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SUPREME COURT OF ARKANSAS
No. CV-15-107
Opinion Delivered March 17, 2016
BANK OF THE OZARKS, INC., AND
BANK OF THE OZARKS APPEAL FROM THE LONOKE
APPELLANTS COUNTY CIRCUIT COURT
[NO. CV-2011-777]
V.
HONORABLE SANDY HUCKABEE,
ROBERT WALKER, ANN B. HINES, JUDGE
AND JUDITH BELK
APPELLEES AFFIRMED.
JOSEPHINE LINKER HART, Associate Justice
In Bank of the Ozarks, Inc. v. Walker, 2014 Ark. 223, 434 S.W.3d 357, the circuit court
denied the motion of appellants Bank of the Ozarks, Inc., and Bank of the Ozarks (Ozarks) to
compel the arbitration of a class-action complaint filed by appellees, Robert Walker, Ann B.
Hines, and Judith Belk on the ground that the arbitration provision in the account agreement
between Ozarks and the appellees was unconscionable. This court reversed and remanded the
circuit court’s decision, holding that the circuit court must first determine, as a threshold issue,
whether there was a valid agreement to arbitrate between Ozarks and appellees.
On remand, the circuit court concluded that there was not a valid agreement to
arbitrate. Particularly, the circuit court found that there was neither a mutual agreement nor
a mutual obligation. Ozarks appeals from the circuit court’s decision. On appeal, Ozarks
contends that the circuit court erred in concluding that neither mutual agreement nor mutual
obligation was shown. We affirm the circuit court’s decision to deny Ozarks’s motion to
compel arbitration.
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Our jurisdiction is established by Rule 2(a)(12) of the Arkansas Rules of Appellate
Procedure–Civil, which provides that an order denying a motion to compel arbitration is an
immediately appealable order. On appeal, we review the circuit court’s order denying the
motion to compel de novo on the record and determine the issue as a matter of law. Walker,
2014 Ark 223, at 4, 434 S.W.3d at 360. The parties in this matter do not dispute that the
Federal Arbitration Act applies to the agreement. Even though an arbitration provision is
subject to the Act, courts look to state contract law to decide whether the parties’ agreement
to arbitrate is valid, and the same rules of construction that apply to agreements in general also
apply to arbitration agreements. Id., 434 S.W.3d at 360. As we noted in Walker, the essential
elements of a contract are (1) competent parties, (2) subject matter, (3) legal consideration, (4)
mutual agreement, and (5) mutual obligation. Id., 434 S.W.3d at 360.
At issue here are the 2007, 2011, and 2013 versions of the account agreement between
appellees, who are Ozarks’s customers, and Ozarks, which holds the accounts. Those
agreements included the following arbitration provision:
ARBITRATION. You or we may require that any controversy or claim relating to
this agreement, or breach of it, be resolved through arbitration administered by the
American Arbitration Association under its commercial rules. Judgment on any award
rendered by the arbitrator may be entered in any court having jurisdiction.
The 2007 and 2011 agreements also contained several other provisions pertinent to the
circuit court’s ruling.
LAW, JURISDICTION, AND VENUE. The laws of Arkansas govern this agreement.
The courts of that state have jurisdiction of any dispute in connection with this
agreement. You agree that venue will be proper in the courts in the county and city of
our office where you signed or delivered this agreement.
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WAIVER OF JURY TRIAL. You waive your right to a jury trial in any dispute with
us. Such disputes may be tried before a judge only.
....
EXPENSES. You will pay any expenses we incur in good faith related to this
agreement, such as fees on items sent for collection, foreign exchange charges; and
unreimbursed research and copying fees when someone requires records about our
relationship, and attorneys’ fees we incur in good faith because of concerns about the
account, whether or not litigation has begun, including such fees through trial and all
appeals, plus court costs. You also agree to pay any expense that we incur, including
attorneys’ fees in responding to any subpoena, writ, government agency or judicial
order, search warrant, or other order which we may be required to respond to
regarding your account or your relationship with us.
....
NO WAIVER. Failure to insist on your strict performance of any obligation under this
agreement will not create any duty on our part to continue to do so. You will not claim
that we waived our right to insist on proper performance.
Rather than a “NO WAIVER” provision, the 2013 agreement provided as follows:
OUR WAIVER OF RIGHTS. You understand and agree that no delay or failure on
our part to exercise any right, remedy, power or privilege available to us under this
Agreement shall affect or preclude our future exercise of that right, remedy, power or
privilege.
With respect to expenses, the 2013 agreement provided as follows:
ATTORNEY FEES AND EXPENSES. You agree to be liable to us for any loss, costs
or expenses, including reasonable attorneys’ fees to the extent permitted by law, that
we incur as a result of any dispute involving your account, and you authorize us to
deduct any such loss, costs or expense from your account without prior notice to you.
This obligation includes disputes between yourself and us involving the account and
situations where we become involved in disputes between you and an authorized
signer, another joint owner, or a third party claiming an interest in the account. It also
includes situations where you, an authorized signer, another joint owner, or a third
party takes action with respect to the account that causes us, in good faith, to seek the
advice of counsel, whether or not we actually become involved in a dispute.
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There were only minor differences in the following provision of the 2013 agreement as
follows:
LAW, JURISDICTION, AND VENUE. This agreement and the account shall be
governed by the laws of the state where the branch at which the account was opened
is located. The courts of that state have jurisdiction of any dispute in connection with
this agreement. You agree that venue will be proper in the courts in the county and
city of our office where the branch at which the account was opened or located.
On remand, the circuit court found that the account agreements defining the parties’
relationships did not establish either a mutual agreement or a mutual obligation. On the
element of mutual agreement, the court noted that the account agreement provided that
Arkansas courts have jurisdiction of any dispute and that any dispute was to be tried before a
judge. The court also observed that Ozarks was also “seeking to enforce the arbitration
provision in the same subject contract” and compel appellees to arbitrate. Based on this
dissonance, the court found that mutual agreement was lacking.
On the element of mutual obligation, the circuit court found the element missing for
two reasons. First, the court noted that the agreement provided that “[f]ailure to insist on your
strict performance of any obligation under this agreement will not create any duty on our part
to continue to do so. You will not claim that we waived our right to insist on proper
performance.” Citing Alltel Corp. v. Rosenow, 2014 Ark. 375, the court concluded that there
was no mutual obligation because this “NO WAIVER” provision extended to Ozarks, but not
to its customers, appellees. Second, the court found that the account agreement required
appellees to pay any expenses that Ozarks incurred in “good faith” when the disagreement or
issue related to the account agreement, while not imposing the same obligation on Ozarks.
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On appeal, Ozarks argues that the presence of the “LAW, JURISDICTION, AND
VENUE” and the “WAIVER OF JURY TRIAL” provisions do not vitiate mutual agreement
of the parties. Ozarks argues that these provisions are not inconsistent with the arbitration
clause because the clause makes clear that either Ozarks or appellees can compel arbitration,
but neither is required to do so. Further, Ozarks contends that granting the courts of Arkansas
jurisdiction does not create an inconsistency with the arbitration clause because these courts
would have jurisdiction if arbitration was waived and would have jurisdiction over certain
matters if arbitration ensued. Ozarks asserts that these clauses can be read harmoniously to give
effect to all the provisions of the agreement.
Ozarks further challenges the court’s finding that there was no mutuality of obligation.
Ozarks first contends that the “NO WAIVER” clause does not defeat mutuality of obligation
because the arbitration clause provides that either party “may require” the other to arbitrate,
and if a customer elected to arbitrate, Ozarks could not litigate. Second, Ozarks contends that
the “EXPENSES” clause and its imposition of costs on appellees does not destroy mutuality
of obligation. Ozarks asserts that mutuality of obligation does not require that the provisions
of a contract treat the parties identically or that an expenses provision be mutual. Ozarks
further submits that the expenses provision of the agreement does not specifically mention
arbitration. Also, Ozarks asserts that invalidating the arbitration clause on this basis would result
in a per se rule that singles out or disfavors arbitration, which would violate AT & T Mobility,
LLC v. Concepcion, 563 U.S. 333 (2011), and would employ what Ozarks describes as a
“bootstrapping” argument to avoid arbitration that was rejected in Buckeye Check Cashing, Inc.
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v. Cardegna, 546 U.S. 440 (2006).
We first consider the circuit court’s finding that there was no mutuality of obligation
because the language in the agreement required appellees to pay the expenses that Ozarks
incurred in good faith related to the agreement while not imposing the same obligation on
Ozarks. We affirm the circuit court’s decision. In effect, by imposing the entirety of the
arbitration costs on appellees, the arbitration clause precluded appellees from “effectively
vindicating [their] . . . rights in the arbitral forum.” See Green Tree Fin. Corp.-Ala. v. Randolph,
531 U.S. 79, 90–92 (2000). In Green Tree, the United States Supreme Court recognized that
“the existence of large arbitration costs” could serve as the basis for holding an arbitration
clause to be unenforceable. Id. at 90. The Court observed that the record revealed only the
arbitration agreement’s silence on the subject and thus concluded that the risk of prohibitive
costs was too speculative to justify the invalidation of the arbitration agreement. Id. at 91. The
Court ultimately held that the plaintiff in that case had not sufficiently demonstrated “the
likelihood of incurring such costs.” Id. at 92.
Green Tree supports our holding. The arbitration clause in the account agreement also
did not contain a specific provision within it relating to costs of arbitration. In our case,
however, the account agreement contained a separate provision related to expenses, placing
on appellees the burden of paying any expenses that Ozarks incurred in good faith related to
the account agreement, which would include arbitration expenses. In imposing all of the costs
of arbitration on appellees, the parties in this case are treated differently, and “this disparate
treatment results in a lack of mutuality.” Independence Cnty. v. City of Clarksville, 2012 Ark. 17,
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at 8, 386 S.W.3d 395, 400 (affirming a circuit court’s holding that an arbitration agreement
lacked mutuality of obligation because the arbitration panel did not have the authority or the
jurisdiction to award monetary damages or any other legal relief against one of the parties). The
lack of mutuality in the arbitration clause renders the agreement invalid and unenforceable, and
we hold that the circuit court did not err in denying the motion to compel arbitration on this
basis.
Furthermore, we affirm the circuit court’s finding that there was no mutual obligation
because this “NO WAIVER” provision extended to Ozarks but not to appellees. We
addressed a similar question in Rosenow. There, the agreement contained and arbitration clause
providing that “[a]ny dispute arising out of this Agreement or relating to the Services and
Equipment must be settled by arbitration.” However, the agreement also provided, “If we do
not enforce any right or remedy available under this Agreement, that failure is not a waiver.”
The court concluded that
Alltel clearly reserved to itself the option of pursuing remedies other than arbitration,
without the consequence of waiver. Moreover, that reservation and protection was
limited solely to Alltel and was not extended to the customer. Succinctly put, Alltel
provided itself with an “out” to the required arbitration; Alltel customers, such as
Rosenow, however, were limited to pursuing relief against Alltel in the form of
arbitration, while Alltel alone was provided absolution if it chose to pursue an alternate
remedy.
Rosenow, 2014 Ark. 375, at 7. We further stated that an arbitration agreement lacks mutuality
when one provision of a contract is inconsistent with the contract’s arbitration clause and the
two cannot be harmonized, and “despite both Alltel and its customers being bound to the
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remedy of arbitration, Alltel, and only Alltel, was permitted to reject that remedy without
consequence.” Id. at 8. We concluded that this disparate treatment resulted in lack of mutuality
to arbitrate that rendered the agreement invalid and unenforceable.
Ozarks contends that the “NO WAIVER” and the “OUR WAIVER OF RIGHTS”
clauses do not defeat mutuality of obligation because the arbitration clause does not treat the
parties differently. Ozarks argues that rather than being mandatory, either party “may require”
the other to arbitrate, and thus, if a customer elected to arbitrate, Ozarks could not litigate. As
in Rosenow, however, only Ozarks is permitted to reject that remedy without that rejection
serving as a subsequent waiver of pursuing remedies in court, and this disparate treatment
results in a lack of mutuality to arbitrate that renders the agreement invalid and unenforceable.
Thus, we affirm the circuit court’s order denying Ozarks’s motion to compel arbitration on
this basis as well.
In reaching this conclusion, we do not defy Buckeye, which holds that it is improper for
a court to consider a claim that a contract containing an arbitration clause is invalid as a whole
when there is not also a claim that the arbitration clause is itself invalid. As we have previously
stated, Buckeye does not hold that when considering the validity of an arbitration clause, a court
is constrained to the clause itself and prohibited from considering other parts of the contract
relating to the agreement to arbitrate disputes arising from the contract. Advance Am. Servicing
of Ark., Inc. v. McGinnis, 375 Ark. 24, 35–36, 289 S.W.3d 37, 45 (2008). Moreover, as we
explained in Rosenow, as we would do with any other contract, this court considers in the first
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instance the doctrine of mutuality of obligation to determine whether there is a valid
agreement to arbitrate. Rosenow, 2014 Ark 375, at 6. Thus, we do not treat agreements to
arbitrate differently than other contracts, and our analysis here thus does not violate Concepcion.
Because we affirm the circuit court’s finding that the agreement lacked mutuality of
obligation, we need not address Ozarks’s assertion that the circuit court erred in finding that
the agreement also lacked mutuality of agreement.
Affirmed.
Special Justice WALTER B. COX joins in this opinion.
GOODSON, J., concurs in part and dissents in part.
WOOD, J., not participating.
COURTNEY HUDSON GOODSON, Justice, concurring in part and dissenting in
part. In part, I join the majority’s decision to affirm the circuit court’s denial of the motion
to compel arbitration. I concur in the majority’s conclusion that mutuality of obligation is
lacking based on the no-waiver clause of the agreement pursuant to this court’s decision in
Alltel Corp. v. Rosenow, 2014 Ark. 375. Although I dissented in that case, see Rosenow, supra
(Goodson, J., dissenting), stare decisis dictates the same result here. However, I cannot join
the majority’s decision that mutuality of obligation is absent because the agreement provides
that Ozarks’s customers are to pay expenses, which includes attorney’s fees, that are incurred
in connection with arbitration.
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This court follows the American rule, which requires every litigant to bear his or her
attorney’s fees absent statutory authority or a contractual agreement between the parties. Carter
v. Cline, 2013 Ark. 398, 430 S.W.3d 22; Griffin v. First Nat'l Bank of Crossett, 318 Ark. 848,
888 S.W.2d 306 (1994); Damron v. Univ. Estates, Phase II, Inc., 295 Ark. 533, 750 S.W.2d 402
(1988). In Griffin, we held quite clearly that a contractual provision requiring one party to pay
the other party’s expenses and attorney’s fees is enforceable “in accordance with its terms.”
Griffin, 318 Ark. at 856, 888 S.W.2d at 311. Because the beneficiary of that provision was the
prevailing party, we reversed and remanded with directions for the trial court to award
reasonable attorney’s fees and expenses incurred in the litigation.
The Supreme Court has mandated that arbitration agreements are to be placed on
“equal footing with all other contracts.” DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 468
(2015). The converse is also true, as the law this court applies on mutuality of obligation to
arbitration agreements must also be applied with equal force to other contracts. The rule of
law pronounced by the majority in this case regarding mutuality of obligation unnecessarily
calls into question not only the validity of attorney’s fees and cost provisions as they pertain to
arbitration agreements, but it also casts doubt on the legitimacy of other contracts that contain
like terms, as well as our decision in Griffin and its progeny. It is completely gratuitous for the
majority to embark on this course when the circuit court’s decision must be affirmed based on
the no-waiver provision and the holding in Rosenow. Accordingly, I dissent from the
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majority’s conclusion that the agreement fails for lack of mutuality of obligation based on the
provision regarding expenses and attorney’s fees.
Before concluding this opinion, I must point out that, prior to the decision in Rosenow,
this court’s jurisprudence regarding mutuality of obligation in the context of arbitration
agreements was based on the notion that there is no mutuality of obligation where one party
retains the right to seek judicial relief, while the other party is strictly limited to arbitration.
Independence Cty. v. City of Clarksville, 2012 Ark. 17, 386 S.W.3d 395. This was so because,
under Arkansas law, mutuality requires that the terms of the agreement fix real liability upon
both parties. Showmethemoney Check Cashers, Inc. v. Williams, 342 Ark. 112, 27 S.W.3d 361
(2000). In Rosenow, this court expanded that concept by holding that mutuality of obligation
is lacking where a party shields itself from the waiver of contractual rights, while not affording
the other party the same privilege. The majority in the present case advances this principle one
step farther in its conclusion that an agreement lacks mutuality of obligation where one party
is obligated to pay expenses and attorney’s fees incurred in good faith by the other party.1
However, in our contracts law, we have recognized that mutuality of obligation does not mean
1
In support of its holding, the majority singles out a passage from Independence County,
supra, stating that “disparate treatment results in a lack of mutuality.” However, that
quotation is taken entirely out of context, repeating a mistake that was also made by the
Rosenow court. In Independence County, mutuality of obligation was lacking because the
arbitration agreement contained a provision limiting the arbitrator’s jurisdiction in such a way
that one party reserved the right to seek recourse in a judicial forum, while the other party
was strictly bound to arbitrate all claims. In other words, only one party had the keys to the
courthouse.
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that the promisor’s obligation must be exactly coextensive with that of the promisee. Linder
v. Mid-Continent Petroleum Corp., 221 Ark. 241, 252 S.W.2d 631 (1952). Indeed, this court
has said that a contract does not lack mutuality merely because every obligation of one party
is not met by an equivalent counter obligation of the other party. Johnson v. Johnson, 188 Ark.
992, 68 S.W.2d 465 (1934). With the decision in this case, the majority stretches the concept
of mutuality of obligation so as to undermine our basic principles of contract law.
Rose Law Firm, A Professional Association, by: Richard T. Donovan, Amanda K. Wofford,
and Betsy Turner-Fry, for appellants.
Carney Bates & Pulliam, PLLC, by: Randall K. Pulliam, Allen Carney, and John C.
Williams, for appellees.
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