STATE ex rel. STEVEN PINKERTON, Relator,
THE HONORABLE JOEL P. FAHNESTOCK, Respondent.
ORIGINAL PROCEEDING IN PROHIBITION
PATRICIA BRECKENRIDGE, JUDGE.
Pinkerton seeks a writ of mandamus or, in the alternative, a
writ of prohibition requiring the circuit court to overrule
the motion to compel arbitration filed by Aviation Institute
of Maintenance (the school). In the alternative, Mr.
Pinkerton seeks a writ of mandamus requiring the circuit
court to enforce discovery and allow him to file additional
opposition to the school's motion to compel arbitration.
Mr. Pinkerton contends the circuit court improperly sustained
the school's motion to compel arbitration because: (1)
the school's incorporation of the delegation provision
into the arbitration agreement by reference to the American
Arbitration Association's commercial rules was not clear
and unmistakable evidence the parties intended to arbitrate
threshold questions of arbitrability; (2) issues regarding
the formation of the arbitration agreement cannot be
delegated to an arbitrator; and (3) he specifically
challenged the validity and enforceability of the delegation
Court issued a preliminary writ and now holds the
incorporation of the American Arbitration Association (AAA)
rules into the arbitration agreement provided clear and
unmistakable evidence the parties intended to delegate
threshold issues of arbitrability to the arbitrator. Mr.
Pinkerton's only specific challenge to the delegation
provision - that it would be unconscionable to delegate a
determination of unconscionability to a person with a direct
financial interest in the outcome - was without merit, and he
did not otherwise specifically challenge the validity or
enforceability of the delegation provision. Accordingly, the
circuit court properly sustained the school's motion to
compel arbitration, stayed the case, and ordered the parties
to arbitrate threshold issues of arbitrability. The
preliminary writ is quashed.
and Procedural Background
2009, Mr. Pinkerton e-mailed the school and requested
information about becoming an aircraft
technician. In response, Adrian Rothrock, an
admissions representative, scheduled an appointment at the
school's Kansas City campus. Soon thereafter, Mr.
Pinkerton met with Mr. Rothrock and received a tour of the
school and a packet of information. A few weeks later, Mr.
Pinkerton visited the school for a second time and submitted
an application for admission. Four days later, he returned to
the school to sign the two-page enrollment agreement for the
aviation maintenance technical engineer program.
enrollment agreement listed information about the
program's duration, graduation requirements, tuition and
fees, scheduling, and its policies regarding cancellation,
termination, withdrawal, and refunds. The enrollment
agreement also included an arbitration agreement. The
arbitration agreement was about three-fourths from the top of
the enrollment agreement's first page. The heading
"Arbitration Agreement" was in bold face type, and
the terms of the arbitration agreement were in the same type
size as the remainder of the enrollment agreement. The
arbitration agreement provided:
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.
Mr. Pinkerton did not receive a copy of the AAA commercial
R-7 of the commercial rules defined the scope of the
arbitrator's "jurisdiction." It read, in
The arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the
existence, scope, or validity of the arbitration agreement or
to the arbitrability of any claim or counterclaim.
Mr. Pinkerton signed the enrollment agreement and received a
copy. An admissions representative and another school
official also signed the agreement.
September 28, 2009, Mr. Pinkerton began attending classes.
Almost six months later, he requested to switch from the
school's 100-week aviation maintenance technical engineer
program to a shorter 80-week aviation technician program. The
enrollment agreement he signed for the aviation technician
program was dated March 24, 2010, and contained a change in
the credit hours required for graduation, the cost of books
per semester, the total length of the program, and the
estimated total student cost per quarter. Otherwise, the
enrollment agreement for the aviation technician program
included the same information as the enrollment agreement for
the aviation maintenance technical engineer program as well
as the same arbitration agreement.
2011, Mr. Pinkerton graduated from the school as the
valedictorian of the night program. Having fulfilled the
graduation requirements, he received a certificate of
aviation maintenance, which entitled him to take the federal
aviation administration examinations to become an airline
mechanic. He took both required examinations and received his
temporary airman certificate from the federal aviation
administration in 2012. Despite having obtained his
certification, Mr. Pinkerton alleges he cannot find
employment in the aviation field.
2014, Mr. Pinkerton filed a lawsuit against the school, Mr.
Rothrock, and the school's owner, W. Gerald Yagen,
alleging the school engaged in fraud, misrepresentation, and
deception related to the school's graduation and job
placement rates, starting salaries, and the costs and
benefits of its educational programs. The lawsuit included
claims for violations of the Missouri Merchandising Practices
Act, fraudulent misrepresentation, negligent
misrepresentation, money had and received, and unjust
school moved to dismiss, or in the alternative, to compel
arbitration and stay the proceedings, citing the arbitration
agreement in the enrollment agreement requiring Mr. Pinkerton
to arbitrate "any controversy, claim or dispute."
The school further contended the arbitration agreement
delegated threshold arbitrability disputes, such as whether
an arbitration clause is enforceable or its applicability to
the dispute at issue, to the arbitrator by incorporating by
reference the AAA's jurisdictional rule into the
arbitration agreement. The school requested the circuit court
enforce this delegation provision if Mr. Pinkerton challenged
the arbitration agreement. The school also filed a motion to
stay discovery and all other pending pretrial proceedings.
response, Mr. Pinkerton filed his preliminary opposition to
the school's motion to compel arbitration and the
school's motion to stay discovery. Mr. Pinkerton argued
the threshold issue of the existence of an enforceable
arbitration agreement cannot be delegated to an arbitrator
but, instead, is always a decision for the court. He also
filed a motion to stay briefing and ruling on the motion to
compel arbitration until the parties could conduct discovery
related to the arbitration agreement. The circuit court
sustained Mr. Pinkerton's motion to stay briefing and
ruling on the motion to compel arbitration and allowed the
parties 90 days to conduct discovery limited to "the
issue of whether an arbitration contract was formed and the
scope of any arbitration contract."
school subsequently renewed its motion to compel arbitration,
contending Mr. Pinkerton had not specifically challenged the
delegation provision but challenged only the arbitration
agreement as a whole. In response, Mr. Pinkerton argued he
had challenged the existence of the delegation provision by
challenging the existence of any arbitration agreement -
including any agreement to delegate issues of arbitrability -
in his preliminary opposition. Mr. Pinkerton also contended,
for the first time, that the delegation provision was not
clearly and unmistakably incorporated into the arbitration
agreement, that both the arbitration agreement and the
delegation provision lacked consideration, and that the
delegation provision was unconscionable.
conducting a hearing on the matter, the circuit court
sustained the school's motion to compel
arbitration. The circuit court concluded the delegation
provision was enforceable because Mr. Pinkerton did not
challenge the delegation provision specifically. The circuit
court further held the provision provided for delegation of
the gateway question of whether the parties agreed to
arbitrate and, therefore, the issue of whether the
arbitration agreement was unconscionable is left to the
arbitrator per the clear and unmistakable intent of the
parties expressed by the incorporation of the AAA rules into
Pinkerton petitions this Court for a writ of mandamus or
prohibition, requesting the Court order the circuit court to
overrule the school's motion to compel arbitration or, in
the alternative, order the circuit court to enforce discovery
and allow Mr. Pinkerton to file additional opposition to the
school's motion to compel arbitration. This Court issued
a preliminary writ of prohibition. Mo. Const. art. V, sec. 4.
Court has the authority to "issue and determine original
remedial writs." Id. Writs of prohibition or
mandamus are appropriate mechanisms to challenge whether a
motion to compel arbitration was improperly sustained.
State ex rel. Hewitt v. Kerr, 461 S.W.3d 798, 805
(Mo. banc 2015); see also State ex rel. Union Pac. R.R.
Co. v. David, 331 S.W.3d 666, 666 (Mo. banc 2011). This
Court reviews de novo the legal issue of
"[w]hether a valid, enforceable arbitration agreement
exists." Union Pac., 331 S.W.3d at 667.
Pinkerton contends the circuit court erred in sustaining the
school's motion to compel arbitration. He asserts the
school's incorporation of the AAA commercial rules into
the arbitration agreement did not "clearly and
unmistakably" express the parties' intent to
delegate threshold issues of arbitrability to an arbitrator.
He further contends the circuit court improperly ordered
arbitration because only a court, not an arbitrator, can
decide whether an arbitration agreement was formed. Lastly,
Mr. Pinkerton argues the circuit court erred in finding he
did not specifically challenge the delegation provision's
validity and enforceability.
circuit court determined the arbitration agreement contained
an enforceable delegation provision delegating issues of
arbitrability to the arbitrator. Mr. Pinkerton contends his
signature on the enrollment agreement was not evidence he
agreed to delegate threshold issues of arbitrability to the
arbitrator because the delegation provision was not included
as part of the arbitration agreement but was instead
incorporated by reference to the AAA commercial rules. Mr.
Pinkerton argues that incorporating a delegation provision by
reference does not meet the "clear and
unmistakable" standard required to show the parties
intended an arbitrator to decide issues of arbitrability.
any silence or ambiguity "concerning the scope of
arbitrable issues should be resolved in favor of
arbitration." Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)
(internal quotation omitted). Issues will, therefore,
typically "be deemed arbitrable unless it is clear that
the arbitration clause has not included them." First
Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 945
(1995) (internal quotations omitted). This has been referred
to as the "presumption of arbitrability."
Granite Rock Co. v. Int'l Bhd. of Teamsters, 561
U.S. 287, 300 (2010).
presumption of arbitrability, however, is reversed when
considering whether a court or an arbitrator should decide
threshold questions of arbitrability. First Options,
514 U.S. at 944-45. Disputes about arbitrability include
those "questions such as whether the parties are bound
by a given arbitration clause, or whether an arbitration
clause in a concededly binding contract applies to a
particular type of controversy." BG Grp. PLC v.
Republic of Arg., 134 S.Ct. 1198, 1206 (2014)
(internal quotations omitted). Disputes over the formation of
the parties' arbitration agreement and its enforceability
or applicability to the dispute at issue have been considered
threshold issues of arbitrability. Id. at 1206-07.
When considering whether parties have intended to delegate
threshold questions of arbitrability to an arbitrator,
"[c]ourts should not assume that the parties agreed to
arbitrate arbitrability unless there is clea[r] and
unmistakabl[e] evidence that they did so."
Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63, 69
n.1 (2010) (internal quotation omitted) (alteration in
original). This "'clear and unmistakable'
requirement . . . pertains to the parties' manifestation
of intent" that issues of arbitrability be decided by
the arbitrator instead of the court. Id. at 69 n.1
United States Supreme Court has addressed why different
standards are necessary when considering "whether a
particular merits-related dispute is arbitrable" versus
"who (primarily) should decide arbitrability."
First Options, 514 U.S. at 944-45 (emphasis
omitted). The Supreme Court explained:
[T]his difference in treatment [between whether a particular
merits-related dispute is arbitrable or who (primarily)
should decide arbitrability] is understandable. The latter
question arises when the parties have a contract that
provides for arbitration of some issues. In such
circumstances, the parties likely gave at least some thought
to the scope of arbitration. And given the law's
permissive policies in respect to arbitration, one can
understand why the law would insist upon clarity before
concluding that the parties did not want to arbitrate a
related matter. On the other hand, the former question - the
who (primarily) should decide arbitrability question - is
rather arcane. A party often might not focus upon that
question or upon the significance of having arbitrators
decide the scope of their own powers. And, given the
principle that a party can be forced to arbitrate only those
issues it specifically has agreed to submit to arbitration,
one can understand why courts might hesitate to interpret
silence or ambiguity on the "who should decide
arbitrability" point as giving the arbitrators that
power, for doing so might too often force unwilling parties
to arbitrate a matter they reasonably would have thought a
judge, not an arbitrator, would decide.
Id. at 945 (internal quotations and citations
omitted) (emphasis omitted).
Pinkerton interprets the "clear and unmistakable"
standard to prohibit the delegation provision from being
incorporated by reference into an arbitration agreement. He
contends that no clear and unmistakable evidence exists of
the parties' mutual assent to the delegation provision
unless the delegation provision is expressly written into an
arbitration agreement. Mr. Pinkerton incorrectly assumes that
a contract is silent or ambiguous about who should decide
arbitrability if the delegation provision is incorporated
into an arbitration agreement by reference.
the Supreme Court has referred to the "clear and
unmistakable" standard as a "heightened standard,
" First Options explains it is
"heightened" insofar as it is a higher standard
than the "presumption of arbitrability" standard
applied when interpreting "silence" or
"ambiguity" related to the scope of arbitration
provisions. Rent-A-Ctr., 561 U.S. at 69 n.1. The
Supreme Court has not held the "clear and
unmistakable" standard is heightened in relation to
generally applicable principles of contract interpretation.
of a written contract is a question of law. Webbe v.
Keel, 369 S.W.3d 755, 756 (Mo. App. 2012). In Missouri,
"the primary rule of contract interpretation is that
courts seek to determine the parties' intent and give
effect to it." Chochorowski v. Home Depot
U.S.A., 404 S.W.3d 220, 226 (Mo. banc 2013). "The
intention of the parties is to be gleaned from the four
corners of the contract." L.A.C. ex rel. D.C. v.
Ward Parkway Shopping Ctr. Co., 75 S.W.3d 247,
260 (Mo. banc 2002). Each clause "must be read in the
context of the entire contract, and interpretations that
render provisions meaningless should be avoided."
McGuire v. Lindsay, 496 S.W.3d 599, 607 (Mo. App.
2016). This Court determines the parties' intent as
"expressed by the plain and ordinary meaning of the
language of the contract." Chochorowski, 404
S.W.3d at 226. "When the language of a contract is clear
and unambiguous, the intent of the parties will be gathered
from the contract alone, and a court will not resort to a
construction where the intent of the parties is expressed in
clear and unambiguous language." Id. at 226-27.
"It is only where the contract is ambiguous and not
clear that resort to extrinsic evidence is proper to resolve
the ambiguity." J. E. Hathman, Inc. v. Sigma Alpha
Epsilon Club, 491 S.W.2d 261, 264 (Mo. banc 1973).
further recognizes that "matters incorporated into a
contract by reference are as much a part of the contract as
if they had been set out in the contract in haec verba."
Dunn Indus. Grp., Inc. v. City of Sugar Creek, 112
S.W.3d 421, 435 n.5 (Mo. banc 2003). Generally, "[t]erms
not explicit in a contract may be incorporated into the
contract by reference" so long as the "intent to
incorporate [is] clear." Hewitt, 461 S.W.3d at
810-11. "To incorporate terms from another document, the
contract must make  clear reference to the document and
describe it in such terms that its identity may be
ascertained beyond a doubt." Id. Parties may,
therefore, "incorporate contractual terms by reference
to a separate, noncontemporaneous document, including a
separate agreement to which they are not parties, including a
separate document which is unsigned." Intertel, Inc.
v. Sedwick Claims Mgmt. Servs., Inc., 204 S.W.3d 183,
196 (Mo. App. 2006). There is no requirement that an
incorporated document be attached to the contract or provided
to the parties prior to the execution of the contract.
the parties' arbitration agreement specifically
references the AAA's commercial arbitration rules. At the
time Mr. Pinkerton signed the enrollment agreement, the
AAA's "Commercial Arbitration Rules with
Supplementary Procedures for Consumer-Related Disputes"
governed all consumer arbitration disputes. The reference to
the AAA's commercial rules in the arbitration agreement
was not a mere passing reference to these rules; instead, it
was a clear reference to an identifiable, ascertainable set
of rules. Such a reference establishes the parties'
intent to incorporate the AAA commercial arbitration rules
into the enrollment agreement.
finding is consistent with most federal circuit courts, which
have concluded arbitration agreements containing similar
language were sufficient to incorporate by reference the
delegation provision in the AAA rules. For example,
arbitration agreements stating disputes will be "settled
by, " "conducted by, " and "determined
by" arbitration "in accordance with" specific
rules containing a delegation provision have been held to
have "clearly and unmistakably" incorporated the
delegation provision into the arbitration agreement.
Brennan v. Opus Bank, 796 F.3d 1125, 1129 (9th Cir.
2015) ("settled by"); Petrofac, Inc. v.
DynMcDermott Petroleum Operations Co., 687 F.3d 671, 674
(5th Cir. 2012) ("conducted by"); Fallo v. High
- Tech Inst., 559 F.3d 874, 877-78 (8th Cir. 2009)
("settled by"); Qualcomm Inc. v. Nokia
Corp., 466 F.3d 1366, 1373 (Fed. Cir. 2006)
("settled by"); Terminix Int'l Co. v.
Palmer Ranch LP, 432 F.3d 1327, 1332 (11th Cir. 2005)
("conducted"); Contec Corp. v. Remote Solution
Co., 398 F.3d 205, 208 (2d Cir. 2005) ("determined
dissenting opinion attempts to differentiate these federal
cases on the basis that all but one involved sophisticated
parties, not a mere consumer such as Mr.
Pinkerton. But in doing so, the dissenting opinion
ignores longstanding Missouri contract principles and,
instead, advocates for adoption of a standard that would have
far-reaching consequences beyond interpretation of
dissenting opinion asserts whether Mr. Pinkerton intended to
incorporate the AAA rules is a factual question that should
be put to the parties' proof. But for purposes of
contract interpretation, the intent of the parties is a
question of law to be determined from the four corners of the
contract. Whelan Sec. Co. v. Kennebrew, 379 S.W.3d
835, 846 (Mo. banc 2012). It is only when an ambiguity arises
and cannot be resolved within the four corners of the
contract that "the parties' intent can be determined
by use of parol evidence." Id. Only then does
the parties' intent become "a factual issue to be
resolved by the finder of fact." Id.
dissenting opinion recognizes these principles but contends
this Court must look at the "context" of an
agreement - including who signed it and the nature of the
agreement - to determine ambiguity. More specifically, the
dissenting opinion asserts that the unsophisticated nature of
a party is key to the determination of ambiguity and that
"when a consumer contract purports to incorporate by
reference another writing, the court should determine whether
the parties actually know and understand the provisions to be
dissenting opinion is mischaracterizing the general
proposition that "ambiguity depends on context" to
conclude "context" means consideration of the
parties' circumstances and whether they actually know and
understand the incorporated provision. Such a subjective
standard is not what this Court means by considering the
"context" of an agreement. Rather,
"context" means the reading of the agreement as a
whole to determine whether an ambiguity exists. J. E.
Hathman, 491 S.W.2d at 264; see also Purcell Tire
& Rubber Co., v. Exec. Beechcraft, Inc., 59
S.W.3d 505, 510 (Mo. banc 2001) ("Contract language is
not interpreted in a vacuum, but by reference to the contract
as a whole.").
while the dissenting opinion cites to cases that mention the
sophistication of the parties, such cases do not support the
subjective "context" standard advocated for by the
dissenting opinion. Instead, such cases address specific
contract provisions or clauses - such as exculpatory clauses,
indemnity clauses, forum selection clauses, and jury trial
waivers - that impose additional requirements for a specific
provision or clause to be enforceable.
instance, in addressing exculpatory and indemnity clauses,
this Court held limitations or shifts of liability in
contracts are enforceable if the exculpatory or indemnity
clause contains clear, unambiguous, unmistakable, and
conspicuous language. Alack v. Vic Tanny Intern. of Mo.,
Inc., 923 S.W.3d 330, 337-38 (Mo. banc 1996). In
determining the clause's enforceability, this Court did
not consider parol evidence as to the parties' subjective
intent regarding the clause. Instead, the Court required the
clause to include specific terms like
"'negligence' or 'fault' or their
equivalents" that would conspicuously shift the
liability. Id. at 337. This Court subsequently held
that requirement does not govern contracts when the parties
are both sophisticated businesses. Purcell Tire, 59
S.W.3d at 509. But again, the parties' subjective intent
was not examined. This Court simply recognized:
"Sophisticated businesses that negotiate at arm's
length may limit liability without specifically mentioning
'negligence, ' 'fault, ' or an
equivalent." Id. "Sophisticated parties
have freedom of contract - even to make a bad bargain, or to
relinquish fundamental rights." Id. at 508.
in High Life Sales Co. v. Brown-Forman Corp., 823
S.W.2d 493, 497 (Mo. banc 1992), this Court adopted the
majority rule that forum selection clauses will be enforced,
so long as doing so is neither unfair or unreasonable. In
considering whether to enforce the forum selection clause,
this Court considered whether "the contract was entered
into under circumstances that caused it to be adhesive"
- that is, a contract "in which the parties have unequal
standing in terms of bargaining power." Id.
There was no consideration of whether the parties
subjectively understood the forum selection clause.
Id. Instead, this Court reasoned "the important
factor is that the contract terms were generally arrived at
under circumstances that cannot be described as
in Malan Realty Investors, Inc. v. Harris, 953
S.W.2d 624, 627 (Mo. banc 1997), this Court held that the
parties' waiver of a right to a jury trial must be
knowing and voluntary. But in doing so, this Court recognized
that "more than contract law is involved."
Id. And while the Court acknowledged "[t]he
real concern with every case decision has been the relative
bargaining powers of the parties, " the analysis focused
primarily on whether the written agreement contained
"clear, unambiguous, unmistakable, and conspicuous
language" such that a knowing and voluntary waiver of
the right to a jury trial was evident. Id.
follows that none of the cases considering the sophistication
of the parties addresses arbitration agreements, and each
case presents an exception to general principles of contract
law. The United States Supreme Court has held arbitration can
be limited only by application of principles of general
contract law, AT&T Mobility LLC v. Concepcion,
563 U.S. 333, ...