NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 12 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHAD CARTER, No. 16-15835
Plaintiff-Appellant, D.C. No.
2:15-cv-00178-GMN-CWH
v.
RENT-A-CENTER, INC., MEMORANDUM*
Defendant-Appellee.
Appeal from the United States District Court
for the District of Nevada
Gloria M. Navarro, Chief Judge, Presiding
Argued and Submitted October 20, 2017
San Francisco, California
Before: WALLACE and CALLAHAN, Circuit Judges, and RESTANI,** Judge.
Plaintiff, Chad Carter (Carter), appeals from the district court’s decisions
compelling arbitration on an individual basis and denying Carter’s motion for
reconsideration of an order dismissing Carter’s complaint, including his class
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Jane A. Restani, Judge for the United States Court of
International Trade, sitting by designation.
claims. We affirm.1
1. An order to compel arbitration is not ordinarily appealable, see 9 U.S.C.
§ 4, but we have appellate jurisdiction where the district court compels arbitration
and dismisses the action. See Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d
1072, 1074 (9th Cir. 2014). Although the dismissal here was “without prejudice,”
the district court’s orders and their context “sufficiently show that the court
intended to close this case without precluding the parties from bringing a new
action after completing arbitration. It is only in this sense that the dismissal was
‘without prejudice.’” Interactive Flight Techs., Inc. v. Swissair Swiss Air Transp.
Co., 249 F.3d 1177, 1179 (9th Cir. 2001) (rejecting the argument that the court
lacked appellate jurisdiction because the district court’s dismissal was without
prejudice).
2. The decision to grant a motion to compel arbitration, including the
determination of the validity of an arbitration agreement, is reviewed de novo.
Casa del Caffe Vergnano S.P.A. v. ItalFlavors, LLC, 816 F.3d 1208, 1211 (9th Cir.
2016). Carter does not challenge the district court’s decision to compel arbitration,
but only the decision to compel arbitration on an individual basis. That decision is
based on the district court’s ruling that the class action waiver provision in the
1
The facts are familiar to the parties and are restated here only as
necessary to resolve the legal issues of the appeal.
2
“Lease-Purchase Agreement” is enforceable. Carter argues the class action waiver
provision is unconscionable under Nevada law.
Carter’s argument is foreclosed by AT&T Mobility LLC v. Concepcion, 563
U.S. 333 (2011). We have interpreted Concepcion as foreclosing any argument
that a class action waiver, by itself, is unconscionable under state law or that an
arbitration agreement is unconscionable solely because it contains a class action
waiver. See Kilgore v. KeyBank, Nat. Ass’n, 718 F.3d 1052, 1058 (9th Cir. 2013)
(en banc) (plaintiffs’ argument that a class action waiver in a promissory note is
unconscionable under California law “is now expressly foreclosed by
Concepcion”); Johnmohammadi, 755 F.3d at 1074 (noting that plaintiff, who
challenged the enforceability of a class action waiver in her employment contract,
could not “argue that the class-action waiver is unenforceable under California
law”) (citing Concepcion, 563 U.S. at 347–48). Nevada courts are in accord. See
Tallman v. Eighth Jud. Dist. Ct., 359 P.3d 113, 122 (Nev. 2015) (“Concepcion
teaches that the FAA protects class waivers in arbitration agreements, even when
requiring individual arbitration hampers effective vindication of statutory
claims.”).
Carter’s rationale for applying Nevada’s unconscionability doctrine to
invalidate the class action waiver is indistinguishable from the California Supreme
Court’s rationale in Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), a
3
case expressly overruled by Concepcion.2
3. Even if Carter’s unconscionability argument were not barred by
Concepcion, his argument of procedural unconscionability is unavailing. The
Lease-Purchase Agreement, together with the arbitration agreement, is not a classic
“take-it-or-leave-it” contract. The arbitration agreement sets forth a procedure for
opting out of the arbitration agreement and states this option in prominent bold
lettering near the top of the first page of the agreement. Carter was thus free to do
business with defendant, Rent-A-Center, Inc. (Rent-A-Center), without being
bound by the arbitration agreement. See Kilgore, 718 F.3d at 1059 (concluding the
arbitration provision was not procedurally unconscionable because it allowed
students obtaining loans to reject arbitration within sixty days of signing the
promissory note); Circuit City Stores, Inc. v. Ahmed, 283 F.3d 1198, 1199 (9th Cir.
2002) (“[T]his case lacks the necessary element of procedural unconscionability.
2
To be clear, Concepcion does not foreclose application of state
unconscionability doctrines to arbitration agreements generally. See Sonic-
Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109, 1142–43 (2013) (“[A]fter
Concepcion, unconscionability remains a valid defense to a petition to compel
arbitration.”). However, Carter’s unconscionability argument is directed at the
class action waiver provision only. He does not contend the entire arbitration
agreement—or any aspect of it other than the class action waiver—is
unconscionable. Our decision does not provide a “sweeping reading of
Concepcion” as asserted in the concurring opinion. Rather, our decision is based
on the ground that Carter’s argument is foreclosed by Concepcion because, as the
concurrence states, the “argument is materially indistinguishable from the rationale
underlying the Discover Bank rule invalidated in Concepcion.”
4
Ahmed was not presented with a contract of adhesion because he was given the
opportunity to opt-out of the Circuit City arbitration program by mailing in a
simple one-page form [within thirty days].”).
4. The denial of a motion for reconsideration is reviewed for abuse of
discretion. Smith v. Pac. Properties & Dev. Corp., 358 F.3d 1097, 1100 (9th Cir.
2004). Carter, concerned that the district court might have dismissed his class
claims with prejudice, argues the district court abused its discretion by not
clarifying whether the dismissal was with or without prejudice. The order
dismissing the complaint clearly states the dismissal was without prejudice, which
Rent-A-Center concedes. Carter has not shown an abuse of discretion.
AFFIRMED.
5
FILED
Carter v. Rent-A-Center, No. 16-15835
DEC 12 2017
WALLACE, Circuit Judge, concurring in the result: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I concur in the result, but write separately to express my disagreement with
the majority’s reading of Concepcion. Unlike my colleagues, I do not read
Concepcion as categorically foreclosing Carter, or any other consumer, from
arguing that class action waivers in arbitration agreements are unconscionable
under state law.
I.
The issue in Concepcion was whether the Federal Arbitration Act (FAA)
preempted California’s judge-made Discover Bank rule that classified most class
action waivers in consumer contracts as unconscionable. AT & T Mobility LLC v.
Concepcion, 563 U.S. 333, 340 (2011). The Supreme Court answered this question
in the affirmative, and stressed that the Discover Bank rule—which provided that
class action waivers were unconscionable when they involved contracts of
adhesion, small amounts of damages, and disparities in bargaining power between
companies and customers—disfavored arbitration. Id. at 341–42. The Court
explained the rule could not stand because it effectively conditioned the
enforceability of arbitration agreements on the availability of classwide arbitration
procedures, thereby interfering with fundamental attributes of arbitration. Id. at
344.
The holding in Concepcion reflected and reaffirmed the core principle of the
Supreme Court’s arbitration jurisprudence: that “courts must place arbitration
agreements on an equal footing with other contracts.” Id. at 339 (citing Buckeye
Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). This principle also is
reflected in section 2 of the FAA itself, which provides that arbitration agreements
“shall be valid, irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Under this saving
clause, arbitration agreements may 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 meaning from the fact that an
agreement to arbitrate is at issue.” Concepcion, 563 U.S. at 339 (quoting Doctor’s
Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). In other words, the FAA
recognizes the applicability of state-law based contract defenses, including
unconscionability, but preempts state-law rules that disfavor or have a
disproportionate impact on arbitration. Id. at 343–44.
Consistent with this equal footing principle, the Court in Concepcion
invalidated the Discover Bank rule because the rule applied unconscionability law
in a way that was hostile to arbitration. See id. at 343 (“Although § 2’s saving
clause preserves generally applicable contract defenses, nothing in it suggests an
2
intent to preserve state-law rules that stand as an obstacle to the accomplishment of
the FAA’s objectives.”). But the case did not call into question the availability of
state-law based unconscionability doctrine as a means of challenging class action
waivers under appropriate circumstances. Indeed, to read Concepcion as doing so
would turn the equal footing principle on its head by inoculating core provisions of
arbitration agreements from challenge. I do not think Concepcion can be so read,
nor do I think the FAA compels such a reading.
II.
The cases my colleagues cite to support their sweeping reading of
Concepcion are either distinguishable or do not directly support the proposition for
which they are cited. In Kilgore v. KeyBank, Nat’l Ass’n, 718 F.3d 1052, 1058 (9th
Cir. 2013), we stated that Concepcion “expressly foreclosed” plaintiffs’ argument
that a class action waiver was unconscionable under California law. But that
determination reflected the fact that the district court had relied on the Discover
Bank rule to hold the waiver at issue unconscionable. Our statement that plaintiffs’
unconscionability argument was “foreclosed by Concepcion” simply recognized
the impact of Concepcion on the continued validity of the Discover Bank rule. We
did not use Kilgore to hold that all state-law unconscionability challenges to class
action waivers were barred by Concepcion.
3
The majority also cites Johnmohammadi v. Bloomingdale’s, Inc., 755 F.3d
1072, 1074 (9th Cir. 2014), in which we stated in dicta, citing Concepcion, that
plaintiff could not argue the class action waiver in that case was unenforceable
under California law. But the plaintiff in Johnmohammadi did not challenge the
waiver at issue on unconscionability grounds. Rather, the issue in Johnmohammadi
was whether federal labor law rendered the waiver unenforceable. Our dicta in that
case should not be read as affirming an interpretation of Concepcion that was
neither advanced by the parties, nor relevant to the disposition of the case.
Finally, the majority cites Tallman v. Eighth Jud. Dist. Ct., 359 P.3d 113
(Nev. 2015), where the Nevada Supreme Court acknowledged that Concepcion
overruled a previous Nevada Supreme Court decision holding that class action
waivers in arbitration agreements were unenforceable because such waivers
violated Nevada’s public policy. But this aspect of the Tallman decision was
simply a natural application of the “equal footing” principle—i.e., that state law (in
this case, Nevada’s public policy favoring class actions) could not be applied in a
way that disfavored arbitration. No part of the Tallman decision established a rule
that Concepcion categorically bars unconscionability challenges to class action
waivers in arbitration agreements.
III.
4
The majority’s reading of Concepcion also fails to take into account the
diversity of the common law. State unconscionability doctrines vary in subtle but
important ways, and Concepcion was not premised on the assumption that all such
doctrines were as equally hostile to arbitration as the Discover Bank rule. Rather
than establish an ex ante preclusion rule foreclosing unconscionability arguments
altogether, Concepcion provides a principle to which state-law rules must adhere to
survive federal preemption. This makes sense given that not all state
unconscionability doctrines resemble the Discover Bank rule invalidated in
Concepcion.
A brief hypothetical illustrates the point. Assume that a consumer signs an
arbitration agreement containing a class action waiver, and that Washington law
governs disputes over enforceability of the waiver. Assume also that the consumer
subsequently seeks to invalidate the class action waiver by arguing the waiver is
unconscionable under Washington law. On these facts, Concepcion would not
necessarily require preemption of the state-law rule. This is because Washington
law permits a finding of unconscionability on the basis of procedural
unconscionability alone, Gandee v. LDL Freedom Enters., Inc., 293 P.3d 1197,
1199 (Wash. 2013), which may be present when the manner in which the contract
was entered, and the format and presentation of the contractual terms, indicates a
5
party lacked meaningful choice, Zuver v. Airtouch Commc’ns, Inc., 103 P.3d 753,
759–60 (Wash. 2004) (en banc). Also, unlike the Discover Bank rule,
Washington’s procedural unconscionability doctrine neither “derive[s] [its]
meaning from the fact that an agreement to arbitrate is at issue,” nor is formulated
in a way that disfavors arbitration. Concepcion, 563 U.S. at 339. A hypothetical
consumer presumably could challenge a class action waiver under Washington law
by arguing the waiver was presented in fine print or was expressed in convoluted
language, or by alleging some other form of procedural unconscionability not at
issue in Concepcion. Such a challenge would be entirely consistent with
Concepcion’s holding and rationale. That my colleagues’ reading of the case would
bar such a valid challenge highlights the error in their interpretation.
IV.
I harbor no delusions about Concepcion’s far-reaching impact on
consumers’ ability to challenge class action waivers on the basis of
unconscionability. In holding that the FAA preempted the Discover Bank rule, the
Supreme Court made clear that some of the most common features of an
unconscionability challenge—in particular, the adhesive nature of consumer
agreements and the vast disparity in bargaining power between companies and
their customers—will not invalidate class action waivers in arbitration agreements.
6
In practice, this makes it extremely difficult to invalidate class action waivers on
the basis of unconscionability. That result, however, does not justify the conclusion
that Concepcion categorically forecloses all such challenges. Although Concepcion
makes clear that generally applicable contract defenses will not survive federal
preemption when those defenses are hostile to arbitration, for the reasons stated
above I do not think the decision eliminates unconscionability challenges to class
action waivers altogether.
Nonetheless, I agree with my colleagues that Carter’s unconscionability
argument fails on the merits. Carter argues, based upon Nevada law, that the class
action waiver in this case is unconscionable because the waiver is a one-sided
contract of adhesion that was presented by a party with superior bargaining power.
This argument is materially indistinguishable from the rationale underlying the
Discover Bank rule invalidated in Concepcion. Therefore, while I disagree with the
majority’s sweeping reading of Concepcion, I concur in the result reached here.
7