Woods v. Qc Financial Services, Inc.
| Decision Date | 23 December 2008 |
| Docket Number | No. ED 90949.,ED 90949. |
| Citation | 280 S.W.3d 90 |
| Parties | DeQuae WOODS, Plaintiff/Respondent, v. QC FINANCIAL SERVICES, INC., d/b/a Quik Cash, Defendant/Appellant. |
| Court | Missouri Court of Appeals |
Erich Vincent Vieth, John G. Simon, John Campbell, Debra Kay Lumpkins, St. Louis, for Plaintiff/Respondent.
Dana M. Mehrer, Amy Brown, Pierre H. Bergeron, Kansas City, for Respondent/Appellant.
QC Financial Services, Inc., d/b/a Quik Cash (Appellant) appeals from the trial court's Order and Judgment granting Count I of DeQuae Woods' (Respondent) petition, in part, seeking a declaratory judgment that Appellant's arbitration clause is unconscionable, and denying Appellant's motion to dismiss Respondent's case. We affirm.
Appellant is a payday lender, with whom Respondent entered into a loan contract on several occasions. Respondent filed a petition alleging that Appellant has committed several violations of Missouri statutes governing payday lenders, and seeking class certification on behalf of those similarly situated to Respondent. Appellant sought dismissal of Respondent's petition and asked the trial court to compel Respondent to engage in individual arbitration with Appellant as provided for in the mandatory arbitration clause contained in the loan contract. The pertinent portion of this mandatory arbitration clause provides as follows:
2. You acknowledge and agree that by entering into this Arbitration Provision:
(a) YOU ARE WAIVING YOUR RIGHT TO HAVE A TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED AGAINST U.S. OR RELATED THIRD PARTIES;
(b) YOU ARE WAIVING YOUR RIGHT TO HAVE A COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL, RESOLVE ANY DISPUTE ALLEGED AGAINST U.S. OR RELATED THIRD PARTIES; and
(c) YOU ARE WAIVING YOUR RIGHT TO SERVE AS A REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER REPRESENTATIVE CAPACITY, AND/OR TO PARTICIPATE AS A MEMBER OF A CLASS OF CLAIMANTS, IN ANY LAWSUIT FILED AGAINST U.S. AND/OR RELATED THIRD PARTIES.
3. Except as provided in Paragraph 6 below, all disputes including any Representative Claims against us and/or related third parties shall be resolved by binding arbitration only on an individual basis with you. THEREFORE, THE ARBITRATOR SHALL NOT CONDUCT CLASS ARBITRATION; THAT IS, THE ARBITRATOR SHALL NOT ALLOW YOU TO SERVE AS A REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER REPRESENTATIVE CAPACITY FOR OTHERS IN THE ARBITRATION.
[Emphasis of waiver added].
After considering evidence, testimony and argument, the trial court granted Respondent's request for declaratory judgment in part, finding that those portions of Appellant's arbitration clause prohibiting class arbitration were unconscionable, and severed them. The trial court also granted Appellant's motion to dismiss in part, so that the matter could proceed to arbitration to determine whether Respondent satisfies the requisite criteria for the matter to proceed as a class arbitration. The trial court denied Appellant's motion to dismiss in part, specifically the part that requested Respondent be forced to participate in individual arbitration. The trial court ordered that Respondent's claim be sent to the American Arbitration Association, per Respondent's choice, as provided for in the arbitration clause, without any prohibition against class arbitration, and declared that a panel of arbitrators will determine whether a class should be certified and damages awarded, pursuant to Missouri law.
This appeal follows.
In its first point, Appellant claims that the trial court erred as a matter of law by holding that Respondent need not prove procedural unconscionability.
In its second point, Appellant asserts that the trial court erred in refusing to enforce the arbitration agreement as procedurally unconscionable, because the font size used complies with statute and Respondent signed the contract without any misrepresentations, hurry, or duress from Appellant.
In its third point, Appellant contends that the trial court erred in refusing to enforce the class action waiver because the arbitration agreement was not substantively unconscionable, in that (1) it does not limit Respondent's substantive remedies or her ability to pursue those remedies, and provides that Appellant will pay all arbitration costs, (2) the procedural ability to file a class action can be waived by contract under Missouri law, (3) the trial court relied upon inadmissible expert attorney testimony, and (4) the Federal Arbitration Act (FAA) preempts the trial court's holding as Missouri law does not bar class action waivers in all consumer contracts.
In its fourth point, Appellant states that the trial court erred in severing the class action waiver from the arbitration agreement because the waiver is essential to the contractual bargain, in that it is integral to Appellant's promises, including the promise to pay all arbitration fees, and the contract does not contain a severance clause.
In its fifth point, Appellant avers that the trial court erred in granting Respondent's request for a declaratory judgment, because Respondent never moved for judgment, and summary judgment was not proper in that the court did not construe all reasonable inferences in Appellant's favor, nor did Appellant have notice or an opportunity to defend a request for judgment.
When reviewing a declaratory judgment, an appellate court's standard of review is the same as in any other court-tried case. Guyer v. City of Kirkwood, 38 S.W.3d 412, 413 (Mo.banc 2001). That is, the trial court's decision should be affirmed unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law. Id.
On the other hand, an appellate court's review of the arbitrability of a dispute is de novo. State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 856 (Mo.banc 2006). Missouri contract law applies to determine whether the parties have entered a valid agreement to arbitrate. Fiordelisi v. Mt. Pleasant, LLC, 254 S.W.3d 120, 125 (Mo.App. E.D.2008).
We discuss Appellant's points out of sequence for organizational purposes.
Appellant maintains that the trial court granted summary judgment without according Appellant the benefit of all reasonable inferences from the record, as required by ITT Comm. Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.banc 1993). This argument is implausible. The trial court did not grant a summary judgment. The court granted a declaratory judgment. Appellant also claims that the trial court acted "on its own initiative to grant judgment on [Respondent's] claim that the contract is unconscionable despite the fact that she never moved for any such form of relief." Again, Count I of Respondent's petition asked for a declaratory judgment finding the mandatory arbitration clause unenforceable. The trial court found in favor of Respondent to the extent the mandatory arbitration clause prohibited class action, but ordered arbitration, essentially granting Appellant's motion to compel arbitration. The court did so after hearing extensive argument and testimony and considering the parties' evidence.
Point V is without merit and therefore denied.
"It is suggested that there are procedural and substantive aspects of unconscionability, the former relating to the formalities of the making of the contract and the latter to the specific contract terms." Whitney v. Alltel Communications, Inc., 173 S.W.3d 300, 308 (Mo.App W.D.2005); Bracey v. Monsanto Co., 823 S.W.2d 946, 950 (Mo.banc 1992). "`[P]rocedural unconscionability in general is involved with the contract formation process, and focuses on high pressure exerted on the parties, fine print of the contract, misrepresentation, or unequal bargaining position.'" Whitney, 173 S.W.3d at 308, quoting Funding Sys. Leasing Corp. v. King Louie Int'l, Inc., 597 S.W.2d 624, 634 (Mo.App. W.D.1979). "`By substantive unconscionability is meant an undue harshness in the contract terms themselves.'" Whitney, 173 S.W.3d at 308, quoting King Louie, 597 S.W.2d at 634. "`Generally there must be both procedural and also substantive unconscionability before a contract or a clause can be voided.'" Whitney, 173 S.W.3d at 308, quoting King Louie, 597 S.W.2d at 634. Furthermore, "it has been suggested ... that there be a balancing between the substantive and procedural aspects, and that if there exists gross procedural unconscionability then not much be needed by way of substantive unconscionability, and that the same `sliding scale' be applied if there be great substantive unconscionability but little procedural unconscionability." Whitney, 173 S.W.3d at 308, quoting King Louie, 597 S.W.2d at 634.
Appellant maintains that the trial court erred by holding that Respondent need not prove procedural unconscionability. Appellant asserts that "[t]he trial court, however, believed that a recent Missouri Supreme Court decision, Vincent v. Schneider, eliminated this requirement so that only substantive unconscionability was required."
This assertion is a mystery to us, as the trial court discussed procedural unconscionability extensively in its opinion, and found, using an objective reasonable person standard,1 that there was procedural unconscionability present in this case. Appellant also misconstrues the trial court's characterization of the holding of Vincent v. Schneider. The trial court stated, verbatim, in its Order and Judgment, that
[u]nder Missouri law, substantive unconscionability alone may be enough to invalidate offensive...
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