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A-1 Premium Acceptance v. Hunter

Court of Appeals of Missouri, Western District, Special Division

July 18, 2017

A-1 PREMIUM ACCEPTANCE, Appellant,
v.
MEEKA HUNTER, Respondent.

         Appeal from the Circuit Court of Jackson County, Missouri The Honorable Joel P. Fahnestock, Judge

          Before: Cynthia L. Martin, Presiding Judge, Gary D. Witt, Judge and Zel M. Fischer, Special Judge

          Cynthia L. Martin, Judge

         A-1 Premium Acceptance, Inc. d/b/a "King of Kash" ("A-1") appeals from the trial court's denial of a motion to compel arbitration of all claims asserted by Meeka Hunter ("Hunter") that went beyond A-1's claim against Hunter for recovery of amounts alleged due on a loan. Because the parties' arbitration agreement required it to be interpreted pursuant to the Federal Arbitration Act ("FAA"),[1] and because the FAA requires that a substitute arbitrator be named if there is a lapse or vacancy in the naming of an arbitrator, we reverse the trial court's judgment denying the motion to compel, and remand this matter for further proceedings consistent with this opinion.

         Factual and Procedural Background

         In June and July 2006, Hunter took out four loans from A-1 totaling $800. Each loan was documented by several agreements including a loan application.[2] Each loan application form was one page in length, and was signed by Hunter. Relevant to this appeal, each loan application contained identical boiler plate language as follows:

You agree and understand that all transactions are governed by the laws of the State of Missouri.
. . . .
You agree and understand that a claim or demand for recovery of the balance due lender from your default in payment may be asserted by lender in any court of competent jurisdiction. However, you agree that any claim or dispute including class action suits, other than that resulting from your default in payment, between you and the lender or against any agent, employee, successor, or assign of the other, whether related to this agreement or otherwise, and any claim or dispute related to this agreement or the relationship or duties contemplated under this contract, including the validity of this arbitration clause, shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure then in effect. Any award of the arbitrator(s) may be entered as a judgment in any court of competent jurisdiction. Information may be obtained and claims may be filed at any office of the National Arbitration Forum at P.O. Box 50191, Minneapolis, MN 55405. This agreement shall be interpreted under the Federal Arbitration Act.

(Emphasis added.)

          On January 21, 2015, A-1 filed a petition against Hunter to collect the outstanding balance on one of the four loans, claimed to be $275 in principal, plus interest in the amount of $6,957.62 as of September 16, 2014, together with continuing interest, attorney's fees and costs. On March 31, 2015, Hunter filed an answer, and a counterclaim which alleged a violation of the Missouri Merchandising Practices Act. On August 4, 2015, Hunter filed an amended answer which asserted several additional counterclaims and a request for class action certification for those who had entered into similar loans. Hunter also asked that the matter be reassigned from the associate circuit court to the circuit court. On September 28, 2015, A-1 filed a motion to compel arbitration and for stay of proceedings ("Motion to Compel"). The Motion to Compel argued that arbitration of Hunter's counterclaims was required by the agreement set forth in the loan application. The Motion to Compel sought the appointment of a substitute arbitrator pursuant to section 5 of the FAA because the National Arbitration Forum ("NAF"), designated as the arbitrator in the arbitration agreement, was prohibited from involvement in "consumer arbitrations" as of a July 17, 2009 consent judgment.

         Hunter opposed the Motion to Compel on several grounds. Hunter argued that: (i) whether an arbitration agreement had even been formed was an issue that had not been delegated to the arbitrator for determination; (ii) the arbitration agreement exclusively designated the NAF as the arbitrator, rendering the arbitration agreement unenforceable because the NAF was not available to arbitrate; (iii) a contract to arbitrate was never formed because of the doctrines of unconscionability and mutuality; and (iv) A-1 waived its right to enforce the arbitration agreement. Hunter requested time to conduct discovery related to the merits of the Motion to Compel.

         On May 20, 2016, the trial court entered its order ("Order") denying the Motion to Compel. The Order concluded that "[s]ince the NAF is no longer able to arbitrate consumer matters, the arbitration agreements are missing an integral term. Thus, the arbitration agreements are invalid and unenforceable." The Order noted that as a result of this finding, "it is not necessary for the Court to rule on the remaining issues related to delegation issues, unconscionability due to lack of mutuality, and waiver of the right to arbitration."

         A-1 filed this timely appeal.

         Standard of Review

         "'Whether the trial court should have granted a motion to compel arbitration is a question of law decided de novo.'" Ellis v. JF Enterprises, LLC, 482 S.W.3d 417, 419 (Mo. banc 2016) (quoting Johnson ex rel. Johnson v. JF Enterprises, LLC, 400 S.W.3d 763, 766 (Mo. banc 2013)).

         Analysis

         A-1 raises three points on appeal. First, A-1 argues it was error to deny the Motion to Compel because the FAA required the appointment of a substitute arbitrator upon the NAF's unavailability. Second, A-1 argues it was error to deny the Motion to Compel because the Missouri Uniform Arbitration Act mandates the appointment of a substitute arbitrator. Third, A-1 argues that it was error to deny the Motion to Compel because the arbitration agreement contains a latent ambiguity that frustrates the intent of the parties to arbitrate. Because the first point on appeal is dispositive, we need not resolve the second and third points.

         By its express terms, the arbitration agreement set forth in Hunter's loan application is subject to the FAA, as the agreement provides that it "shall be interpreted under the [FAA]."[3] "[T]he FAA . . . governs what courts may consider in determining whether an agreement to arbitrate is enforceable." Ellis, 482 S.W.3d at 419. Section 1 of the FAA provides that:

A written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such contract, transaction, or refusal, shall be valid, irrevocable, and ...

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