Jones v. TitleMax of Missouri, Inc.

Filing 21

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Defendant TitleMax of Missouri, Inc.s Motion to Compel Arbitration (Doc. No. 8 ) is GRANTED. IT IS FURTHER ORDERED that this matter is STAYED pending arbitration. The Clerk of Court is ordered to admi nistratively close the case until such time as the parties move for judgment to be entered according to the outcome of arbitration proceedings. IT IS FINALLY ORDERED that the parties shall jointly submit a notice updating the Court on the status of this case every 120 days, including within 120 days of this Memorandum and Order, and shall also submit a notice updating the Court no later than ten (10) days following the completion of arbitration. ( Response to Court due by 12/3/2016.), Case stayed.. Signed by District Judge John A. Ross on 8/5/16. (KKS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
TIMOTHY H. JONES,
Plaintiff,
v.
TITLEMAX OF MISSOURI, INC.,
Defendant.

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No. 4:15-cv-01361-JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendant TitleMax of Missouri, Inc.’s (“TitleMax”)
Motion to Compel Arbitration (Doc. No. 8). In his Petition, filed in Missouri state court and
removed to this Court on diversity grounds, Plaintiff alleges individual and class complaints in six
counts: one for declaratory judgment, and statutory counts under Missouri Revised Statutes
Section 367.527, the Missouri Merchandising Practices Act, Missouri Revised Statutes Chapter
408, and the Uniform Commercial Code. Plaintiff’s counts each relate to so-called “title loans”
issued by Defendant, which are loans with exorbitant interest rates and which are generally made
without regard to a loan recipient’s credit score or ability to repay the loan. The loans are instead
based on the Defendant’s assertion of a lien on a vehicle title.
An August 18, 2012 Consumer Installment Loan Agreement executed between Plaintiff
and Defendant (“Agreement”) includes certain arbitration provisions governed by the Federal
Arbitration Act (“FAA”), 9 U.S.C. §§ 1 et seq. The Agreement compels binding arbitration for
any disputes arising out of or relating to the contracts or the parties’ relationships.
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The

Agreement also contains what appears to be a class action waiver, requiring all claims to be
arbitrated on an individual basis. Finally, the Agreement includes what has commonly been
referred to as a “delegation provision,” which delegates to the arbitrator any dispute about the
Agreement itself, including disputes regarding “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[.]” (Doc. No. 9-1 at 2.) Defendant now moves to compel individual
arbitration of all of Plaintiff’s claims. Plaintiff opposes the motion. For the following reasons,
Defendant’s motion will be granted.
BACKGROUND
In August 2012, Plaintiff Timothy Jones took out a loan with TitleMax secured by a lien on
his 2003 Dodge Ram 2500 truck. The terms of this loan were set forth in the Agreement.
Relevant to the present motion, the Agreement includes a choice of law provision, which states:
GOVERNING LAW, ASSIGNMENT. This Loan Agreement
shall be governed by the laws of the State of Missouri, except that
the Waiver of Jury Trial and Arbitration Provision shall be governed
by the Federal Arbitration Act, 9 U.S.C. Sections 1-16 (“FAA”). We
may assign or transfer this Loan Agreement or any of our rights
hereunder.
(Doc. No. 9-1 at 2.)
The Agreement also includes express terms regarding Plaintiff’s mandatory individual
arbitration of claims (the “Arbitration Provision”) as follows:
WAIVER OF JURY TRIAL AND ARBITRATION
PROVISION.
Arbitration is a process in which persons with a dispute: (a) waive
their rights to file a lawsuit and proceed in court and to have a jury
trial to resolve their disputes; and (b) agree, instead, to submit their
disputes to a neutral third person (an “arbitrator”) for a decision.
Each party to the dispute has an opportunity to present some
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evidence to the arbitrator. Pre-arbitration discovery may be limited.
Arbitration proceedings are private and less formal than court trials.
The arbitrator will issue a final and binding decision resolving the
dispute, which may be enforced as a court judgment. A court rarely
overturns an arbitrator’s decision.
THEREFORE, YOU ACKNOWLEDGE AND AGREE AS
FOLLOWS:
1. For purposes of this Waiver of Jury Trial and Arbitration
Provision (hereinafter the “Arbitration Provision”), the words
“dispute” and “disputes” are given the broadest possible
meaning and include, without limitation (a) all claims, disputes,
or controversies arising from or relating directly or indirectly
to the signing of this Arbitration Provision, the validity and
scope of this Arbitration Provision and any claim or attempt to
set aside this Arbitration Provision; (b) all federal or state law
claims, disputes or controversies, arising from or relating
directly or indirectly to this Loan Agreement (including the
Arbitration Provision), the information you gave us before
entering into this Loan Agreement,and/or any past agreement or
agreements between you and us; (c) all counterclaims, cross-claims
and third-party claims; (d) all common law claims, based upon
contract, tort, fraud, or other intentional torts; (e) all claims based
upon a violation of any state or federal constitution, statute or
regulation; (f) all claims asserted by us against you, including
claims for money damages to collect any sum we claim you owe us;
(g) all claims asserted by you individually against us and/or any of
our employees, agents, directors, officers, shareholders, governors,
managers, members, parent company or affiliated entities
(hereinafter collectively referred to as “related third parties”),
including claims for money damages and/or equitable or injunctive
relief; (h) all claims asserted on your behalf by another person; (i)
all claims asserted by you as a private attorney general, as a
representative and member of a class of persons, or in any other
representative capacity, against us and/or related third parties
(hereinafter referred to as “Representative Claims”); and/or (j) all
claims arising from or relating directly or directly to the disclosure
by us or related third parties of any non-public personal information
about you.
2. You acknowledge and agree that by entering into this Arbitration
Provision:
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(a) YOU ARE WAIVING YOUR RIGHT TO HAVE A TRIAL
BY JURY TO RESOLVE ANY DISPUTE ALLEGED
AGAINST US OR RELATED THIRD PARTIES;
(b) YOU ARE WAIVING YOUR RIGHT TO HAVE A
COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL,
RESOLVE ANY DISPUTE ALLEGED AGAINST US OR
RELATED THIRD PARTIES; and
(c) YOU ARE WAIVING YOUR RIGHT TO SERVE AS A
REPRESENTATIVE, AS A PRIVATE ATTORNEY
GENERAL, OR IN ANY OTHER REPRESENTATIVE
CAPACITY, AND/OR TO PARTICIPATE AS A MEMBER
OF A CLASS OF CLAIMANTS, IN ANY LAWSUIT FILED
AGAINST US AND/OR RELATED THIRD PARTIES.

Id. at 2 (emphasis added in Paragraph 1). More specifically, the Arbitration Provision includes a
delegation provision, which has the effect of committing to an arbitrator any decision on the
validity of the parties’ entry into the Agreement:
[T]he words “dispute” and “disputes” are given the broadest
possible meaning and include, without limitation (a) all claims,
disputes, or controversies arising from or relating directly or
indirectly to the signing of this Arbitration Provision, the validity
and scope of this Arbitration Provision and any claim or attempt to
set aside this Arbitration Provision; (b) all federal or state law
claims, disputes or controversies, arising from or relating directly or
indirectly to this Loan Agreement (including the Arbitration
Provision) . . .
Id. The Agreement also contains limitations on “Representative Claims”—class or collective
actions—as well as exceptions for equitable claims. Near the line for Plaintiff’s signature, the
Agreement further set forth:
Please note that this Loan Agreement contains a binding
Waiver of Jury Trial and Arbitration Provision, which limits
your right to file suit against us. By signing this Loan Agreement
you acknowledge that it was filled in before you did so and that you
have received a completed copy of it . . . You acknowledge that
you have read, understand, and agree to all the terms of this
Loan Agreement, including the ADDITIONAL TERMS AND
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CONDITIONS set forth on Page 2 of 3 and Page 3 of 3 of this
Loan Agreement which contains a “Waiver of Jury Trial and
Arbitration Provision.”
Id. at 3 (emphasis in original). Finally, the Agreement sets forth a specific provision by which a
borrower can opt-out of the Arbitration Provision, but Plaintiff did not avail himself of the option.
On July 24, 2015, Plaintiff filed this putative class action in the Circuit Court of St. Louis
City, Missouri.

He asserted six claims of alleged statutory or regulatory violations under

Missouri law. Plaintiff’s Petition also requests declaratory relief establishing that “TitleMax’s
arbitration clause is unconscionable, against Missouri public policy, and unenforceable.”
(Petition at 31.)
Defendant’s instant motion to compel argues that the FAA mandates enforcement of the
Arbitration Provision in the Agreement.

Defendant further argues that the class waiver

provisions of the Agreement are enforceable, and that this action should be dismissed or stayed
pending arbitration of Plaintiff’s claims.
Plaintiff responds in two ways: first, he alleges that because he is seeking equitable relief,
he should be able to pursue the instant motion in federal court. More pertinently, Plaintiff asserts
that the entirety of the Arbitration Provision is unconscionable and therefore, should not be
enforced. Plaintiff cites Brewer v. Missouri Title Loans, 364 S.W.3d 486 (Mo. 2012), which
upheld a finding of unconscionability in an arguably similar arbitration agreement and which was
decided by the Missouri Supreme Court following the United States Supreme Court’s ruling in
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011). Plaintiff argues the following factors,
also present in Brewer, apply to the instant Agreement: Defendant was in a superior bargaining
position and offered Plaintiff a non-negotiable Title Loan Agreement; the Arbitration Provision
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was very difficult to understand; and, as in Brewer, the small damages potential of each individual
loan make individualized claims difficult or impossible to litigate; and, the terms of the Arbitration
Provision are one-sided. Specifically, Plaintiff argues that the Arbitration Provision is one-sided
because according to the Agreement’s anti-waiver provision, TitleMax is permitted to obtain
primary remedies of judicial or self-help repossession without arbitration. Plaintiff argues that as
a title lending company, repossession is TitleMax’s “primary remedy.” (Doc. No. 10 at 7.)
Thus, Plaintiff asserts that TitleMax has preserved its equitable remedies as well as its primary
monetary remedy—the ability to repossess a given vehicle, sell it, and pursue a deficiency
judgment from a small claims division if necessary.

Describing this as a “one-sided . . . carve

out,” Plaintiff further argues that it cannot be severed because the Agreement lacks a severability
clause, and that it renders the entire Agreement unconscionable.
In reply, Defendant asserts that any claim of unconscionability must be decided—pursuant
to the Agreement—by the assigned arbitrator according to the delegation clause, and that even if
the Court addresses unconscionability on its merits, any such claim should fail. Defendant cites
to the United States Supreme Court’s holding in Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63
(2010), which established that unless a plaintiff challenges a delegation provision specifically,
courts will treat it as valid under § 2 of the FAA and will enforce its terms.
In Plaintiff’s sur-reply, filed with the Court’s leave, he raises—for the first
time—arguments relating specifically to the purported unconscionability of the delegation
provision. He argues that it represents an unfair surprise, and that his previously asserted grounds
for unconscionability of the Agreement as a whole also apply to the delegation provision.
Finally, Plaintiff argues that because the instant matter is chiefly concerned with contract
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formation, even under the terms of the Agreement, it is not properly referred to arbitration.
LEGAL STANDARD
The FAA “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, 563 U.S. 333
(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.; see also Torres, 781 F.3d at 968–69.

An arbitration

agreement’s scope is interpreted liberally, with any doubts resolved in favor of arbitration.
MedCam, 414 F.3d at 975. A district court should compel arbitration “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).
DISCUSSION
Validity of the Delegation Provision
Plaintiff and Defendant devote much of their initial briefs to the terms of the Agreement
and whether Plaintiff is bound to arbitration for his action in equity, but the Court must first answer
a threshold question: whether the delegation provision is valid. If the answer to that question is
affirmative, the Court must defer and submit the case to arbitration not only on its core substantive
questions, but on the question of “arbitrability” based on the Agreement’s definition of “disputes”
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which includes “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[.]” (Doc. No. 9-1 at 2.) Therefore,
the only question the Court may endeavor to answer at the outset is whether the delegation
provision is valid, or whether, as Plaintiff argues, the delegation provision itself is unconscionable
and must be voided. If the delegation provision is valid as a matter of law, all other issues raised
in the case should not be addressed, and the Court’s only role will be to enter an order compelling
arbitration.
The Supreme Court’s decision in Rent–A–Center addressed a challenged delegation
provision. In that case, a plaintiff filed suit against 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.” 561 U.S. at 65–66. The plaintiff in
Rent–A–Center argued that the arbitration provision as a whole was unconscionable.
Rent-A-Center responded that this preliminary question was delegated to the arbitrator. The
Supreme Court agreed with Rent-A-Center, 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

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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 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.
And while the delegation provision in the instant matter may differ slightly from the provision at
issue in Rent-A-Center, the Court finds that the delegation provision is virtually identical to that
addressed by this Court in Volpe v. Advance Am., No. 4:15 CV 1119 JMB, 2015 WL 5124202
(E.D. Mo. Sept. 1, 2015) (finding Rent-A-Center applicable and controlling, and granting the
motion to compel arbitration). There, as here, the delegation provision at issue stated explicitly
that “all disputes” would be resolved by an arbitrator, and “dispute” was defined to include “the
validity and scope of this Arbitration Provision and any claim or attempt to set aside this
Arbitration Provision.” Id. at *2. 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 Provision is clear that any dispute about the signing of the

agreement, its validity and scope, or any effort to set it aside—in short, any dispute related to
contract formation—is within the province of the arbitrator.
Plaintiff argues that the instant matter is distinguishable from Rent-A-Center because, in
his sur-reply, he raises—for the first time—arguments that the delegation clause itself is
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unconscionable.

In fact, in Plaintiff’s earlier briefing on Defendant’s Motion to Compel

Arbitration, and in Plaintiff’s Petition, Plaintiff does not argue that the delegation clause
specifically is unconscionable, but only that the “arbitration clause” generally is
unconscionable—an argument found inadequate in Rent-A-Center. But aside from being raised
late in the proceedings, Plaintiff’s specific delegation provision arguments are unavailing. The
delegation clause itself cannot be said to be an unfair surprise; it was included in clear terms in the
first paragraph of the Arbitration Provision, and the Arbitration Provision itself used highlighted,
bolded print to express that the signer of the Agreement was “waiving [his] right to have a trial by
jury to resolve any dispute[.]” (Doc. No. 9-1 at 2.) Information about the Arbitration Provision
was repeated immediately above the line for Plaintiff’s signature, and similar delegation
provisions have been upheld by this Court in the past. See Volpe, 2015 WL 5124202; Wilson v.
Career Educ. Corp., No. 4:11 CV 1583 RWS, 2011 WL 6012172 (E.D. Mo. Dec. 2, 2011).
The unconscionability factors set forth in Brewer also apply with little force to the
delegation provision. Plaintiff argues Defendant was in a superior bargaining position and
offered Plaintiff a non-negotiable Title Loan Agreement; that the Arbitration Provision was very
difficult to understand; that the terms of the Arbitration Provision are one-sided; and, as in Brewer,
that the small damages potential of each individual loan make individualized claims difficult to
impossible to litigate. Applying these arguments specifically to the delegation provision—as
Plaintiff asks the Court to do in his sur-reply—the Court finds them either inapplicable (one-sided
terms, small damages) or unpersuasive. With regard to Defendant’s superior bargaining position
and the non-negotiable nature of the delegation clause, the Court finds it relevant that the
Arbitration Provision has an “opt-out” procedure whereby Plaintiff could decline to be bound by

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the Arbitration Provision—so it is untrue that the Agreement was offered on a take-it-or-leave-it
basis. The fact that the Agreement appeared on a pre-printed form alone does not make it
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”). With regard to difficulty understanding
the Agreement, the Court finds that the delegation provision itself is reasonably easy to interpret.
Moreover, the Agreement’s use of bold print and repeated statements explaining the nature of
arbitration and the binding nature of the Arbitration Provision generally undermine such an
argument. Thus, the Court determines that the delegation provision is valid, and must refer to
arbitration any dispute about the validity and applicability of the Arbitration Provision.
Enforceability of the Agreement
Alternatively, however, even if the Court were to determine that it is the correct entity to
make a decision as to the enforceability of the Arbitration Provision, the Court would find it
enforceable under the FAA and Missouri law, and would not find the Arbitration Provision as a
whole unconscionable.
In assessing unconscionability at contract formation, a court looks 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. For much the same reasons
given above in reference to the delegation provision specifically, the Arbitration Provision
generally is not unconscionable because it is too difficult to understand, because it was
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non-negotiable, or because the Defendant was in a superior bargaining position. Again, the
Arbitration Provision’s “opt-out” procedure suggests Plaintiff retained agency in determining
whether to be bound by the provision. As noted above, simply because the Agreement was
presented as a pre-printed form does not make it per se unconscionable. Robinson, 364 S.W.3d at
515 (Mo. 2012). The Arbitration Provision’s use of bold and underlined print and its repeated
statements regarding the waiver of rights indicate that it was not beyond the grasp of a person of
reasonable capability. With regard to Plaintiff’s argument that the Arbitration Provision is
one-sided because it gives Defendant powers of repossession, the Court will simply note that
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”).
Therefore, to the extent this Court considers the enforceability of the Arbitration Provision,
it determines that the Arbitration Provision was validly made. Pursuant to its limited role in “any
challenge to an arbitration agreement,” which is restricted “to deciding whether ‘the making of the
agreement . . . is at issue,” the Court finds that, considering all relevant factors, the Arbitration
Provision was not unconscionable and is therefore enforceable. See MedCam, Inc., 414 F.3d at
974 (quoting 9 U.S.C. § 4).
CONCLUSION
The Court’s opinion should not be read as a statement on the inherent fairness, or lack
thereof, of TitleMax’s Agreement. But under the precedent set by Rent-A-Center, the Court is
limited in its ability to question the validity of a delegation provision like the one presented in this
matter, particularly where that specific issue has not been identified as a central component of the
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challenge to the Agreement. For the aforementioned reasons, this Court holds that under Rent–A–
Center v. Jackson, the question of arbitrability is for the arbitrator in the first instance; and holds in
the alternative that the underlying arbitration provision is not unconscionable under the FAA and
Missouri law, and it is thus enforceable in this matter.
Accordingly,
IT IS HEREBY ORDERED that Defendant TitleMax of Missouri, Inc.’s Motion to
Compel Arbitration (Doc. No. 8) is GRANTED.
IT IS FURTHER ORDERED that this matter is STAYED pending arbitration. The
Clerk of Court is ordered to administratively close the case until such time as the parties move for
judgment to be entered according to the outcome of arbitration proceedings.
IT IS FINALLY ORDERED that the parties shall jointly submit a notice updating the
Court on the status of this case every 120 days, including within 120 days of this Memorandum
and Order, and shall also submit a notice updating the Court no later than ten (10) days following
the completion of arbitration.

JOHN A. ROSS
UNITED STATES DISTRICT JUDGE
Dated this 5th day of August, 2016.

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