Slatten et al v. Jim Glover Chevrolet Lawton LLC et al

Filing 25

ORDER denying 11 Motion to Compel Arbitration and Stay Proceedings. Signed by Honorable Timothy D. DeGiusti on 6/29/2016. (mb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
ASHLEY SLATTEN, et al.,

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Plaintiffs,
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vs.
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JIM GLOVER CHEVROLET LAWTON, )
LLC, et al.,
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Defendants.
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Case No. CIV-15-1180-D

ORDER
Before the Court is Defendant Jim Glover Chevrolet Lawton, LLC’s Motion to
Compel Arbitration and Stay Proceedings [Doc. No. 11].1 Relying on a Dispute Resolution
Clause (“DRC”) signed by Plaintiff Ashley Slatten (“Mrs. Slatten”), Defendant seeks to
enforce an arbitration agreement pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16.2
Plaintiffs have timely opposed the Motion on multiple grounds, including that their federal
claims are not arbitrable, Mrs. Slatten’s signature was procured by fraud, a fee-splitting
provision of the DRC is unconscionable and makes it unenforceable, and Plaintiff Jonathan
Slatten (“Mr. Slatten”) is not bound by the DRC. In reply, Defendant contends the facts
presented by Plaintiffs do not establish fraud, Mr. Slatten can be bound under an estoppel

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The other named defendants, GM Financial, LLC and General Motors, LLC, have answered but
have made no filings regarding the Motion. For purposes of this Order, the movant will be referred to as
“Defendant.”
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The Motion also cites Fed. R. Civ. P. 12(b)(1), but does not challenge subject matter jurisdiction.
Defendant removed the case to federal court pursuant to 28 U.S.C. § 1441 based on original jurisdiction
under 28 U.S.C. § 1331.

theory, and the DRC’s fee-splitting provision does not render it unenforceable. The Motion
is fully briefed and at issue.
Factual and Procedural Background
This case concerns Plaintiffs’ purchase of a 2011 Chevrolet Cruze from Defendant
on August 13, 2011. Plaintiffs allege that multiple, repeated mechanical failures and
unsuccessful repairs rendered the Cruze unsafe and unmerchantable but that Defendant has
refused to rescind the purchase agreement and the related retail installment sales contract.
In their pleading, Plaintiffs seek rescission and damages based on claims of breach of
warranty; breach of contract; common law fraud; violation of the Oklahoma Consumer
Protection Act, Okla. Stat. tit. 15, §§ 751-764.1; violation of the Magnuson-Moss Warranty
Act, 15 U.S.C. §§ 2301-12; and intentional infliction of emotional distress. Defendant timely
removed the case to federal court based on Plaintiffs’ assertion of a claim arising under
federal law.
Defendant’s Motion
As stated above, Defendant seeks to enforce an arbitration agreement in the DRC.
Identical versions of the DRC were contained in a written purchase agreement regarding the
vehicle and a separate document that was allegedly part of the sales transaction. Defendant
relies on the allegations of Plaintiffs’ pleading and evidentiary materials submitted in support
of the Motion, including a copy of the purchase agreement dated August 13, 2011; a color
copy of a form agreement to illustrate that the DRC section of the document was printed in

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red ink; and a separate DRC document dated August 5, 2011. Plaintiffs have responded in
kind, submitting evidentiary materials that include Mrs. Slatten’s affidavit; copies of the
retail installment sales contract and a written warranty procedure contained in the owner’s
manual; and a document represented to be billing statements for a similar arbitration
proceeding in 2014 (Pollock v. David Stanley Dodge, L.L.C.), which show the cost of the
arbitrator’s services totaled almost $30,000.
Plaintiffs dispute parts of Defendant’s statement of facts in support of its Motion, and
argue additional facts designed to show that the DRC is unenforceable. Although both of the
DRC documents appear to be signed by Mrs. Slatten, she attests in her affidavit that she did
not knowingly sign them. Mrs. Slatten states that multiple documents were presented for her
signature after she, her husband, and their two-year old child had been forced to wait at the
dealership for seven hours on the day of the sales transaction; Defendant’s finance manager
prevented her from reading the content of the documents; he misrepresented the purpose of
her signature on the purchase agreement; and he did not disclose that she was signing an
arbitration agreement. Mrs. Slatten states the separate DRC document is dated eight days
earlier than the purchase agreement because it was executed as part of a separate sales
transaction for a different vehicle, which Defendant rescinded because the financing was not
approved.
Plaintiffs request a jury trial to determine the validity of the arbitration agreement, as
authorized by the Federal Arbitration Act. See 9 U.S.C. § 4. According to the court of

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appeals, “[w]hen parties dispute the making of an agreement to arbitrate, a jury trial on the
existence of the agreement is warranted unless there are no genuine issues of material fact
regarding the parties’ agreement.” Avedon Eng’g, Inc. v. Seatex, 126 F.3d 1279, 1283 (10th
Cir. 1997). Defendant contends any disputed facts and the facts asserted by Plaintiffs are not
material to enforcement of the arbitration agreement.
Discussion
The Federal Arbitration Act provides that “an agreement in writing to submit to
arbitration an existing controversy . . . shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract.” See 9 U.S.C.
§ 2. The Act “reflects the fundamental principle that arbitration is a matter of contract.” See
Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010). Under the Act, a court decides
“gateway” issues that determine the arbitrability of a dispute, such as whether the parties are
bound by a given arbitration clause and whether the arbitration clause applies to a particular
controversy. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002); Rent-ACenter, 561 U.S. at 68-69. In so doing, federal courts may apply state law principles that
govern the validity, revocability, and enforceability of contracts. See AT&T Mobility LLC
v. Concepcion, 563 U.S. 333, 339 (2011); Doctor’s Assoc., Inc. v. Casarotto, 517 U.S. 681,
686-87 (1996). “The final phrase of § 2” or the “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

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meaning from the fact that an agreement to arbitrate is at issue.” AT&T Mobility, 563 U.S.
at 339 (quoting Doctor’s Assoc., 517 U.S. at 687); Rent-A-Center, 561 U.S. at 68.
Federal courts have recognized, however, an “effective vindication” exception to the
enforcement of an otherwise valid arbitration agreement. See Am. Express Co. v. Italian
Colors Rest., 133 S. Ct. 2304, 2310 (2013); Nesbitt v. FCNH, Inc., 811 F.3d 371, 376-77
(10th Cir. 2016). The exception reflects “a willingness to invalidate, on ‘public policy’
grounds, arbitration agreements that ‘operat[e] . . . as a prospective waiver of a party’s right
to pursue statutory remedies.’” Am. Express, 133 S. Ct. at 2310 (quoting Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985); alterations by the
Court in Am. Express; emphasis omitted); see Nesbitt, 811 F.3d at 377.
The Tenth Circuit applied this exception in Shankle v. B-G Maintenance Management
of Colorado, Inc., 163 F.3d 1230, 1234 (10th Cir. 1999), to deny enforcement of an
arbitration agreement that required an employee bringing statutory claims against his
employer to pay half of the arbitrator’s fees. The court held that “an arbitration agreement
that prohibits use of the judicial forum as a means of resolving statutory claims must also
provide for an effective and accessible alternative forum.” Id. The agreement in Shankle did
not satisfy this requirement because it contained a fee-splitting provision, the employee
“would have had to pay an arbitrator between $1,875 to $5,000 to resolve his claims,” and
he could not afford this amount. Id. Finding that “the prohibitive cost substantially limited
use of the arbitral forum,” the court of appeals concluded that the arbitration agreement was

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unenforcable under the Federal Arbitration Act. Id. at 1235. The court therefore affirmed
the district court’s refusal to compel arbitration. Id. at 1236.
More recently in Nesbitt, the Tenth Circuit considered what showing a party must
make to resist arbitration under this exception. The court was asked to consider the impact
of the Supreme Court’s intervening decision in Green Tree Financial Corp. v. Randolph, 531
U.S. 79 (2000), “that the party ‘seek[ing] to invalidate an arbitration agreement on the ground
that arbitration would be prohibitively expensive . . . bears the burden of showing the
likelihood of incurring such costs.’” Nesbitt, 811 F.3d at 378 (quoting Green Tree, 531 U.S.
at 92). As pertinent here, the court of appeals rejected the defendants’ argument that the
plaintiff failed to satisfy her burden because the arbitration agreement provided for
application of the rules of the American Arbitration Association and she did not explore the
possibility of deferred or reduced arbitration fees under those rules, which permit a fee
waiver for a party in financial need. See id. The court instead accepted the plaintiff’s view
“that being at the mercy of the arbitrator’s discretion as to whether to defer or reduce her
share of the arbitration fees is not the same as the protections of the [federal wage statute
under which her claims were asserted]. Id. (internal quotation omitted).3
The undisputed facts of this case, as presented by the parties and supported by the
evidentiary materials submitted with their briefs, are that Plaintiffs bought the 2011 Cruze

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The court endorsed a statement in Shankle that the mere possibility that an arbitrator could shift
fees by awarding them as costs if the plaintiff was successful on the merits, was insufficient to prevent a
finding of unconscionability. Nesbitt, 811 F.3d at 378-79 (discussing Shankle, 163 F.3d at 1234, n.4).

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vehicle from Defendant pursuant to a purchase agreement that contained the DRC signed by
Mrs. Slatten. The DRC provided in full as follows:
DISPUTE RESOLUTION CLAUSE
Any controversy, claim or dispute between the Purchaser and the Dealer
arising out of, or related to this sale, and any financing contract or agreement
executed by the Purchaser in conjunction with the sale of the vehicle described
herein, or any alleged breach thereof, shall be submitted to binding arbitration,
with the American Arbitration Association, pursuant to the Federal Arbitration
Act, Title 9 U.S.C. § 1, et seq. The parties agree and understand that all
disputes arising under case law, statutory law, and all other laws including, but
not limited to, all contract, tort, and property disputes will be subject to binding
arbitration in accord with this Contract. The parties agree and understand that
the arbitrator shall have all powers provided by the law and contract, including
but not limited to, money damages, declaratory relief, and injunctive relief.
Arbitration shall be conducted in compliance with the rules of the American
Arbitration Association. All procedures pertinent to or conducted prior to
arbitration shall be conducted in conformity with the Federal Rules of Civil
Procedure. Any evidence submitted by the parties shall be accepted by the
arbitrator in conformity with the Federal Rules of Evidence. The award
rendered by the arbitrator(s) will be entered as a judgment in a court having
jurisdiction over the parties. Both the Purchaser and Dealer acknowledge and
understand that they are waiving their right to a jury trial by entering into this
agreement. It is agreed between the parties that the party filing the arbitration
claim shall be responsible for the filing fee. The cost of the arbitrator’s fee
shall be equally divided between the parties. The prevailing party of any
dispute submitted to arbitration shall be entitled to attorney’s fees and costs as
allowed by Oklahoma Statutes. Dealer and Purchaser agree that if Dealer must
hire legal counsel to enforce or defend Dealer’s legal rights under this Dispute
Resolution Clause, Purchaser will pay to Dealer its attorney fees and costs
incurred by Dealer in Dealer’s successful defense of Dealer’s rights.
PURCHASER:__________________DEALER:____________________

Def.’s Mot. Compel Arbitration, Ex. 1 [Doc. No. 11-1] (emphasis added).

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Defendant does not dispute Plaintiffs’ assertion that they cannot afford to pay their
share of an arbitrator’s fee, nor challenge as insufficient Plaintiffs’ showing that enforcement
of the arbitration agreement would be cost prohibitive. Defendant instead relies on the
American Arbitration Association’s rules providing for a reduction or shifting of the
arbitrator’s fees and expenses in cases of financial hardship. This possibility is insufficient
under Nesbitt.4 Therefore, the Court finds that enforcement of the arbitration agreement in
this case would prevent the effective vindication of Plaintiffs’ statutory claims under the
Magnuson-Moss Warranty Act and that the DRC is unenforceable under the Federal
Arbitration Act.
Conclusion
For these reasons, the Court finds that Defendant has failed to show that it is entitled
to an order compelling arbitration or a stay of this action until an arbitration is completed.
IT IS THEREFORE ORDERED that Defendant Jim Glover Chevrolet Lawton, LLC’s
Motion to Compel Arbitration and Stay Proceedings [Doc. No. 11] is DENIED.
IT IS SO ORDERED this 29th day of June, 2016.

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The Court notes that Nesbitt was decided after the parties’ briefs were filed, but Defendant has not
asked to supplement its briefs in light of the court of appeals’ decision.

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