arbitration and stay proceedings in a contract dispute concerning a car sale to Lashiya Ellis. The trial court refused to compel arbitration because the contract between Ms. Ellis and JF Enterprises was void under section 301.210.1 Time and again, however, the United States Supreme Court has held that section 2 of the Federal Arbitration Act ("FAA") prohibits state courts from refusing to enforce an arbitration agreement on the ground that the underlying contract was void under state law. Because the FAA makes agreements to arbitrate severable from the other agreements of the parties, courts may only refuse to enforce an arbitration agreement if the party opposing arbitration brings a discrete challenge to the arbitration agreement—and not merely to the underlying or other contemporaneous contract—and shows that the arbitration agreement is invalid under generally applicable state law principles. Ms. Ellis has raised no discrete challenge to the arbitration provision distinct from her challenge to the underlying contract. Even though the sale between JF Enterprises and Ms. Ellis may well be void under section 301.210, that question (and the question of her remedies) is for the arbitrator to determine, not the courts. Accordingly, the trial court's judgment is vacated, and the case is remanded with instructions for the trial court to grant JF Enterprise's motion and compel arbitration.
On November 4, 2013, Ellis purchased a new car from JF Enterprises. Upon purchase, Ellis signed a retail buyers order and executed a retail installment contract. That same day, Ellis also signed an arbitration agreement that provided, in pertinent part:
On July 11, 2014, Ellis filed the underlying petition for damages. She alleged JF Enterprises violated the Missouri Merchandising Practices Act by failing to pass title for her new vehicle in violation of section 301.210. Ellis requested the trial court declare the retail buyers order, retail installment contract, and arbitration agreement void and rescind the transaction under section 301.210.2
In its answer and motion to stay proceedings and compel arbitration, JF Enterprises asked the trial court to enforce the arbitration agreement between the parties. JF Enterprises argued Ellis' allegations arise out of or relate to her purchase of the car as contemplated by the arbitration agreement. Ellis maintained the contract documents, including the arbitration agreement, should be construed together and, when so construed, are void and unenforceable under section 301.210. JF Enterprises replied that the FAA governs the arbitration agreement and that, under applicable United States Supreme Court precedent, it is severable from the underlying sales contract and related agreements and must stand or fall without reference to them. The trial court overruled the motion to compel arbitration, finding:
[N]o title to the 2012 Hyundai Sonata was provided to Plaintiff Lashiya D. Ellis at the time of the sale or since, and therefore, pursuant to Section 301.210 RSMo., the contract is fraudulent and void, and ... the arbitration provision which is to be construed with the other contract documents is subject to [Ellis'] contract defenses of fraud and lack of consideration and is void, and therefore, not enforceable.
Thereafter, JF Enterprises filed an appeal under section 435.440.3
Whether the trial court should have granted a motion to compel arbitration is a question of law decided de novo. Johnson ex rel. Johnson v. JF Enterprises, LLC, 400 S.W.3d 763, 766 (Mo. banc 2013). "When faced with a motion to compel arbitration, the motion court must determine whether a valid arbitration agreement exists and, if so, whether the specific dispute falls within the scope of the arbitration agreement." Nitro Distributing, Inc. v. Dunn, 194 S.W.3d 339, 345 (Mo. banc 2006). Here, there is no question that the FAA applies—both under the Supremacy Clause and as a matter of the parties' express agreement. Nor is there any dispute that the parties' arbitration agreement, if valid, covers the claims Ms. Ellis has asserted. Accordingly, the only issue before this Court is whether the arbitration agreement is valid.
Ms. Ellis contends that the arbitration agreement is not enforceable because it was signed as part of, and must be construed together with, the sales agreement, which section 301.210 would render "fraudulent and void" if no title was passed. She raises no challenge to the arbitration agreement distinct from the challenge she raises to the underlying contract. Instead, she argues that—if the latter falls—the former falls with it.
Under Missouri law, Ms. Ellis may be right. But the FAA, not Missouri law, governs what courts may consider in determining whether an agreement to arbitrate is enforceable. Under the FAA, such agreements are "severable." This means that they are to be considered separate and apart from any underlying or contemporaneous related agreements. Of course, the FAA does not say that all purported arbitration agreements necessarily are enforceable. It does provide, however, that such agreements are enforceable unless the arbitration agreement itself—in isolation—is invalid under generally applicable state law principles. So sayeth the Supreme Court on three separate occasions, and it does not behoove this Court to parse its clear language in search of a way to achieve what the Supreme Court so clearly has held Congress and the FAA prevent.
The long pole of the tent in the Supreme Court's treatment of this issue is Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006), in which the Court overturned the Florida Supreme Court for adopting the very argument urged by Ms. Ellis. To illustrate the breadth and depth of the Supreme Court's unwillingness to indulge the argument that an arbitration agreement cannot be enforced if it is contained within a contract that is void under state law, the Supreme Court's rationale is set forth here in full:
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