[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUNE 19, 2002
THOMAS K. KAHN
No. 00-16479 CLERK
________________________
D. C. Docket No. 00-01838 CV-C-W
ELIZABETH BESS, DEBORAH GEORGE,
TERRY STOUGH, individually and as
representatives of a class of similarly
situated persons,
Plaintiffs-Appellees,
versus
CHECK EXPRESS, d.b.a. PAYDAY NOW,
QUIK PAWN SHOP FRANCHISING, INC., et al.,
Defendants-Appellants.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(June 19, 2002)
Before BIRCH, COX and ALARCON*, Circuit Judges.
COX, Circuit Judge:
*
Honorable Arthur L. Alarcon, U.S. Circuit Judge for the Ninth Circuit,
sitting by designation.
Express Check Services, Inc., doing business as PayDay Now (“PayDay”), and
Quick Pawn Shop Franchising, Inc., Frank Evans, Charlotte Evans, and Jeffrey Evans
(collectively referred to as “the other defendants”), appeal the district court’s denial
of their motion to compel arbitration of the claims against them by Luna Clifton
Colburn. We vacate and remand for a trial on how many of Colburn’s claims are
subject to arbitration.
I. Background
This lawsuit was filed as a class action against PayDay and the other defendants
for alleged violations of state and federal law arising out of “check advances” or
“deferred payment transactions” between the plaintiffs and defendants. In such
transactions, a customer writes a check to the vendor in exchange for an immediate
cash payment in an amount less than the face value of the check. (R.1-52 at ¶ 1.) The
vendor agrees to hold the check for a specified period of time, generally five to
fourteen days. Upon the expiration of the agreed time, the customer may redeem the
check by paying back the full face value, or the vendor will present the check for
payment. (Id.) The plaintiffs allege that deferred payment transactions actually are
loans governed by the Alabama Small Loan Act, Ala. Code § 5-18-1, et seq., and that
PayDay and the other defendants violated this statute by making loans to the plaintiffs
without the requisite license and at usurious rates of interest. The plaintiffs also allege
2
that the collection of this usurious interest constituted the collection of an unlawful
debt in violation of the Racketeer Influenced and Corrupt Organizations Act, 18
U.S.C. § 1961, et seq.1
Colburn was added as a named plaintiff by way of an amended complaint. The
amended complaint alleges that Colburn engaged in three deferred payment
transactions with PayDay: on January 11, 2000; on February 4, 2000; and on February
18, 2000. (R.1-16 at ¶¶ 19-21.) The record also indicates that Colburn engaged in
two other deferred payment transactions with PayDay: on May 26, 2000 (R.1-9, Ex.
B); and on June 9, 2000 (R.1-17, Evans Aff.). At some point, Colburn signed an
arbitration agreement, which reads as follows:
I understand that if I have any dispute(s) with Express Check Services,
Inc., including any of its past, present, and future officers, directors,
agents, employees, representatives, parents, subsidiaries, affiliates,
predecessors, successors, heirs and/or assigns (hereinafter referred to
collectively as “Express Check Services, Inc.”) arising out of or in
connection with the Check Advance or any other aspect of my
transaction with Express Check Services, Inc. (as defined above),
including, but not limited to, the Check Advance transaction, the terms
of the Check Advance, representations concerning any aspect of the
Check Advance transaction, the money advanced, the Check Advance
charges assessed, the payments made, or the recovery of any funds due
Express Check Services, Inc. (as defined above), I HEREBY AGREE
that any such dispute(s) shall be resolved only through binding
arbitration. The arbitration will be conducted under the rules of the
1
In addition to their claims for violations of the Small Loan Act and RICO,
the plaintiffs assert various other claims under Alabama law.
3
American Arbitration Association (“AAA”) that are in effect at the time
the arbitration is commenced. The arbitrator may, in his or her
discretion, allow discovery as per the Alabama Rules of Civil Procedure.
Although the arbitration shall be conducted pursuant to the rules of the
AAA, the arbitration shall not be conducted through the AAA unless
otherwise agreed to by the parties. I FURTHER UNDERSTAND THAT
ARBITRATION SHALL BE THE EXCLUSIVE METHOD OF
RESOLVING ANY AND ALL DISPUTES, AND I AM WAIVING MY
RIGHT TO HAVE SUCH DISPUTES RESOLVED THROUGH A
TRIAL BY JURY.
(R.1-17, Ex. A.) Although the arbitration agreement is signed, it is not dated. There
is no evidence in the record as to whether Colburn signed any other arbitration
agreements, nor is there evidence that any of the other named plaintiffs signed
arbitration agreements.
Invoking the arbitration agreement, PayDay and the other defendants moved to
compel arbitration of Colburn’s claims pursuant to the Federal Arbitration Act
(“FAA”), 9 U.S.C. § 1, et seq. Colburn opposed this motion, inter alia, on the
following grounds: the arbitration agreement could not be enforced because the
deferred payment transaction in general was void as illegal under Alabama law; the
arbitration agreement was void on its face because it is undated; and the arbitration
agreement is unconscionable. Without holding an evidentiary hearing, the district
court denied the motion to compel arbitration simply by stamping “DENIED” on the
motion, offering no reasons for the denial.
4
PayDay and the other defendants filed a notice of appeal from the denial of their
motion to compel arbitration. After hearing oral argument, we remanded this case to
the district court for the limited purpose of explaining its denial, retaining jurisdiction
in this court over the appeal. Bess v. Check Express, No. 00-16479, unpublished (11th
Cir. Oct. 2, 2001). On remand, the district court entered findings of fact and
conclusions of law in support of its denial of the defendants’ motion. After finding
that the arbitration agreement fails to specify certain details about the method of
arbitration, including the costs of such, the district court found that Colburn is unable
financially to pay more than $150.00 to resolve his claim against PayDay and the
other defendants. The district court also found that, should it appoint an arbitrator, the
fee would be at least $150.00 per hour and the arbitration would require at least four
hours. Based on these findings, the district court concluded that Colburn could not
afford to pay his share of the arbitration costs, and it expressly relied on this court’s
decision in Randolph v. Green Tree Fin. Corp.–Alabama, 178 F.3d 1149 (11th Cir.
1999), aff’d in part and rev’d in part, 531 U.S. 79, 121 S. Ct. 513 (2000), in refusing
to enforce the arbitration agreement.
We ordered supplemental briefing on the issues presented by the district court’s
order following remand. Having reviewed the supplemental briefs, we proceed to
consider the issues raised in this appeal.
5
II. Jurisdiction and Standard of Review
This court has jurisdiction over this appeal pursuant to 9 U.S.C. § 16(a). We
review de novo the district court’s denial of the motion to compel arbitration. See,
e.g., Perez v. Globe Airport Sec. Servs., Inc., 253 F.3d 1280, 1283 (11th Cir. 2001).
III. Discussion
PayDay and the other defendants contend that the district court’s reliance on
Randolph v. Green Tree Fin. Corp.–Alabama, 178 F.3d 1149 (11th Cir. 1999) , which
was reversed in relevant part by the Supreme Court, see Green Tree Fin. Corp. v.
Randolph, 531 U.S. 79, 121 S. Ct. 513 (2000), necessitates reversal of the district
court’s decision. Colburn, on the other hand, asserts that the district court’s holding
in this case is distinguishable from Randolph, and he additionally argues that we may
affirm the district court on several alternative bases. We conclude that the district
court’s articulated reason for denying the motion to compel arbitration cannot be
sustained in light of the Supreme Court’s decision in Randolph. We also conclude
that Colburn’s alternative arguments concerning the illegality of the deferred payment
transactions and the unconscionability of the arbitration agreement do not provide
adequate grounds for affirming the district court. Colburn’s argument that the
arbitration agreement cannot be enforced because it is undated, however, raises
unresolved questions of fact that necessitate a remand to the district court.
6
A. The District Court’s Articulated Reason
As explained above, the district court expressly declined to enforce the
arbitration agreement on the authority of this court’s decision in Randolph. In that
case, a panel of this court determined that an arbitration provision in a retail
installment contract was unenforceable because it potentially gave rise to high costs
to the party pursuing arbitration. See Randolph, 178 F.3d at 1158. Specifically, the
arbitration clause said nothing about the payment of filing fees, the apportionment of
the costs of arbitration, the ability to waive such fees and costs due to financial
hardship, or the set of rules that would govern the arbitration. Id. The lack of
specificity as to these matters meant that neither the court nor the parties possessed
adequate information about how claimants would fare under the arbitration clause.
Id. For this reason, the court determined that the clause potentially could lead to
prohibitive costs and therefore failed to safeguard the plaintiff’s ability to vindicate
her rights. Accordingly, the court held that the clause was unenforceable. Id.
The Supreme Court reversed this holding because the record failed to show that
the plaintiff in fact was likely to bear prohibitive costs if the dispute went to
arbitration. See Randolph, 121 S. Ct. at 522. Although the plaintiff asserted that the
American Arbitration Association (“AAA”) would conduct the arbitration, and
therefore assumed that its filing fees and arbitrator fees would apply, the Court
7
pointed out that no factual showing was made to support these assertions. Instead, the
plaintiff “relied entirely on unfounded assumptions,” which “provide[d] no basis on
which to ascertain the actual costs and fees to which she would be subject in
arbitration.” Id. at n.6. The only fact established by the record was that the arbitration
clause was silent on the subject of fees and costs, and that fact alone was “plainly
insufficient” to render the clause unenforceable. Id. at 522. As the party seeking to
invalidate the arbitration clause on the basis of prohibitive costs, the plaintiff bore “the
burden of showing the likelihood of incurring such costs.” Id. Because she failed to
meet that burden, the Court rejected this court’s conclusion that the clause was
unenforceable.
Similarly, we must reject the district court’s rationale for refusing to enforce the
arbitration agreement in this case. Although Colburn attempts to distinguish the
district court’s holding from the rejected holding in Randolph, we find no meaningful
distinction. The district court specifically found that the arbitration agreement does
not specify the manner in which arbitration is to be commenced or the manner in
which an arbitrator is to be chosen by the parties. Additionally, the district court
found that, like in Randolph, the arbitration agreement is silent on the issue of
arbitration costs. The district court then found, without any citation to the record, that
the arbitrator’s fee would be at least $150.00 per hour if the court were to appoint an
8
arbitrator, and that the arbitration of Colburn’s claims against PayDay would require
at least four hours. Finally, without any findings about how these fees and costs
would be allocated or what amount Colburn might actually be expected to pay, the
district court concluded that Colburn could not afford the costs of arbitration. We
have reviewed the record and can find no support for the district court’s findings
concerning the costs that Colburn likely would bear in arbitration or his ability to pay
those costs. Because the record does not show that Colburn likely will incur
prohibitive costs, this case is indistinguishable from Randolph.
We acknowledge that, unlike the arbitration clause in Randolph, the arbitration
agreement in this case provides that arbitration will be conducted under the rules of
the AAA. Colburn contends that the district court made findings of fact as to
Colburn’s costs under those rules, and therefore, this case is different from Randolph.
We disagree for two reasons. First, although the district court discussed the fees and
costs set forth under various rules of the AAA, it specifically found that there is no
uniform set of AAA rules and that the arbitration clause failed to specify which set of
rules were applicable. The district court could not have made any findings about
Colburn’s costs without finding which set of rules, and concomitantly, which set of
fees and costs, applied to the dispute. Second, we note that the arbitration clause
specifically states that the AAA will not conduct the arbitration unless the parties
9
agree otherwise. Therefore, the arbitration clause remains ambiguous as to whether
it even contemplates the fees and costs charged by the AAA, a fact conceded by
Colburn. See Appellee’s Br. Following Remand, at 25 (“Because there is no
indication of the organization which would perform the arbitration, customers are
given no idea of what the costs of arbitration would be or whether the organization has
a history of fairness to customers . . . .”). For these reasons, any discussion of
Colburn’s potential costs under the AAA rules necessarily is based on speculation and
cannot provide an adequate basis for concluding that her costs likely would be
prohibitively expensive. As was the case in Randolph, the record reveals only that the
arbitration agreement is silent on the subject, and that fact alone is insufficient to
render the agreement unenforceable. See Randolph, 121 S. Ct. at 522. Thus, the
district court’s articulated reason for denying the motion to compel arbitration is in
error.
B. The Legality of the Deferred Payment Transactions
That brings us to Colburn’s alternative argument that the deferred payment
transactions are void ab initio because they violate the Alabama Small Loan Act.2
2
Even though the district court did not address Colburn’s alternative
arguments, we must affirm the district court if its result is correct, even if its
reasoning is in error. See Turner v. Am. Fed’n of Teachers Local 1565, 138 F.3d
878, 880 n.1 (11th Cir. 1998). Therefore, we consider Colburn’s alternative
arguments in support of affirmance.
10
Colburn contends that the court, rather than the arbitrator, must decide the legality of
these transactions, and the district court therefore was correct in not compelling
arbitration until this issue is resolved. PayDay, by contrast, maintains that the validity
of the transactions is an issue for the arbitrator, not the court, and it asserts that its
motion to compel arbitration should therefore have been granted. Thus, before
considering the legality of the deferred payment transactions, we must decide whether
this issue is one for the court or the arbitrator.
The starting point for our analysis is the FAA. The FAA makes valid any
written agreement to arbitrate a dispute arising out of a transaction involving interstate
commerce, “save upon such grounds as exist at law or in equity for the revocation of
any contract.” See 9 U.S.C. § 2. Where a party to such an agreement fails or refuses
to arbitrate, the other party may move the district court for an order compelling
arbitration. See id. § 4. The district court must grant the motion if it is satisfied that
the parties actually agreed to arbitrate the dispute. See id. § 4. If “the making of the
arbitration agreement” is in issue, however, the court must first adjudicate whether
the agreement is enforceable against the parties. See id.; see also Chastain v.
Robinson-Humphrey Co., 957 F.2d 851, 853-54 (11th Cir. 1992).
The resolution of our question, then, turns on whether Colburn’s assertions of
illegality with regard to the deferred payment transactions place “the making of the
11
arbitration agreement” in issue. Our answer is informed by the Supreme Court’s
decision in Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S. Ct.
1802 (1967). The plaintiff in that case brought an action in federal court to rescind
a contract on the grounds that the contract was fraudulently induced. Invoking the
contract’s arbitration clause, the defendant moved to stay the action pending
arbitration, which the district court granted. The Supreme Court upheld the district
court’s stay, concluding that a claim of fraudulent inducement of the contract
generally was a matter to be resolved by the arbitrator, not the court. Id. at 403-04,
87 S. Ct. at 1806. The Court distinguished this claim from a claim that the arbitration
clause itself was fraudulently induced, a claim that clearly would put the making of
the arbitration agreement in issue. Id. Because the plaintiff alleged fraudulent
inducement only as to the underlying contract generally, and not as to the arbitration
clause specifically, the district court properly stayed the litigation.
Because Colburn’s allegations of illegality go to the deferred payment
transactions generally, and not to the arbitration agreement specifically, it would
appear that, under Prima Paint, an arbitrator should decide those questions. Colburn,
however, contends that this court’s decision in Chastain, supported by several
decisions from other circuits, mandates a different conclusion. In Chastain, this court
held that the district court, rather than the arbitrator, must decide the validity of two
12
contracts containing arbitration clauses where it was undisputed that one of the parties
to the litigation never signed the contracts. See Chastain, 957 F.2d at 853-54. The
court distinguished the allegations of fraudulent inducement in Prima Paint by noting
that, in the case before it, the allegation was “that a contract never existed at all,” an
allegation that the holding in Prima Paint did not reach. Id. at 855 (emphasis in
original). The court also distinguished the unique facts of the case before it with what
it described as “normal circumstances,” under which “an arbitration provision within
a contract admittedly signed by the contractual parties is sufficient to require the
district court to send any controversies to arbitration.” Id. at 854. Under such
circumstances, “the parties have at least presumptively agreed to arbitrate any
disputes, including those disputes about the validity of the contract in general.” Id.
(emphasis in original). Where the party seeking to avoid arbitration admittedly did
not sign any contract requiring arbitration, however, “there is no presumptively valid
general contract which would trigger the district court’s duty to compel arbitration
pursuant to the [FAA].” Id. Accordingly, before it could decide whether the FAA
mandated it to compel arbitration, the district court had to determine whether valid
contracts existed, or more specifically, whether both of the parties assented to the
contracts containing the arbitration provisions.
13
Likening his void ab initio allegations to the contentions in Chastain that no
contract ever existed, Colburn argues that, as in Chastain, the court must determine
the legality of the deferred payment transactions before deciding whether to compel
arbitration. But the focus of the court’s decision in Chastain, as just explained, was
on the question of assent, i.e., whether the parties mutually had agreed to the contracts.
By contrast, Colburn urges that the transactions in this case are void, not because he
failed to assent to the essential terms of the contracts, but because those terms
allegedly render the contracts illegal under Alabama law. At bottom, Colburn
challenges the content of the contracts, not their existence. Indeed, unlike the
contracts in Chastain, both the arbitration agreement and the deferred payment
contracts were signed by Colburn, and there is no question about Colburn’s assent to
those contracts. Thus, this case falls within the “normal circumstances” described in
Chastain, where the parties have signed a presumptively valid agreement to arbitrate
any disputes, including those about the validity of the underlying transaction.
Therefore, the issue raised by Colburn — whether the deferred payment transactions
are void as illegal — is one for the arbitrator, not the court.
None of the decisions cited by Colburn from our sister circuits counsels a
different conclusion. Like Chastain, all of those cases involved questions of assent
to the general contract. See Sphere Drake Ins. Ltd. v. All Am. Ins. Co., 256 F.3d 587,
14
590-91 (7th Cir. 2001) (concluding that court, rather than arbitrator, should determine
whether agent had authority to bind principal to underlying contract); Sandvik AB v.
Advent Int’l Corp., 220 F.3d 99, 1104-10 (3d Cir. 2000) (same); Three Valleys Mun.
Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136, 1140-41 (9th Cir. 1991) (same); I.S.
Joseph Co. v. Michigan Sugar Co., 803 F.2d 396, 400 (8th Cir. 1986) (concluding that
court, rather than arbitrator, should decide whether assignee of original party could
enforce arbitration clause). We are aware of only one other circuit to address the
question presented in this case — whether an attack on a deferred payment transaction
as illegal under state law is to be decided by the court or by the arbitrator — and that
circuit reached the same conclusion that we reach today. See Burden v. Check Into
Cash of Kentucky, LLC, 267 F.3d 483, 489-90 (6th Cir. 2001) (concluding that
plaintiffs’ allegations that deferred payment contracts were void as illegal constituted
challenge to substance of loan agreements and should thus be decided by arbitrator
rather than by court). Because Colburn’s void ab initio argument is an issue for the
arbitrator, it does not furnish an adequate basis for denying PayDay’s motion to
compel arbitration.3
3
Colburn also relies on the Alabama Supreme Court’s decision in Alabama
Catalog Sales v. Harris, 794 So.2d 312 (Ala. 2000), which held that the court, not
the arbitrator, must decide whether deferred payment contracts containing
arbitration clauses were void as illegal under the Small Loan Act. See id. at 317.
Colburn contends that we are bound by Alabama law in deciding defenses to the
15
C. The Enforceability of the Arbitration Agreement
Finally, Colburn contends that the arbitration agreement is unconscionable
under Alabama law and is void on its face because it is not dated. Because these
contentions place in issue the enforceability of the arbitration agreement itself, they
are to be decided by the court rather than by the arbitrator. See Prima Paint, 388 U.S.
at 404; 87 S. Ct. at 1806 (holding that court should consider issues relating to making
and performance of agreement to arbitrate).
1. Unconscionability
The FAA allows state law to invalidate an arbitration agreement, provided the
law at issue governs contracts generally and not arbitration agreements specifically.
See Doctor’s Associates, Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S. Ct. 1652,
1656 (1996) (stating that “generally applicable contract defenses, such as fraud,
duress, or unconscionability, may be applied to invalidate arbitration agreements”).
Under Alabama law, unconscionability is an affirmative defense to the enforcement
of a contract, and the party asserting that defense bears the burden of proving it by
substantial evidence. See Green Tree Fin. Corp. v. Wampler, 749 So.2d 409, 415, 417
arbitration agreement and, therefore, Harris requires that the void ab initio
argument be decided by the court. In reaching our decision, however, we are not
deciding questions of Alabama contract law; rather, we are deciding the scope of
the district court’s authority under 9 U.S.C. § 4, a question of federal law.
16
(Ala. 1999); see also Johnnie’s Homes, Inc. v. Holt, 790 So.2d 956, 964 (Ala. 2001).
Because Alabama law allows unconscionability to invalidate contracts generally, this
defense, consistent with the FAA, may also invalidate the arbitration agreement in this
case if Colburn proves unconscionability by substantial evidence.
Colburn contends that he has met this burden, relying on American Gen. Fin.,
Inc. v. Branch, 793 So.2d 738 (Ala. 2000), where the Alabama Supreme Court held
that an arbitration clause in a loan agreement was unconscionable. Articulating the
two essential elements of unconscionability as “(1) terms that are grossly favorable
to a party that has (2) overwhelming bargaining power,” id. at 748, the court identified
four indicia of unconscionability in the arbitration clause at issue. First, the arbitration
clause — which applied to every dispute relating to every actual or potential
transaction, as well as to every person involved in those transactions — was
“unusually broad in scope and application.” Id. Second, the clause vested in the
arbitrator the power to decide, in the first instance, whether an issue or dispute was
arbitrable. Id. at 749. Third, the arbitration clause lacked mutuality of remedy,
requiring the borrower to arbitrate while expressly reserving for the lender the right
to a trial by jury. This lack of mutuality was compounded by the limitation on the
award recoverable in arbitration, which could not exceed five times the amount of
economic loss to the aggrieved party. Id. Thus, unlike the lender, the borrower was
17
confined both in the right to a forum and in the right to “the full panoply of relief
available in state courts under Alabama law.” Id. These three indicia led the court to
conclude that the arbitration clause was grossly favorable to the lender. Id. at 750.
The fourth indicia of unconscionability — the borrower’s inability to obtain the
loan without considerable expense of time and resources — went to the lender’s
overwhelming bargaining power. The court noted that, at the time the borrower
obtained her loans, “the market was virtually closed to consumers seeking comparable
financing without agreeing to arbitration provisions.” Id. at 750. Specifically, the
record contained evidence that, at the time of the first loan, only two companies in the
borrower’s geographic area did not require arbitration agreements. By the time of the
last loan, the number of companies not requiring arbitration agreements had fallen to
one. Id. at 751. This evidence demonstrated that the borrower would have been
forced to expend considerable time and resources to obtain the loans without agreeing
to arbitrate, and this fact established overwhelming bargaining power. Id.
In the same decision, however, the court rejected the same unconscionability
argument, raised by a second borrower, as to the same arbitration clause because that
borrower did not demonstrate overwhelming bargaining power. At the time the
second borrower obtained her loans, the finance companies requiring arbitration
agreements in her geographic area were a distinct minority. Moreover, the second
18
borrower testified that she obtained at least two other loans without signing an
arbitration agreement, that she did not shop around from other lenders when seeking
the loans at issue, that she did not ask any questions about the arbitration clause, and
that she did not read the loan agreement. Id. at 751-52. For these reasons, the court
held that the second borrower could not demonstrate that she had no meaningful
choice but to arbitrate. Id. at 752.
We find Branch distinguishable from this case. Although we agree with
Colburn that the arbitration agreement here, like that in Branch, is unusually broad,
that is the only meaningful similarity between the two cases. Unlike Branch, the
arbitration agreement in this case does not give the arbitrator the authority to decide
issues of arbitrability, nor does it limit Colburn’s right to relief. As pointed out by
PayDay and the other defendants, nothing in the agreement prevents the arbitrator
from awarding “the full panoply of relief” available under Alabama law. And while
the agreement requires only Colburn to arbitrate his disputes, without mentioning
PayDay’s rights or obligations in this regard, this lack of mutuality does not, in and
of itself, render the arbitration agreement unconscionable. See Wampler, 749 So.2d
at 416 (fact that borrower must arbitrate while lender may litigate, standing alone,
does not warrant a finding of unconscionability); see also Branch, 793 So.2d at 750
(distinguishing provision that requires only one side to arbitrate and also limits
19
available relief from provision that lacks mutuality but allows all legal and equitable
remedies). Thus, we cannot say that the terms of the arbitration agreement grossly
favor PayDay.
Similarly, we cannot say that Colburn has demonstrated by substantial evidence
that PayDay had overwhelming bargaining power. Although Colburn asserts that the
market was “saturated” with arbitration provisions at the time of his deferred payment
transactions with PayDay, he supports this assertion by citing only to what he
describes as a “composite exhibit” of forms from various lenders throughout Alabama.
(R.3-31, Ex. J.) But this exhibit does not reveal how many lenders in Colburn’s
geographic area, Tuscaloosa and its vicinity, utilize arbitration agreements in deferred
payment transactions. Many of the forms appear to come from the same companies,
and the majority of the forms appear to be from companies outside the Tuscaloosa
area or of unknown location. Additionally, while Colburn’s affidavit stated that he
engaged in deferred payment transactions with other lenders (R.3-31, Ex. F at ¶ 3),
noticeably absent from the affidavit is any mention of these other lenders requiring
arbitration agreements. Likewise, we note that none of the other plaintiffs in this case
are alleged to have signed an arbitration agreement, suggesting that PayDay did not
always require such an agreement in its deferred payment transactions. Unlike the
first borrower in Branch, then, Colburn simply has not established that the deferred
20
payment transaction market was virtually closed to borrowers not agreeing to
arbitrate. See also Wampler, 749 So.2d at 417 (concluding that borrower failed to
show unconscionability, in part, because record contained no evidence that other
similarly situated dealers would insist on arbitration clauses).
Furthermore, like the second borrower in Branch, there is no evidence that
Colburn asked any questions about the arbitration agreement or that he even read the
agreement. In fact, Colburn testified that he did not remember signing the arbitration
agreement and that he did not understand what arbitration meant until his attorney
explained it to him. Rather, he testified that PayDay told him where he needed to
sign, and he did so. (R.3-31, Ex. F at ¶¶ 5-6.) Thus, Colburn has not established
sufficient indicia of unconscionability to warrant a determination that the arbitration
agreement is unenforceable.
Colburn maintains, however, that there are other indicia of unconscionability
in this case; specifically, he points out that the arbitration agreement is silent about the
costs of arbitration, that PayDay did not explain the arbitration agreement or expressly
offer him a choice, and that he was in dire straits financially at the time of the deferred
payment transactions. None of these facts renders the arbitration agreement
unconscionable. See Holt, 790 So.2d at 960 (“A dealer is under no duty to disclose,
or explain, an arbitration clause to a buyer.”); Wampler, 749 So.2d at 415 (noting that,
21
where clause was silent about costs of arbitration, “settled principles of Alabama law”
prevent court from assuming worst case scenario); id. at 416 (“Because the general
principles of Alabama contract law do not excuse performance on grounds of financial
hardship, we cannot allow a party’s poverty, standing alone . . . , to constitute a
defense to enforcement of an arbitration agreement.”).
For the foregoing reasons, we conclude that Colburn has not met his burden of
proving unconscionability by substantial evidence, and his unconscionability
argument does not provide an adequate basis for affirming the district court’s denial
of PayDay’s motion to compel arbitration.
2. Void Because Undated
Lastly, we find no merit in Colburn’s argument that the arbitration agreement
in the record is void on its face because it is undated. We know of no generally
applicable tenet of Alabama contract law that allows a party to avoid contractual
obligations simply because the agreement at issue contains no date. Nonetheless, the
lack of a date poses a problem to the enforcement of the arbitration agreement. There
is only one arbitration agreement in the record, and it clearly requires arbitration only
for disputes arising out of or in connection with a single transaction. We have no
evidence about when Colburn signed that agreement or whether he signed any other
arbitration agreements. Because Colburn cannot be forced to arbitrate disputes he has
22
not agreed to arbitrate, see Chastain, 957 F.2d at 854, and because we do not know
which specific deferred payment transactions might be subject to arbitration
agreements, we cannot say which of Colburn’s claims must be submitted to
arbitration. Factual development is needed.
Accordingly, we remand this case to the district court. Pursuant to 9 U.S.C. §
4, the district court should “proceed summarily” to a trial on the issue of when
Colburn signed the arbitration agreement in the record and whether he signed any
other such agreements relating to transactions giving rise to his claims. Should the
district court find that any of Colburn’s claims against PayDay and the other
defendants arise out of transactions subject to an arbitration agreement, it should grant
the motion to compel arbitration as to those claims.
IV. Conclusion
We vacate the district court’s denial of PayDay’s motion to compel arbitration
and remand for further proceedings consistent with this opinion.
VACATED AND REMANDED.
23
Elizabeth Bess v. Check Express
Boost your productivity today
Delegate legal research to Cetient AI. Ask AI to search, read, and cite cases and statutes.