Mckenzie Check Advance of Fla., LLC v. Betts

• Citation: 112 So.3d 1176
• Decision Date: 11 April 2013
• Docket Number: No. SC11–514.,SC11–514.
• Parties: McKENZIE CHECK ADVANCE OF FLORIDA, LLC, et al., Petitioners, v. Wendy BETTS, et al., Respondents.
• Court: United States State Supreme Court of Florida

112 So.3d 1176

McKENZIE CHECK ADVANCE OF FLORIDA, LLC, et al., Petitioners,

v.Wendy BETTS, et al., Respondents.

No. SC11–514.

Supreme Court of Florida.

April 11, 2013.

Virginia B. Townes and Carrie Ann Wozniak of Akerman Senterfitt, Orlando, FL; Jaime A. Bianchi, David P. Draigh and Sheldon Philp of White & Case, LLP, Miami, FL and Lawrence Patrick Rochefort of Akerman Senterfitt, West Palm Beach, FL, for Petitioner McKenzie Check Advance of Florida, LLC.

Claudia Callaway of Katten, Muchin, Rosenman, LLP, Washington, DC, for Petitioners Steve A. McKenzie and Brenda G. Lawson.

Theodore Jon Leopold and Diana L. Martin of Leopold Kuvin, P.A., Palm Beach Gardens, FL, and F. Paul Bland, Jr., Public Justice, Washington, DC, for Respondents.

Andrew J. Pincus and Archis A. Parasharami of Mayer, Brown, LLP, Washington, DC; Robin S. Conrad, National Chamber Litigation Center, Inc., Washington, DC; Caryn L. Bellus of Kubicki Draper, Miami, FL, for Amicus Curiae Chamber of Commerce of the United State of America.

PARIENTE, J.

The issue raised by the decision of the Fourth District Court of Appeal in McKenzie v. Betts, 55 So.3d 615 (Fla. 4th DCA 2011), is whether the class action waiver in the arbitration agreement in this case violates Florida public policy.¹ After the Fourth District decided this case, concluding that the class action waiver violated public policy, and certified a question to be of great public importance to this Court,² the United States Supreme Court issued its decision in AT & T Mobility, LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 1744, 179 L.Ed.2d 742 (2011), addressing the issue of whether the Federal Arbitration Act (FAA) “prohibits States from conditioning the enforceability of certain arbitration agreements on the availability of classwide arbitration procedures.” The Supreme Court concluded that the California Discover Bank rule,³ which it characterized as “classifying most collective-arbitration waivers in consumer contracts as unconscionable,” was preempted by the FAA. Id. at 1746.

Applying the rationale of Concepcion to the facts set forth by the Fourth District in McKenzie, we conclude that the FAA preempts invalidating the class action waiver in this case on the basis of it being void as against public policy. Accordingly, we quash the Fourth District's decision below. We decline to answer the certified question because it is moot in light of Concepcion. In other words, even if the Fourth District is correct that the class action waiver in this case is void under state public policy, this Court is without authority to invalidate the class action waiver on that basis because federal law and the authoritative decision of the United States Supreme Court in Concepcion preclude us from doing so.⁴

FACTS AND BACKGROUND

In 2001, plaintiffs Wendy Betts and Donna Reuter filed a class action complaint in circuit court against McKenzie Check Advance, LLC, d/b/a National Cash Advance (MCA), as well as Brenda and Steve McKenzie as the majority owners and managing officers of MCA. The plaintiffs asserted claims based on the Florida lending practices statute (chapter 687), Florida Consumer Finance Act (chapter 516), Florida Deceptive and Unfair Trade Practices Act (chapter 501) (FDUTPA), and the Florida Civil Remedies for Criminal Practices Act (chapter 772) (FCRCPA). The crux of the plaintiffs' claims was that MCA, under the deceptive guise of a check cashing service, was in reality loaning money at usurious and exorbitant rates.

The issue involved in this case arose when, in 2007, the plaintiffs amended the class action complaint to add Tiffany Kelly as an additional plaintiff and named class member. Because Kelly had signed the version of MCA's arbitration agreement that contained a class action waiver, this case focuses on her contracts with MCA, and not on the contracts signed by Betts or Reuter.

The Fourth District set forth the following facts with respect to Kelly:

This new plaintiff was Tiffany Kelly; her contracts with [MCA] included an arbitration agreement with a class action waiver. [MCA] moved to stay the proceedings and compel arbitration. The plaintiffs objected to arbitration, claiming the class action waiver was unconscionable, violated public policy, or both. The challenge to the arbitration agreement necessitated an evidentiary hearing.

At the hearing, Kelly testified she was a 24–year–old single mother with a year of college education. Money was tight—she had been turned down for public assistance and her bank would not give her a loan. A co-worker told her about [MCA]. Though embarrassed, she needed money so desperately that she went to a[MCA] store to obtain a cash advance on her paycheck. She described this first transaction with [MCA]. [MCA] gave her documents to review and initial. While she did not read the documents thoroughly, Kelly admitted that no one discouraged her from doing so. She was, however, anxious to receive the advance, and she knew she had to sign the documents to receive it.

....

Kelly signed the contract, gave [MCA] a $338 check in exchange for $300 cash, and left. She understood she would have to redeem the check within ten days or [MCA] could present it for payment. During the putative class period, Kelly ultimately engaged in twenty-one more payday loans with [MCA]. She paid a total of $860 in fees. When she entered into the transactions, Kelly testified she assumed they were legal: “If it was against the law, [the defendants] wouldn't be allowed to operate. At least that's what I would assume.”

McKenzie, 55 So.3d at 618–19 (alteration in original). Each transaction between MCA and Kelly was memorialized by a written contract that contained an arbitration clause and a class action waiver. The arbitration clause explicitly stated that the arbitrator shall not conduct class arbitration. The agreement further provided: “If any of this WAIVER OF JURY TRIAL AND ARBITRATION AGREEMENT is held invalid, the remainder shall remain in effect.” The parties stipulated, however, that if the class action waivers were held to be unenforceable, the arbitration provisions would be stricken.

The parties presented evidence at an evidentiary hearing on whether the class action waivers left MCA's customers “without a viable means of seeking redress.... Kelly presented the expert testimony of three Florida attorneys. The three testified that, absent the class action mechanism, Florida customers who wanted to challenge the practice of payday advance businesses would not be able to obtain competent legal representation.” Id. at 619. The attorneys further testified that it was virtually impossible for an individual consumer to find a competent attorney for a payday loan case because of the complex nature of such cases and the small amount of potential recovery. See id. at 619–20.

Following the hearing, the trial court denied MCA's motion to compel arbitration. In its order, the trial court found that the greater weight of the evidence “support[ed] the proposition that it would have been virtually impossible for Kelly to obtain competent individual representation for the claims brought here, particularly in 2000.” The trial court ruled that the class action waiver was unenforceable because it was void as against public policy. Specifically,the trial court determined that “enforcement of the class ban would deprive Kelly and similarly situated consumers of any remedy” and “would defeat the implicated statutes' remedial purposes and undercut their deterrent value.”

On appeal, MCA argued that its class action waiver would not defeat the remedial purposes of the statutes upon which the plaintiffs sued, including FDUTPA and FCRCPA. Id. at 621. The Fourth District disagreed, stating that “[c]ompetent, substantial evidence support[ed] the trial court's finding that no other reasonable avenue for relief would be available if it enforced the class action waiver.” Id. at 623. The Fourth District recognized that the contract “preserved [Kelly's] substantive rights,” id. at 619, but reasoned that the class action waiver violated the public policy of FDUTPA and FCRCPA because the inability to bring a class action suit against MCA would “eviscerate the remedial purposes of the relied-upon statutes. Only with the availability of class representation would consumers' rights in these payday loan transactions be vindicated.” Id. at 623. The Fourth District concluded that “[b]ecause payday loan cases are complex, time-consuming, involve small amounts, and do not guarantee adequate awards of attorney's fees, individual plaintiffs cannot obtain competent counsel without the procedural vehicle of a class action. The class action waiver prevents consumers from vindicating their statutory rights, and thus violates public policy.” Id. at 629. Stating that “these class action waivers frequently involve transactions amenable to suit under remedial statutes like FDUTPA, and such waivers are used more and more,” the Fourth District certified to this Court the question of whether a class action waiver in an arbitration agreement violates public policy when the trial court is persuaded that the waiver prevents consumers from obtaining competent counsel. Id.

ANALYSIS

MCA argues that in light of AT & T Mobility, LLC v. Concepcion, –––U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), which was issued after the Fourth District's decision below, the FAA preempts state laws invalidating arbitration agreements that require arbitration on an individual basis, thus requiring enforcement of the class action waiver in this case. Kelly responds that Concepcion does not apply to this case and, even if it did, it does not require enforcement of a class action waiver when, as here, an extensive factual record demonstrates that the plaintiffs would be unable to obtain competent counsel absent class action. Therefore, Kelly argues, enforcing the ban would prevent plaintiffs from vindicating their statutory...