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Plummer v. McSweeney

United States Court of Appeals, Eighth Circuit

October 23, 2019

Jerri Plummer Plaintiff - Appellee
Rhett McSweeney; David Langevin; McSweeney Langevin, LLC Defendants - Appellants Whitney Shoemaker, D.O.; Women's Health And Surgery Center, LLC; Plaintiff Funding Holding, Inc., doing business as LawCash; Vincent Chhabra; MichaelChhabra; LawFirm Headquarters, LLC; Surgical Assistants, Inc.; Wesley BlakeBarber; Kasia Osadzinska, M.D.; Boston Scientific Corporation; Alpha Law, LLP;Richard Martindale; John Does, 1-97 (originally named as 1-99); Ron Lasorsa; Diane Sugimoto Defendants

          Submitted: September 24, 2019

          Appeal from United States District Court for the Eastern District of Arkansas - Little Rock

          Before GRUENDER, ARNOLD, and GRASZ, Circuit Judges.

          ARNOLD, Circuit Judge.

         This case is about the enforceability of an agreement to arbitrate disputes between a law firm and its client. Though we share some of the client's and the district court's concerns about the events giving rise to this lawsuit, we hold that the district court erred in refusing to enforce the agreement. We therefore reverse and remand.

         Arkansas resident Jerri Plummer received a wholly unexpected phone call one day in October 2014 from someone named Yolanda. Yolanda knew that Plummer had had a transvaginal mesh implanted about six years earlier, and Yolanda asserted that the mesh was defective and that Plummer could die if she did not have it removed. Yolanda informed Plummer that she could arrange for Plummer to undergo surgery in Florida to have the mesh removed and could connect her with an attorney who could help her obtain compensation for the surgery and for her travel to Florida. Since Yolanda knew some of her medical history and since Plummer had recently experienced minor pain she attributed to the mesh, she agreed to Yolanda's arrangement. Plummer explains that, after the call, she felt as if she "had a ticking time bomb inside of" her. Plummer traveled to Florida and had the mesh removed about two months later.

         Plummer maintains that the surgery has caused her substantial and ongoing medical problems. She sued a horde of defendants in the medical and legal fields for fraud, constructive fraud, breach of fiduciary duty, civil conspiracy, unjust enrichment, violations of the Arkansas Deceptive Trade Practice Act, and malpractice. Among those sued were Minnesota attorneys Rhett McSweeney and David Langevin and their law firm, McSweeney Langevin, LLC, whom we refer to collectively as "McSweeney Langevin." McSweeney Langevin moved the district court to compel arbitration in light of a retainer agreement that Plummer had signed. That agreement contained a provision beginning with the phrase "Alternate Dispute Resolution" in bold type that went on to say that, if mediation failed to resolve any disputes the parties might have, they "agree to submit their dispute to binding arbitration in Washington D.C. before JAMS," which is an organization specializing in alternative dispute resolution. The agreement then provides: "CLIENT HEREBY ACKNOWLEDGES THAT ARBITRATION IS CLIENT'S ONLY RECOURSE AND THAT CLIENT WAIVES CLIENT'S RIGHT TO TRIAL BY JURY AND TO JUDICIAL APPEAL BY SIGNING THIS AGREEMENT."

         The district court held that the parties had entered into a contract, but it declined to enforce it on the ground that the contract was unconscionable under Washington D.C. law, which the parties agree is appropriate under a choice-of-law provision in the agreement. As the district court saw it, "the defendant attorneys and their firm, through agents acting on their behalf, somehow got their hands on Plummer's cell phone number and, after instilling fear of death in her, solicited her to not only undergo a surgical procedure in another state, but also to allow them to represent her" in a lawsuit against the mesh's manufacturer. The district court found significant Plummer's statement that she felt she "was in a life or death situation and there was no time to dicker over details with people who informed [her] of [her] possible impending death and offered a procedure to save [her] life and to seek justice on [her] behalf." Further, the court pointed out that McSweeney and Langevin were attorneys, but Plummer had a tenth-grade education, was inexperienced in reading contracts, and did not know what arbitration was. The district court also noted that the retainer agreement was sent to Plummer electronically along with several other documents she was asked to sign. Finally, the court found that Plummer could not afford the costs of arbitration: Her income was minimal, and her share of the arbitration costs and her travel costs made arbitration inaccessible.

         McSweeney Langevin appeals the district court's denial of the motion to compel arbitration-a decision we review de novo. See Shockley v. PrimeLending, 929 F.3d 1012, 1017 (8th Cir. 2019). We are a little uncertain about the procedural posture in which this case comes to us. Under the Federal Arbitration Act, Plummer arguably could have demanded a jury trial on the question of the enforceability of the arbitration clause. See 9 U.S.C. § 4. But see Am. Heritage Life Ins. Co. v. Orr, 294 F.3d 702, 710 (5th Cir. 2002). She did not do so, however, and so the motion here could have eventually been resolved by a trial to the district court. See Neb. Mach. Co. v. Cargotec Sols., LLC, 762 F.3d 737, 743-44 (8th Cir. 2014). Though neither party, so far as we can tell from the record, moved for summary judgment, the district court ruled in Plummer's favor as a matter of law based on what it concluded were the undisputed facts set forth in Plummer's amended complaint, declarations attached to Plummer's responses to the motion to compel arbitration, and some supplemental sworn submissions. In its briefs, McSweeney Langevin raised no objections to this procedure or to the district court's determination that there did not exist genuine issues of material fact necessitating a trial, and at oral argument it eschewed any interest in doing so. We therefore accept the district court's findings as true and deal only with their legal consequences.

         McSweeney Langevin maintains first that an arbitrator should decide the matter of unconscionability, not a court, because Plummer's arguments about unconscionability, and the district court's acceptance of them, are directed at the retainer agreement as a whole and not just the arbitration provision within it. See Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006). McSweeney Langevin, however, failed to raise this matter to the district court, and this is not merely a new argument; it is an entirely new issue, see Hintz v. JPMorgan Chase Bank, N.A., 686 F.3d 505, 508 (8th Cir. 2012), so we review it for plain error at most. But we have held before that "the requirement to proceed in federal court can hardly be considered a miscarriage of justice" necessitating plain-error relief. See Wiser v. Wayne Farms, 411 F.3d 923, 927-28 (8th Cir. 2005).

         We therefore take up the matter of unconscionability ourselves. Under the FAA, agreements to arbitrate "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. One of these grounds is unconscionability. See Kindred Nursing Ctrs. Ltd. P'ship v. Clark, 137 S.Ct. 1421, 1426 (2017). Under the governing D.C. law, "a contract may be unconscionable either because of the manner in which it was made or because of the substantive terms of the contract or, more frequently, because of a combination of both." See Urban Invs., Inc. v. Branham, 464 A.2d 93, 99 (D.C. 1983) (per curiam). These two concepts are frequently referred to as procedural unconscionability and substantive unconscionability. Id.

         We begin with substantive unconscionability, which in this case involves Plummer's ability to pay for arbitration. Though the arbitration provision does not mention who will pay the costs of arbitration, it does say that arbitration will proceed before JAMS, and JAMS rules provide that parties will pay a pro rata share of costs unless they agree otherwise. According to the district court, Plummer provided evidence that her share of costs was extremely high compared to her income, rendering arbitration prohibitively expensive.

         We do not decide whether the district court correctly found that Plummer had carried her burden to show that arbitration was prohibitively expensive. On appeal, McSweeney Langevin has offered to pay Plummer's share of the arbitration costs, which, it asserts, cures any substantive unconscionability in the contract. Plummer maintains that we should not consider post-hoc offers like this one since others bound by the same contract terms might be dissuaded from pursuing claims because of the high costs of arbitration. We recognize that other courts agree with her. See, e.g., Spinetti v. Serv. Corp. Int'l, 324 F.3d 212, 217-18 n.2 (3d Cir. 2003); Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 676-77 (6th Cir. 2003) (en banc). Plummer also points out that D.C. courts have noted that unconscionability is determined at the time the contract is made. See Urban, 464 A.2d at 99-100 n.7.

         We nevertheless hold that McSweeney Langevin's offer has cured any substantive unconscionability that the agreement may have contained. We rely heavily on the fact that at least two (and probably three) separate Washington D.C. federal district courts applying D.C. law have allowed post-hoc offers to cover arbitration expenses to cure substantive-unconscionability difficulties. See Fox v. Comput. World Servs. Corp., 920 F.Supp.2d 90, 102 (D.D.C. 2013); Nelson v. Insignia/Esg, Inc., 215 F.Supp.2d 143, 157 (D.D.C. 2002); see also Nur v. K.F.C., USA, Inc., 142 F.Supp.2d 48, 52 (D.D.C. 2001). These courts are presumptively familiar with D.C. law, and so we think their approval of this strategy best reflects that law. And though D.C. courts have observed that unconscionability is determined at the time the contract is made, that does not mean that a defendant cannot cure any substantively unconscionable provisions it contains by offering to pay for arbitration. Courts invoke this time-of-the-making rule when one party argues that a ...

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