Advance America Servicing of Arkansas, Inc., d/b/a Advance America Cash Advance; Advance America, Cash Advance Centers of Arkansas, Inc.; and Advance America, Cash Advance Centers, Inc. v. Brenda McGinnis, Individually and o/b/o A Class of Similarly Situated Persons
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SUPREME COURT OF ARKANSAS
No.
08-492
ADVANCE AMERICA SERVICING OF
ARKANSAS, INC., D/B/A ADVANCE
AMERICA CASH ADVANCE; ADVANCE
AMERICA, CASH ADVANCE CENTERS OF
ARKANSAS, INC.; AND ADVANCE
AMERICA, CASH ADVANCE CENTERS,
INC.,
APPELLANTS;
Opinion Delivered NOVEM BER 6, 2008
APPEAL FROM THE CLARK COUNTY
CIRCUIT COURT, NO. CV-2007-32; HON.
JOHN A. THOMAS, JUDGE;
VS.
BRENDA MCGINNIS, INDIVIDUALLY AND
O/B/O A CLASS OF SIMILARLY SITUATED
PERSONS,
APPELLEE;
AFFIRMED.
DONALD L. CORBIN, Associate Justice
1.
APPEAL & ERROR — FAILURE TO RAISE ARGUM ENTS BEFORE TRIAL COURT — ARGUM ENTS NOT
PRESERVED FOR APPELLATE REVIEW. — It is elementary that the supreme court will not consider
arguments that are not preserved for appellate review because it is incumbent upon the parties to
raise arguments initially to the trial court in order to give that court an opportunity to consider them;
appellant, for the first time on appeal, presents arguments that (1) the fact that “all civil remedies”
is listed on the face of the Customer Agreement in the same sentence as returned check fee, court
costs, and reasonable attorney’s fees reflects the parties’ intent that “all civil remedies” refer to
“damages” and not the “forum” in which a party may pursue such damages; and that (2) because
the “all civil remedies” language appears outside and independent from the arbitration provision,
it would defy the plain meaning of the Customer Agreement and the rules of contract construction
to read the “all civil remedies” language as invalid for lack of mutuality; these subpoints are not
preserved for appellate review.
2.
CONTRACTS — ARBITRATION CLAUSE — EVEN T H O UGH LANGUAGE REFERENCING “ALL CIVIL
REM EDIES” AVAILABLE TO CHECK- CASHER IN CUSTOM ER AGREEM ENT WAS VERY SIM ILAR TO
LAN GUAGE IN THE CHECK-CASHERS ACT , THAT LANGUAGE RENDERED THE AGREEM ENT TO
ARBITRA T E IN VALID FOR LACK OF M UTUALITY. — The supreme court has consistently and
repeatedly held that the reference to “all civil remedies” available to only one party in a checkcashing agreement renders the agreement to arbitrate invalid for lack of mutuality; even though the
Check-Cashers Act and regulations use very similar language giving a check-casher the right to all
civil remedies allowed by law, the mere statement of such language in the Act did not restore the
lack of mutuality of obligation in this Customer Agreement caused by the “all civil remedies”
language.
3.
CONTRACTS — M UTUALITY OF OBLIGATION — EVEN IF CIRCUIT COURT ’S RULING DID REQUIRE
BOTH PARTIES TO HAVE THE SAM E REM EDIES, THAT DECISION COULD BE A F F IRM ED FOR THE
REASON T H A T M U T UALITY OF OBLIGATION WAS REQUIRED AND WAS LACKING HERE. — It is
axiomatic that an appellate court can affirm a circuit court if the right result is reached even if for
a different reason; contrary to Appellants’ assertion that mutuality of obligation does not require
mutuality of remedy, the supreme court did not interpret the circuit court’s ruling as requiring both
parties to have the same remedies; even if the ruling below did so require, however, that decision
could be affirmed for the reason that mutuality of obligation was required and was lacking here.
4.
CONTRACTS — ARBITRATION CLAUSE — CIRCUIT COURT DID NOT RUN AFOUL OF BUCKEYE
CHECK CASHING, INC. V. CARDEGNA IN HOLDING THAT A TERM OUTSIDE AND INDEPENDENT OF
THE ARBITRATION PROVISION RENDERED THE A RBITRATION PROVISION UNENFORCEABLE. —
Buckeye Check Cashing, Inc. v. Cardegna holds that it is improper for a court to consider a
claim that a contract containing an arbitration clause is invalid as a whole when there is not also a
claim that the arbitration clause itself is invalid; Buckeye does not, however, also hold that when
considering the validity of an arbitration clause, a court is constrained to the clause itself and
prohibited from considering other parts of the contract relating to the agreement to arbitrate
disputes arising from the contract; like Buckeye, the complaint in the present case does not assert
a challenge to the arbitration provision itself, but rather asserts a challenge to the whole contract
as being usurious and a deceptive trade practice; however, unlike Buckeye where there was no
challenge to the arbitration provision itself, Appellee in the present case asserted a claim that the
arbitration provision was invalid for lack of mutuality; accordingly, the circuit court did not err in
holding that a term outside and independent of the arbitration provision rendered the arbitration
provision unenforceable.
5.
APPEAL & ERROR — FAILURE TO RAISE ARGUM ENT BEFORE TRIAL COURT — ARGUM ENT THAT
CIRCUIT COURT SHOULD HAVE STRUCK THE “ALL CIVIL REM EDIES” LANGUAGE FROM THE
CUSTOM ER AGREEM ENT NOT CONSIDERED ON APPEAL. — Because Appellants did not raise
below the argument that the circuit court should have struck the “all civil remedies” language from
the Customer Agreement that it now makes on appeal, the supreme court did not consider that
argument; neither the addendum nor the abstract revealed that Appellants ever asked the circuit
court to strike that language and give effect to the remainder of the Customer Agreement.
6.
CONTRACTS —
— TRIAL COURT CORRECTLY DENIED APPELLANTS’
M OTION TO COM PEL ARBITRATION WHERE APPELLEE CHALLENGED THE ARBITRATION PROVISION
ON AN INDEPENDENT BASIS FROM THE CHALLENGE TO THE CONTRACT AS A WHOLE. —
ARBITRAT IO N CLAUSE
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Consistent with Buckeye, it is permissible for a trial court to rule on the validity of an arbitration
provision where the party challenging the provision does so on an independent basis from a
challenge to the contract as a whole; here, Appellee’s challenge to the contract was that it was a
usurious loan, a deceptive trade practice, and a violation of a court-approved settlement
agreement; her challenge to the arbitration provision was that it was unenforceable as lacking
mutuality of obligation; the trial court followed the numerous cases from the supreme court
invalidating similar arbitration provisions and contract language as lacking mutuality of obligation
and therefore correctly denied Appellants’ motion to compel arbitration; accordingly, the order
denying the motion to compel arbitration was affirmed.
Wright, Lindsey & Jennings, by: Claire Shows Hancock and Gary D. Marts, Jr.; Sutherland
Asbill & Brennan, by: Lewis S. Wiener, Phillip E. Stano, and Brendan Ballard, for appellants.
Arnold, Batson Turner & Turner, by: Todd Turner and Dan Turner; Scholtens & Averitt, by:
Chris Averitt and Jay Scholtens, for appellee.
Appellants, Advance America Servicing of Arkansas, Inc., d/b/a Advance America Cash
Advance; Advance America, Cash Advance Centers of Arkansas, Inc.; and Advance America,
Cash Advance Centers, Inc., appeal from the order of the Clark County Circuit Court denying
their motion to compel arbitration of a putative class-action complaint for alleged violations
of Arkansas’s Constitution and laws prohibiting usurious interest and deceptive trade practices.
Our jurisdiction is pursuant to Arkansas Supreme Court Rule 1-2(a)(1) as an appeal involving
the interpretation or construction of the Arkansas Constitution.
On appeal, Appellants argue
the circuit court erred in concluding the arbitration provision in question was invalid for lack
of mutuality, in looking outside the arbitration provision to other parts of the underlying
contract, and in failing to strike the invalid portion of the contract and to enforce the
arbitration provision.
We find no error and affirm the circuit court’s denial of the motion to
compel arbitration.
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Appellee, Brenda McGinnis, filed a putative class-action complaint against Appellants
in circuit court on February 27, 2007, alleging Appellants had charged her and other potential
class members usurious interest, engaged in deceptive trade practices, and violated a prior
court-approved settlement agreement.
According to the complaint, Appellee engaged in a
transaction with Appellants at their Jonesboro, Arkansas, branch office on November 3, 2006,
whereby she wrote a check for $278.83 and Appellants gave her $250.00 in cash and agreed
to hold her check until her next payday.
The complaint alleged this transaction was typical of
the transactions between Appellants and its customers in Arkansas and amounted to a loan
resulting in an effective annual percentage rate of over 150% in violation of the prohibition
of usurious interest contained in article 19, section 13 of the Arkansas Constitution.
As such,
the complaint alleged entitlement to twice the amount of interest paid plus costs and attorney’s
fees. See Ark. Const. art. 19, § 13; Ark. Code Ann. §§ 4-57-101 et seq. (Repl. 2001 & Supp.
2005).
In addition to being a usurious loan, the complaint also alleged this transaction was a
violation of the Arkansas Deceptive Trade Practices Act, Arkansas Code Annotated sections
4-88-101 et seq. (Repl. 2001 & Supp. 2003), entitling Appellee to her actual damages plus
costs and attorney’s fees. The complaint alleged further that the transaction demonstrated that
Appellants were operating under the Check-Cashers Act, Arkansas Code Annotated sections
23-52-101 et seq. (Repl. 2000 & Supp. 2005), and charging fees under that act in violation of
a settlement agreement to cease conducting check-cashing transactions in Arkansas approved
by the circuit court in Garrett v. Advance America, Cash Centers of Arkansas, Inc., Clark
County Circuit Court, Case No. CIV-99-152.
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Appellants moved to compel arbitration of the matters alleged in the complaint.1
They
argued that Appellee’s claims arose from six transactions between her and Appellants
conducted from September 1, 2006 to February 2, 2007, pursuant to a Deferred Presentment
Option Agreement (Customer Agreement) she executed with Appellants.
Appellants contended
that, pursuant to the express terms of the Customer Agreement she signed, Appellee was
required to submit to arbitration the claims alleged in her complaint.
Appellants argued that
Appellee did not challenge the arbitration provision of the Customer Agreement; rather, she
asserted a challenge to the Customer Agreement as a whole and therefore Buckeye Check
Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), required the circuit court to send the case
to arbitration.
Appellants attached to their motion to compel arbitration a copy of the
Customer Agreement. The portions of that Customer Agreement that are at issue in this appeal
are as follows:
Deferred Presentment Option Agreement
....
Default, Returned Check Fee, Court Costs, and Attorney’s Fee. You will be
in default under this Customer Agreement if you do not pay us any amount you
owe us under this Customer Agreement or you cause your Check not to be
honored on or after the Presentment Date. If the Check is returned to us from
your bank or other financial institution due to insufficient funds, closed account,
or a stop-payment order, we shall have the right to all civil remedies allowed by
law to collect the check and shall be entitled to recover a returned check fee of
$25.00 as authorized by applicable Arkansas law, court costs, and reasonable
1
We observe that while the motion to compel arbitration w as p ending in s tate circuit court, Appellants also filed
an action in federal dis t rict court to compel arbitration and stay the state-court proceedings. The Court of Appeals for
the Eighth Circuit ultimately dismissed that action, determining that the amount in cont rovers y did not satisfy the
requirements for diversity jurisdiction. Advance Am. Servicing of Ark., Inc. v. McGinnis, 526 F.3d 1170 (2008).
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attorney’s fee paid to an attorney who is not our salaried employee. Neither we
nor any other person on our behalf will institute or initiate any criminal
prosecution against you.
....
Acknowledgments.
Please note that this Customer Agreement contains a
binding Waiver of Jury Trial and Arbitration Provision. You acknowledge that
we issued a copy of this Customer Agreement to you. You acknowledge that we
paid the proceeds of the transaction to you, in cash. . . . You further
acknowledge that you have read, understand, and agree to all of the terms on both
sides of this Customer Agreement, including the provision on the other side of
this Customer Agreement entitled “Waiver Jury Trial and Arbitration Provision.”
....
WAIVER OF JURY TRIAL AND ARBITRATION PROVISION. Arbitration is a
process in which persons with a dispute: (a) waive their rights to file a lawsuit
and proceed in court and to have a jury trial to resolve their disputes; and (b)
agree, instead, to submit their disputes to a neutral third person (an “arbitrator”)
for a decision. Each party to the dispute has an opportunity to present some
evidence to the arbitrator. Pre-arbitration discovery may be limited. Arbitration
proceedings are private and less formal than court trials. The arbitrator will
issue a final and binding decision resolving the dispute, which may be enforced
as a court judgment. A court rarely overturns an arbitrator’s decision. Nothing
contained in this Waiver of Jury Trial and Arbitration Provision (hereinafter the
“Arbitration Provision”) shall prevent or limit the authority of the Arkansas
State Board of Collection Agencies from fully exercising its administrative
remedies as set forth in Act 1216 of 1999 nor preclude you from any
administrative remedies available to you under the Act. THEREFORE, YOU
ACKNOWLEDGE AND AGREE AS FOLLOWS:
1. For purposes of this Arbitration Provision, the words “dispute” and “disputes”
are given the broadest possible meaning and include, without limitation (a) all
claims, disputes, or controversies arising from or relating directly or indirectly
to the signing of this Arbitration Provision, the validity and scope of this
Arbitration Provision and any claim or attempt to set aside this Arbitration
Provision; (b) all federal or state law claims, disputes or controversies, arising
from or relating directly or indirectly to this Customer Agreement (including
the Arbitration Provision), the information you gave us before entering into this
Customer Agreement, including the Application, and/or any past agreement or
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agreements between you and us; (c) all counterclaims, cross-claims and thirdparty claims; (d) all common law claims, based upon contract, tort, fraud, or
other intentional torts; (e) all claims based upon a violation of any state or
federal constitution, statute or regulation; (f) all claims asserted by us against
you, including claims for money damages to collect any sum we claim you owe
us; (g) all claims asserted by you individually against us and/or any of our
employees, agents, directors, officers, shareholders, governors, managers,
members, parent company or affiliated entities (hereinafter collectively
referred to as “related third parties”), including claims for money damages
and/or equitable or injunctive relief; (h) all claims asserted on your behalf by
another person; (i) all claims asserted by you as a private attorney general, as a
representative and member of a class of persons, or in any other representative
capacity, against us and/or related third parties (hereinafter referred to as
“Representative Claims”); and/or (j) all claims from or relating directly or
indirectly to the disclosure by or related third parties of any non-public personal
information about you.
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 US 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 US 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 US 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.
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....
6. All parties, including related third parties, shall retain the right to seek
adjudication in a small claims tribunal for disputes within the scope of such
tribunal’s jurisdiction. Any dispute, which cannot be adjudicated within the
jurisdiction of a small claims tribunal, shall be resolved by binding arbitration.
Any appeal of a judgment from a small claims tribunal shall be resolved by
binding arbitration.
In her response to Appellants’ motion to compel arbitration, Appellee for the first time
asserted a challenge to the arbitration provision of the Customer Agreement as being
unenforceable for lack of mutuality.
Appellee relied on former case law from this court
holding similar arbitration provisions unenforceable as lacking the element of mutuality of
obligation. See, e.g., Nat’l Cash, Inc. v. Loveless, 361 Ark. 112, 205 S.W.3d 127 (2005).
Appellee also claimed that the lack of mutuality rendered the Customer Agreement one-sided
and therefore unconscionable.
According to Appellee’s response, Buckeye was not applicable
to her case since she now included a challenge to the arbitration provision of the Customer
Agreement.
The circuit court held a hearing on November 20, 2007, on the motion to compel
arbitration and ruled from the bench that
the language, reserving the right to all civil remedies, when considered with the
language in the arbitration agreement section of the contract, that the arbitration
agreement is invalid because the remedies lacked mutuality of the parties, not
that the whole contract lacks mutuality. . . .
I’m not making any ruling with regard to the validity or non-validity of the
contract. I’m making my ruling only with regard to the language which I think
has to be considered in conjunction with the arbitration language to determine
whether or not the arbitration clause is invalid.
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The circuit court then entered an order on January 16, 2008, denying the motion to compel
arbitration for the reasons stated from the bench. This appeal followed.
An order denying a motion to compel arbitration is an immediately appealable order.
Ark. R. App. P.–Civ. 2(a)(12). We review the circuit court’s order denying Appellants’ motion
to compel arbitration de novo on the record. Nat’l Cash, 361 Ark. 112, 205 S.W.3d 127.
The first point Appellants assign as error to the trial court is the ruling that the “all civil
remedies”
language in the Customer Agreement renders the arbitration
unenforceable for lack of mutuality of obligation.
provision
Implicit in the circuit court’s ruling was a
finding, based upon this court’s case law, that the “all civil remedies” language gives Appellants
access to the circuit court while limiting Appellee to arbitration.
Appellants assert this was
an incorrect interpretation of the arbitration provision, which provides that all disputes arising
under the Customer Agreement must be resolved in either small claims court or binding
arbitration.
Appellants point out that the “all civil remedies” language is located separately and
independently from the arbitration provision and that the circuit court erroneously grafted the
language into the arbitration provision to find that it lacks mutuality.
Appellants assert the
circuit court erred in fundamentally equating and thereby blurring the distinction between “all
civil remedies” available to a party and the “forum” in which a party may seek such remedies.
Appellants maintain, for the first time on appeal, that the “all civil remedies” language is an
independent-damages provision of the Customer Agreement giving Appellants the right to
pursue “all civil remedies” in the event a customer’s check is dishonored, but does not give
them the right to pursue those remedies in judicial forums.
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Appellants assert five subpoints under this first assignment of error.
We address all
five subpoints, but first point out that many of these subpoints raised under this first
assignment of error were not raised below. At the hearing on the motion to compel arbitration,
Appellants’ primary argument was that Buckeye Check Cashing, 546 U.S. 440, required
Appellee’s complaint to be heard by an arbitrator. Their focus at the hearing was on the fact
that Appellee could not be in court because, according to Buckeye, her complaint only
challenged the validity of the contract as a whole and not the arbitration provision. In addition,
they argued that it was only in response to the motion to compel that Appellee raised a
challenge to the arbitration provision; and then the challenge was not to the arbitration
provision itself but to the “all civil remedies” language, which is found elsewhere in the
Customer Agreement outside the arbitration provision and therefore required the court to
evaluate the contract as a whole in violation of Buckeye.
Thus, although there was discussion
at the hearing regarding the “all civil remedies” language and mutuality of the arbitration
provision, as we discuss in the remainder of this opinion, much of what Appellants now argue
specifically on appeal simply was not raised or ruled upon below and is therefore not preserved
for appellate review.
It is elementary that this court will not consider arguments that are not preserved for
appellate review. Seidenstricker Farms v. Doss, 374 Ark. 123, ___ S.W.3d ___ (2008). We
will not do so because it is incumbent upon the parties to raise arguments initially to the trial
court in order to give that court an opportunity to consider them. Id. Otherwise, we would be
placed in the position of reversing a trial court for reasons not addressed by that court. Id.
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We first dispose of those subpoints that are not preserved for our review. These include
Appellants’ arguments that (1) the fact that “all civil remedies” is listed on the face of the
Customer Agreement in the same sentence as returned check fee, court costs, and reasonable
attorney’s fees reflects the parties’ intent that “all civil remedies” refer to “damages” and not
the “forum” in which a party may pursue such damages; and that (2) because the “all civil
remedies” language appears outside and independent from the arbitration provision, it would
defy the plain meaning of the Customer Agreement and the rules of contract construction to
read the “all civil remedies” language as invalid for lack of mutuality. As previously stated, this
court does not address arguments presented for the first time on appeal.
Turning now to Appellants’ subpoints that are preserved for our review, we first
consider the argument that the “all civil remedies” language in the Customer Agreement
merely restates the law as codified in the Check-Cashers Act and its implementing regulations
and is therefore evidence that the “all civil remedies” language is intended to ensure
Appellants’ right to recover damages, not to give them access to judicial forums.
Below,
Appellee cited Richard Harp Homes, Inc. v. Van Wyk, 99 Ark. App. 424, 262 S.W.3d 189
(2007), which held that a reference in an arbitration clause to court costs, expenses of
litigation, and attorney’s fees rendered the arbitration clause ambiguous and therefore defeated
mutuality.
Appellants attempted to distinguish Van Wyk based on the fact that the language at
issue in this case was a restatement of the Check-Cashers Act.
We note that the Act and regulations do use very similar language giving a check-casher
the right to all civil remedies allowed by law, including receiving the face amount of the check
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purchased, a returned check fee, court costs, and reasonable attorney’s fees.
However, the
mere statement of such language in the Act does not restore the lack of mutuality of obligation
in this Customer Agreement caused by the “all civil remedies” language.
This court has
consistently and repeatedly held that the reference to “all civil remedies” available to only one
party in a check- cashing agreement renders the agreement to arbitrate invalid for lack of
mutuality.
See, e.g., E-Z Cash Advance v. Harris, 347 Ark. 132, 60 S.W.3d 436 (2001).
There, this court stated that “[t]aking into account their line of business, it is difficult to
imagine what other causes of action against a borrower remain that [the check-casher] would
be required to submit to arbitration.” Id. at 141, 60 S.W.3d at 442. Thus, regardless of the
source and the location of the “all civil remedies” language, there is no other remedy for
Appellants to seek in arbitration, and the “all civil remedies” language therefore has the effect
of allowing Appellants to go to circuit court, thereby destroying the element of mutuality since
Appellee does not also have that right. The location of the “all civil remedies” language in the
Customer Agreement and the source of the language have no effect on the issue of mutuality
or lack thereof.
Appellants also argue as a subpoint that mutuality of obligation does not require
mutuality of remedy.
They contend that under this Customer Agreement, the fact that the
remedy or damages available to one party may be different than the remedy or damages
available to the other party, does not defeat mutuality of obligation in the separate and
independent arbitration provision.
Contrary to Appellants’ assertion, we do not interpret the
circuit court’s ruling as requiring both parties to have the same remedies.
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below did so require, however, we can affirm it for the reason that mutuality of obligation is
required and is lacking here. It is axiomatic that this court can affirm a circuit court if the right
result is reached even if for a different reason. Office of Child Support Enforcement v. Wood,
373 Ark. 595, ___ S.W.3d ___ (2008).
Appellants’ second assignment of error is the circuit court’s holding that a term outside
and independent of the arbitration provision rendered the arbitration provision unenforceable.
Appellants contend the circuit court erred in looking to provisions of the contract outside the
arbitration provision to evaluate the validity of the arbitration provision. The circuit court ruled
that the “all civil remedies” language in the Customer Agreement destroyed the arbitration
provision’s mutuality.
Appellants contend that since the “all civil remedies” language was not
part of the arbitration provision itself, the circuit court erroneously evaluated the contract as
a whole and thereby contravened Buckeye Check Cashing, 546 U.S. 440.
Buckeye does not stand for the proposition argued by Appellants.
Buckeye holds that
it is improper for a court to consider a claim that a contract containing an arbitration clause
is invalid as a whole when there is not also a claim that the arbitration clause is itself invalid.
Buckeye does not, however, also hold that when considering the validity of an arbitration
clause, a court is constrained to the clause itself and prohibited from considering other parts
of the contract relating to the agreement to arbitrate disputes arising from the contract.
Appellants’ argument extends the holding of the Buckeye case too far.
Buckeye involved a putative class action filed in Florida state court alleging the deferred
deposit contract signed by Buckeye Check Cashing and its customers violated Florida’s laws
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prohibiting usury and deceptive trade practices.
Buckeye Check Cashing moved to compel
arbitration of that case. The United States Supreme Court granted certiorari to decide “whether
a court or an arbitrator should consider the claim that a contract containing an arbitration
provision is void for illegality.”
Buckeye Check Cashing, 546 U.S. at 442.
The Supreme
Court observed that “[t]he crux of the complaint is that the contract as a whole (including its
arbitration provision) is rendered invalid by the usurious finance charge” and went on to
conclude that “because respondents challenge the Agreement, but not specifically its
arbitration provisions, those provisions are enforceable apart from the remainder of the
The challenge should therefore be considered by an arbitrator, not a court.” Id. at
contract.
444, 446.
The Supreme Court ultimately held that, “regardless of whether the challenge is
brought in federal or state court, a challenge to the validity of a contract as a whole, and not
specifically to the arbitration clause, must go to the arbitrator.” Id. at 449.
Like Buckeye, the complaint in the present case does not assert a challenge to the
arbitration provision itself, but rather asserts a challenge to the whole contract as being
usurious and a deceptive trade practice.
However, unlike Buckeye where there was no
challenge to the arbitration provision itself, Appellee in the present case asserted a claim that
the arbitration provision was invalid for lack of mutuality of obligation in her response to the
motion to compel arbitration.
The circuit court below clearly stated from the bench that it was not making a ruling
on the merits of the validity of the contract as a whole, but was ruling that the “all civil
remedies” language appearing on the first page of the Customer Agreement rendered the
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arbitration provision found in the remainder of the Customer Agreement invalid for lack of
mutuality.
As we quoted previously in this opinion, the circuit court clearly stated: “I’m not
making any ruling with regard to the validity or non-validity of the contract.
I’m making my
ruling only with regard to the language which I think has to be considered in conjunction with
the arbitration language to determine whether or not the arbitration clause is invalid.”
This
ruling does not amount to an evaluation of the validity of the contract as a whole and therefore
does not run afoul of Buckeye.
Appellants’ third assignment of error is that the circuit failed to strike the allegedly
offensive “all civil remedies” clause and enforce the remainder of the arbitration provision.
Appellants contend that rather than invalidating the arbitration provision, the circuit court
should have, at most, invalidated and severed only the “all civil remedies” language, while
giving effect to the intent of the parties to arbitrate claims covered by the arbitration provision.
Appellants concede that the arbitration provision does not contain a severance provision. They
argue, however, that the essence of the Customer Agreement is that the parties
arbitrate any
disputes arising from or related to the Customer Agreement and severing the “all civil
remedies” language does not change the essence of that intent of to arbitrate.
Neither the addendum nor the abstract reveals that Appellants ever asked the circuit
court to strike the “all civil remedies” language and give effect to the remainder of the
Customer Agreement.
Appellants’ motion to compel arbitration does not raise the issue.
The
abstract of the hearing does not indicate this issue was ever presented to or ruled upon by the
circuit court.
Because Appellants did not raise below the argument that the circuit court
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should have struck the “all civil remedies” language from the Customer Agreement that it now
makes on appeal, we do not consider that argument. Seidenstricker, 374 Ark. 123, ___ S.W.3d
___.
Appellee includes an assertion in her brief that this court could affirm the trial court
for a reason different from what it ruled — that the arbitration provision was unconscionable.
There is no need to address this assertion since we affirm on the lack of mutuality. See, e.g.,
The Money Place v . Barnes, 349 Ark. 411, 78 S.W.3d 714 (2002) (stating that because the
arbitration provision was held unenforceable for lack of mutuality, there was no need to
discuss whether the arbitration provision was unconscionable).
We conclude that, consistent with Buckeye, it was permissible for the trial court to rule
on the validity of the arbitration provision because Appellee challenged the arbitration
provision on an independent basis from her challenge to the contract as a whole.
Appellee’s
challenge to the contract was that it was a usurious loan, a deceptive trade practice, and a
violation of a court-approved settlement agreement.
Her challenge to the arbitration provision
was that it was unenforceable as lacking mutuality of obligation.
numerous cases from this court
The trial court followed the
invalidating similar arbitration provisions and contract
language as lacking mutuality of obligation and therefore correctly denied Appellants’ motion
to compel arbitration. The order denying the motion to compel arbitration is affirmed.
-16-
08-492
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