Hornsby et al v. Macon County Greyhound Park, Inc.

Filing 158

OPINION AND ORDER that Defendants Macon County Greyhound Park, Inc., McGregor Enterprises, Milton McGregor, and Victoryland's motions to compel arbitration of claims brought by plaintiffs Nancy Yarenko and Murray Baker (Doc. Nos. 27 and 75 ) are granted; that Plaintiffs Yarenko and Baker are to arbitrate their claims in this litigation; that proceedings on their claims are stayed pending arbitration. Signed by Honorable Judge Myron H. Thompson on 6/13/2012. (Attachments: # 1 Civil Appeals Checklist)(cc, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, EASTERN DIVISION

LUCRETIA HORNSBY, et al.,
etc.,
Plaintiffs,
v.
MACON COUNTY GREYHOUND
PARK, INC., et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)

CIVIL ACTION NO.
3:10cv680-MHT
(WO)

OPINION AND ORDER
Plaintiffs Nancy Yarenko and Murray Baker and other
named plaintiffs bring this putative class-action suit
charging the defendants with violations of the Employee
Retirement

Income

Security

Act

(ERISA),

29

§§ 1001-1461, and other related federal statutes.

U.S.C.
This

case is now before the court on the defendants’ motions
for arbitration and dismissal of Yarenko and Baker’s
claims pursuant to the Federal Arbitration Act (FAA), 9
U.S.C. §§ 1–16.

The motions will be granted to the

extent that arbitration will be compelled.

I.

BACKGROUND

Yarenko and Baker are former employees of the Macon
County Greyhound Park (MCGP), one of the defendants in
this

lawsuit.

insurance plan.

They

were

provided

a

group

health

They assert that, under federal law,

employees who participated in a qualified healthcare plan
and were involuntarily terminated between certain dates
were entitled to continued health coverage at a 65 %
discount.

Yarenko and Baker claim that, in violation of

ERISA and other federal statutes, the defendants failed
to provide them with notice of this 65 % discount and
failed

to

remit

or

refund

the

excess

premiums

for

insurance withheld from paychecks near the end of their
employment relationship.
The defendants now move to compel arbitration of, and
dismiss,

Yarenko

arbitration
Applicant”

and

clause
they

Baker’s
contained

each

signed

2

claims
in
when

a

pursuant

to

“Statement

they

applied

an
of
for

employment with MCGP.

In pertinent part, the statement

provides:
“I agree that any controversy which may
cause [sic] arise out of my employment
with
MCGP
will
be
resolved
by
arbitration in Birmingham, Alabama, in
accordance with the procedures of the
American Arbitration Association.
I
understand
that
my
rights
and
responsibilities under arbitration as
well as those of MCGP are more fully set
out in the employee handbook.”
Ex. B (Doc. No. 28-2) at 2.

II. DISCUSSION
A.
In

general,

the

arbitration agreements.

FAA

governs

the

validity

of

Caley v. Gulfstream Aerospace

Corp., 428 F.3d 1359, 1367 (11th Cir. 2005).

Section 2,

the “primary substantive provision of the Act,” Moses H.
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983), provides: “A written provision in ... a contract
evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such
3

contract or transaction, ... or an agreement in writing
to submit to arbitration an existing controversy arising
out of such a contract, transaction, or refusal, 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.

This provision reflects

“both a ‘liberal federal policy favoring arbitration’...
and the ‘fundamental principle that arbitration is a
matter of contract.’ ... [C]ourts must place arbitration
agreements on an equal footing with other contracts, and
enforce them according to their terms.”

AT&T Mobility

LLC v. Concepcion, 131 S. Ct. 1740, 1745 (2011) (quoting,
respectively,

Moses

H.

Cone,

460

U.S.

at

24,

and

Rent–A–Center, West, Inc. v. Jackson, 130 S. Ct. 2772,
2776 (2010) (further citation omitted)).

As such, “where

the contract contains an arbitration clause, there is a
presumption of arbitrability in the sense that an order
to arbitrate a particular grievance should not be denied
unless it may be said with positive assurance that the

4

arbitration

clause

is

not

susceptible

of

interpretation that covers the asserted dispute.”

an
AT&T

Techs., Inc. v. Communications Workers of Am., 475 U.S.
643, 651 (1986) (internal quotes and citation omitted);
see also Seaboard Coast Line R.R. Co. v. Trailer Train
Co., 690 F.2d 1343, 1348 (11th Cir. 1982) (“[F]ederal
policy requires that we construe arbitration clauses
generously,

resolving

all

doubts

in

favor

of

arbitration.”).
Nonetheless, because, under the FAA, contract law is
left primarily to the States, the antecedent question of
whether an enforceable contract or agreement to arbitrate
exists, along with the interpretation of that contract or
agreement,

is

generally

a

matter

of

state

law.

Stolt–Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct.
1758,

1773

(2010);

In

re

Checking

Account

Overdraft

Litig. MDL No. 2036, 674 F.3d 1252, 1255 (11th Cir.
2012).

5

To effect § 2’s substantive provision, § 4 of the FAA
establishes
arbitration

a

procedural

when

one

mechanism

party

has

been

for

compelling

subjected

to

a

lawsuit it believes is within the ambit of an arbitration
agreement: “A party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a
written

agreement

for

arbitration

may

petition

[the

court] ... for an order directing that such arbitration
proceed in the manner provided for in such agreement.”
9 U.S.C. § 4.

Section 4 goes on to provide that, “upon

being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in
issue,

the

court

shall

make

an

order

directing

the

parties to proceed to arbitration in accordance with the
terms of the agreement.”

Id.1

1. To be within the reach of the FAA, an arbitration
agreement must, as stated, “evidenc[e] a transaction
involving commerce.” 9 U.S.C. § 2; Caley, 428 F.3d at
1367. The parties do not contest this issue here.
6

B.
The dispute here is, primarily, about whether an
enforceable

arbitration

agreement

exists

between

the

parties and, secondarily, about whether the terms of any
such agreement, should it exist, control the statutory
claims advanced by Yarenko and Baker.2

The defendants’

argument is straightforward: the Statement of Applicant
includes a valid, written agreement to arbitrate that
clearly

encompasses

Yarenko

and

Baker’s

claims.

Therefore, the defendants continue, the court is required
to compel arbitration under the FAA and should dismiss
Yarenko and Baker and their claims from this lawsuit.

2. The parties do not contest that the issue of who
determines arbitrability is properly one for judicial
determination, not for an arbitrator.
“Unless the
parties clearly and unmistakably provide otherwise, the
question of whether the parties agreed to arbitrate is to
be decided by the court, not the arbitrator.”
AT&T
Technologies, 475 U.S. at 649.
7

1.
Because arbitration is a creature of contract, the
court must apply ordinary state-law contract principles
governing

the

formation

of

contracts

when

deciding

whether the parties have an arbitration agreement.

The

defendants, as the parties seeking to compel arbitration,
bear the burden of proving the existence of a contract
calling for arbitration.
The parties agree that Alabama law applies here.

In

Alabama, the “elements of a valid contract include: an
offer and an acceptance, consideration, and mutual assent
to terms essential to the formation of a contract.”
Shaffer v. Regions Fin. Corp., 29 So.3d 872, 880 (Ala.
2009) (internal quotes and citations omitted).
Here, the document at issue is the Statement of
Applicant Yarenko and Baker signed when they initially
sought employment at MCGP.

Yarenko and Baker first argue

that this statement does not constitute an agreement to
arbitrate because its language includes the following

8

provision that, according to them, is “nonsense,”

Pl.

Br. (Doc. No. 34) at 15: “I agree that any controversy
which may cause arise out of my employment with MCGP will
be resolved by arbitration....”
2 (emphasis added).

Ex. B (Doc. No. 28-2) at

While it “is not seriously disputed

that the Statement of Applicant is not well drafted,” the
error is “[s]o obvious that it does not in any way
obscure the obvious meaning of the sentence or the nature
of the agreement between the parties.”

Sides v. Macon

County Greyhound Park, Inc., 2011 WL 2728926, at *4 (M.D.
Ala. July 12, 2011) (Fuller, J.) (addressing the same
provision).

In other words, the typographical error is

so obvious and not self-contradictory that the meaning of
the provision remains clear: The provision provides for
arbitration.
Yarenko and Baker next argue that the Statement of
Applicant

did

not

create

an

agreement

to

arbitrate

because it was not signed by anyone on MCGP’s behalf.
They contend that the statement “does not evidence any

9

intent by the defendants to accept or be bound by the
statement.”

Pl. Br. (Doc. No. 34) at 16.

This argument

misses the mark, however, because it misapprehends how an
expression of assent operates.

In consideration for

signing the statement, MCGP agreed to hire Yarenko and
Baker according to the terms of the statement, which
hiring was enough to demonstrate MCGP’s assent to the
statement’s terms.

Cf. Sides, 2011 WL 2728926, at *4

(noting that MCGP’s “decision to hire [the plaintiffs]
after

they

signed

the

Statements

of

Applicant

is

sufficient evidence of its assent and agreement to be
bound to the contractual offer it had extended) (citing
Gadsen Budweiser Distrib. Co., Inc. v. Holland, 807 So.2d
528, 531 (Ala. 2001)).
To elaborate, basic principles of Alabama contract
law,

along

with

other

terms

in

the

Statement

of

Applicant, demonstrate why the employment of Yarenko and
Baker was sufficient to indicate mutual assent.

“Alabama

follows the general rule” that a “unilateral contract is

10

created when one party makes an offer and the other party
accepts

by

performing

an

act.

...

In

a

unilateral

contract, ‘[o]nly one party makes an offer (or promise)
which invites performance by another, and performance
constitutes

both

consideration.’”

acceptance

of

that

offer

and

Conference Am., Inc. v. Conexant Sys.,

Inc., 508 F. Supp. 2d 1005, 1014) (M.D. Ala. 2007)
(Watkins, J.) (quoting SouthTrust Bank v. Williams, 775
So.2d 184, 188 (Ala. 2000) (internal quotes and citation
omitted)).

Accordingly,

“‘[i]n

such

a

case

the

performance supplies the element of mutuality necessary
as a consideration to support the obligation.’”

Id.

(quoting Miller v. Thomason, 156 So. 773, 774 (1934)
(citations omitted)).

Here, when MCGP hired Yarenko and

Baker, it assented to the statement and accepted its
terms.
As a result, MCGP as well as Yarenko and Baker
accepted all the Statement of Applicant’s terms: MCGP had
a

right,

under

the

statement

11

to

“investigate

all

references and to secure additional information about”
each

applicant;

“conducts
failure

drug

to

application

and

MCGP

screening

pass

such

being

also
on

a

all

test

rejected,

clear

applicants
will

or,

employment being terminated.
(Doc. No. 28-2) at 2.

made

that
and

that

in

[an]

result

if

it

employed,

...

Statement of Applicant

The statement also gave MCGP a

limited amount of time to effect its acceptance of these
terms

through

performance

by

providing

that:

application is current for only sixty days.

“This
At the

conclusion of this time, if [the applicant] ha[s] not
heard from MCGP and still wish[es] to be considered for
employment, it will be necessary for [the applicant] to
fill out a new application.”
With
Applicant

these

terms,

invites

Id.

therefore,

performance

by

the
MCGP

Statement
to

hire

of
the

applicant according to certain terms: It can conduct drug
tests, investigate her background, and, as set forth in
the

statement,

force

any

controversy

12

arising

out

of

employment to be resolved by arbitration.
case,

performance

necessary

as

enforceable

supplies

consideration
agreement

has

the
to
been

element
find

of

that

made.

In such a
mutuality
a

valid,

Cf.

Lanier

Worldwide, Inc. v. Clouse, 875 So.2d 292, 296 (Ala. 2003)
(“Conduct of one party to a contract from which the other
may

reasonably

draw

an

inference

of

assent

to

an

agreement is effective as acceptance.”) (internal quotes
and citation omitted).
In their final argument based upon the text of the
Statement of Applicant, Yarenko and Baker assert that,
because the statement’s broad arbitration language does
not explicitly mention ERISA claims or any statutory
claims, the statement does not constitute an agreement to
arbitrate the claims they have asserted under ERISA.
Addressing an arbitration clause with terms as broad as
the

“any

controversy”

language

in

the

Statement

of

Applicant here, the Eleventh Circuit Court of Appeals has
explained that an agreement to arbitrate “any action,

13

dispute, claim, counterclaim or controversy” between the
parties includes the arbitration of statutory claims
because “[a]ny disputes means all disputes, because ‘any’
means all.’”

Anders v. Hometown Mortg. Servs., Inc.,

346 F.3d 1024, 1028 (11th Cir. 2003) (quoting Merritt v.
Dillard Paper Co., 120 F.3d 1181, 1187 (11th Cir. 1997)).
To

make

their

case,

Yarenko

and

Baker

point

to

Paladino v. Avnet Computer Technologies, Inc., 134 F.3d
1054 (11th Cir. 1998), a discrimination case brought
under Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. §§ 1981a, 2000e through 2000e-17,
where the appellate court invalidated an arbitration
clause because the agreement provided for arbitration of
all disputes, but limited the arbitrator to providing
damages for breach of contract only, and not for any
other damages, such as those for violations of antidiscrimination law or other tortious liability.
Paladino, 134 F.3d at 1060-62.

See

As the Eleventh Circuit

later explained in Anders, the arbitration clause in

14

Paladino “was invalid ... because ‘the arbitrability of
[statutory]

claims

rests

on

the

assumption

that

the

arbitration clause permits relief equivalent to court
remedies’”; and, because the Paladino clause excluded
equivalent remedies, the court “pronounced it invalid.”
346 F.3d at 1030 (quoting Paladino, 134 F.3d at 1062).
Yarenko and Baker’s attempt to sweep this case under
the rule of Paladino is unavailing.

The argument comes

in two steps: First, they point out that the arbitration
clause

requires

accordance

with

that

arbitration

be

conducted

the

procedures

of

the

“in

American

Arbitration Association,” Statement of Applicant (Doc.
No. 28-2) at 2, procedures which they deem “fair” and do
not at all limit their statutory remedies.
(Doc. No. 34) at 21.

Pls. Br.

Second, they point to the next

sentence in the provision: “I understand that my rights
and responsibilities under arbitration as well as those
of MCGP are more fully set out in the employee handbook.”
Statement of Applicant (Doc. No. 28-20) at 2.

15

The

problem, Yarenko and Baker contend, is that the grievance
procedures set out in the employee handbook are not the
same

as,

or

consistent

with,

those

of

the

American

Arbitration Association.

Examination of these grievance

procedures

appear

reveals

what

to

be

internal,

less

formal channels of dispute resolution that would operate
before

or

outside

of

more

formal

processes

litigation or even arbitration itself.

like

In fact, these

internal grievance procedures do not appear in any way to
limit remedies available externally.

For instance, and

consistent with Paladino, the grievance procedures make
clear that employees who file charges of discrimination
with the Equal Employment Opportunity Commission are not
within the scope of the internal system.
the

reference

to

the

employee

Yet, even if

handbook

could

be

considered as having a bearing upon how arbitration is to
proceed, Yarenko and Baker’s argument still misses the
mark

because,

in

contrast

with

Paladino,

nothing

in

MCGP’s employee handbook’s description of the grievance

16

procedures purports to limit or burden an employee’s
right to get any form of statutory remedy.

2.
Yarenko and Baker submit a number of policy arguments
asserting that their ERISA claims cannot be arbitrated as
a matter of federal policy because ERISA was passed in
order to provide employee beneficiaries with “appropriate
remedies, sanctions, and ready access to the Federal
courts.”

29 U.S.C. § 1001 (emphasis added).

To effect

this policy of federal-court access, Yarenko and Baker
emphasize, ERISA grants exclusive jurisdiction to federal
courts, thus denying the concurrent jurisdiction that
typically applies in state court for the assertion of
federal claims.

29 U.S.C. § 1132(e).

While the court

agrees that there is a clear federal policy expressed in
ERISA to provide plaintiffs with an exclusively federal
forum for judicial resolution of ERISA-related disputes,
the court cannot conclude that, as a matter of policy,

17

Congress intended to supercede the FAA, or prohibit nonjudicial determination of ERISA claims, when it enacted
ERISA.
Once

a

valid,

enforceable

agreement

that

covers

disputes brought pursuant to a federal statute has been
found, “the statutory claims are subject to arbitration
‘unless Congress has evinced an intention to preclude a
waiver of judicial remedies for the statutory rights at
issue.’”
1249,

Picard v. Credit Solutions, Inc., 564 F.3d

1254

(11th

Cir.

2009)

(quoting

Gilmer

v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 26 (1991)).
“‘Statutorily-created causes of action are no exception
to

the

enforced

rule

that

according

arbitration
to

their

agreements
terms.’”

Id.

should

be

(quoting

Cunningham v. Fleetwood Homes, 253 F.3d 611, 617 (11th
Cir. 2001)).

When assessing such a claim, the Supreme

Court has explained that a court must review statutory
text, legislative history, and the purpose of the statute
in determining whether to preclude arbitration because,

18

“[l]ike any statutory directive, the Arbitration Act’s
mandate may be overridden by a contrary congressional
command.

The

burden

is

on

the

party

opposing

arbitration, however, to show that Congress intended to
preclude a waiver of judicial remedies for the statutory
rights at issue. If Congress did intend to limit or
prohibit waiver of a judicial forum for a particular
claim,

such

statute's]

an

text

intent
or

will

be

legislative

deducible
history,

from
or

[the

from

an

inherent conflict between arbitration and the statute’s
underlying purposes.” Shearson/American Express, Inc. v.
McMahon,

482

U.S.

220,

226-27

(1987)

(alteration

in

original) (internal quotations and citations omitted)).
Fortunately, in addressing whether ERISA claims may
be subject to arbitration, this court does not write on
a blank slate.

Before Shearson/American Express, Inc. v.

McMahon and Rodriguez de Quijas v. Shearson/American
Express,

Inc.,

490

U.S.

477

(1989),

there

was

some

disagreement among courts about whether ERISA claims were

19

arbitrable.

See Secure Health Plans of Ga., LLC, v. DCA

of Hawkinsville, LLC, 2010 WL 4823435, at *3 (M.D. Ga.
Nov. 22, 2010) (Treadwell, J.) (collecting cases).

After

McMahon and Quijas, however, courts have analyzed the
purpose of both ERISA and the FAA and have “uniformly
held that ERISA claims are arbitrable.”

Id.; see, e.g.,

Comer v. Micor, Inc., 436 F.3d 1098, 1100 (9th Cir. 2006)
(explaining that the Ninth Circuit Court of Appeals had
“expressed skepticism about the arbitrability of ERISA
claims, ... but those doubts seem to have been put to
rest by the Supreme Court’s opinions” in McMahon and
Quijas); Williams v. Imhoff, 203 F.3d 758, 767 (10th Cir.
2000) (holding “that Congress did not intend to prohibit
arbitration of ERISA claims”); Kramer v. Smith Barney, 80
F.3d 1080, 1084 (5th Cir. 1996) (surveying prior courts
and “agree[ing] that Congress did not intend to exempt
statutory

ERISA

claims

from

the

dictates

of

the

Arbitration Act”); Pritzker v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 7 F.3d 1110, 1119 (3d Cir. 1993)

20

(overturning

circuit

precedent

and

holding

that

“McMahon’s analysis makes it clear that agreements to
arbitrate statutory ERISA claims under the FAA may be
enforceable”); Bird v. Shearson Lehman/American Express,
Inc., 926 F.2d 116, 122 (2d Cir. 1991) (“Arbitration is
not inconsistent with the underlying purposes of ERISA.
Appellees

have

not

sustained

their

burden

of

demonstrating that the text, legislative history, or
underlying

purposes

of

ERISA

indicate

that

Congress

intended to preclude a waiver of a judicial forum for
claims

arising

under

it.

Accordingly,

we

hold

that

statutory claims arising under ERISA may be the subject
of compulsory arbitration.”); Arnulfo P. Sulit, Inc. v.
Dean Witter Reynolds, Inc., 847 F.2d 475, 478-79 (8th
Cir. 1988) (similar).
The court finds these decisions persuasive, and there
is no need to repeat the now well-established reasons for
holding that ERISA claims may be subject to arbitration.
Thus, having carefully examined this body of law and the

21

rationale of each decision, and while neither the Supreme
Court nor Eleventh Circuit has explicitly ruled upon the
issue of whether ERISA claims are subject to arbitration,
this court holds that Congress did not intend to prohibit
arbitration for ERISA claims.
Finally, Yarenko and Baker argue that requiring them
and other putative plaintiff-class members to arbitrate
their ERISA claims would be unconscionable because, among
other things, it would deprive them of the ability to
proceed as a class action. The final phrase of § 2 of the
FAA

“permits

arbitration

agreements

to

be

declared

unenforceable ‘upon such grounds as exist at law or in
equity for the revocation of any contract,’” and this
“saving clause permits agreements to arbitrate to be
invalidated by ‘generally applicable contract defenses,
such as fraud, duress, or unconscionability,’ but not by
defenses that apply only to arbitration or that derive
their

meaning

from

the

arbitrate is at issue.”

fact

that

an

agreement

to

Concepcion, 131 S. Ct. at 1746

22

(quoting 9 U.S.C. § 2, and Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681, 687 (1996)); see, e.g., Palmer
v. Infosys Techs. Ltd., Inc., ___ F. Supp. 2d ___, 2011
WL

5434258,

at

*3-4

(Nov.

9,

2011)

(Thompson,

J.)

(applying state unconscionability law).
That said, Concepcion recently shed new light on the
application of § 2’s savings clause.

In extending the

rule of Doctor’s Associates, which held that state-law
doctrines that single-out arbitration are preempted by
§ 2, 517 U.S. at 687, Concepcion held that California’s
rule “classifying most collection-arbitration waivers in
consumer contracts unconscionable” is preempted.
Ct. at 1746.

131 S.

The Supreme Court affirmed the principle

that, “Although § 2’s saving clause preserves generally
applicable contract defenses, nothing in it suggests an
intent to preserve state-law rules that stand as an
obstacle to the accomplishment of the FAA’s objectives.”
Id. at 1748.

In reaching this conclusion, the Court

explained that, “When state law prohibits outright the

23

arbitration of a particular type of claim, the analysis
is straightforward: The conflicting rule is displaced by
the FAA.

But the inquiry becomes more complex when a

doctrine normally thought to be generally applicable,
such as duress or, as relevant here, unconscionability,
is

alleged

to

have

been

disfavors arbitration.”

applied

in

a

fashion

that

Id. at 1747 (citation omitted).

Application of § 2’s savings clause, under Concepcion, is
now purposive: a court inquires whether a particular
application of a State’s unconscionability law interferes
with the purposes of arbitration.

Id. at 1750.

Thus, in

Concepcion itself, California’s rule was preempted by the
FAA

“[b]ecause

it

st[ood]

as

an

obstacle

to

the

accomplishment and execution of the full purposes and
objectives of Congress.”

Id. at 1753 (internal quotes

and citation omitted).
With
determine

these

principles

whether

(1)

in

mind,

Alabama’s

this

court

must

unconscionability

doctrine as applied in Leonard v. Terminix International

24

Co., L.P., 854 So.2d 529 (Ala. 2002), governs this case,
and

(2)

if

so

whether,

under

Concepcion,

this

rule

impermissibly conflicts with the purposes of the FAA.
In Alabama, courts generally consider two factors for
determining whether a contract is unconscionable: “‘(1)
terms that are grossly favorable to a party that has (2)
overwhelming

bargaining

power.’”

Briarcliff

Nursing

Home, Inc. v. Turcotte, 894 So.2d 661, 665 (Ala. 2004)
(quoting American General Finance, Inc. v. Branch, 793
So.2d 738, 748 (Ala. 2000)). Applying these standards,
the Alabama Supreme Court held in
following

arbitration

agreement

Leonard that the
unconscionable

therefore unenforceable:
“The Purchaser and Terminix agree that
any controversy or claim between them
arising out of or relating to this
agreement shall be settled exclusively
by arbitration. Such arbitration shall
be conducted in accordance with the
Commercial Arbitration rules then in
force of the American Arbitration
Association.
The decision of the
arbitrator shall be a final and binding
resolution of the disagreement which may
be entered as a judgment by any court of
25

and

competent jurisdiction. Neither party
shall sue the other where the basis of
the suit is this agreement other than
for enforcement of the arbitrator's
decision.
In no event shall either
party be liable to the other for
indirect,
special
or
consequential
damages or loss of anticipated profits.”
854 So.2d at 532-33.
Leonard found this clause unconscionable because it
precluded a class action, which the plaintiffs urged was
the only way they could obtain relief given the small
size

of

their

claims

and

the

costs

imposed

by

the

arbitration under the American Arbitration Association’s
Commercial Arbitration Rules.
plaintiffs

contended

that,

Id. at 535.
because

the

That is, the
value

of

the

plaintiffs’ claim ($ 500) was less than the price of
arbitration

itself

unconscionable.

The

($

1150),

only

way

the
to

agreement

have

an

was

effective

remedy, the plaintiffs further argued, was to proceed on
a

classwide

basis.

In

granting

this

“economic-

unfeasibility” argument, id., the Alabama Supreme Court
emphasized that its finding of unconscionability was not
26

an “attack on arbitration clauses alone,” but would have
been the same if the contract prohibited an assertion of
claims on a class-wide basis in a judicial forum.

Id.;

see also id. at 539 (“The invocation of Alabama law
relating to unconscionability to declare an arbitration
agreement unconscionable and thereby avoid relegation to
arbitration of small claims not reasonably susceptible to
meaningful redress in that forum does not impermissibly
discriminate against arbitration contrary to Doctor’s
Associates ....

This is so because a conclusion of

unconscionability could apply with equal force to an
effort to enforce a contract provision silent as to
arbitration yet prohibiting participation in a class
action under similar circumstances.”).
From there, after emphasizing that the arbitration
clause provided that neither party could be “liable to
the other for indirect, special or consequential damages
or loss of anticipated profits recoverable damages,”
Leonard concluded that the clause deprived the plaintiffs

27

of

“a

meaningful

remedy,”

exhibited

“unreasonably

favorable and patently unfair terms in its contract of
adhesion,” and was therefore unconscionable.
Leonard

explained:

“This

arbitration

Id. at 538.

agreement

is

unconscionable because it is a contract of adhesion that
restricts the [plaintiffs] to a forum where the expense
of

pursuing

controversy.

their

claim

far

exceeds

the

amount

in

The arbitration agreement achieves this

result by foreclosing the [plaintiffs] from an attempt to
seek

practical

restricting

redress

them

to

a

individual arbitration.”

through

a

class

disproportionately

action

and

expensive

Id. at 539.

Yarenko and Baker argue that the arbitration clause
in the Statement of Applicant here is unconscionable
under Leonard and that, because the Alabama Supreme Court
expressly applied the rule of Doctor’s Associates (and
made a rule of general applicability, not one focused on
arbitration), Leonard is not preempted by the FAA under
Concepcion.

The court cannot agree.

28

This case is

distinguishable from Leonard, and the court finds that
the arbitration clause is not “grossly favorable” to
either party or otherwise unconscionable.
First, the arbitration clause here does not limit
damages in any way, which was a substantial motivator for
the Leonard holding.

In subsequent cases--in the Alabama

Supreme Court, this court, and other courts--courts have
uniformly

rejected

Leonard-based

unconscionability

challenges where there was no restriction on damages or
other sorts of remedy.

See, e.g., Lawrence v. Household

Bank (SB), N.A., 343 F. Supp. 2d 1101, 1112 (M.D. Ala.
2004) (Thompson, J.) (“Unlike in Leonard, there is no
claim here that plaintiffs’ arbitration agreements limit
the damages they can recover and no argument that their
arbitration agreements limit their ability to recover
their costs and fees.

Accordingly, this argument does

not provide plaintiffs with relief.”); Taylor v. First
North Am. Nat’l Bank, 325 F. Supp. 2d 1304, 1321 (M.D.
Ala. 2004) (Thompson, J.) (describing a case as “very

29

similar”

to

Leonard

in

“some

ways,”

but

nonetheless

distinguishing the case on the ground that there was no
limitation on the plaintiff’s right to recover damages);
Taylor v. Citibank USA, N.A., 292 F. Supp. 2d 1333, 1345
(M.D.

Ala.

2003)

(Albritton,

C.J.)

(distinguishing

Leonard from a case where the “arbitration clause d[id]
not limit any of the substantive remedies available to
the Plaintiff under” a federal statute); Gipson v. Cross
Country Bank, 294 F. Supp. 2d 1251, 1263-64 (M.D. Ala.
2003) (Albritton, C.J.) (same); Service Corp. Int’l v.
Fulmer,

883

So.2d

621,

632

(Ala.

2003)

(“While

the

arbitration provision in Leonard was part of a contract
of adhesion, it also included a ‘limitation upon recovery
of indirect, special, and consequential damages or loss
of anticipated profits, and prohibited treatment of the
plaintiff’s claims as a class action’” (quoting Leonard,
854 So.2d at 538 (internal quotes omitted)).

Indeed,

this court’s conclusion that the absence of a limitation
of

damages

distinguishes

this

30

case

from

Leonard

is

consistent with the court’s conclusion above that the
arbitration clause in the Statement of Applicant is not
invalid under Paladino; for both determinations, there
has

not

been

an

impermissible

restriction

on

the

plaintiffs’ right to a remedy just because they are
compelled to arbitrate.
Second, and relatedly, Yarenko and Baker do not
contend that their potential recovery in arbitration will
be necessarily smaller than the amount they will be
required to spend just to arbitrate the case (that is,
there is no “economic-unfeasibility”), a circumstance
that

puts

concern.

this

case

well

outside

of

Leonard’s

core

See also Pitchford v. AmSouth Bank, 285 F.

Supp. 2d 1286, 1296 (M.D. Ala. 2003) (Albritton, C.J.)
(noting that Leonard “addressed a situation where the
plaintiffs could not vindicate their rights because the
costs of arbitration would exceed the potential recovery”
but found the arbitration provision conscionable because
the

plaintiffs’

potential

31

“recovery

w[ould]

not

necessarily be smaller than the costs to the Plaintiffs
of pursuing th[e] matter through arbitration”); Matthews
v. AT&T Operations, Inc., 764 F. Supp. 2d 1272, 1281
(N.D.

Ala.

2011)

(Propst,

J.)

(rejecting

a

Leonard

unconscionability claim in part because the “arbitration
costs would not be prohibitively expensive”); Powell v.
AT&T Mobility, LLC, 742 F. Supp. 2d 1285, 1292 (N.D. Ala.
2010) (Coogler, J.) (similar).
Third, and at the end of the day, Yarenko and Baker’s
complaint is really a policy argument: it would be more
efficient for them to litigate this case as a class
action than to proceed as individuals.

They urge that

the only “practical way to assure the enforcement” of
ERISA’s policy requiring certain coverage notice be sent
is through class-action litigation.
34) at 28.

Pl. Br. (Doc. No.

Yet, just because, on Yarenko and Baker’s

theory, it would be more efficient to proceed as a class,
does not mean that it is unconscionable under Alabama law
to preclude them, and any other potential plaintiffs who

32

signed the Statement of Applicant, from proceeding with
arbitration.
Notably, the arbitration clause here says nothing
about classwide arbitration.

This silence means that the

Alabama default rule, that “classwide arbitration is
permitted only when the arbitration agreement provides
for it,” kicks in.

Taylor, 325 F. Supp. 2d at 1320 n.28.

This default rule does not mean that Yarenko and Baker
should prevail on their challenge to arbitration.

In an

analytically similar situation, the Eleventh Circuit has
held that arbitration clauses are enforceable even when
their application may effectively prevent plaintiffs from
pursuing their claims as a class action.

See, e.g.,

Caley, 428 F.3d at 1378 (rejecting the argument that
arbitration of a number of claims, including an ERISA
claim, was unconscionable under Georgia law because it,
among other things, “precluded class actions” (citing
Gilmer, 500 U.S. at 31); Randolph v. Green Tree Financial
Corp.--Alabama, 244 F.3d 814, 816-19 (11th Cir. 2001)

33

(similar for claims under the Truth in Lending Act, 15
U.S.C. § 1601, et seq.).

As the appellate court has

explained,

a

“there

exists

difference

between

the

availability of the class action tool, and possessing a
blanket

right

to

that

tool

under

any

circumstance.”

Randolph, 244 F.3d at 817 (internal quotes and citation
omitted).3
Because the arbitration clause in the Statement of
Applicant is not unconscionable, the court need not, and
does

not,

reach

the

issue

unconscionability

on

the

of

basis

whether
of

a

finding

of

would

be

Leonard

preempted by the FAA under Concepcion.

3. See also Caudle v. Am. Arbitration Ass’n, 230
F.3d 920, 921 (7th Cir. 2000) (“A procedural device
aggregating multiple persons’ claims in litigation does
not entitle anyone to be in litigation; a contract
promising to arbitrate the dispute removes the person
from those eligible to represent a class of litigants.”);
cf. Johnson v. West Suburban Bank, 225 F.3d 366, 378 (3d
Cir. 2000) (holding that Congress did not intend to
preclude parties from contracting away their ability to
seek class action relief under Truth in Lending Act);
Taylor, 325 F. Supp. 2d at 1317-18 (same).
34

***
Accordingly, it is ORDERED as follows:
(1) Defendants Macon County Greyhound Park, Inc.,
McGregor Enterprises, Milton McGregor, and Victoryland’s
motions

to

compel

arbitration

of

claims

brought

by

plaintiffs Nancy Yarenko and Murray Baker (Doc. Nos. 27
and 75) are granted.
(2) Plaintiffs Yarenko and Baker are to arbitrate
their claims in this litigation.

Proceedings on their

claims are stayed pending arbitration.
DONE, this the 13th day of June, 2012.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE