[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MARCH 5, 2012
No. 11-14317
Non-Argument Calendar JOHN LEY
CLERK
________________________
D.C. Docket Nos. 1:09-md-02036-JLK,
1:10-cv-20476-JLK
In Re: CHECKING ACCOUNT OVERDRAFT LITIGATION
lllllllllllllMDL NO. 2036
____________________________________________
LAWRENCE D. HOUGH,
PAMELA J. HOUGH,
on behalf of themselves and
all others similarly situated,
Plaintiffs - Appellees,
versus
REGIONS FINANCIAL CORPORATION,
REGIONS BANK,
Defendants - Appellants.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(March 5, 2012)
Before HULL, PRYOR and FAY, Circuit Judges.
PER CURIAM:
Regions Financial Corporation and Regions Bank (collectively “Regions”)
appeal the denial of their renewed motion to compel Lawrence and Pamela Hough
to arbitrate their complaint against Regions. 9 U.S.C. § 16(a)(1)(C). The Houghs
sued Regions for allegedly violating federal and state law by collecting overdraft
charges under its deposit agreement, and Regions moved to compel arbitration
based on an arbitration clause in that agreement. The district court denied the
motion to compel on the ground that the arbitration clause was substantively
unconscionable because it contained a class action waiver, but we vacated that
ruling and remanded for further consideration in the light of AT&T Mobility LLC
v. Concepcion, 563 U.S. ___,131 S. Ct. 1740 (2011). On remand, Regions
renewed its motion to compel, which the district court denied on the ground that
the arbitration clause was substantively unconscionable under Georgia law
because a provision granting Regions the unilateral right to recover its expenses
for arbitration allocated disproportionately to the Houghs the risks of error and
loss inherent in dispute resolution. Because the reimbursement provision is
conscionable under Georgia law, we reverse the order denying the renewed motion
to compel of Regions and remand with instructions to compel arbitration.
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I. BACKGROUND
Approximately ten years after the Houghs became customers of Regions
Bank, the Houghs filed a complaint “on behalf of themselves and all persons
similarly situated” against Regions. The Houghs complained that they were
assessed overdraft charges unfairly on their checking account. The complaint
alleged five acts of wrongdoing by Regions: (1) Regions breached its duty of good
faith and fair dealing with its customers; (2) Regions converted funds by levying
overdraft charges unfairly; (3) Regions processed transactions and fees
deceptively to maximize overdraft charges; (4) Regions loaned money at a
usurious rate to process transactions when the account contained insufficient
funds; and (5) Regions was unjustly enriched.
Regions moved to compel the Houghs to arbitrate their complaint
individually. Regions argued that the Houghs had agreed in paragraph 34 of its
deposit agreement that, “except as expressly provided[,] . . . either party [could]
elect to resolve by BINDING ARBITRATION any controversy, claim, . . . dispute
or disagreement” and that “no Claim [could] be joined with another dispute or
lawsuit . . . or resolved on behalf of a class of similarly situated persons . . . .”
Regions requested that the district court, “upon being satisfied that the making of
the agreement for arbitration or the failure to comply therewith is not in issue, . . .
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direct[] the parties to proceed to arbitrate in accordance with the terms of the
agreement.”
The Houghs responded that the arbitration provisions in the deposit
agreement were unconscionable. The Houghs argued, relevant to this appeal, that
the arbitration provisions were substantively unconscionable because the expenses
imposed in paragraphs 34 and 36 of the deposit agreement created a financial
disincentive to arbitrate. Although paragraph 34 capped the Houghs’ costs for the
arbitration proceeding at $125, paragraph 36 required the Houghs to reimburse
Regions as a prevailing party for its costs of arbitration. Paragraph 36 provided
that “[Depositors] agree to reimburse [Regions] for [its] costs and expenses
(including reasonable attorney’s fees) in connection with . . . (iii) any action or
arbitration regarding this Agreement, [the depositor’s] account or services linked
to the account where [Regions] [is] the prevailing party.” Paragraph 36 also
provided that “[Regions] may charge any account of [a depositor] for such costs
and expenses without further notice.”
In reply, Regions argued that the district court “should deny the
conscionability challenge and . . . enforce the parties’ arbitration agreement.”
Regions argued that the reimbursement provision was commercially reasonable
and conscionable. Regions also argued that it never had exercised its right to
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reimbursement and that the provision “could not render the arbitration agreement
unconscionable” because the provision “is expressly severable.” Additionally,
Regions argued that the Houghs could, as permitted in paragraph 34, “pursue their
individual claims in small claims court” and, if they prevailed on their claims of
conversion and usury, could recover attorney’s fees. Regions stated in footnote 16
of the reply that “[i]f [it were to] prevail on [the] motion [to compel], it [would]
not file an arbitration action” and the Houghs could then “decide . . . [to] initiate
an individual action in small claims court or in arbitration.”
After we remanded for the district court to reconsider the motion to compel
in the light of Concepcion, Regions renewed its motion to compel arbitration.
Regions argued, based on the decision of the Supreme Court in Rent-A-Center,
W., Inc. v. Jackson, 561 U.S. ___, 130 S. Ct. 2772 (2010), that the district court
should “compel arbitration of all issues” because “the arbitration agreement
delegates threshold arbitrability issues to the arbitrator.” And Regions quoted in
its renewed motion a sentence in paragraph 34 of the deposit agreement providing
that the parties would submit all disputes to an arbitrator: “Any dispute regarding
whether a particular controversy is subject to arbitration, including any claim of
unconscionability and any dispute over the scope or validity of this agreement to
arbitrate disputes or of this entire Agreement, shall be decided by the
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arbitrator(s).” Regions also argued, based on our decision in Cappuccitti v.
DirecTV, Inc., 623 F.3d 1118 (11th Cir. 2010), that the Houghs “created
unconscionability by . . . refusing to plead a cause of action [under the Georgia
Fair Business Practices Act] that would [have] confer[red] automatic attorney’s
fees.”
The Houghs opposed the renewed motion of Regions. The Houghs argued
that the district court should decide the issue of conscionability because, in
contrast with the arbitration agreement in Rent-A-Center, the arbitration clause in
the Houghs’ deposit agreement failed to “clearly place[] [the Houghs] on notice
that an arbitrator would decide questions of arbitrability.” The Houghs contended
that the delegation of all disputes to the arbitrator was substantively
unconscionable, and the Houghs argued that the arbitration provisions in the
deposit agreement were procedurally and substantively unreasonable.
The district court denied the renewed motion to compel. As to the initial
question of who should decide conscionability, the district court concluded that
Regions “waived its right to arbitrate the threshold issue of unconscionability” by
“ask[ing] [the district] Court to determine [that] question in [its] original motion to
compel arbitration, filed well over a year ago.” The district court ruled that the
arbitration clause was substantively unconscionable under Georgia law because
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the provision granting Regions the right of reimbursement allocated “nearly all the
risks of engaging in dispute resolution” unfairly on the Houghs. The district court
rejected the argument of Regions that the reimbursement provision in paragraph
36 was severable from the arbitration clause in paragraph 34. The district court
ruled that Regions “waived the right to invoke [the severance] provision” by
failing to mention it “in either its Motion [to compel] or the Reply filed in support
of its original Motion.”
II. STANDARD OF REVIEW
We review de novo the denial of a motion to compel arbitration. Jenkins v.
First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 873 (11th Cir. 2005).
III. DISCUSSION
Regions contends that it was entitled to compel the Houghs to arbitrate their
complaint and that the district court ignored precedent requiring it to enforce the
agreement to arbitrate. Regions argues that the district court should have
submitted the issue of conscionability to the arbitrator, the arbitration clause was
conscionable and, even if unconscionable, the clause was severable. Although we
conclude that Regions waived the right to have the arbitrator resolve the issue of
conscionability, because we agree with Regions that the reimbursement provision
was conscionable, we need not address whether the clause was severable.
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Regions waived its right to arbitrate the conscionability of its arbitration
clause. The clause contained “sweeping language concerning the scope of the
questions committed to arbitration,” Green Tree Fin. Corp. v. Bazzle, 539 U.S.
444, 453, 123 S. Ct. 2402, 2407 (2003), and “clearly and unmistakably
provide[d],” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S. Ct.
588, 591 (2002), that an arbitrator should resolve “any claim of
unconscionability,” but Regions did not invoke that delegation provision in
response to the Houghs’ arguments that the clause was unconscionable. Regions
instead asked the district court to “deny the conscionability challenge.” The
actions of Regions are virtually indistinguishable from the actions of Princess
Cruise Lines in Doe v. Princess Cruise Lines, Ltd., 657 F.3d 1204, 1213 (11th Cir.
2011), where we held that Princess was barred from arguing that the district court
should have submitted the issue of arbitrability to an arbitrator because Princess
“asked the district court to decide for itself whether the dispute was subject to
arbitration.” Regions, “as a party to the contract it signed, is presumed to know
that it had . . . [the right] to arbitrate” the issue of conscionability, Holt & Holt,
Inc. v. Choate Constr. Co., 271 Ga. App. 292, 294, 609 S.E.2d 103, 105 (2004),
and “waive[d] [that aspect of the] agreement to arbitrate by taking actions that
[were] inconsistent with [that] right of arbitration,” M. Homes, LLC v. S.
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Structural, Inc., 281 Ga. App. 380, 383, 636 S.E.2d 99, 101 (2006) (internal
quotation marks omitted).
The district court erred in its resolution of the issue of substantive
conscionability. The arbitration agreement permitted Regions, if it was “the
prevailing party,” to obtain “reimburse[ment] for [its] costs and expenses
(including reasonable attorney’s fees) . . . [in] arbitration” and to collect that
amount by “charg[ing] [the Houghs’] account.” The district court concluded that
the reimbursement provision was unconscionable because Regions had an
exclusive right of setoff, but under Georgia law “an arbitration provision is not
unconscionable because it lacks mutuality of remedy.” Crawford v. Great Am.
Cash Advance, Inc., 284 Ga. App. 690, 693, 644 S.E.2d 522, 525 (2007); see also
Greene v. Citizens & S. Bank of Cobb Cnty., 134 Ga. App. 73, 76, 213 S.E.2d
175, 178 (1975) (“A contract allowing a bank a set-off of its indebtedness to a
depositor against the depositor’s indebtedness to it is not unconscionable.”). The
arbitration agreement is not substantively unconscionable.
The district court also ruled that the arbitration clause had “a degree of
procedural unconscionability,” but to be unconscionable under Georgia law, a
contract must be “so one-sided” that “‘no sane man not acting under a delusion
would make and that no honest man would’” participate in the transaction. NEC
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Techs., Inc. v. Nelson, 267 Ga. 390, 391 & n.2, 478 S.E.2d 769, 771 & n.2 (1996)
(quoting R.L. Kimsey Cotton Co. v. Ferguson, 233 Ga. 962, 966, 214 S.E.2d 360,
363 (1975)). The arbitration clause in the Houghs’ agreement falls well short of
this standard. Although the district court found troubling that the clause was
presented to the Houghs “on a take-it-or-leave-it basis with no opt-out provision,”
under Georgia law, an adhesion contract is not per se unconscionable. See
Crawford v. Results Oriented, Inc., 273 Ga. 884, 885, 548 S.E.2d 342, 343 (2001)
(citing Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 542 S.E.2d 360 (2001)); see
also Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1377 (11th Cir. 2005)
(despite the existence of a “bargaining disparity” common to an employment
relationship, it did not render the arbitration agreement entered unconscionable
under Georgia law). As the Supreme Court has recognized, “[m]ere inequality in
bargaining power . . . is not a sufficient reason to hold that arbitration agreements
are never enforceable . . . .” Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20,
33, 111 S. Ct. 1647, 1655 (1991). The district court also criticized the clause as
“not conspicuous” because it was “buried on the twenty-first page of a forty-three
page, single-spaced document” and “in a maze of fine print,” but the district court
overlooked other aspects of the document that made apparent the agreement to
arbitrate. The first two pages of the deposit agreement thrice reference that it
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contains “BINDING ARBITRATION provisions,” and the second page of the
agreement contains a separate paragraph typed in all caps, bold, and underlined
stating that “THIS AGREEMENT CONTAINS PROVISIONS FOR BINDING
ARBITRATION” and that “ACCEPTANCE OF [THE] AGREEMENT
INCLUDES YOUR ACCEPTANCE OF AND AGREEMENT TO SUCH
PROVISIONS.” And reference to the arbitration clause is not difficult: the table
of contents states that the paragraph regarding “Arbitration and Waiver of Jury
Trial” is located on pages 21 through 23, and that paragraph explains in bold
typeset what kinds of disputes are subject to arbitration. The Supreme Court
invalidated in Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S. Ct.
1652 (1996), a requirement under state law that operated to “singl[e] out
arbitration provisions for suspect status” on the ground that the Federal Arbitration
Act requires that “such provisions be placed ‘upon the same footing as other
contracts.’” Id. at 687, 116 S. Ct. at 1656 (quoting Scherk v. Alberto-Culver Co.,
417 U.S. 506, 511, 94 S. Ct. 2449, 2453 (1974)). The Houghs fail to cite any case
law that requires provisions relating to arbitration be “conspicious,” and even if
this were the standard, the language regarding arbitration in the Houghs’
agreement is conspicious. The arbitration agreement is not procedurally
unconscionable.
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The Federal Arbitration Act provides that an arbitration agreement “shall be
. . . enforceable, save upon such grounds as exist at law or in equity for [its]
revocation.” 9 U.S.C. § 2. The arbitration clause in the Houghs’ agreement is
neither procedurally nor substantively unconscionable. Because Regions is
entitled to “an order directing that such arbitration proceed in the manner provided
for in [its deposit] agreement,” id. § 4, we need not address the alternative
argument of Regions about severability.
IV. CONCLUSION
We REVERSE the order that denied the renewed motion of Regions to
compel the Houghs to arbitration. We REMAND with instructions to compel
arbitration.
REVERSED AND REMANDED WITH INSTRUCTIONS.
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