Robinson v. Title Lenders, Inc.

• Decision Date: 06 March 2012
• Docket Number: No. SC 91728.,SC 91728.
• Citation: 364 S.W.3d 505
• Parties: Lavern ROBINSON, Respondent, v. TITLE LENDERS, INC., d/b/a Missouri Payday Loans, Appellant.
• Court: Missouri Supreme Court

364 S.W.3d 505

Lavern ROBINSON, Respondent,

v.TITLE LENDERS, INC., d/b/a Missouri Payday Loans, Appellant.

No. SC 91728.

Supreme Court of Missouri,

En Banc.

March 6, 2012.

John Campbell, John Simon, Erich Vieth, The Simon Law Firm, St. Louis, MO, for Robinson.

Claudia Callaway, Katten Muchin Rosenman LLP, Washington, D.C., Jane E. Dueker, Cicely I. Lubben, Stinson Morrison Hecker LLP, St. Louis, MO, for Title Lenders.

MARY R. RUSSELL, Judge.

At issue in this case is whether a consumer arbitration agreement containing a class action waiver is unconscionable and, therefore, unenforceable. Title Lenders, Inc., a payday loan company, argues that its arbitration agreement containing a class waiver is enforceable and should result in the dismissal of a lawsuit brought by Lavern Robinson (Borrower). Borrower seeks to have the arbitration provision or its class waiver declared unenforceable so that she can proceed with a class action suit or class arbitration against Title Lenders.

The trial court found that Title Lenders' arbitration agreement is unconscionable and unenforceable because its class waiver deprives borrowers of a meaningful remedy. Title Lenders appeals, and its appeal presents the issue of how the United States Supreme Court's recent decision in AT & T Mobility LLC v. Concepcion, ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), applies in this case.¹Concepcion held that the Federal Arbitration Act (FAA) preempted a California judicial rule that deemed unconscionable most class arbitration waivers in consumer contracts. See131 S.Ct. at 1746 (noting that the question the court was addressing was whether section 2 of the FAA preempted California's “ Discover Bank rule,” which classified “most collective-arbitration waivers in consumer contracts as unconscionable”).

This Court finds that Concepcion instructs that the trial court erred in finding that Title Lenders' arbitration agreement was unconscionable based on its class waiver. Concepcion indicates that, in light of the FAA's section 2 “saving clause,” the trial court instead should have adjudicated whether the arbitration agreement was enforceable in light of Borrower's evidence relevant to her claims regarding ordinary state-law principles that govern contracts but that do not single out or disfavor arbitration. For these reasons, the trial court's judgment is reversed.

Because the trial court has not yet adjudicated Borrower's unconscionability claims that are not related to the arbitration agreement's class waiver, this matter is remanded to the circuit court for further consideration in light of Concepcion and this opinion.

I. Background

From September 2005 to September 2006, Borrower entered into 13 separate loan agreements with Title Lenders. Borrower does not contest that each of these agreements was approved by the Missouri Division of Finance and included all necessary disclosures under state and federal law. Each of the loan agreements signed by Borrower contained Title Lenders' standard arbitration agreement language. The arbitration provisions explained arbitration, noted that some claims still might be resolved in small claims “court,” provided that arbitrations would be administered by the American Arbitration Association, and indicated that Title Lenders would cover the filing fees and costs for arbitration when “it would be unfair or burdensome” for the borrower to pay. The arbitration agreement indicated that Borrower was waiving a jury trial or access to a class action, but it did not otherwise contain a waiver of any claims, remedies, or damages that would be available to Borrower. The following language in the arbitration agreement noted the class waiver (bolded and capitalized emphasis appears in the agreement, underlined emphasis added by this Court):

Only disputes involving you and us may be addressed in the arbitration. The arbitration may not address any dispute on a “class action” basis. This means that the arbitration may not address disputes between you and us.

The arbitrator shall have the authority to award any legal or equitable remedy or relief that a court in the State of Missouri could order or grant. The arbitrator, however, is not authorized to change or alter the terms of this Agreement or to make any award that would extend to any loan other than your own.

BY AGREEING TO ARBITRATE ANY DISPUTE, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT DISPUTE IN COURT, OR TO HAVE A JURY TRIAL ON THAT DISPUTE, OR ENGAGE IN DISCOVERY PROCEEDINGS EXCEPT AS PROVIDED FOR ABOVE OR IN THE ARBITRATION RULES. FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS PERTAINING TO ANY DISPUTE SUBJECT TO ARBITRATION. THE ARBITRATOR'S DECISION WILL BE FINAL AND BINDING, EXCEPT TO THE EXTENT IT IS SUBJECT TO REVIEW IN ACCORDANCE WITH APPLICABLE LAWS GOVERNING ARBITRATION AWARDS, OTHER RIGHTS THAT YOU OR WE WOULD HAVE IN COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION.

Borrower signed each of the lending contracts, including the arbitration provisions, and her signature was noted to indicate her understanding and acceptance of all terms in the agreement. Borrower attested in a deposition that she never was threatened, rushed, pressured, or forced into entering the agreements with Title Lenders. She also indicated, however, that she never read the arbitration clauses when she signed the loan contracts.

In October 2006, Borrower sued Title Lenders, alleging that its lending practices violated the Missouri Merchandising Practices Act and certain regulatory statutes. Borrower sought to represent herself in the suit, as well as a putative class of borrowers who also had obtained payday loans using Title Lenders' loan agreement form. Title Lenders, asserting the arbitration provisions signed by Borrower, moved to stay Borrower's suit and to compel her to pursue her claims via individual arbitration or in the small claims division of the circuit court. Borrower responded that Title Lenders' class waiver in its loan contract arbitration provisions rendered its arbitration agreement unconscionable and, therefore, unenforceable.² Borrower also asserted that Title Lenders' class waiver would effectively immunize it from suits because attorneys would not agree to handle borrowers' cases unless a class action was available. She argued that the class waiver was an exculpatory clause that was unenforceable because it was not clear and unambiguous.³

Arguments and briefs were presented to the trial court. Evidence was presented regarding Borrower's contentions that Title Lenders' arbitration agreement was unconscionable. Borrower's evidence sought to emphasize her lack of sophistication and her lack of understanding of the agreement. She also raised complaints about the agreement's print size, location, and clarity, as well as the high rate of interest available under the loan contract. Title Lenders highlighted that Borrower was not coerced or pressured into entering the agreement but rather voluntarily signed it 13 times despite her admissions that she did not read or understand it.⁴ Title Lenders' evidence also included that Borrower admitted to preferring to obtain financing from Title Lenders, though she had other sources of financing available from other lenders that did not require her to sign an arbitration agreement.

Evidence also was presented regarding Borrower's arguments that the arbitration agreement and its class waiver effectively exculpated Title Lenders from suits. Borrower's evidence included the testimony of two lawyers who opined that consumer lawyers would not take a case like Borrower's case unless it could be pursued as a class action. Title Lenders countered by arguing that there was no evidence that its borrowers had been unsuccessful in retaining counsel to pursue individual claims. Title Lenders sought to compel individual arbitration, and Borrower sought to have the class waiver stricken so she could proceed with class arbitration or a class action suit.

In March 2009, the trial court granted Title Lenders' motion to stay Borrower's court case, finding: “The Court has reviewed the evidence and the submissions of the parties and finds that the present dispute is arbitrable ... [and] must be stayed for arbitration.” But noting the “unequal bargaining position between the parties when the underlying contract was entered into,” the court also found: “[T]he terms of the Arbitration Clause are unduly harsh and not commercially reasonable in the prohibition of class actions and the ability to arbitrate a class. As such, the Arbitration Clause is both procedurally and substantively unconscionable to the extent that it prohibits class actions.” The trial court's March 2009 order discussed that the lack of class availability would leave Borrower and similarly situated consumers without a practical remedy for their relatively small claims. It stated that the class waiver provisions are unconscionable insofar as their “practical effect affords [Title Lenders] immunity” from suit. The trial court additionally found that the class waiver is “exculpatory and unenforceable because it is not clear and unambiguous.” The trial court struck the class waiver provisions from the arbitration agreement, but it ordered enforcement of the other arbitration provisions absent the class waiver.

Titled Lenders appealed the March 2009 judgment, but its initial appeal was dismissed and the case was remanded because the trial court had not addressed one of Borrower's declaratory-relief counts. While the case was pending on remand, the United States Supreme Court held that class arbitration could not be compelled absent express consent by the parties. See Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., ––– U.S. ––––, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). Borrower moved that the trial court, in light of Stolt–Nielsen, deny Title Lenders' motion to stay the suit, and Title Lenders moved that...