Rose et al v. Silverleaf Resorts, Inc.
Filing
20
MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant Silverleaf's Motion to Compel Arbitrations and Dismiss Litigation # 7 is GRANTED, and Plaintiffs must submit their claims to individual arbitration. IT IS FURTHER ORDERED that Plaintiffs' claims will be dismissed without prejudice. A separate Order of Dismissal in accordance with this Memorandum and Order is entered this same date. Signed by District Judge Rodney W. Sippel on 7/20/15. (ARL)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ROBERT IAPPINI,1 et al.,
Plaintiffs,
vs.
SILVERLEAF RESORTS, INC.,
Defendant.
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No. 4:15 CV 695 RWS
MEMORANDUM AND ORDER
This Missouri Merchandising Practices Act (MMPA) class action is before me on
defendant Silverleaf Resorts, Inc. (Silverleaf)’s motion to compel arbitrations and dismiss
without prejudice, or alternatively to stay the action pending arbitration. Plaintiffs Robert and
Lilly Iappini brought suit individually and on behalf of a purported class of consumers who
purchased time-share units located in Missouri from Silverleaf after January 1, 2010. Plaintiffs
allege that Silverleaf used deceptive and misleading tactics to induce them to purchase timeshare units and that they attempted but were unable to timely cancel their time-share purchases
because Silverleaf “clogged” their right to cancel by not answering their phones during the
contractual cancellation period. Plaintiffs seek damages under the MMPA as well as the
rescission of their time-share contracts.
The written contracts between Plaintiffs and Silverleaf include an Arbitration Addendum
governed by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq.. The Arbitration
Addendum appears to compel binding arbitration for any disputes arising out of or relating to the
1
This case was originally styled Michael Rose, et al. v. Silverleaf Resorts, Inc., but on July 1, 2015, Plaintiffs filed
an amended complaint removing Michael Rose from the case and naming only Robert and Lilly Iappini as plaintiffs.
As a result, I have substituted Michael Iappini as the named plaintiff in this case.
contracts or the parties’ relationships. The Arbitration Addendum also contains what appears to
be a class action waiver, requiring all claims to be arbitrated on an individual basis.
Silverleaf now moves to compel individual arbitration of all of Plaintiffs’ claims.
Plaintiffs oppose the motion, arguing that 1) the class action waiver is ambiguous, 2) the class
action waiver is unenforceable because it is substantively and procedurally unconscionable, and
3) Plaintiff’s claims fall under the FAA’s savings clause and should not be subject to arbitration.
For the reasons that follow, I find that the arbitration agreements are unambiguous, enforceable,
and applicable to all of Plaintiffs’ claims. As a result, I will compel individual arbitrations and
will dismiss this suit without prejudice.
Legal Standard
The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 et seq., “establishes a liberal federal
policy favoring arbitration.” Torres v. Simpatico, Inc., 781 F.3d 963, 968 (8th Cir. 2015)
(quoting AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1748, 179 L. Ed. 2d 742 (2011)).
“[T]he FAA limits a district court's initial role in any challenge to an arbitration agreement to
deciding whether ‘the making of the agreement for arbitration or the failure to comply therewith’
is at issue.” MedCam, Inc. v. MCNC, 414 F.3d 972, 974 (8th Cir.2005) (quoting 9 U.S.C. § 4).
“[The United States Court of Appeals for the Eighth Circuit] has refined this inquiry to asking
1) whether the agreement for arbitration was validly made and 2) whether the arbitration
agreement applies to the dispute at hand, i.e., whether the dispute falls within the scope of the
arbitration agreement.” Id. (emphasis in original); see also Torres, 781 F.3d at 968-69.
An arbitration agreement’s scope is interpreted literally, with any doubts resolved in
favor of arbitration. MedCam, 414 F.3d at 975. A district court should compel arbitration
2
“unless it may be said with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.” Id. (internal quotations omitted).
“Because ‘arbitration is a matter of contract,’ whether an arbitration provision is valid is a
matter of state contract law, and an arbitration provision may 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 fact that an agreement to arbitrate
is at issue.’” Torres v. Simpatico, Inc., 781 F.3d 963, 968-69 (8th Cir. 2015) (quoting
Concepcion, 131 S.Ct. at 1745–46) (internal quotations omitted)). Under Missouri law,
“arbitration agreements are tested through a lens of ordinary state-law principles that govern
contracts, and consideration is given to whether the arbitration agreement is improper in light of
generally applicable contract defenses . . . . such as fraud, duress, or unconscionability.”
Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 515 (Mo. 2012). “If a valid and enforceable
arbitration agreement exists under state-law contract principles, any dispute that falls within the
scope of that agreement must be submitted to arbitration.” Torres, 781 F.3d at 968-69 (citing
Faber v. Menard, 367 F.3d 1048, 1052 (8th Cir. 2004)). “[N]o state-law rule that is ‘an obstacle
to the accomplishment of the FAA's objectives’ should be applied to invalidate an arbitration
agreement.” Robinson v. Title Lenders, Inc., 364 S.W.3d at 515 (quoting Concepcion, 131 S.Ct.
at 1748).
Discussion
Plaintiffs do not dispute that their claims falls within the scope of the Arbitration
Addendum. Rather, Plaintiffs argue that the class action waiver in the Arbitration Addendum is
invalid for unconscionability.
The Arbitration Addendum states, in relevant part:
3
Arbitration Disclosure: By entering into the Contract, you agree in
regard to any Claim, as defined in the Arbitration Provision below, either you or
we can choose to have that Claim resolved by binding arbitration as set forth in
the Arbitration Provision. . . . IF ARBITRATION IS CHOSEN BY ANYONE
WITH RESPECT TO A CLAIM NEITHER YOU NOR WE WILL HAVE
THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A
JURY TRIAL ON THAT CLAIM, OR TO ENGAGE IN PREARBITRATION DISCOVERY EXCEPT AS PROVIDED FOR IN THE
PROCEDURES AND RULES. FURTHER, YOU WILL NOT HAVE THE
RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF
ANY CLASS OF CLAIMAINTS PERTAINING TO ANY CLAIM
SUBJECT TO ARBITRATION.
Arbitration Provision:
1. Any claim, dispute or controversy regarding the Contract or our relationship (a
“Claim” or “Claims”) shall be resolved, upon the election by you or us, by
binding arbitration pursuant to this Arbitration Provision. For purposes of this
Arbitration Provision, a Claim shall include, but not be limited to, any claim,
dispute or controversy of every kind and nature arising from or relating to the
Contract or our relationship, promotions or oral or written statements related to
the Contract, the Vacation Interest acquired under the Contract, . . . and the
validity, enforceability, and scope of this Arbitration Provision and the Contract.
This includes claims based on contract, regulatory provisions, tort (including
intentional tort), fraud, negligence, statutory provisions, constitutional provisions,
common law, equitable principles or other sources of law. . . .
***
4. You and we also agree that no Claim shall be arbitrated on a class action, private
attorney general or other representative action basis. Further, arbitration can only
decide your or our Claim and may not consolidate or join the claims of other
persons who may allege similar claims, and the arbitration may award relief only
on an individual (non-class, non-representative) basis.
***
12. Any questions about whether a Claim is subject to arbitration shall be resolved by
interpreting this Arbitration Provision in the broadest way the law will allow it to
be enforced . . . .
***
Right to Opt Out:
IF YOU DO NOT WISH TO BE BOUND BY THIS ARBITRATION
ADDENDUM, YOU MUST NOTIFY SELLER IN WRITING WITHIN 90
DAYS FROM THE EFFECTIVE DATE OF THIS ARBITRATION
ADDENDUM . . . .
4
A. Ambiguity of the Class Action Waiver
Plaintiffs argue that the class action waiver in the Arbitration Addendum is ambiguous
and should be interpreted in their favor. Specifically, Plaintiffs argue that the first sentence of
paragraph 4 is ambiguous, which states, “You and we also agree that no Claim shall be arbitrated
on a class action, private attorney general or other representative action basis.” Despite arguing
elsewhere in their brief that the class action waiver “effectively bans” their ability to bring a class
action, Plaintiffs contend in the context of this argument that they “interpret this inconspicuously
drafted provision to mean that class action litigation is not subject to arbitration.”
Contract interpretation is a matter of law. Robbins v. McDonnell Douglas Corp., 27
S.W.3d 491, 496 (Mo. Ct. App. 2000). In interpreting a contract, a court must not “unreasonably
distort the language of a policy or exercise inventive powers for the purpose of creating an
ambiguity when none exists.” Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 163 (Mo.
2007). “An ambiguity does not exist merely because the parties dispute the meaning of the
contract. Rather, a contract is ambiguous when the terms are susceptible of more than one
meaning so that reasonable persons may fairly and honestly differ in their construction of the
terms.” Robbins v. McDonnell Douglas Corp., 27 S.W.3d 491, 496 (Mo. Ct. App. 2000) (citing
Chehval v. St. John’s Mercy Med. Ctr., 958 S.W.2d 36, 39 (Mo. Ct. App. 1997)). “In
determining the intent of the parties to a contract, we review the terms of a contract as a whole,
not in isolation.” Tuttle v. Muenks, 21 S.W.3d 6, 11 (Mo. Ct. App. 2000).
Applying these principles, and after carefully reviewing the Arbitration Addendum as a
whole, I find that the class action waiver is unambiguous. The sentence in paragraph 4 that
Plaintiffs quote is not a model of clarity. However, when it is read together with the rest of the
paragraph, its meaning is clear. The entirety of paragraph 4 provides:
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“You and we also agree that no Claim shall be arbitrated on a class action,
private attorney general or other representative action basis. Further, arbitration
can only decide your or our Claim and may not consolidate or join the claims of
other persons who may allege similar claims, and the arbitration may award relief
only on an individual (non-class, non-representative) basis.”
When paragraph 4 is read as a whole, it is apparent that its effect is to waive either party’s right
to bring a class action once arbitration is elected. It does not, as Plaintiffs contend, exempt class
actions from the scope of the arbitration agreement. Additionally, the language in the Arbitration
Disclosure, which is conspicuously placed at the beginning of the Addendum, plainly states in
bold, capital letters that, if arbitration is elected, “YOU WILL NOT HAVE THE RIGHT TO
PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF
CLAIMAINTS PERTAINING TO ANY CLAIM SUBJECT TO ARBITRATION.” This
language clearly conveys the message that the parties cannot bring a class action once arbitration
is elected, and it resolves any confusion that could be found in paragraph 4.
As a result, I find that, when read as a whole, the Arbitration Addendum unambiguously
waives either party’s right to bring or participate in a class action once either party has elected to
arbitrate that claim.
B. Validity of the Arbitration Addendum
Following the United States Supreme Court’s decision in AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740 (2011), and the Missouri Supreme Court’s decision in Brewer v.
Missouri Title Loans, 364 S.W.3d 486 (Mo.2012), courts in Missouri reviewing for
unconscionability must focus on alleged unconscionability occurring at contract formation, i.e.,
procedural unconscionability. In a recent opinion, the United States Court of Appeals for the
Eighth Circuit explained the new standard established by these cases. See Torres v. Simpatico,
Inc., 781 F.3d 963, 968-69 (8th Cir. 2015). As the Eighth Circuit said:
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Missouri courts have traditionally viewed unconscionability in the context of
procedural unconscionability, i.e., the formalities of making the contract, and
substantive unconscionability, i.e., the terms set forth in the contract. But because
Concepcion “dictate[d] a review” limited to “whether state law defenses such as
unconscionability impact the formation of a contract,” the court's analysis would
no longer focus on the traditional distinction between procedural and substantive
unconscionability and would instead be “limited to a discussion of facts relating
to unconscionability impacting the formation of the contract.” Brewer v. Missouri
Title Loans, 364 S.W.3d 486, 492 n. 3 (Mo.2012) (emphasis in original). The
[Brewer] court went on to instruct that in future cases, Missouri courts “shall limit
review of the defense of unconscionability to the context of its relevance to
contract formation.” Id.
Nevertheless, the Brewer court also noted that “the purpose of the
unconscionability doctrine is to guard against one-sided contracts, oppression[,]
and unfair surprise,” which may “occur during the bargaining process” or when a
later dispute reveals “the objectively unreasonable terms.” Id. at 492–93. Thus,
courts may be called upon to “consider whether the terms of an arbitration
agreement are unduly harsh,” that is, “whether the contract terms are so one-sided
as to oppress or unfairly surprise an innocent party or . . . reflect an overall
imbalance in the rights and obligations imposed by the contract at issue.” Id. at
489 n. 1. In either event, the court reasoned, “it is at formation that a party is
required to agree to the objectively unreasonable terms.” Id. at 493.
Id.
1. Procedural Unconscionability
Plaintiffs briefly argue that the Arbitration Addendum is procedurally unconscionable
because 1) the class action waiver is in fine print, 2) Silverleaf used high-pressure sales tactics to
induce consumers to sign the contracts, and 3) the sales documents were lengthy and complex.
Plaintiffs provide only minimal support for their procedural unconscionability arguments.
In support of their fine print argument, Plaintiffs cite to the class action waiver in paragraph 4 of
the Arbitration Addendum. However, a review of the Arbitration Addendum shows that the
class action waiver is not in such fine print as to make it unconscionable. The Addendum itself
is a separate document that is not hidden on the back of the sales contract or otherwise
concealed. While the text of the entire Arbitration Addendum, as provided to the Court, is in a
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very small font size, the class action waiver in paragraph 4 is not unusually small, hidden, or
concealed compared to the rest of the document. Additionally, the font size and spacing overall
does not lead words or lines to blur together or overlap, which could make it more difficult to
read. Cf. Woods v. QC Fin. Servs., Inc., 280 S.W.3d 90, 96 (Mo. Ct. App. 2008). Moreover, as
discussed above, the class action waiver is also stated in bold capital letters in the Arbitration
Disclosure, which is placed conspicuously at the beginning of the Addendum.
Plaintiffs’ other arguments for procedural unconscionability, that Silverleaf used highpressure sales tactics and that the documents Silverleaf had consumers sign were lengthy and
complex, are not supported by any evidence at all. Plaintiffs’ argument that the documents were
lengthy and complex appears to focus on documents other than the Arbitration Addendum,
which itself is only three pages long.2 Nor is it necessarily improper to require consumers to sign
multiple and complex contracts when entering into a long-term and potentially expensive
contracts. That is especially true where, as here, Plaintiffs have not even suggested that
Silverleaf had an improper motive in providing any of the documents for signature, or that the
lengthy and complex documents were somehow unnecessary or irrelevant to the time-share unit
purchase agreements.
Additionally, Plaintiffs have not demonstrated that Silverleaf used unconscionable high
pressure sales tactics. Plaintiffs allege that they were pressured into purchasing the time-share
units because Silverleaf aggressively negotiated lower prices every time Plaintiffs tried to leave
the sales presentation and because Silverleaf’s offers were time-sensitive. However, offering
something on a take-it-or-leave-it basis is not, by itself, unconscionable. See Eaton v. CMH
Homes, Inc., No. SC 94374, 2015 WL 3387910, at *9 (Mo. May 26, 2015). Additionally,
2
Plaintiff argues that “consumers consistently reviewed and signed extremely complex and lengthy documents,
including contracts for sale, RESPA disclosures, TILA disclosures, and warranty deeds under pressure and in a
matter of minutes, without sufficient time to read said documents.”
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contrary to Plaintiffs’ assertion that they did not have sufficient time to read the contracts, they
acknowledged reviewing and reading the Arbitration Addendum when they signed it and when
they signed the Contract for Sale. See [#7, Ex. D-1], at 2, 10.
For all of these reasons, I cannot find that the arbitration agreement is invalid for
procedural unconscionability.
2. Substantive Unconscionability
Although Brewer provides that unconscionability review should be limited to the contract
formation stage, the court proceeded to review substantive terms of the arbitration agreement to
determine whether the terms were objectively unreasonable such that “no person ‘in his senses
and not under delusion would make.’” 364 S.W.3d at 493, 495 (internal citations omitted).
Additionally, the Missouri Supreme Court recently instructed that a substantive
unconscionability review is still relevant because a contract’s terms might illuminate the
procedural unconscionability review. See Eaton v. CMH Homes, Inc., No. SC 94374, 2015 WL
3387910, at *4 (Mo. May 26, 2015) (“a court will look at both the procedural and substantive
aspects of a contract to determine whether, considered together, they make the agreement or
provision in question unconscionable”). As a result, I will also review Plaintiffs arguments that
the class action waiver in the Arbitration Agreement is substantively unconscionable such that it
suggests unconscionability in the formation of the contract.
Plaintiffs argue that the class action waiver in the Arbitration Addendum is substantively
unconscionable because 1) it effectively bans resolution of Plaintiffs’ statutory right to elect class
action litigation under the MMPA, 2) it is contrary to public policy, and 3) it is one-sided. For
the following reasons, Plaintiffs’ arguments fail.
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“Concepcion instructs clearly that a court cannot invalidate an arbitration agreement on
the sole basis that it contains a class waiver.” Robinson v. Title Lenders, Inc., 364 S.W.3d 505,
514 (Mo. banc 2012) (citing AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2010)). As a
result, to succeed, Plaintiffs must demonstrate that something other than the mere presence of the
class action waiver is unconscionable.
Plaintiffs argue that § 407.025 of the MMPA provides plaintiffs with a statutory right to
bring a class action. Plaintiffs contend that enforcement of the class action waiver will defeat
this statutory “right.” However, the Eighth Circuit has already held that while “[t]he MMPA
allows for class actions,” it “does not suggest that public policy favors class actions or that the
wrongs sought to be remedied by the MMPA would continue unabated without the availability of
class actions.” Cicle v. Chase Bank USA, 583 F.3d 549 (8th Cir. 2009) (emphasis in original).
Additionally, even if the MMPA’s provision allowing class actions could be interpreted as
providing a substantive right, which the Supreme Court has previously rejected,3 to the extent the
MMPA prohibits arbitration, it conflicts with the FAA, and the FAA displaces the MMPA.
Concepcion, 131 S. Ct. at 1747. For these same reasons, Plaintiffs’ public policy argument,
which argues that deprivation of their statutory right to bring a class action under the MMPA
violates public policy, likewise fails.4
Plaintiffs also argue that prohibiting a class action from being brought under the MMPA
will effectively afford Silverleaf immunity because individual arbitration is not economically
practical or feasible. However, it is Plaintiffs’ burden to establish that “the costs of individual
arbitration ‘are so high as to make access to the forum impracticable’ or to prevent them from
3
State laws allowing class actions to be brought do not create a substantive right to do so. Rather, such laws merely
state a procedural rule. See Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010).
4
See also Concepcion, 131 S. Ct. at 1755 (“[c]ontract defenses unrelated to the making of the agreement—such as
public policy—could not be the basis for declining to enforce an arbitration clause”) (Thomas, J. concurring).
10
effectively vindicating their rights in the arbitral forum.” Torres v. Simpatico, Inc., 781 F.3d
963, 970 (8th Cir. 2015) (quoting Am. Express Co. v. Italian Colors Rest., 133 S.Ct. 2304, 2310–
11 (2013)). To meet this burden, a plaintiff must establish, with “specific evidence,” “more than
a ‘hypothetical inability to pay’ the costs of arbitration.” Torres, 781 F.3d at 969 (quoting Faber,
367 F.3d at 1053). If this burden is not met, “the district court must honor the arbitration
agreement and compel arbitration.” Id. at 1054.
Here, Plaintiffs have not met their burden of establishing economic infeasibility.
Plaintiffs’ own complaint alleges that they suffered over $25,000 in actual damages for the
amount of money already paid towards the time-share units, financing and origination costs,
additional time-share costs and fees, and attorneys’ fees. They also seek punitive damages.
Plaintiffs expressly acknowledge that “the totality of the individual damages sought is not
miniscule.” Additionally, Plaintiffs fail to provide any specific evidence to support the
contention that individual arbitration is economically impractical. As a result, Plaintiffs’ have
failed to establish economic infeasibility. See id. at 1054 (finding that appellants’ evidence that
average arbitration fees would exceed the amount of a class member’s claim and that none of the
class members could afford the costs of individual arbitration was insufficient to establish that
individual arbitration is cost prohibitive and therefore unconscionable).
Finally, Plaintiffs argue that the class action waiver is one-sided and lacks adequate
mutuality to be enforced. “Mutuality of contract means that an obligation rests upon each party
to do or permit to be done something in consideration of the act or promise of the other; that is,
neither party is bound unless both are bound.” Eaton v. CMH Homes, Inc., No. SC 94374, 2015
WL 3387910, at *4 (Mo. May 26, 2015) (quoting Aden v. Dalton, 107 S.W.2d 1070, 1073
(1937)). Plaintiffs argue that there is no mutuality because, under the contract, Silverleaf is not
11
bound to arbitrate all claims and can file suit to collect debts and proceed with judicial
foreclosures, while Plaintiffs are prohibited from seeking judicial recourse, including bringing
compulsory counterclaims. However, the Supreme Court of Missouri rejected this argument in
Eaton v. CHM Homes, Inc., holding that mirror image obligations are not required by the
doctrine of mutuality. Rather, the mutuality requirement is met “as long as the contract as a
whole meets the consideration requirement.” Id. at *5. Here, there is no allegation that the
consideration requirement was not met, nor is there any evidence in the record that suggests a
lack of consideration in the creation of the contracts. Furthermore, there is a reasonable basis to
permit judicial recourse for actions like foreclosures given the unique nature of the remedy and
the statutory safeguards provided to the debtors. Moreover, exceptions to the arbitration
agreement were also carved out for Plaintiffs. For example, under the agreement, Plaintiffs are
entitled to judicial review of claims brought in small claims court as well as claims for personal
injury.5 See [#7, Ex. D-1], at 9, ¶1.
For all of these reasons, I find that Plaintiffs have not demonstrated procedural or
substantive unconscionability sufficient to overcome the FAA’s policy favoring arbitration or the
clear intention of the parties as expressed in the Arbitration Addendum, which requires binding,
individual arbitration.
C. Disputes Subject to Arbitration
Having determined that a valid arbitration agreement exists, I must next determine
whether Plaintiffs’ claims in this suit are of the type contemplated by and covered by the
arbitration agreement. Plaintiffs do not dispute that their claims are encompassed by the
5
Not only does Plaintiffs’ ability to bring small claims in court weight against finding that the arbitration agreement
is one-sided, it also undermines Plaintiffs’ argument that the class action waiver effectively immunizes Silverleaf
from defending against claims that are not economically feasible when brought on an individual basis since lowvalue claims may be resolved inexpensively in small claims court.
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Arbitration Addendum. A review of the agreement also shows that the claims fall within the
scope of the arbitration agreement. The Arbitration Addendum states that:
a Claim shall include, but not be limited to, any claim, dispute or controversy of
every kind and nature arising from or relating to the Contract or our relationship,
promotions or oral or written statements related to the Contract, the Vacation
Interest acquired under the Contract, . . . and the validity, enforceability, and
scope of this Arbitration Provision and the Contract. This includes claims based
on contract, regulatory provisions, tort (including intentional tort), fraud,
negligence, statutory provisions, constitutional provisions, common law, equitable
principles or other sources of law. . . .
See [#7, Ex. D-1], at 8.
Plaintiffs have brought two claims in this suit, one for violation of the MMPA, and one
for rescission of the contracts. Both of these claims are grounded on allegations that Silverleaf
defrauded Plaintiffs or misrepresented material information to induce them to sign the contracts
to purchase time-share units. These are claims “arising from or relating to the Contract or [the
parties’] relationship, promotions or oral or written statements related to the Contract.” As a
result, both of Plaintiffs’ claims are encompassed by the broad language of the Arbitration
Addendum.
D. The FAA’s Savings Clause
Plaintiffs argue that the savings clause of the FAA makes agreements to arbitrate “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. Plaintiffs argue that both of their claims, alleging that
the contracts systematically violated the MMPA and seeking contract rescission, fall within the
savings clause and should not be subject to arbitration.
Plaintiffs misconstrue the savings clause of the FAA. The savings clause does not
exempt from arbitration any claim alleging that an underlying agreement was unconscionable,
made under duress, or otherwise invalid. Rather, it provides that agreements to arbitrate, while
13
generally enforceable, might not be enforceable if a party can establish that the agreement to
arbitrate is invalid based on a contract defense, such as unconscionability. That is the analysis I
just conducted when considering whether the Arbitration Agreement was unconscionable. As I
concluded that Plaintiffs had failed to establish there was unconscionability in the formation of
the contract, or in its substantive terms, Plaintiffs’ savings clause argument fails.
E. Dismissal of the Action
Silverleaf asks me to dismiss this action after compelling arbitration. “The FAA
generally requires a federal district court to stay an action pending an arbitration, rather than to
dismiss it.” Green v. SuperShuttle Intern., Inc., 653 F.3d 766, 769 (8th Cir. 2011) (citing
9 U.S.C. § 3). Where there is ambiguity as to whether all contested issues between the parties
will be resolved by arbitration, it is an abuse of discretion for the district court to dismiss the
action in lieu of staying it pending completion of the arbitration. Id. However, where all the
claims against all parties are subject to arbitration, dismissal of the action is proper. See Stifel,
Nicolaus & Co. v. Freeman, 924 F.2d 157, 158 (8th Cir.1991) (affirming dismissal without
prejudice under 9 U.S.C. § 3).
“[A] nonnamed class member is [not] a party to the class-action litigation before the class
is certified.” Standard Fire Ins. Co. v. Knowles, 133 S.Ct. 1345, 1349 (2013) (alterations in
original) (emphasis omitted). Because I have not certified a class, the only parties are the named
plaintiffs and defendant, and there exists no ambiguity as to whether the contested issues
between the parties are subject to arbitration. As a result, I will dismiss Plaintiffs' claims without
prejudice.6
6
Plaintiffs did not address Silverleaf’s request that I dismiss rather than stay this action, so presumably Plaintiffs
consent to the dismissal of the action.
14
Conclusion
Plaintiffs have failed to establish or support with evidence that the class action waiver is
unconscionable or that there are other substantive or procedural reasons to set aside the
Arbitration Addendum. The Arbitration Addendum is binding, enforceable, and unambiguous.
Additionally, Plaintiffs’ claims fall within the scope of the arbitration agreements. As a result, I
will grant Silverleaf’s motion to compel individual arbitrations and then will dismiss this action
without prejudice.
Accordingly,
IT IS HEREBY ORDERED that Defendant Silverleaf’s Motion to Compel Arbitrations
and Dismiss Litigation #[7] is GRANTED, and Plaintiffs must submit their claims to individual
arbitration.
IT IS FURTHER ORDERED that Plaintiffs’ claims will be dismissed without
prejudice. A separate Order of Dismissal in accordance with this Memorandum and Order is
entered this same date.
RODNEY W. SIPPEL
UNITED STATES DISTRICT JUDGE
Dated this 20th day of July, 2015.
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