Volpe v. Advance America, Cash Advance Centers of Missouri, Inc.

Filing 21

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiffs Second Motion for Leave to Substitute Plaintiffs Memorandum In Opposition of Defendants Motion to Stay Litigation and Compel Individual Arbitration (ECF No. 17 ) is GRANTED; IT IS FURTHE R ORDERED that Defendants Request to File an Amended Reply is DENIED as moot; IT IS FURTHER ORDERED that Defendants Motion to Stay Litigation and Compel Individual Arbitration (ECF No. 8 ) is GRANTED; IT IS FURTHER ORDERED pursuant to 9 U.S.C. &# 167; 4, that the parties proceed to arbitration in accordance with the Loan Agreement; and IT IS FURTHER ORDERED that the parties shall jointly submit a notice updating the Court on the status of this case no later than ten (10) days following the completion of arbitration. Signed by Magistrate Judge John M. Bodenhausen on 9/1/15. (JAB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
CAROLINA VOLPE, individually and on
behalf of all others similarly situated,
Plaintiff,
vs.
ADVANCE AMERICA, CASH
ADVANCE CENTERS OF MISSOURI,
INC., d/b/a/ Advance America, Cash
Advance Centers, d/b/a Advance America
(a Delaware Corporation)
Defendants.

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MEMORANDUM AND ORDER
Before the Court is Defendant’s Motion to Stay Litigation and Compel Individual
Arbitration (ECF No. 8). 1 The Court has jurisdiction under 28 U.S.C. § 1332, and all matters are
pending before this Court with the consent of the parties under 28 U.S.C. § 636(c). This matter
has been fully briefed and is ready for disposition.
Background 2
Beginning in August of 2009, Carolina Volpe (“Plaintiff”) sought and received several
small, short-term loans from Advance America, Cash Advance Centers of Missouri, Inc, d/b/a/
Advance America (“Defendant”). As part of the loan process each time, Plaintiff signed nearly
identically-worded Consumer Loan Agreements (“Loan Agreements”). The Loan Agreements,
in turn, contain details of the loan amounts, various Federal Truth in Lending Disclosures (such
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This Memorandum and Order will also address Plaintiff’s Second Motion for Leave to Substitute Plaintiff’s
Memorandum In Opposition of Defendant’s Motion to Stay Litigation and Compel Individual Arbitration (ECF No.
17), and Defendant’s Response thereto, which this Court will construe as a motion based upon the contents of the
Response (ECF No. 20).
2
The factual discussion in this section is only for purposes of the motion under consideration.

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as Annual Percentage Rate, the Finance Charges, etc.), and required Missouri Disclosures. (See
ECF No. 9-1, 9-2) The Loan Agreements also reference an obligation to arbitrate in three
different places.
First, on the front of the document, above one of the signature lines, the following
language appears in bold print: “Please note that this Loan Agreement contains a binding
arbitration provision….” Second, a few inches down the page, above the final signature line
on the front page, the following language appears in bold print: “You further acknowledge
that you have read, understand, and agree to all of the terms on both sides of this Loan
Agreement, including the provision on the other side of this Loan Agreement entitled
‘Waiver of Jury Trial and Arbitration Provision.’” (Id.)
Third, the opposite side of the Loan Agreement contains a full page of Additional Terms
and Conditions. A majority of these Terms and Conditions relate to arbitration. Those terms
require that “all disputes, including any representative Claims against [Defendant] and/or related
third parties shall be resolved by binding arbitration only on an individual basis with you.” As
relevant to this particular motion, the Terms and Conditions define “dispute” to mean inter alia
“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.” (Id.) (emphasis supplied). Plaintiff signed or
initialed next to or below all three references to arbitration. (Id.)
Over the course of their relationship, Plaintiff took out many similar loans from
Defendant, and signed several identical Loan Agreements. Plaintiff alleges that during this time,
she was stuck in a cycle of debt whereby she could not pay off old loans without taking out new

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ones; her loans were structured so as to prevent her from paying down principle; and that she
was charged exorbitant interest rates, in violation of Missouri law. (ECF No. 18-1 at *2)
Plaintiff filed suit in St. Louis County on June 15, 2015, alleging that Defendant violated
the Missouri Merchandising Practices Act (Mo. Rev. Stat. § 407.010 et seq.) and laws regarding
Lenders of Unsecured Loans Under $500 (Mo. Rev. Stat. § 408.500 et seq.). Plaintiff also
sought a Declaratory Judgment under Missouri law that the Arbitration Provision of Plaintiff’s
Loan Agreements is unconscionable and unenforceable. (See e.g. Petition, ¶¶ 82, 140, 79)
Defendant timely removed this case to federal court on the basis of diversity jurisdiction
under 28 U.S.C. § 1332. (ECF No. 1) Defendant then moved for an order staying litigation and
compelling Plaintiff to arbitrate these purported violations of law. (ECF No. 8)
Arguments of the Parties, and Summary of Decision
Defendant argues that the plain language of the Arbitration Provision—as quoted
above—requires Plaintiff to arbitrate all of the claims that she has filed in state court, including
the preliminary question of whether the Arbitration Provision is binding; and that Plaintiff must
do so on an individual basis, not as the representative of a putative class of plaintiffs.
On the other hand, Plaintiff argues: (1) that the enforceability of the Arbitration
Provision must be decided by this Court, as opposed to by an arbitrator; (2) the Arbitration
Provision is unenforceable because it is an unenforceable contract of adhesion; (3) and the
Arbitration Provision is unconscionable.
For the reasons stated herein, the Court finds that this issue regarding the validity, scope,
and enforceability of the Arbitration Provision must be decided in the first instance by an
arbitrator because the parties provided—in the Loan Agreements—for an arbitrator to decide
whether the Arbitration Provision is enforceable. Alternatively, even if the question of the

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enforceability of the Arbitration Provision were properly before this Court, the undersigned
would hold that the Arbitration Provision is not unconscionable, and is therefore enforceable
under the Federal Arbitration Act (“FAA”) and Missouri law.
Discussion
This Agreement is governed by the FAA. 9 U.S.C. §§ 1-16. Under the FAA, an
agreement to arbitrate is to be treated as a normal matter of contract. American Exp. Co. v.
Italian Colors Restaurant, 133 S. Ct. 2304, 2308-09 (2013). That means that an agreement to
arbitrate must be “rigorously enforce[d]” according to its terms. Id.
The terms of this Loan Agreement state explicitly that “all disputes” will be resolved by
an arbitrator, and the terms of the Loan Agreement define “dispute” to include “the validity and
scope of this Arbitration Provision and any claim or attempt to set aside this Arbitration
Provision.” Thus, this agreement delegates to the arbitrator the decision over the enforceability
of the Arbitration Provision. This Court must “rigorously enforce” this delegation according to
its terms. Id.
Furthermore, this dispute is directly controlled by Rent-A-Center, West, Inc. v. Jackson,
561 U.S. 63 (2010). In that case, the plaintiff filed an employment discrimination suit against
defendant Rent-A-Center, his former employer. As part of his employment contract, the plaintiff
signed a “Mutual Agreement to Arbitrate Claims” which provided for arbitration of all “past,
present or future disputes arising out of [plaintiff’s] employment,” and which provided that
“[t]he Arbitrator, and not any federal state, or local court or agency, shall have exclusive
authority to resolve any dispute relating to the interpretation, applicability, enforceability or
formation of this Agreement, including, but not limited to any claim that all or any part this
Agreement is void or voidable.” Id. at 65-66. The plaintiff in Rent-A-Center argued that the

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arbitration provision was unconscionable. The defendant argued that this preliminary question
was delegated to the arbitrator, while the plaintiff argued that a court has to determine the
preliminary question of arbitrability. The Supreme Court agreed with the defendant, holding that
under the FAA, where an agreement to arbitrate includes an agreement that the arbitrator will
determine the enforceability of the agreement, then the decision regarding enforceability is for
the arbitrator. (Id. at 67-74) The Supreme Court labeled this delegation provision a “gateway
issue,” and held that “unless [the plaintiff] challenged the delegation provision specifically, we
must treat it as valid under § 2 [of the FAA], and must enforce it … leaving any challenge to the
validity of the Agreement as a whole for the arbitrator.” Id. at 72.
The Arbitration Provision in each of Plaintiff’s agreements with Defendant explicitly
provides that all disputes arising from the contract will be settled in arbitration, and defines
“dispute” to include “the validity and scope of this Arbitration Provision and any claim or
attempt to set aside this Arbitration Provision.” Thus, the Arbitration Provision in this case, like
the agreement to arbitrate in Rent-A-Center, expressly delegates the “gateway issue” of
arbitrability to an arbitrator. See 561 U.S. at 70. “[T]he FAA operates on this additional
arbitration agreement just as it does on any other.” Id. Thus, similar to the Supreme Court in
Rent-A-Center, this Court concludes that Plaintiff’s arguments against enforceability of the
Arbitration Provision are for the arbitrator in the first instance, and not properly before this
Court.
Furthermore, even prior to Rent-A-Center, the rule in the Eighth Circuit was that federal
courts should defer the question of arbitrability to the arbitrator where the court finds “a clear
and unmistakable expression of the parties’ intent to leave the question of arbitrability to an
arbitrator.” Fallo v. High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009). Here, the Arbitration

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Provision clearly states that it is the province of the arbitrator to determine the validity and scope
of the Arbitration Provision and any claim or attempt to set it aside.
Alternatively, even if there were no delegation provision in this case, the Court would
still find that the Arbitration Provision is enforceable under the FAA and Missouri Law.
Under the FAA and Missouri law, agreements to arbitrate are “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. Following the United States Supreme Court decision in AT&T Mobility
LLC v. Concepcion, 131 S. Ct. 1740 (2011), and the Missouri Supreme Court case applying
Missouri law to that decision, Brewer v. Missouri Title Loans, 364, S.W.3d 486 (Mo. 2012), an
agreement to arbitrate is enforceable unless, at formation, the agreement was unconscionable. 3
Id. at 492.
In assessing unconscionability at contract formation, a court should look to the purposes
of the unconscionability doctrine, which 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.” Brewer, 364 S.W.3d at 492-93.
Plaintiff here argues that the Arbitration Provision is unconscionable because: (1) the
terms of the arbitration provision are “grossly one-sided;” (2) it is a contract of adhesion; (3) the
arbitration provision was in “fine print and could not easily be read or understood;” and (4)
Defendant holds an unequal bargaining position over its consumers. None of Plaintiff’s
contentions are meritorious.
First, the terms of the arbitration provision are not grossly one-sided. Although Plaintiff
argues that there is no mutuality of obligation—only Plaintiff is bound by the Arbitration
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Of course other grounds not at issue here, such as fraud or duress may also invalidate such an agreement,
because these are traditional grounds for the revocation of any contract, within the meaning of section 2 of the FAA.

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Provision, and Defendant can choose to litigate—that is not correct. The terms of the provision
apply equally to “all claims asserted by [Plaintiff]” and “all claims asserted by [Defendant].” In
any event, mutuality of obligation is not necessary in arbitration agreements. See Eaton v. CMH
Homes, Inc., 461 S.W.3d 426, 433 (Mo. 2015) (“the lack of mutuality as to the arbitration
agreement does not itself invalidate that arbitration agreement”).
Second, the provision is not an unconscionable contract of adhesion. As an initial matter,
the very fact that the provision is on a pre-printed form, or is part of a contract of adhesion is not
sufficient for it to be unconscionable. Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 515
(Mo. 2012) (“a court should not invalidate an arbitration agreement in a consumer contract
simply because it is contained in a contract of adhesion or because the parties had unequal
bargaining power, as these are hallmarks of modern consumer contracts generally”).
Furthermore, the Court finds it relevant that the Arbitration Provision has an “opt-out” procedure
whereby Plaintiff could decline to be bound by the Arbitration Provision if she had mailed a
notice of her preference to Defendant. 4 Plaintiff could have opted-out of the Arbitration
Provision, so the contention that this Arbitration Provision was forced on Plaintiff on a take-itor-leave-it basis is simply not correct.
Third, the terms of the Loan Agreement relating to arbitration were not hidden in small
print. As this Court recited above, there were multiple references, in bold-faced font, to a
binding arbitration provision and waiver of class representation rights. The provision even
contained a paragraph describing the nature, process, and implications of the arbitration
provision.

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The opt-out process required Plaintiff to notify Defendant in writing, within thirty days of the date of the
Agreement. The notice had to include Plaintiff’s name, address, social security number, date of the Agreement, and
a statement that Plaintiff wished to opt out of the Arbitration Agreement. See ECF No. 9-3.

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Fourth, the unequal bargaining power of the parties is simply not, in-and-of-itself, a
sufficient grounds to find unconscionability. See Robinson 364 S.W.3d at 515 (“a court should
not invalidate an arbitration agreement simply … because the parties had unequal bargaining
power”); see also Brewer, 364 S.W.3d at 502 (“an unequal balance of power between the parties,
alone, does not support a finding of unconscionability”). Additionally, inclusion of the opt-out
feature of this Arbitration Provision cedes to Plaintiff a fair measure of control over the
Arbitration Provision.
Thus, this Court holds: (1) that under the governing law of Rent-A-Center v. Jackson, the
question of arbitrability is for the arbitrator in the first instance; in the alternative, (2) that the
underlying arbitration provision is not unconscionable under the FAA and Missouri law; and (3)
it is thus enforceable in this matter.
Finally, also pending before the Court is Plaintiff’s Motion for Leave to Substitute
Plaintiff’s Memorandum in Opposition to Defendant’s Motion to Stay Litigation and Compel
Individual Arbitration [ECF No. 17] and Defendant’s response thereto [ECF No. 20]. The Court
grants Plaintiff’s Motion and has considered the arguments advanced in Plaintiff’s substitute
memorandum in resolving this matter. Because the arguments advanced in Plaintiff’s substitute
memorandum do not alter the Court’s final decision, the Court denies as moot Defendant’s
request to file an amended reply.
Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s Second Motion for Leave to Substitute
Plaintiff’s Memorandum In Opposition of Defendant’s Motion to Stay Litigation and Compel
Individual Arbitration (ECF No. 17) is GRANTED;

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IT IS FURTHER ORDERED that Defendant’s Request to File an Amended Reply is
DENIED as moot;
IT IS FURTHER ORDERED that Defendant’s Motion to Stay Litigation and Compel
Individual Arbitration (ECF No. 8) is GRANTED;
IT IS FURTHER ORDERED pursuant to 9 U.S.C. § 4, that the parties proceed to
arbitration in accordance with the Loan Agreement; and
IT IS FURTHER ORDERED that the parties shall jointly submit a notice updating the
Court on the status of this case no later than ten (10) days following the completion of
arbitration.
/s/ John M. Bodenhausen
JOHN M. BODENHAUSEN
UNITED STATES MAGISTRATE JUDGE
Dated this 1st day of September, 2015

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