Pinkerton v. Technical Educ. Servs., Inc.
| Decision Date | 24 November 2020 |
| Docket Number | WD 83594 |
| Citation | 616 S.W.3d 477 |
| Parties | Steven PINKERTON, Respondent, v. TECHNICAL EDUCATION SERVICES, INC., Appellant. |
| Court | Missouri Court of Appeals |
Kevin A. Jones and Martin M. Meyers, Kansas City, MO, for respondent.
Kyle B. Russell, Overland Park, KS, for appellant.
Before Division Four: Cynthia L. Martin, Chief Judge, Presiding, Karen King Mitchell, Judge and Anthony Rex Gabbert, Judge
Technical Education Services Inc., an affiliate of Aviation Institute of Maintenance, et al., ("AIM"), appeals the trial court's order denying AIM's motion to dismiss, or in the alternative, to compel arbitration.1 AIM asserts three points on appeal challenging the trial court's determination that AIM is collaterally estopped from seeking to compel arbitration. We affirm the trial court's order.
AIM, a Virginia-based corporation, operates aviation maintenance trade schools throughout the United States, one of which is located in Kansas City, Missouri. In 2009, Steven Pinkerton ("Pinkerton") enrolled at AIM's Kansas City, Missouri trade school. In doing so, he signed an enrollment agreement which included an arbitration provision that provided as follows:
Arbitration Agreement: I agree that any controversy, claim or dispute of any sort arising out of or relating to matters including, but not limited to: student admission, enrollment, financial obligations and status as a student, which cannot be first resolved by way of applicable internal dispute resolution practices and procedures, shall be submitted for arbitration, to be administered by the American Arbitration Association located within Virginia Beach, Virginia, in accordance with its commercial arbitration rules. All fees and expenses of arbitration shall be shared equally and any award rendered in favor of a student will be limited to the total amount paid to the School by the student. Any award or determination rendered by the arbitrator(s) shall be final and entered as a judgment by a court of competent jurisdiction.
Six months later, Pinkerton signed a new enrollment agreement when he switched to a different program within AIM's school. The new enrollment agreement contained the same arbitration provision.
In 2014, Pinkerton filed a lawsuit in the Circuit Court of Jackson County, Missouri, against AIM; Adrian Rothrock, an admissions representative; and W. Gerald Yagen, the school's owner, alleging the school engaged in deception, misrepresentation, and fraud. AIM moved to dismiss the suit, or in the alternative, to compel arbitration and stay the proceedings. AIM contended that the arbitration provision required delegation to an arbitrator of all threshold arbitrability disputes, including whether the arbitration clause is enforceable. The trial court granted AIM's motion to compel arbitration, concluding that the arbitration provision required delegation of threshold arbitrability disputes to an arbitrator, including Pinkerton's contention that the arbitration provision was unenforceable because it was unconscionable.
Pinkerton sought a writ of prohibition from the Missouri Supreme Court to require the trial court to overrule the motion to compel arbitration because he had raised issues involving the validity and enforceability of the arbitration provision that could not be delegated to an arbitrator for determination. State ex rel. Pinkerton v. Fahnestock , 531 S.W.3d 36, 39-40 (Mo. banc 2017). The Supreme Court found that "[t]he arbitration agreement clearly and unmistakably evidence[d] the parties' intent to delegate threshold issues of arbitrability to the arbitrator," and that the trial court properly sustained AIM's motion to compel arbitration. Id. at 53. The Supreme Court thus ordered the parties to proceed to arbitration. Id.
Pinkerton's lawsuit proceeded to arbitration. Pinkerton and AIM jointly selected the Honorable Gary Oxenhandler to serve as the arbitrator. On November 15, 2018, Judge Oxenhandler issued an arbitrator's decision denoted as a "judgment" which ruled that:
Arbitration is supposed to be a fair process, a process that affords all parties the process they are due. Such is not the case here. For the reasons stated above, the Arbitrator finds the Arbitration Agreement unconscionable and unenforceable. This case is remanded to the Courts for appropriate action. Arbitration dismissed.
Pinkerton filed the arbitrator's decision with the trial court as an attachment to a motion to lift the stay of proceedings imposed when arbitration had been compelled. AIM did not oppose lifting the stay, and did not challenge the arbitration decision. The trial court granted Pinkerton's motion, lifted its stay, and the parties resumed litigation of Pinkerton's lawsuit in the trial court.
On July 23, 2019, Pinkerton voluntarily dismissed his lawsuit without prejudice pursuant to Rule 67.02.2 Three days later, Pinkerton re-filed his lawsuit, naming the same parties and asserting the same causes of action as had been asserted in his original lawsuit filed in 2014.
AIM once again moved to dismiss, or alternatively, to compel arbitration and stay the proceedings. AIM argued that the arbitration provision in the enrollment agreement was enforceable and that any challenges to enforceability of the provision had been delegated to the arbitrator for determination. Pinkerton argued that AIM was collaterally estopped from seeking to compel arbitration because an arbitrator had already found the arbitration provision to be unconscionable and unenforceable. AIM argued it was not collaterally estopped from seeking to compel arbitration because the arbitrator's decision was not a final judgment, and because Pinkerton's voluntary dismissal of the 2014 lawsuit "wipe[d] the slate clean," negating any preclusive effect of the arbitrator's decision.
The trial court denied AIM's motion to compel arbitration. The trial judge found that for purposes of collateral estoppel, the pertinent issue was whether the arbitration provision was enforceable, and that "[t]he prior action resulted in a final, valid judgment on that issue" when the arbitrator issued his decision. The trial court also found that Pinkerton had established the remaining elements of collateral estoppel. Thus, the trial court concluded that AIM was collaterally estopped from seeking to compel arbitration because the arbitration provision had been determined to be unenforceable. The trial court also concluded that Pinkerton's voluntary dismissal of the 2014 lawsuit did not negate the preclusive effect of the "valid final judgment regarding the enforceability of the arbitration provision."
AIM appeals.
"We review the circuit court's denial of a motion to compel arbitration de novo. " Fogelsong v. Joe Machens Auto. Group Inc. , 600 S.W.3d 288, 293 (Mo. App. W.D. 2020) (citing Soars v. Easter Seals Midwest , 563 S.W.3d 111, 113 (Mo. banc 2018)). "Upon such review, we must first determine whether a valid arbitration agreement exists." Sniezek v. Kansas City Chiefs Football Club , 402 S.W.3d 580, 583 (Mo. App. W.D. 2013) (citing Nitro Distributing, Inc. v. Dunn , 194 S.W.3d 339, 345 (Mo. banc 2006)). If the trial court's ruling on the motion to compel arbitration includes "factual findings that bear on the existence, scope, or revocability of the arbitration agreement, then we will affirm the factual findings if they are supported by substantial evidence and are not against the weight of the evidence." Id. (citing Whitworth v. McBride & Son Homes, Inc. , 344 S.W.3d 730, 736 (Mo. App. W.D. 2011)). The party asserting the existence of a valid and enforceable contract to arbitrate bears the burden of proving that proposition. Id.
AIM raises three points on appeal challenging the trial court's conclusion that AIM was collaterally estopped from seeking to compel arbitration. In its first point, AIM argues that the trial court committed legal error because collateral estoppel is an issue of arbitrability which had been delegated to the arbitrator for determination. AIM's second point asserts that even if the trial court properly determined the issue of collateral estoppel instead of referring that matter to arbitration, the trial court erred because the arbitrator's decision was not a final judgment on the merits. In its third point, AIM claims that the trial court erred in concluding that Pinkerton's voluntary dismissal of the 2014 lawsuit did not negate the preclusive effect, if any, of the arbitrator's decision. We address the points in turn.
Point One: Because the arbitrator's decision controls whether an arbitration agreement exists between Pinkerton and AIM, the trial court properly determined the collateral estoppel effect of the arbitrator's decision
It is uncontested that the arbitration provision AIM now seeks to enforce was determined by an arbitrator to be unenforceable in connection with Pinkerton's 2014 lawsuit. In other words, an arbitrator previously determined that no valid arbitration agreement exists between the parties because the arbitration provision was unconscionable. "Arbitration is a matter of contract under the Federal Arbitration Act (FAA)." Soars v. Easter Seals Midwest , 563 S.W.3d 111, 114 (Mo. banc 2018) (citing AT&T Mobility, LLC v. Concepcion , 563 U.S. 333, 339, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011)). " ‘[A] party cannot be required to arbitrate a dispute that it has not agreed to arbitrate[,]' and arbitration will only be compelled where ‘a valid arbitration agreement exists....’ " Hughes v. Ancestry.com , 580 S.W.3d 42, 47 (Mo. App. W.D. 2019) (quoting NutraPet Sys., LLC v. Proviera Biotech, LLC , 542 S.W.3d 410, 413-14 (Mo. App. W.D. 2017) ).
As such, the ultimate issue we must resolve is the preclusive effect of the arbitrator's decision that no valid arbitration agreement exists...
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...See id. at 718–20 ; Williams, 364 S.W.3d at 233 ; Jeffrey, 104 S.W.3d at 430.Shelter's reliance on Pinkerton v. Technical Education Services, Inc. , 616 S.W.3d 477 (Mo. App. W.D. 2020) is misplaced. In Pinkerton , the Western District held that the prior action (an arbitrator's decision fin......