Petition for Writ of Certiorari — A-1 Premium Acceptance, Inc., Petitioner v. Meeka Hunter

NO.

In the Supreme Court of the United States

A-1 PREMIUM ACCEPTANCE, INC.,

v.

MEEKA HUNTER,

Petitioner,

Respondent.

On Petition for Writ of Certiorari

to the Supreme Court of Missouri

PETITION FOR WRIT OF CERTIORARI

Mark D. Murphy

Counsel of Record

The Murphy Law Firm

6640 West 143rd Street

Suite 250

Overland Park, Kansas 66223-2104

(913) 647-8090

mmurphy@mlf-llc.com

Counsel for Petitioner

A-1 Premium Acceptance, Inc.,

d/b/a King of Kash

Becker Gallagher · Cincinnati, OH · Washington, D.C. · 800.890.5001

i

Question Presented for Review

Whether a statement in an arbitration agreement

that a specific arbitrator is to be utilized is an integral

term that prohibits application of §5 of the Federal

Arbitration Act if the named arbitrator is not available,

thus invalidating the arbitration agreement as a whole.

ii

Parties to This Proceeding and

Corporate Disclosure Statement

Petitioner is A-1 Premium Acceptance, Inc.

Respondent is Meeka R. Hunter. There are no other

parties to this proceeding.

Pursuant to Rule 29.6 of this Court’s Rules,

petitioner A-1 Premium Acceptance, Inc. states that it

has no parent company, and no publicly held

corporation owns 10% or more of its stock.

iii

Table of Contents

Question Presented for Review . . . . . . . . . . . . . . . . i

Parties to This Proceeding and Corporate

Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . ii

Table of Authorities . . . . . . . . . . . . . . . . . . . . . . . . . v

Petition for A Writ of Certiorari . . . . . . . . . . . . . . . . 1

Opinions Below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Constitutional and Statutory Provisions Involved . 1

Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Reasons for Granting the Petition . . . . . . . . . . . . . . 6

A. This Case Presents an Important Question As

To Which The State and Lower Federal Courts

Are Divided. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1. This Case is an Ideal Vehicle for this

Court to Resolve the Split . . . . . . . . . . . . . 7

2. A-1 v. Hunter Proceedings and Analysis . 9

3. Split of Jurisdictions . . . . . . . . . . . . . . . . 15

4. This Case Allows the Court to Reiterate

the Favored Federal Policy of Arbitration

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5. This Implications of This Case

Reach Beyond the Application of §5 of the

FAA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

iv

Appendix

Appendix A Opinion in the Supreme Court of

Missouri

(October 16, 2018) . . . . . . . . . . . . App. 1

Appendix B Order in the Supreme Court of

Missouri

(December 19, 2017) . . . . . . . . . App. 13

Appendix C Opinion and Dissent in the Missouri

Court of Appeals, Western District

(July 18, 2017) . . . . . . . . . . . . . . App. 15

Appendix D Order in the Circuit Court of Jackson

County, Missouri at Kansas City

(May 20, 2016) . . . . . . . . . . . . . . App. 43

Appendix E 9 U.S.C. § 5 . . . . . . . . . . . . . . . . . App. 53

Appendix F King of Kash Loan Application for

Meeka K. Hunter . . . . . . . . . . . . App. 54

Appendix G Split of Jurisdictions on Application

of §5 of FAA and Integral/Ancillary

Analysis Tables . . . . . . . . . . . . . App. 57

v

Table of Authorities

CASES

Adler v. Dell, Inc.,

2009 U.S. Dist. LEXIS 112204 (E.D. Mich. De. 3,

2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

American Express Co. v. Italian Colors Restaurant,

133 S. Ct. 2304 (2013) . . . . . . . . . . . . . . . . . . . . 17

AT&T Mobility LLC v. Concepcion,

563 U.S. 333 (2011) . . . . . . . . . . . . . . . . . . . . . . 21

In re Brock Specialty Servs., LTD.,

286 S.W.3d 649 (Tex. App. Corpus Christi 2009)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Brown v. ITT Consumer Financial Corp.,

211 F.3d 1217 (11th Cir. 2000) . . . . 11, 12, 17, 18

Carideo v. Dell, Inc.,

2009 U.S. Dist. LEXIS 104600 (W.D. Wash. Oct.

26, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 10, 15, 16

Courtyard Gardens Health & Rehab., LLC v.

Arnold,

485 S.W.3d 669 (Ark. 2016) . . . . . . . . . . . . . . . . 17

Dunn Indus. Group, Inc. v. City of Sugar Creek,

112 S.W.3d 421 (Mo. banc 2003) . . . . . . . . . . . . 13

Ellis v. JF Enters., LLC,

482 S.W.3d 417 (Mo. 2016) . . . . . . . . . . . . . . 9, 10

GGNSC Lancaster v. Roberts,

2014 U.S. Dist. LEXIS 43102 (E.D. Pa. Mar. 31,

2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

vi

Green v. U.S. Cash Advance Ill., LLC,

724 F.3d 787 (7th Cir. 2013) . . . . . . . . . . . . . . . 16

Hall St. Assocs., LLC v. Mattel, Inc.,

552 U.S. 576 (2008) . . . . . . . . . . . . . . . . . . . . . . 12

Henry Schein, Inc. v. Archer & White Sales, Inc.,

2019 U.S. LEXIS 566 . . . . . . . . . . . . . . . . . . . . . 22

Jones v. GGNSC Pierre LLC,

684 F. Supp. 2d 1161 (D.S.D. 2010) . . . . . . . . . 16

Khan v. Dell Inc.,

669 F.3d 350 (3d Cir. 2012) . . . . . . . . . . 12, 15, 16

Kindred Nursing Ctrs. Ltd. P’ship v. Clark,

137 S. Ct. 1421 (2017) . . . . . . . . . . . . . . . . . . . . 21

McMullen v. Meijer, Inc.,

166 Fed. Appx. 164 (6th Cir. 2006) . . . . . . . . . . 16

Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp.,

460 U.S. 1 (1983) . . . . . . . . . . . . . . . . . . . . . 2, 8, 9

Moss v. First Premier Bank,

835 F.3d 260 (2nd Cir. 2016) . . . . . . . . . . . . . . . 18

Nitro Distrib., Inc. v. Dunn,

194 S.W.3d 339 (Mo. 2006) . . . . . . . . . . . . . . . . . 7

Ranzy v. Tigerina,

393 Fed. Appx 174 (5th Cir. 2010) . . . . . . . . . . 10

Reddam v. KPMG LLP,

457 F.3d 1054 (9th Cir. 2010) . . . . . . . . . . . 10, 11

vii

Robinson v. EOR-ARK, LLC,

2015 U.S. Dist. LEXIS 130293 (W.D. Ark. June

19, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Robinson v. Title Lenders, Inc.,

364 S.W.3d 505 (Mo. banc 2012) . . . . . . . . . 21, 22

In re Salomon Inc. Shareholders’ Derivative

Litigation,

68 F.3d 554 (2nd Cir. 1995) . . . . . . . . . . 10, 11, 18

Sarasota Facility Operations, LLC v. Manning,

112 So. 3d 712 (Fla. Dist. Ct. App. 2d Dist. 2013)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

State ex rel. Hewitt v. Kerr,

461 S.W.3d 798 (Mo. banc 2015) . . . 19, 20, 21, 22

Torrence v. National Budget Fin.,

753 S.E.2d 802 (N.C. Ct. App. 2014) . . . . . . . . . 17

Triarch Indus. V. Crabtree,

158 S.W. 3d 772 (Mo. banc 2005) . . . . . . . . . . . 21

White v. Eskridge Auto Group,

326 P.3d 544 (Okla. Ct. App. 2014) . . . . . . . . . . 17

STATUTES

9 U.S.C. §2 . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 20, 21

9 U.S.C. §5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

28 U.S.C. §1257(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1

Petition for A Writ of Certiorari

Petitioner A-1 Premium Acceptance, Inc. (“A-1)

respectfully petitions for a writ of certiorari to review

the judgment of the Missouri Supreme Court in this

case.

Opinions Below

The opinion of the Missouri Supreme Court (App. A

at 1, infra) is reported at 557 S.W.3d 923 (Mo banc

2018) (“Missouri Supreme Court Decision”). The

Missouri Supreme Court had taken transfer of this

case (App. B at 13, infra) after the Missouri Court of

Appeals for the Western District of Missouri had issued

its opinion in this case (App. C at 15, infra), which is

unreported but is available at 2017 Mo.App. LEXIS 719

(“Court of Appeals Decision”). The order of the Circuit

Court of Jackson County, Missouri, at Kansas City

denying A-1’s motion to compel arbitration (App. D at

43, infra) is unreported (“Trial Court Decision”).

Jurisdiction

The judgment of the Missouri Supreme Court was

entered on October 16, 2018. App. A, infra. This

Court’s jurisdiction rests on 28 U.S.C. §1257(a).

Constitutional and Statutory

Provisions Involved

Section 5 of the FAA, 9 U.S.C. §5, (App. E at 53,

infra) provides:

If in the agreement provision be made for a

method of naming or appointing an arbitrator or

arbitrators or an umpire, such method shall be

followed; but if no method be provided therein,

2

or if a method be provided and any party thereto

shall fail to avail himself of such method, or if

for any other reason there shall be a lapse in the

naming of an arbitrator or arbitrators or umpire,

or in filling a vacancy, then upon the application

of either party to the controversy the court shall

designate and appoint an arbitrator or

arbitrators or umpire, as the case may require,

who shall act under the said agreement with the

same force and effect as if he or they had been

specifically named therein; and unless otherwise

provided in the agreement the arbitration shall

be by a single arbitrator.

Statement

This petition addresses a recurring issue of

extraordinary importance to the viability of arbitration

agreements: whether a court can avoid application of

§5 of the FAA to appoint a substitute arbitrator by

finding that the naming of a specific arbitrator in the

arbitration agreement was “integral” to the agreement

and ignore the express provisions of §5 in that it is to

apply “if for any other reason there shall be a lapse in

the naming of an arbitrator or arbitrators or umpire, or

in filling a vacancy…” This artificial and arbitrary use

of the integral/ancillary analysis of arbitration

agreements evidences the judicial hostility to

arbitration against the FAA contrary to the

“congressional declaration of a liberal federal policy

favoring arbitration agreements.” Moses H. Cone

Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,

24 (1983).

3

There is a split among the states, and among the

Federal Courts, as to the application of the

integral/ancillary analysis with regard to the

application of §5 of the FAA. The table included in the

Appendix hereto shows the amplitude of the split and

includes relevant case citations. App. G at 57, infra.

The present case is an ideal vehicle for resolving

this split of courts across the country. The arbitrator

named in the subject arbitration agreement was not

available to arbitrate consumer matters at the time the

dispute between the parties arose through no fault of

either party. It is clear that the agreement to arbitrate

was the main point of the parties’ agreement.

Application of §5 of the FAA would allow the parties to

continue to arbitrate their dispute, thus maintaining

the validity of the arbitration process which is favored

under the law of the land. The lower court rulings in

this case, and the splits between other courts in the

country evidences that the goal of arbitrating disputes

is being ignored and overran.

1. Arbitration Agreement of the Parties. On

June 7, 2006 respondent Meeka R. Hunter (“Hunter”)

made applications for two consumer loans from A-1. As

a material condition of each of the loans, Hunter signed

a Loan Application that contained the parties’

arbitration agreement. App. F at 54, infra. That

arbitration agreement is:

You agree and understand that a claim or

demand for recovery of the balance due lender

resulting from your default in payment may be

asserted by lender in any court of competent

jurisdiction. However, you agree that any claim

or dispute including class action suits, other

4

than that resulting from your default in

payment, between you and the lender or against

any agent, employee, successor, or assign of the

other, whether related to this agreement or

otherwise, and any claim or dispute related to

this agreement or the relationship or duties

contemplated under this contact, including the

validity of this arbitration clause, shall be

resolved by binding arbitration by the National

Arbitration Forum, under the Code of Procedure

then in effect. Any award of the arbitrator(s)

may be entered as a judgment in any court of

competent jurisdiction. Information may be

obtained and claims may be filed at any office of

the National Arbitration Forum or at P.O. Box

50191, Minneapolis, MN 55405. This agreement

shall be interpreted under the Federal

Arbitration Act.

The particular provisions of that subject arbitration

agreement at issue herein are:

• The arbitration agreement provided in part that

any dispute “shall be resolved by binding

arbitration by the National Arbitration Forum,

under the Code of Procedure then in effect.”

• This agreement shall be interpreted under the

Federal Arbitration Act.

2. Proceedings in the State Courts. The

underlying court case was initiated by A-1 filing suit to

collect on the non-payment of the balance due on the

5

various loans1. In response, Hunter has filed her

counterclaims – including seeking class action

certification – making claims other than those

resulting from her default. According the clear and

unambiguous terms of the parties’ arbitration

agreement, Hunter’s claims are required to be

arbitrated. On September 28, 2015, A-1 filed its

Motion to Compel Arbitration and for Stay of

Proceedings, in which A-1 noted that the designated

arbitrator, National Arbitration Forum (“NAF”),

entered into a consent order with the state of

Minnesota in 2009, three years after the arbitration

agreements were entered into by the parties, and as

such NAF was no longer available to conduct consumer

arbitrations. Therefore, A-1 sought the Circuit Court’s

order appointing a substitute arbitrator as provided by

§5 of the FAA. App. D, infra. The Circuit Court

entered the Trial Court Decision on May 20, 2016

denying A-1’s motion, finding that the naming of NAF

was an integral term to the parties’ arbitration

agreement without which arbitration could not

continue and that §5 of the FAA would not apply, and

so the parties’ arbitration agreement is “invalid and

unenforceable.” See App. D at 51, infra.

A-1 then timely appealed from the Trial Court

Decision to the Court of Appeals, Western District of

Missouri. The Court of Appeals reversed the Circuit

Court and directed that the matter be remanded for

1

Filing with the Circuit Court of Jackson County, Missouri was

allowed under the parties’ arbitration agreement for collection of

unpaid balance due. Any other claim or dispute, including

Hunter’s counterclaim and her seeking a class action, was required

to be arbitrated. App. F, infra.

6

proceedings consistent with its ruling. App. C, infra.

The Court of Appeals Decision held that the inability of

the NAF to arbitrate the parties’ dispute did not relieve

Hunter of her obligation to arbitrate and found that the

arbitration agreement provided for reference to the

FAA, §5 in particular, to appoint a substitute

arbitrator.

Following the entry of the Court of Appeals

Decision, Hunter sought transfer to the Missouri

Supreme Court for a rehearing of the matter. The

Missouri Supreme Court granted transfer. App. B,

infra. The Missouri Supreme Court then found that

the parties’ arbitration agreement required the parties

to arbitrate before the NAF and no other – that the

naming of the NAF was “integral” to the arbitration

agreement – and as such affirmed the Trial Court

Decision. App. A, infra.

Reasons for Granting the Petition

The multiple state and federal jurisdictional split on

the haphazard and arbitrary application of the

integral/ancillary analysis to avoid application of §5 of

the FAA has been ongoing for years and is ripe for

resolution. At the present there is no uniformity in the

application of §5 of the FAA, causing uncertainty

across the country, and eroding the federal policy

favoring arbitration. This case is perfectly situated for

the Court to resolve the split and provide for the

national uniform application of §5 of the FAA.

7

A. This Case Presents an Important Question As

To Which The State and Lower Federal Courts

Are Divided.

As the extensive state and federal split evidences,

this issue is significant. The courts that determine to

apply the integral/ancillary analysis to avoid

application of §5 of the FAA not only contradicts the

express provision of that statute, but also erodes the

federal policy favoring arbitration, giving the

antagonists to arbitration a loophole to escape an

agreement to arbitrate.

1. This Case is an Ideal Vehicle for this

Court to Resolve the Split

This case represents the ideal opportunity for the

Court to resolve the split.

In this case, the

unavailability of the named arbitrator was through no

fault of either party to the arbitration agreement, but

rather was a result of circumstances outside of their

control. In the case at bar, the arbitration agreement

provided in the Loan Agreement is short and

straightforward. It is a simple paragraph that

concludes with one sentence: “This agreement shall be

interpreted under the Federal Arbitration Act.” App.

F, infra. The parties’ intention is crystal clear – they

want to arbitrate any dispute, and if they do, the

provisions of the FAA are to be applied.

The Court should determine “whether a valid

arbitration agreement exists,” and if the “dispute falls

within the scope of the arbitration agreement.” Nitro

Distrib., Inc. v. Dunn, 194 S.W.3d 339, 345 (Mo.

2006). “Federal law in terms of the Arbitration Act

governs [the arbitrability of the dispute] in either state

8

or federal court.” Moses H. Cone Mem’l Hosp. v.

Mercury Constr. Corp., 460 U.S. 1, 24 (1983). Here

there is no dispute that there is a valid arbitration

agreement, save for the contrived issue of the inability

to cover the unavailability of the named arbitrator.

In this case, the parties’ arbitration agreement

states that the “agreement shall be interpreted under

the Federal Arbitration Act.” Section 5 of the FAA

provides for an appointment of a substitute arbitrator:

[i]f in the agreement provision be made for a

method of naming or appointing an arbitrator or

arbitrators or an umpire, such method shall be

followed; but if no method be provided therein,

or if a method be provided and any party thereto

shall fail to avail himself of such method, or if

for any other reason there shall be a lapse

in the naming of an arbitrator or

arbitrators or umpire, or in filling a vacancy,

then upon the application of either party to the

controversy the court shall designate and

appoint an arbitrator or arbitrators or umpire,

as the case may require, who shall act under the

said agreement with the same force and

effect as if he or they had been specifically

named therein; and unless otherwise provided

in the agreement the arbitration shall be by a

single arbitrator.

9 U.S.C.S. §5. (emphasis added)

The highlighted language of §5 is of crucial

importance and is constantly ignored by those courts

that apply the integral/ancillary analysis to invalidate

an arbitration agreement. First, the phrase “if for any

9

other reason there shall be a lapse in the naming of an

arbitrator or arbitrators” clearly covers a situation

where a named arbitrator is for some reason

unavailable or unwilling to serve. The breadth of the

statutory language was intentional to encompass all

such situations. Secondly, the next highlighted phrase

– “with the same force and effect as if he or they had

been specifically named therein” – is plainly read to

make a specific appointment of an arbitrator. The

drafters of the statute contemplated that a specific

arbitrator would or could be named, and that if need

be could be replaced by §5. This recognizes that the

arbitrator is not the lynchpin to the arbitration

agreement -- the arbitration of disputes is the

overriding purpose and agreement of the parties.

2. A-1 v. Hunter Proceedings and Analysis

In the instant case, Missouri law applies except

where the FAA is applicable. The Missouri Supreme

Court in Ellis v. JF Enters., LLC states that “the

FAA, not Missouri law governs what courts may

consider in determining whether an agreement to

arbitrate is enforceable.” 482 S.W.3d 417, 420 (Mo.

2016). While the Trial Court Decision properly cites to

Ellis to establish under the FAA that “agreements are

enforceable unless the arbitration agreement itself—in

isolation—is invalid under generally applicable state

law principles,” not a single Missouri case is provided

that establishes the subject arbitration agreement is

invalid. Id. The FAA contains a “congressional

declaration of a liberal federal policy favoring

arbitration agreements.” Moses H. Cone Mem’l Hosp.,

460 U.S. at 1. In contrast to the Trial Court Decision,

the Missouri Supreme Court acknowledges and favors

10

the liberal Federal policy. See Ellis, 482 S.W.3d at

419-20 (holding an arbitration agreement to be valid

when the rest of the contract was void under Missouri

state law). Also, as eloquently stated by the Missouri

Supreme Court in Ellis, “it does not behoove this Court

to parse its clear language in search of a way to achieve

what the Supreme Court so clearly has held Congress

and the FAA prevent.” Id. at 419.

In citing Carideo v. Dell, Inc., 2009 U.S. Dist.

LEXIS 104600, *16 (W.D. Wash. Oct. 26, 2009), the

Trial Court Decision cites to but a single case to

directly support its holding, one that is not even from

Missouri. In doing so, the Trial Court Decision ignores

a mountain of other case law and the national trend

and fails to pay heed to the Missouri Supreme Court’s

reflection stated above. See App. G, infra. Further, in

light of the 9th Circuit’s opinion in Reddam v. KPMG

LLP 2 published less than a year after Carideo,

Carideo is likely no longer good case law. See 457 F.3d

1054, 1060-61 (9th Cir. 2010).3

2

3

Also cited by the Trial Court Decision.

The Trial Court Decision fails to cite any relevant section from a

case that is on point with the facts of the instant case, except for

Carideo. Although Ranzy v. Tigerina, 393 Fed. Appx 174, 176

(5th Cir. 2010) is on point, the opinion is unpublished, bears no

precedential value, and relied heavily on In re Salomon Inc.

Shareholders’ Derivative Litig., 68 F.3d 554 (2d Cir. 1995)

(uncited in the Trial Court Decision). However, in the 24 years

since In re Salomon, the national trend has shifted away from its

holding. Further, the instant case is distinguishable from In re

Salomon because the court therein had been influenced in its

decision making by a four-year, ongoing, and delayed litigation. Id.

at 561.

11

The Trial Court Decision actually cites for support

to Reddam, 457 F.3d at 1060 (which holds when the

NASD refused to arbitrate for a lack of jurisdiction, the

selection of NASD as the forum was not integral to the

agreement). The court therein expressly stated that

“[t]here is no evidence that the naming of the NASD

was so central to the arbitration agreement that the

unavailability of that arbitrator brought the agreement

to an end” (rejecting In re Salomon for lack of

reasoning). Id. at 1060-61. Comparing its decision to

“our approach to forum selection clauses,” the court

explained that it has “not treated the selection forum

as exclusive of all other forums, unless the parties have

expressly stated that it was.” Id.

So, it is apparent that the Reddam decision

actually would mandate that the subject arbitration

agreement be deemed valid and enforceable and that A1’s motion be granted.

Here, finding that the

designation of the NAF is integral and requires

invalidation of the arbitration agreement directly

contradicts the authority cited by the Trial Court

Decision as law to be followed.

The Trial Court Decision also cites to Brown v. ITT

Consumer Financial Corp., 211 F.3d 1217, 1222

(11th Cir. 2000) to explain that a court may substitute

the arbitral forum only when such forum is not integral

to the arbitration agreement. Brown, however, holds

that exclusively designating an arbitration forum is

NOT integral to the agreement, stating: “Brown also

argues that the arbitration clause is void because the

specified forum, the National Arbitration Forum

(NAF), had dissolved. This argument is without

merit.” Id. at 1222 (emphasis added). Relying on §5 of

12

the FAA, the court therein states: “[t]he unavailability

of the NAF does not destroy the arbitration clause.” Id.

It is also important to note here that the subject

arbitration agreement did not use the word “exclusive”

or anything of that ilk in naming the NAF as the

arbitrator. Many cases across the country have found

that not using such language avoids any “integral”

classification and thus the arbitration agreement

remains valid. See App. G, infra.

Other parts of the Trial Court Decision continue to

confuse a reader of the subject Order: “Section 5 of the

FAA is a default provision ‘meant to tell a court what

to do just in case the parties say nothing else.’” (citing

Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576,

587-88 (2008)). This circumstance (when the parties

said nothing on the issue of replacement arbitral

forums) exactly seems to be the very reason—and one

which the Supreme Court seems to recognize—§5 of the

FAA exists. See also Robinson v. EOR-ARK, LLC,

2015 U.S. Dist. LEXIS 130293, *15 (W.D. Ark. June 19,

2015) (holding that “[t]he unavailability of the NAF to

arbitrate this matter, does not make this Arbitration

Agreement unenforceable,” relying on the Khan v.

Dell Inc., 669 F.3d 350 (3d Cir. 2012) and Brown

decisions). One just needs to read that clip in

conjunction with §5 and the other controlling case law

to reach the just result as done in Khan.

The Missouri Court of Appeals heard this matter

prior to the transfer to the Missouri Supreme Court.

The Court of Appeals ruled in favor of A-1 and held

that §5 of the FAA should apply to name a substitute

arbitrator. In reaching that result, the Court of

Appeals first held that the last sentence in the subject

13

arbitration agreement be given meaning – that the

agreement be interpreted pursuant to the FAA. In

doing so, it then held that when there is a lapse or

vacancy in the naming of an arbitrator, §5 comes into

play and maintains the validity of the arbitration

agreement.

Contrary to the Trial Court Decision, the Court of

Appeals Decision used the plain language of the

arbitration agreement to interpret it under the FAA. It

specifically held:

In concluding that the NAF's inability to

serve as the arbitrator rendered the arbitration

agreement unenforceable for want of “an

integral term,” the trial court ignored that the

agreement expressly required its interpretation

pursuant to the FAA, and thus ignored that

section 5 of the FAA unequivocally required the

appointment of a substitute arbitrator. The trial

court's ruling was clearly erroneous as it

interpreted the agreement in a manner that

rendered the provision requiring interpretation

pursuant to the FAA meaningless. Dunn Indus.

Group, Inc. v. City of Sugar Creek, 112

S.W.3d 421, 428 (Mo. banc 2003) (holding that

each term of a contract is to be construed to

avoid rendering other terms meaningless).

App. C at 22, infra.

The Court of Appeals Decision also recognized the

fact that the application of the integral/ancillary

analysis does not place arbitration agreements on

equal footing with other contracts, violating §2 of the

FAA. App. C at 22-23, infra. This requirement that

14

arbitration agreements be treated on equal footing with

other contracts is universal across the land.

The Missouri Supreme Court Decision bounces back

to the flawed ationale used by the Circuit Court and

held adverse to A-1, that the naming of NAF was

integral and thus voided the arbitration agreement.

The operative part of that decision is:

Here, the plain and unambiguous language of

the Agreement shows Hunter and A-1 agreed to

arbitrate before – but only before – NAF. The

Agreement provides Hunter’s claims “shall be

resolved by binding arbitration by the National

Arbitration Forum, under the Code of Procedure

then in effect.” [Emphasis added.] The

unequivocal, plain and clear terms of this

Agreement establish that A-1 and Hunter

agreed only to arbitrate before NAF. A-1 drafted

this provision and it freely chose to require such

an agreement from Hunter (and other

borrowers) as a condition of obtaining loans from

A-1. Having made the choice to insist upon NAF

– and only NAF – as the arbitration forum, A-1

cannot now look to section 5 of the FAA to

expand the arbitration promise it extracted from

Hunter in the Agreement. (footnotes omitted)

Missouri Supreme Court Decision, App. A at 10-11,

infra.

The Missouri Supreme Court makes this finding

even though no word such as “exclusively” or the like is

used and ignores the parties’ averarching agreement to

arbitrate their disputes. This illustrates the arbitrary

and inconsistent nature of courts applying the

15

integral/ancillary analysis to avoid application of §5 of

the FAA.

3. Split of Jurisdictions

As shown on the table of cases contained in App. G,

infra, there is a pronounced split of applications of §5

of the FAA and the use of the integral/ancillary

analysis to invalidate arbitration agreements. The

courts that are antagonistic to arbitration have applied

the analysis to avoid using §5 to name a substitute

arbitrator.

The rationale that courts have used to apply §5 or

use the integral/ancillary analysis vary case by case.

However, even when the verbiage is essentially

identical, courts have construed the language

differently to reach their desired result, be it favorable

to arbitration or not.

For example, in Khan, 669 F.3d at 354, the court

rejected Carideo (holding that the contract provision

“SHALL BE RESOLVED EXCLUSIVELY AND

FINALLY BY BINDING ARBITRATION

ADMINISTERED BY THE NATIONAL

ARBITRATION FORUM” was not integral to the

agreement). In Khan, the court held that “the parties

must have unambiguously expressed their intent not to

arbitrate their disputes in the event the designated

arbitral forum is unavailable.” Id. If you applied Khan

to this instant matter, it would be dispositive of the

issue, since the subject arbitration agreement contains

no such qualification. Thus, even though the word

“exclusive” was used, it was held not to be integral to

the overall agreement to arbitrate, which was the

controlling factor.

16

Another long-standing example is Adler v. Dell,

Inc., 2009 U.S. Dist. LEXIS 112204 (E.D. Mich. De. 3,

2009) rejecting Carideo (holding the reasoning of

Brown is more consistent with 6th Circuit reasoning,

and the clause “SHALL BE RESOLVED

EXCLUSIVELY AND FINALLY BY BINDING

ARBITRATION ADMINISTERED BY THE

NATIONAL ARBITRATION FORUM (NAF)” was not

integral to the agreement; thus, an order to compel

arbitration was entered) (citing McMullen v. Meijer,

Inc., 166 Fed. Appx. 164, 169 (6th Cir. 2006) (holding

the arbitrator selection provision of the agreement

could be severed and the district court properly

appointed a new arbitrator)); see also Jones v.

GGNSC Pierre LLC, 684 F. Supp. 2d 1161, 1168

(D.S.D. 2010) (holing the language in the arbitration to

be “substantially similar to the language in Brown”

and compelling arbitration); GGNSC Lancaster v.

Roberts, 2014 U.S. Dist. LEXIS 43102, *33 (E.D. Pa.

Mar. 31, 2014) (discussing and following Khan’s

reasoning in holding forum selection clause not integral

to the agreement).

This is further illuminated by the holding in Green

v. U.S. Cash Advance Ill., LLC finding whether the

forum selection clause is an “integral” part of

arbitration agreement is not a legal requirement;

rather, the question is merely an approach to

determine whether §5 of the FAA should be applied.

724 F.3d 787, 791 (7th Cir. 2013). The court therein

states that “[i]nstead of asking whether one or another

feature is “integral,” a court could approach this from

a different direction and assume that a reference to an

unavailable means of arbitration is equivalent to

leaving the issue open.” Id. at 792. For example, that

17

court cited to recent United States Supreme Court

decision American Express Co. v. Italian Colors

Restaurant, 133 S. Ct. 2304 (2013) (holding that

adding to requirements of the FAA can delay the

arbitration process, which goes against the very

purpose of the Act) and insists that district judges

should not add requirements to the FAA. Id. at 792.

The use of the integral/ancillary analysis is a judiciallycreated addition to the FAA which simply should not be

allowed.

Finally, the “majority of courts that have addressed

whether a substitute arbitrator can be appointed

pursuant to §5 of the FAA have utilized the approach

set out in Brown v. ITT Consumer Financial Corp.”

Courtyard Gardens Health & Rehab., LLC v.

Arnold, 485 S.W.3d 669, 677 (Ark. 2016). See also

Sarasota Facility Operations, LLC v. Manning,

112 So. 3d 712, 714 (Fla. Dist. Ct. App. 2d Dist. 2013)

(reversing a circuit court’s decision to not compel

arbitration when the NAF had been designated as the

forum); Torrence v. National Budget Fin., 753

S.E.2d 802, 806-07 (N.C. Ct. App. 2014) (reversing a

circuit court’s decision to not compel arbitration and

holding “[t]he United States Supreme Court has made

it clear that it will no longer tolerate State courts or

laws which seek to frustrate the intent of Congress in

enacting the FAA”); In re Brock Specialty Servs.,

LTD., 286 S.W.3d 649, 652, 656 (Tex. App. Corpus

Christi 2009) (holding the contract clause, “All

Disputes shall be administered by NMAI and

conducted before one (1) NMAI arbitrator” as not

integral to the agreement); White v. Eskridge Auto

Group, 326 P.3d 544, 547 (Okla. Ct. App. 2014)

(affirming the trial court’s decision to compel

18

arbitration when the chosen arbitrator was no longer

available).

As the Arkansas Supreme Court stated, an

overwhelming majority of courts have adopted

Brown’s reasoning. Many federal circuits, including

district courts within those circuits, as well as an

impressive amount of states, all favor the fundamental

Federal policy that states a court shall appoint a

replacement arbitrator for any reason.

Conversely, there are courts that have used the

integral/ancillary analysis to invalidate arbitration

agreements. In Moss v. First Premier Bank, 835

F.3d 260 (2nd Cir. 2016), the court dealt with an

arbitration agreement which stated that the

arbitration would be and under the Code of Procedure

of the NAF, though the NAF was not specifically

named as the arbitrator. That court relied upon the

prior holding in that circuit in In re Salomon Inc.

Shareholders’ Derivative Litigation, 68 F.3d 554

(2nd Cir. 1995), and found that the naming of the NAF

in the arbitration agreement contemplated the NAF

only as the arbitrator, and that as such it was integral

to the parties’ agreement. That court then refused to

apply §5 of the FAA, and the arbitration agreement

was invalidated. That court did, however, intone that

it only did so because of the precedent set by In re

Salomon, leaving the door open for future change. 68

F.3d at 267.

The bottom line is that the various courts have

looked at similar language and have come up with

various results, producing absolutely no uniformity in

the application of §5 of the FAA. Different courts have

considered essentially the same language and yet reach

19

opposite results. The representative table, App. G, and

the comments thereto show the extent of this issue.

4. This Case Allows the Court to Reiterate

the Favored Federal Policy of

Arbitration

In addition to the foregoing, this case also

represents an opportunity for the Court to reinforce the

federal policy favoring arbitration and rein in the

judicial hostility of some courts to arbitration. The

Trial Court Decision and the Missouri Supreme Court

Decision which find that the identification of the NAF

was an “integral term” to the parties’ arbitration

agreement is part of a judicial trend to find a way to

evade the federal mandate to favor arbitration by

twisting the construction of the arbitration agreement

in such a way to avoid arbitration. Despite the holding

in his instant case, the Missouri Supreme Court has

seemingly contradicted itself in its earlier decision in

State ex rel. Hewitt v. Kerr, 461 S.W.3d 798 (Mo.

banc 2015), which remains as good law in Missouri.

In Hewitt, the Missouri Supreme Court found that

the appointment of a specified arbitrator was

unconscionable4. It did not find that the term was

4

In fact, a definite parallel can be drawn between the finding in

Hewitt that the naming of an industry-related arbitrator was

unconscionable to the complaint made against the NAF by the

State of Minnesota that the NAF had industry ties which created

a bias against consumers in its consumer arbitrations. See State

of Minnesota v. National Arbitration Forum, Inc., et al.,

State of Minnesota District Court, County of Hennepin Fourth

Judicial District, Case Number 27-CV-09-18550, of which this

Court may take judicial notice. As such, it would not be a stretch

20

“integral” necessitating that the arbitration agreement

be avoided, but rather treated it appropriately that

since the named arbitrator was not now available, a

substitute would be appointed. Hewitt at 813. Thus,

the Missouri Supreme Court Decision is in conflict with

its own decision in Hewitt.

Further, to apply the Missouri Supreme Court’s

integral/ancillary analysis to avoid arbitration used in

this instant case is in direct contravention of the

requirement of §2 of the FAA which states:

A written provision in any maritime transaction

or a contract evidencing a transaction involving

commerce to settle by arbitration a controversy

thereafter arising out of such contract or

transaction, or the refusal to perform the whole

or any part thereof, or an agreement in writing

to submit to arbitration an existing controversy

arising out of such a contract, transaction, or

refusal, 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.

One of the key phrases in this provision is the last

two words of the last sentence – “any contract.” The

construction used by the Missouri Supreme Court to

of any imagination for the Circuit Court to have found the

appointment of NAF in the subject case as unconscionable

(assuming that NAF was still available at the relevant point in

time) and appointed a substitute arbitrator just as was done in

Hewitt.

21

find that the NAF was “integral” does not treat the

parties’ arbitration agreement the same as “any

contract” but rather creates a special rule for an

arbitration agreement to limit and/or invalidate the

arbitration of the parties’ dispute. Missouri recognizes

that the FAA places arbitration agreements on an

equal footing with all other contracts, and the courts

are to “examine arbitration agreements in the same

light as they would examine any contractual

agreement.” Triarch Indus. v. Crabtree, 158 S.W. 3d

772, 776 (Mo. banc 2005)(citing to cases therein).

Indeed, this Honorable Court has held that §2

“establishes an equal-treatment principle: A court may

invalidate an arbitration agreement based on

“generally applicable contract defenses” like fraud or

unconscionability, but not on legal rules that “apply

only to arbitration or that derive their meaning from

the fact that an agreement to arbitrate is at issue.”

Kindred Nursing Ctrs. Ltd. P’ship v. Clark, 137

S.Ct. 1421, 1426 (2017)(citing to AT&T Mobility LLC

v. Concepcion, 563 U.S. 333, 339 (2011). To follow the

Missouri Supreme Court’s application of the

integral/ancillary analysis is in direct contradiction of

that established law.

The FAA preserves “generally applicable contract

defenses” but preempts “defenses that apply only to

arbitration or that derive meaning from the fact that

an agreement to arbitrate is at issue.” Hewitt, 461

S.W.3d at 823 (citing to Concepcion, 563 U.S. at 341343). In addition to putting arbitration agreements on

equal footing with other contracts, this provision is

meant to “lessen perceived judicial hostility toward

arbitration.” Hewitt at 823 (citing to Robinson v.

Title Lenders, Inc., 364 S.W.3d 505, 512 (Mo. banc

22

2012)). The cites were made in the separate opinion

filed by Judge Teitelman concurring in part and

dissenting in part which was filed in Hewitt, which

then went on to state that “The elimination of

perceived judicial hostility toward arbitration does not

require unbridled judicial enthusiasm for arbitration.

Instead, all that is required is neutrality.” Hewitt at

823.

The application of the integral/ancillary analysis

definitely puts arbitration contracts on different

footings than other contracts. Neutrality is required.

Application of the special integral/ancillary analysis is

not neutral but is a judicially-created justification to

invalidate an arbitration agreement, inappropriately

adding requirements to the FAA.

5. This Implications of This Case Reach

Beyond the Application of §5 of the FAA.

The implications of this case also reach beyond the

determination of if §5 of the FAA should apply – if the

use of the integral/ancillary analysis is allowed to

continue to avoid an arbitration agreement and add a

requirement to the FAA, some courts will be

empowered to use their ability to arbitrarily construe

arbitration agreements to avoid application of the FAA,

violating the separation of powers doctrine. Such a

contract construction in essence re-writes the

legislative statute. “We are not at liberty to rewrite the

statute passed by Congress and signed by the

President.” Henry Schein, Inc. v. Archer & White

Sales, Inc., 2019 U.S. LEXIS 566, *5 (just-issued

majority opinion by Judge Kavanaugh regarding the

application of the FAA).

23

Conclusion

The petition for a writ of certiorari should be

granted.

Respectfully submitted:

Mark D. Murphy

Counsel of Record

The Murphy Law Firm

6640 West 143rd Street, Suite 250

Overland Park, Kansas 66223-2104

(913) 647-8090

mmurphy@mlf-llc.com

Counsel for Petitioner

A-1 Premium Acceptance, Inc.,

d/b/a King of Kash