Credit Acceptance Corporation v. Niemeier

Filing 16

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that respondents motion to dismiss [Doc. # 13 ] is denied. IT IS FURTHER ORDERED that the petition to compel arbitration [Doc. # 1 ] is granted. IT IS FURTHER ORDERED that this matter is stayed pending co mpletion of arbitration. IT IS FURTHER ORDERED that, not later than ten (10) days after the conclusion of the arbitration, the parties shall file a notice informing the Court that the arbitration has concluded. If the arbitration is not concluded by January 1, 2016, the parties must on that date file a joint report setting forth the status of the arbitration. Signed by District Judge Carol E. Jackson on 7/10/15. (JAB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CREDIT ACCEPTANCE CORPORATION,
Petitioner,
vs.
DARREN M. NIEMEIER,
Respondent.

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No. 4:15-CV-555-CEJ

MEMORANDUM AND ORDER
This matter is before the Court on a petition to compel arbitration, pursuant
to the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq. Also before the Court is
respondent’s motion to dismiss the petition for failure to state a claim. The issues
are fully briefed.
I.

Background

On June 27, 2014, respondent purchased a used automobile from the car
dealership where he worked. To fund the purchase, respondent executed a retail
installment contract with the dealership, which the dealership then assigned to
petitioner. The installment contract contains an arbitration provision, which states
in relevant part:
A[n] [arbitrable] “dispute” is any controversy or claim between You
and Us arising out of or in any way related to this Contract . . . .
“Dispute” shall have the broadest meaning possible . . . .
Notwithstanding the foregoing, “Dispute” does not include . . . any
repossession of the Vehicle upon Your default and any exercise of the
power of sale of the Vehicle under this Contract or any individual
action by You to prevent Us from using any such remedy, so long as
such individual action does not involve a request for monetary relief of
any kind. . . . Either You or We may require any Dispute to be
arbitrated . . . . If You or We elect to arbitrate a Dispute, this
Arbitration Clause applies. A Dispute shall be fully resolved by binding
arbitration. . . . Notwithstanding the foregoing, We retain the right to

repossess the Vehicle upon Your default and to exercise any power of
sale under this Contract.
[Doc. #1-1]
Respondent brought a state court action against petitioner and the
dealership,

asserting

claims

of

conversion

and

violation

Merchandising Practices Act, Mo. Rev. Stat. §§ 407.010, et seq.

of

the

Missouri

The state court

proceedings are stayed pending the outcome of the instant petition to compel
arbitration.
II.

Discussion

The FAA provides that an agreement 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. “The FAA establishes a liberal federal
policy favoring arbitration agreements.” M.A. Mortenson Co. v. Saunders Concrete
Co., 676 F.3d 1153, 1156–57 (8th Cir. 2012) (quotation marks and citation
omitted). An arbitration agreement is to be placed “on an equal footing with other
contracts” and must be enforced according to its terms.

AT&T Mobility LLC v.

Concepcion, 131 S. Ct. 1740, 1745 (2011).
However, “an arbitration provision is severable from the remainder of the
contract,” and a court must “consider the challenge” to the arbitration agreement
itself “before ordering compliance with that agreement.”

Rent-A-Ctr., W., Inc. v.

Jackson, 561 U.S. 63, 70–71 (2010). Where a party raises such a challenge, the
“validity [of the arbitration agreement] is subject to initial court determination; but
the validity of the remainder of the contract (if the arbitration provision is valid) is
for the arbitrator to decide.” Nitro-Lift Technologies, L.L.C. v. Howard, 133 S. Ct.
500, 503 (2012) (per curiam).

Ultimately, “any doubts concerning the scope of

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arbitrable issues should be resolved in favor of arbitration . . . .”

Moses H. Cone

Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24–25 (1983).
A court must grant a party’s motion to compel arbitration if (1) “a valid
agreement to arbitrate exists,” and, if so, (2) “the dispute falls within the scope of
that agreement.”

Newspaper Guild of St. Louis, Local 36047 v. St. Louis Post

Dispatch, LLC, 641 F.3d 263, 266 (8th Cir. 2011). “[S]tate contract law governs
the threshold question of whether an enforceable arbitration agreement exists
between litigants; if an enforceable agreement exists, the federal substantive law of
arbitrability governs whether the litigants’ dispute falls within the scope of the
arbitration agreement.”

Donaldson Co. v. Burroughs Diesel, Inc., 581 F.3d 726,

731 (8th Cir. 2009); see Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 630 (2009).
Respondent does not dispute that his claims fall within the terms of the
arbitration agreement. Rather, he challenges the validity of the agreement, which
the parties agree is governed by Missouri law.

“Under Missouri law, the basic

elements of a contract are offer, acceptance of that offer, and consideration to
support the contract.”

Karzon v. AT&T, Inc., No. 4:13-CV-2202-CEJ, 2014 WL

51331, at *2 (E.D. Mo. Jan. 7, 2014) (citing Citibank (S. Dakota), N.A. v. Wilson,
160 S.W.3d 810, 813 (Mo. Ct. App. 2005)). Respondent does not contest that the
arbitration agreement was offered to him and that he accepted it.

He contends

only that the agreement fails for lack of mutual consideration.
Under Missouri law, “[c]onsideration generally consists either of a promise
(to do or refrain from doing something) or the transfer or giving up of something of
value to the other party.”

Marzette v. Anheuser-Busch, Inc., 371 S.W.3d 49, 52

(Mo. Ct. App. 2012) (quotation marks and citation omitted).

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“Generally, if a

contract contains mutual promises, such that a legal duty or liability is imposed on
each party as a promisor to the other party as a promisee, the contract is a
bilateral contract supported by sufficient consideration.” Id. at 53 (quotation marks
and citation omitted). But “[a] contract that purports to exchange mutual promises
will be construed to lack legal consideration if one party retains the unilateral right
to modify or alter the contract as to permit the party to unilaterally divest itself of
an obligation to perform the promise initially made.” Frye v. Speedway Chevrolet
Cadillac, 321 S.W.3d 429, 442 (Mo. Ct. App. 2010).
Here, respondent argues that the arbitration agreement fails for want of
mutual consideration.

The basis for his argument is that, on one hand, the

agreement provides for arbitration of all “disputes,” with that term being defined as
having “the broadest meaning possible,” while on the other hand, the agreement
allows petitioner to unilaterally avoid arbitration by availing itself of the remedy of
repossession. In support of this argument, respondent cites Greene v. Alliance
Automotive, Inc., 435 S.W.3d 646 (Mo. Ct. App. 2014).

In that case, the court

held that the arbitration agreement at issue lacked mutual consideration because at
the same time it purported to subject “any dispute” regarding the purchase contract
to arbitration, it simultaneously provided the seller the right to exercise self-help
remedies, such as repossessing the vehicle.

Id.

In other words, the arbitration

agreement subjected the buyer to arbitration of “all disputes,” while it permitted
the seller to unilaterally opt-out of arbitrating certain “disputes.” Id.
The Court disagrees with respondent’s argument.

First, the agreement

explicitly states that either party can compel arbitration when there is a “dispute.”
Thus both parties are giving up something (their right to come to court) if either

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party invokes the arbitration agreement in a “dispute.”
consideration.

That is mutual

Second, unlike in Greene, petitioner has not kept for itself the

authority to opt out of its promise to arbitrate “disputes.”

The agreement here

defines a “dispute” to include certain disagreements that might arise over the
vehicle, but not others. It merely establishes that petitioner and respondent each
have the power to elect arbitration where there is a “dispute,” and neither has the
power to elect arbitration where a disagreement arises that is not a “dispute,” e.g.,
if petitioner exercises its right to repossession upon default. That is not an opt-out
provision; it does not grant petitioner a unilateral right to divest itself of its promise
to arbitrate what the agreement defines as “disputes.” Thus, Greene’s holding is
inapposite, and the arbitration agreement in this case does not fail for lack of
mutual consideration.
*****
For the foregoing reasons, the Court concludes that the agreement to
arbitrate is valid and that respondent’s claims fall within the scope of the
agreement. Under the FAA, when a court finds the claims raised in an action are
properly referable to arbitration, it should generally stay the action until arbitration
proceedings are concluded. Fleischli v. N. Pole US, LLC, 4:12-CV-1618-CDP, 2013
WL 1965120, at *14 (E.D. Mo. May 10, 2013) (citing 9 U.S.C. § 3).
Accordingly,
IT IS HEREBY ORDERED that respondent’s motion to dismiss [Doc. #13] is
denied.
IT IS FURTHER ORDERED that the petition to compel arbitration [Doc. #1]
is granted.

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IT IS FURTHER ORDERED that this matter is stayed pending completion of
arbitration.
IT IS FURTHER ORDERED that, not later than ten (10) days after the
conclusion of the arbitration, the parties shall file a notice informing the Court that
the arbitration has concluded.

If the arbitration is not concluded by January 1,

2016, the parties must on that date file a joint report setting forth the status of the
arbitration.

CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 10th day of July, 2015.

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