Petition for Writ of Certiorari — Green Tree Financial Corp.-Ala. v. Randolph
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99123 5 Jan 2 1 0099
Ne, 5——— OFFICE OF THE epg
IN THE
Supreme Court of the United States
GREEN TREE FINANCIAL CorP.—ALABAMA,
AND GREEN TREE FINANCIAL CORPORATION,
Petitioners,
Vv.
LARKETTA RANDOLPH,
Respondent.
On Petition for Writ of Certiorari to the
United States Court of Appeals
for the Eleventh Circuit
PETITION FOR WRIT OF CERTIORARI
ROBERT A. HUFFAKER CARTER G. PHILLIPS *
WILLIAM H. WEBSTER PAUL J. ZIDLICKY
RUSHTON, STAKELY, JOHNSTON SIDLEY & AUSTIN
& GARRETT, P.A. 1722 Eye Street, N.W.
184 Commerce Street Washington, D.C. 20006
Montgomery, AL 36101-0270 (202) 736-8000
(334) 206-3100
Counsel for Petitioners
January 21, 2000 * Counsel of Record
PEATE I TIN PP” TTT PEELE EEO OSM OY TORI SETI ELE A ATE TNE
WILSON-Epzs Printine Co., Inc. - (202) 789-0096 - WASHINGTON, D.C. 20001
QUESTIONS PRESENTED
1. Whether the court of appeals erred in concluding
that an order compelling arbitration and dismissing a law-
suit’s underlying claims is a “final decision with respect
to an arbitration” appealable under 9 U.S.C. § 16(a)(3).
2. Whether the court of appeals erred in concluding
that an arbitration provision that was “silent” on the issue
of costs and fees was unenforceable under the Federal
Arbitration Act because the risk that plaintiff “might” be
required to bear unknown costs and fees potentially
undermined her ability to vindicate statutory rights.
(i)
ii
STATEMENT REQUIRED BY RULE 29.6
Pursuant to Rule 29.6 of the Rules of this Court, peti-
tioners state that they are wholly owned subsidiaries of
Conseco, Inc., an Indiana corporation whose stock is
publicly traded. Petitioners further state that no publicly
owned company owns ten percent or more of the stock
of Conseco, Inc.
TABLE OF CONTENTS
QUESTIONS PRESENTED 2000.0... ..ec.eccccecesecteseeeseeeeses
STATEMENT REQUIRED BY RULE 29.6 ..................
TABLE OF AUTHORITIES ....0.00..............c.-csceseeeeeeesenes
I EEIDNIIT .dacscdeelcraiicinanikaneiesneesnectcaiehacicibivinseintiiene
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RELEVANT STATUTORY PROVISIONS
STATEMENT OF THE CASE ...................202..................
I le ceablnaeeenbeine
Em Ree REST Be 1 OOS RE NE
Decision of the Court of Appeals ..........
REASONS FOR GRANTING THE PETITION ............
I.
II.
THE CASE SQUARELY PRESENTS AN IM-
PORTANT ISSUE REGARDING THE SCOPE
OF APPELLATE JURISDICTION OF OR-
DERS DISMISSING CASES IN FAVOR OF
ARBITRATION UNDER THE FEDERAL
ARBITRATION ACT THAT HAS SHARPLY
DIVIDED THE COURTS OF APPEALBS..........
THE COURT OF APPEALS’ DECISION
THAT THE ARBITRATION CLAUSE WAS
UNENFORCEABLE PRESENTS AN IMPOR-
TANT ISSUE OF FEDERAL LAW THAT
HAS GENERATED A CONFLICT AMONG
THE COURTS OF APPEALS .............................
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Cece rene eeeeeeeeceeese
ii
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12
14
83
iv
TABLE OF AUTHORITIES
CASES Page
Altman Nursing, Inc. v. Clay Capital Corp., 84
if &. BF: | 3 | RRemreeences 18
Armijo v. Prudential Ins. Co., 72 F.3d 793 (10th
I a a i cealeieaeleaainl 12, 19, 20
Arnold v. Arnold Corp., 920 F.2d 1269 (6th Cir.
Ree erate ane ee eA ORIN NNER sh Daan 12, 19, 21
Cole v. Burns Int’l Sec. Servs., 105 F.3d 1465 (D.C.
aaa 25, 26
Dobbins v. Hawks Enters., No. 99-1582, 1999 WL
1256184 (8th Cir. Dec. 23, 1999) ...........000000000..... 25, 26
Dorsey Vv. H.C.P.S. Sales, Inc., 46 F. Supp. 2d 804
SE Is UII sciecisip cassia celeriac ieedlheeeiinmcicaed 25
Filanto, S.p.A. v. Chilewich Int'l Corp., 984 F.2d
. fe eee eee 2, 18, 21
Gammaro vy. Thorp Consumer Discount Co., 15
F.3d 93 (8th Cir. 1994) ................. 17
Ex Parte Gates, 675 So. 2d 371 (Ala. 1996) ............. 24
Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
5 ee es RO ey Denese 23, 25
Green Tree Agency, Inc. v. White, 719 So. 2d 1179
PI UI cinch tials delete oceaalaaa 24
Green Tree Financial Corp. v. Davis, 729 So. 2d
gg Se FRR rie er en 24
Green Tree Financial Corp. v. Vintson, No.
1972191, 1999 WL 778496 (Ala. Oct. 1, 1999)... 24
Green Tree Financial Corp. v. Wampler, Nos.
1970983, 1971029, 1999 WL 667292 (Ala. Aug.
Bs Fe in vd sees teacosachseaetienrnctiaendeadiieceaiindbincamaitiebansiianaenlbis 24, 25
Harris v. Green Tree Financial Corp., 183 F.8d
SR CT, Te pisiiissadeicitbabhademeeinniaccnnscbinaliiadioe 25
Humphrey v. Prudential Sec. Inc., 4 F.8d 313 (4th
| Serer Pere Sr a ee ee ORO ce 17, 18
John Hancock Mut. Life Ins. Co. v. Olick, 151 F.3d
153 (Oe Cot. See edit ceeds 18
Koveleskie vy. SBC Capital Markets, Inc., 167 F.3d
861 (7th Cir.), cert. denied, 120 S. Ct. 44
ID sssisin oedbaciighanaicaaiesicastteahesccuanidisaenseinihaligidalesidaimeitibiial 27, 28
Lackey v. Green Tree Financial Corp., 498 S.E.2d
898 (S.C. Ct. App. 1998) ..... is 25
a re re eae ne
v
TABLE OF AUTHORITIES—Continued
Page
McCarthy v. Providential Corp., 122 F.3d 1242
(9th Cir. 1997), cert. denied, 119 S. Ct. 275
ITI sxcevssnstinsenesinhsthiespebioiisoesisgteidshsnciieiiaaiaiaeaamaelieiinalacsss 16, 17, 22
Mitsubishi Motors Corp. vy. Soler Chrysler-Ply-
mouth, Inc., 473 U.S. 614 (1985) -....000220200.22-e. ee 24
Moses H. Cone Mem’l Hosp. vy. Mercury Constr.
SS 8! SS eee 23
Ex Parte Napier, 723 So. 2d 49 (Ala. 1998) .......... 24
Napleton v. General Motors Corp., 138 F.3d 1209
(7th Cir.), cert. denied, 119 S. Ct. 341 (1998) .... 15, 16,
18, 21, 22
Ex Parte Parker, 730 So. 2d 168 (Ala. 1999) ........ 24
In re Pate, 198 B.R. 841 (Bankr. S.D. Ga. 1996).... 25
Patrick Home Ctr. Inc. vy. Karr, 730 So. 2d 1171
EAT, SED <isecocnksSnssuisssibaiouiedilesaccteieibaiinddeihdaiaiieacublanaadinige 24
Perera Vv. Siegel Trading Co., 951 F.2d 780 (7th
PEs MM chseiee cisceharesaeiehcesttaiins edad ie ORG Dare ee Alas 2, 16, 21
Pierman vy. Green Tree Financial Servicing Corp.,
933 P.2d 955 (Okla. Ct. App. 1997) ..................... 25
Rosenberg v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 170 F.3d 1 (1st Cir. 1999) ................ 27,28 ~
Seacoast Motors of Salisbury, Inc. v. Chrysler
Corp., 143 F.3d 626 (1st Cir.), cert. denied, 119
eR Re eee Le ee, 15, 20, 22
Security Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d
369 (6th Cir. 1999), petition for cert. filed, 68
USLW 3291 (U.S. Oct. 18, 1999) (99-669) ........ 19
Shearson/American Express Inc. v. McMahon, 482
it & Bi) eeeverees suaceegiiclaciaibiasiecan 24, 28
Ex Parte Smith, 736 So. 2d 604 (Ala. 1999).......... 24
FEDERAL STATUTES
Judicial Improvements Act of 1990, Pub. L. No.
a I i 1
9 UB, 6G BBS q2.2.2.0-- css einiihaceielcasimiliaiigbeiabsatabincepnns 1
OF sschotinbeneneniiconseiaiciioahinnsaeninegpacientinioaadmimimalide 2, 23
TROD sibchensasiciinsestisitainainitacintiannlbieeiiesdeaadiesaodasalddaiinn 7
OD winicctctintintcsmralenemasiinionisanisiphialgdaghalia 1, 2, 3, 15
vi
TABLE OF AUTHORITIES—Continued
Page
Oe i I OG OI, siienissicecciitenesesctiteatecisonciitilennisis 5
SESE U DE oe SEMEN Eh 5
OTHER AUTHORITY
David R. Siegel, Practice Commentary to 9
U.S.C.A. §16 (West 1999) 0 2
PETITION FOR WRIT OF CERTIORARI
Petitioners Green Tree Financial Corp.—Alabama and
Green Tree Financial Corporation respectfully request
that this Court grant their petition for certiorari to review
the decision of the United States Court of Appeals for
the Eleventh Circuit.
OPINIONS BELOW
The opinion of the court of appeals is published at 178
F.3d-1149 (11th Cir. 1999) and appears in the Appen-
dix.to this Petition (“Pet. App.”) at la-19a. The court
of appeals’ unpublished order denying the petition for
rehearing en banc appears at Pet. App. 55a-56a. The
district court’s memorandum opinion and order is pub-
lished at 991 F. Supp. 1410 (M.D. Ala. 1997) and
appears at Pet. App. 20a-50a. The district court’s order
denying respondent’s motion for reconsideration is pub-
lished at 991 F. Supp. at 1425-26 and appears at Pet.
App. 51a-54a. |
JURISDICTION
The court of appeals entered judgment on June 22,
1999, and denied a timely petition for rehearing on Octo-
ber 28, 1999. This Court has jurisdiction under 28
U.S.C. § 1254(1).
RELEVANT STATUTORY PROVISIONS
The Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-
16, provides appellate jurisdiction for appeals from vari-
ous categories of district court orders relating to arbitra-
tion. Id. § 16. Included among the category of appeal-
able orders is “a final decision with respect to an arbitra-
tion.” Id. § 16(a)(3).4 Section 16 also provides that
1 Section 16 originally was codified at 9 U.S.C. § 15, and was
renumbered without change by the Judicial Improvements Act of
1990, Pub. L. No. 101-650, § 325(a)(1), 104 Stat. 5089, 6120.
2
“an appeal may not be taken from an interlocutory order
. .. directing arbitration to proceed... .” Id. § 16(b)(2).
Finally, Section 2 of the FAA 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.” Id. § 2.
STATEMENT OF THE CASE
Statutory Background
This case presents the issue of the proper construction
of Section 16 of the 1988 Amendments to the FAA, 9
U.S.C. § 16. Prior to 1988, an arbitration decision that
did not qualify for either injunctive appeal under 28
U.S.C. § 1292(a) or discretionary appeal under § 1292(b)
was appealable only if it qualified as a “final decision”
under 28 U.S.C. § 1291. To determine whether an order
constituted a “final decision” under 28 U.S.C. § 1291,
courts of appeals drew a distinction “between cases in
which arbitration [wa]s the only claim for relief [i.e., “in-
dependent” proceedings] and cases in which arbitration
{wa]s raised in the midst of a proceeding for other relief
[i.e., “embedded” proceedings].” Perera v. Siegel Trad-
ing Co., 951 F.2d 780, 784 (7th Cir. 1992). Arbitration
orders in “independent” proceedings were classified as
“final decisions” appealable under 28 U.S.C. § 1291;
arbitration orders in “embedded” proceedings were classi-
fied as interlocutory and could not be appealed under
28 U.S.C. § 1291. See, e.g., id. at 784.
Against this background, Congress enacted Section 16
“to prevent the appellate aspect of the litigation process
from impeding the expeditious disposition of an arbitra-
tion” (David R. Siegel, Practice Commentary to 9
U.S.C.A. § 16, at 495 (West 1999)) and to “promote
appeals from orders barring abitration and limit appeals
from orders directing arbitration,” Filanto, S.p.A. v.
Chilewich Int'l Corp., 984 F.2d 58, 60 (2d Cir. 1993).
a UN
3
That congressional purpose is reflected in the fact that
Section 16 grants jurisdiction over anti-arbitration orders
and denies appellate jurisdiction over orders favoring
arbitration. Thus, Section 16 allows immediate appeals
from orders “refusing a stay of any action { pending arbi-
tration],” 9 U.S.C. § 16(a)(1)(A), denying a petition
“to order arbitration to proceed,” id. § 16(a)(1)(B),
denying an application “to compel arbitration,” id.
§ 16(a)(1)(C), “denying confirmation of an {arbitra-
tion] award or partial award,” id. § 16(a)(1)(D), and
“modifying, correcting, or vacating an award,” id. § 16
(a)(1)(E). Similarly, Section 16 authorizes immediate
appeal from “an interlocutory order granting, continuing,
or modifying an injunction against an arbitration that is
subject to [the FAA],” id. § 16(a) (2).
On the other hand, Section 16(b), which largely mir-
rors Section 16(a)(1), severely limits “interlocutory” ap-
peals from pro-arbitration orders. Jd. § 16(b). Thus,
absent compliance with the discretionary requirements of
28 U.S.C. § 1292(b), a party is prohibited from appeal-
ing an interlocutory order “granting a stay of any action
[pending arbitration],” id. § 16(b)(1), “directing arbi-
tration to proceed,” id. § 16(b)(2), “compelling arbitra-
tion,” id. § 16(b)(3), or “refusing to enjoin an arbitra-
tion that is subject to {Title 9],” id. § 16(b)(4). Because
these orders favor arbitration, Congress dictated that ap-
pellate review of them must await a “final decision” by
the district court terminating the controversy following
the completion of the arbitration. Id. § 16(a)(3).
Factual Background
On January 25, 1994, respondent Larketta Randolph
(“Respondent”) purchased a mobile home from Better
Cents Home Builders Inc. (“Better Cents”). Pet. App.
2a. Respondent financed the purchase through Petitioner
Green Tree Financial Corp.—Alabama, a wholly owned
4
subsidiary of Green Tree Financial Corporation (collec-
tively, “Petitioners”). Jd. The financing documents for
the purchase required that respondent acquire “ ‘vendor's
single interest’” insurance, which protects a vendor or
lienholder against the costs associated with repossession
of the property in the event of a loan default. Id. Re-
spondent’s retail installment contract with Better Cents
identified petitioner Green Tree Financial Corp.—Ala-
bama as the assignee and contains the arbitration provi-
sion at the center of this dispute. Jd. at 2a-3a.
The arbitration provision provides that “ ‘{aJll disputes,
claims, or controversies arising from or relating to this
Contract or the relationships that result from this Con-
tract, or the validity of this arbitration clause or the entire
Contract, shall be resolved by binding arbitration by one
arbitrator selected by Assignee with the consent of
Buyer(s).’” Pet. App. 3a. Moreover, by entering into
the contract, the parties acknowledged that “ ‘[t]his arbi-
tration Contract is made pursuant to a transaction in in-
terstate commerce” that is “governed by the Federal Arbi-
tration Act at 9 U.S.C. Section 1.’” Id. In addition, the
arbitration provision provides:
The parties agree and understand that all disputes
arising under case law, statutory law, and all other
laws including, but not limited to, all contract, tort,
and property disputes, will be subject to binding arbi-
tration in accord with this Contract. The parties
agree and understand that the arbitrator shall have
all powers provided by the law and the Contract.
These powers shall include all legal and equitable
remedies, including, but not limited to, money dam-
ages, declaratory relief, and injunctive relief.
Id. at 57a (emphases added). The arbitration provision
is reproduced in its entirety at Pet. App. 57a-58a.
In January 1996, respondent filed an action in the
United States District Court for the Middle District of
5
Alabama, alleging that petitioners violated the Truth in
Lending Act, 15 U.S.C. § 1601 et seg. (“TILA”), by
failing to include the requirement that respondent pur-
chase vendor’s single interest insurance in the TILA dis-
closure, and violated the Equal Credit Opportunity Act,
15 U.S.C. §§ 1691-1691f (“ECOA”), by requiring arbi-
tration of all statutory claims. Pet. App. 21a-22a. Re-
spondent requested certification of a class action of all
individuals that had entered into similar agreements
with petitioners and sought monetary damages, including
attorneys’ fees and recovery of litigation expenses. Id. at
22a, 27a. In lieu of an answer, petitioners responded by
filing a Motion to Stay Action and Compel Arbitration.
Id.
In resolving that Motion to Stay, the district court did
not address the merits of respondent’s underlying claims
but instead focused on whether respondent could be com-
pelled to arbitrate those claims. Pet. App. 26a n.5. Be-
cause the contract satisfied the necessary interstate com-
merce nexus, the court ruled that the FAA applied. Id.
at 23a n.4 (citing Allied-Bruce Terminix Cos. v. Dobson,
513 U.S. 265 (1995)). The district court noted that by
enacting the FAA, Congress “manifested a ‘liberal federal
policy favoring arbitration agreements,’” and sought
“to reverse the longstanding judicial hostility to arbitra-
tion agreements that had existed at English common law
and had been adopted by American courts’ ” by “plac[ing]
arbitration agreements upon the same footing as other
contracts.” Jd. at 24a (quoting Gilmer v. Interstate/
Johnson Lane Corp., 500 U.S. 20, 25 (1991) and Moses
H. Cone Mem’! Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24 (1983)). Further, the district court acknowl-
edged that “ ‘questions of arbitrability must be addressed
with a healthy regard for the federal policy favoring arbi-
tration.”” Jd. (emphasis added) (quoting Moses H.
Cone, 460 U.S. at 24).
6
To resolve whether respondent could be compelled to
arbitrate her statutory claims, the district court applied a
settled two-part test that required determination of “[1]
whether the Parties’ agreement to arbitrate reaches the
Statutory issues, and . . . [2] whether legal constraints
external to the Parties’ agreement foreclosed the arbitra-
tion of those claims.” Pet. App. 27a. First, the district
court concluded that the arbitration provision encom-
passed respondent’s statutory claims under TILA and the
ECOA. Id. at 28a. Noting that, by its terms, the arbi-
tration provision applied to “‘[a]ll disputes, claims or
controversies arising from or relating to this Contract
or the relationships which result from this Contract, or
the validity of th[e] arbitration clauses or the entire con-
tract,” and “ ‘that all disputes arising under case law,
statutory law, and all other laws, including, but not lim-
ited to, all contract, tort and property disputes will be
subject to binding arbitration in accord with this Con-
tract,’” the district court concluded that this language
was “sufficiently broad to encompass [respondent’s] TILA,
[ECOA], and other claims.” Jd. (emphasis added).
Second, the district court explained that by agreeing
to arbitrate a statutory claim “‘a party does not forgo
the substantive rights afforded by the statute; it only
submits to their resolution in an arbitral, rather than a
judicial, forum. It trades the procedures and opportunity
for review of the courtroom for the simplicity, informality,
and expedition of arbitration.” Pet. App. 29a (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
473 U.S. 614, 628 (1985)). Accordingly, the district
court concluded that respondent bore the burden of show-
ing that Congress intended to preclude a waiver of judi-
cial remedies based on “either the text of the statute(s),
their legislative histories, or from an inherent conflict be-
tween arbitration and the statutes’ underlying purposes.”
Id. at 30a.
7
Because respondent did “not cite any provision of the
text or legislative history of either the TILA or the
[ECOA] that expressly preclude{[d] waiver of judicial
remedies,” the district court considered whether there was
evidence of a “conflict between arbitration and the stat-
utes’ underlying purpose.” Pet. App. 30a. The district
court explained that “ ‘the fact that [TILA] provides for
the possibility of bringing a collective action does not
mean that individual attempts at conciliation were in-
tended to be barred.’” Id. at 33a (quoting Gilmer, 500
U.S. at 32). Because respondent did not “cite any com-
pelling evidence in support of her position,” the district
court concluded that she “failed to meet her burden of
showing why the arbitration provision in her contract
should not be enforced.” Id. at 38a. Similarly, the dis-
trict court rejected as “unpersuasive” respondent’s argu-
ment that 15 U.S.C. § 1691(a)(3), which bars a creditor
from extending credit conditioned on the release of poten-
tial claims for TILA violations that arose in the past,
rendered the arbitration provision unenforceable. Jd. at
34a-35a.?
Accordingly, the district court granted petitioners’ mo-
tion to compel respondent to submit her claims “to bind-
ing arbitration pursuant to the arbitration provision in her
contract.” Pet. App. 49a. Acknowledging that it was
authorized to stay the proceedings and compel arbitration,
see 9 U.S.C. § 3, the district court instead concluded that
dismissal was appropriate because all of respondent's
claims were to be submitted to arbitration in accordance
with the arbitration provision. Pet. App. 48a.
2The district court also rejected respondent’s arguments that
(1) the arbitration provision was not “[e]nforceable for lack of
mutuality of obligation,” Pet. App. 40a, 42a, and (2) respondent
did not “knowingly enter into an agreement to arbitrate,” id. at
46a. Finally, the district court ruled that it was bound by circuit
precedent to reject respondent’s request to “certify a class” for
arbitration. Jd. at 48a.
8
On reconsideration, the district court adhered to its
prior ruling, explaining that it would “gladly modify and/
or vacate its [prior] Order,” if circumstances warranted.
Pet. App. 54a.
Decision of the Court of Appeals
The Eleventh Circuit reversed. Pet. App. 2a. First,
the court of appeals addressed whether the district
court’s order was a “ ‘final decision with respect to an
arbitration that is subject to [the FAA].’” Id. at 7a
(quoting 9 U.S.C. § 16(a)(3)). On that issue, the court
of appeals acknowledged that “a number of circuits” had
‘drawn a distinction between “ ‘embedded’ ” proceedings
in “which the arbitration issue arises as part of a broader
action dealing with other issues,” and “ ‘independent’ ”
proceedings, in which “the motion to compel arbitration
is the only issue before the court.” Jd. at 7a, 8a (em-
phasis in original omitted). The Eleventh Circuit recog-
nized that these “circuits have held that orders compelling
arbitration which arise in embedded proceedings must be
treated as interlocutory and non-appealable, not as ‘final
decisions’ under § 16(a)(3).” Id. at 7a3 Moreover, it
explained that at least five courts of appeals that had
adopted the embedded/independent framework for analyz-
3 Specifically, the court of appeals identified eight circuits in
which orders compelling arbitration in “embedded” proceedings
would be considered non-final for purposes of Section 16(a)(3).
Pet. App. 7a-8a (citing John Hancock Mut. Life Ins. Co. v. Olick,
151 F.3d 132, 185-36 (3d Cir. 1998); Seacoast Motors of Salisbury,
Inc. v. Chrysler Corp., 143 F.3d 626, 628 (1st Cir.), cert. denied,
119 S. Ct. 410 (1998); Napleton v. General Motors Corp., 188 F.3d
1209, 1212 (7th Cir.), cert. denied, 119 S. Ct. 341 (1998) ;
‘McCarthy v. Providential Corp., 122 F.8d 1242, 1243 (9th Cir.
- 1997), cert. denied, 119 S. Ct. 275 ( 1998); In re Pisgah Contrac-
. tors, Inc., 117 F.8d 133, 186 (4th Cir. 1997) ; Altman Nursing, Inc.
Vv. Clay Capital Corp., 84 F.3d 769, 771 (5th Cir. 1996); Gammaro
v. Thorp Consumer Discount Co., 15 F.3d 93, 95 (8th Cir. 1994);
. Filanto, S.p.A. v. Chilewich Int'l Corp., 984 F.2d 58, 60-61 (2d Cir.
1993) ).
9
ing finality under Section 16(a)(3) had held ‘that “a dis-
trict court’s order compelling arbitration in an embedded
Proceeding is interlocutory and non-appealable, even if
the district court dismisses the remaining claims.” Jd. at
8a (emphasis in Original omitted) (citing cases).
On the other hand, the Eleventh Circuit recognized
that “the Sixth and Tenth Circuits” had adopted a differ-
ent “approach to the question of whether an arbitration
order is an appealable ‘final decision’ under § 16(a)(3).”
Pet. App. 9a. In contrast to the majority rule, these two
circuits treated orders dismissing cases in favor of arbi-
tration as “final decisions” appealable under Section
16(a)(3). Id. ( citing Armijo v. Prudential Ins. Ca, 72
F.3d 793, 797 (10th Cir. 1995) and Arnold v. Arnold
Corp., 920 F.2d 1269, 1276 (6th Cir. 1990) ) 4
Having identified “a circuit split on the question
whether a district court’s order compelling arbitration in
an embedded proceeding is an appealable ‘final decision’
when it dismisses the remaining claims,” the court of
appeals explained that this was an issue “of first impres-
sion” in the Eleventh Circuit. Pet. App. 9a. In analyzing
the term “final decision” under Scction 16(a)(3), the
court of appeals explained that it would “proceed from a
different position than circuits such as the Seventh Circuit”
that had accorded “ ‘talismanic significance’ . . . to the
distinction between independent and embedded proceed-
ings.” Id. at 10a (citation omitted) (quoting Napleton
Vv. General Motors Corp., 138 F.3d 1209, 1211 (7th Cir.
1998). In doing so, the court of appeals acknowledged
that its rejection of the independent/embedded framework
was outcome determinative because, if it “followed the
# The court of appeals also noted that this minority approach was
supported by judges who had issued dissenting opinions in cases in
the Seventh and Ninth Circuits. Pet. App. 9a (citing Napleton,
188 F.8d at 1214-15 (Wood, J., dissenting) and McCarthy, 122
F.3d at 1246-47 (Pregerson, J., dissenting) ). '
10
other circuits (save the Sixth and Tenth) and attached
excessive significance to the ‘embedded’ versus ‘independ-
ent’ proceeding distinction,” then it would “lack jurisdic-
tion here.” Jd. at 11a.
Rejecting what it characterized as a “‘myopic’” reli-
ance on the “embedded/independent distinction,” the
Eleventh Circuit “decline[d]” to adopt the majority rule.
Pet. App. 8a, lla. Instead, it stated that the intent of
Section 16 was to “clear away the deadwood” and to
“furnish a clear rule for appealability of orders relating
to arbitration proceedings.’” Id. at 12a. (quoting Naple-
ton, 138 F.3d at 1217 (Wood, J., dissenting) ). Ignoring
the fact that the “embedded/independent” distinction pro-
vided just such a clear rule, the court of appeals looked
instead to statements in the legislative history of Section
16 to conclude that an “ ‘{a]ppeal can be taken from .. .
a final judgment dismissing an action in deference to
arbitration.” Jd. at 13a (quoting Arnold, 920 F.2d at
1274-75). Specifically, the court of appeals criticized the
analysis by the majority of the other Circuits, id. at 14a,
and held that the district court’s “order compelling arbi-
tration was an appealable ‘final decision’ under 9 U.S.C.
§ 16(a)(3),” id. at 15a.
Second, on the merits, the Eleventh Circuit considered
whether the arbitration provision was unenforceable.
While paying lip service to the “ ‘strong federal policy
favoring arbitration’” and recognizing that “procedural
apparatus of an arbitration ‘should not make an arbitra-
tion clause unenforceable,” Pet. App. 15a (quoting
5 The panel noted that the dismissal by the district court in this
case was “with prejudice,” Pet. App. 14a, and that was a “feature”
not present “in most” cases “relying on the embedded/independent
distinction.” Id. Of course, the cases applying the majority view
“did not clearly state the nature of the dismissal,” id., because
that factor has no bearing on the bright-line test that they had
adopted to determine whether an order comyelling arbitration was
a “final decision” under Section 16(a)(3).
11
Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054,
1062 (11th Cir. 1998)), the court of appeals ignored
these principles in ruling that the arbitration provision
was unenforceable because it “failfed] to provide the
minimum guarantees required to ensure that [respondent’s]
ability to vindicate her statutory rights will not be undone
by steep filing fees, steep arbitrators’ fees, or other high
costs of arbitration.” Jd. at 18a.
In doing so, the court of appeals failed to identify any
provision of TILA that would be frustrated by arbitra-
tion of respondent’s claims. Nor could the court of ap-
peals identify any evidence that arbitration of respondent’s
Statutory claims would result in the imposition of sub-
stantial arbitration costs or that she would bear those
costs. Indeed, the Eleventh Circuit ignored the fact that
the arbitration provision expressly provided that the arbi-
trator would have “all powers provided by the law.” Pet.
App. 57a. Instead, it relied upon the absence of any
record evidence on these issues to rule that the arbitra-
tion provision “raises serious concerns with respect to
filing fees, arbitrators’ costs and other arbitration expenses
that may curtail or bar a plaintiffs access to the arbitral
forum.” Jd. at 17a. While it acknowledged that (1)
the arbitration “clause is silent on the subject of arbitra-
tion fees and costs,” id. at 19a, and (2) that there was
no evidence regarding the amount or apportionment of
those costs, the Eleventh Circuit nevertheless resolved
that failure of proof against arbitration by speculating
that respondent “might be required to bear substantial
costs of the arbitration even if she were to prevail.” Id.
(emphasis added).
Petitioners, joined by amici curiae, sought rehearing of
the court of appeals’ decision because, if allowed to stand,
it could jeopardize thousands, if not millions of arbitra-
tion agreements that do not specifically identify the costs
associated with arbitration or provide that the claimant
12
will not bear the costs of pursuing arbitration. The court
of appeals denied the petition for rehearing. Pet. App.
55a-56a.
REASONS FOR GRANTING THE PETITION
Further review of the decision of the Eleventh Circuit
is necessary in this case to ensure the proper and uniform
resolution of a recurring and important issue of appellate
jurisdiction that has sharply divided the courts of appeals.
Specifically, the case squarely presents the issue whether,
under Section 16(a)(3) of the FAA, a court of appeals
has jurisdiction over an appeal from a district court order
dismissing a case so that it may be resolved through arbi-
tration in accordance with the agreement of the parties.
The clear majority of circuit courts answer no, (see
note 3, supra), resolving this issue by analyzing the nature
of the underlying action to determine whether an order
compelling arbitration is truly a “final decision” under
Section 16(a)(3). Where the underlying action seeks
only a determination regarding arbitrability—i.e., an in-
dependent proceeding—an order compelling arbitration is
“final” and immediate appeal is authorized under Section
16(a)(3). Where the underlying action seeks relief other
than an order requiring or prohibiting arbitration—i.e.,
an embedded proceeding—an order compelling arbitration
is non-final and cannot be appealed immediately under
Section 16(a)(3). The majority rule provides a bright-
line, workable standard that implements the language of
Section 16 and furthers the strong federal policy favoring
arbitration that Section 16 was designed to foster.
While recognizing that the vast majority of circuit
courts had adopted this standard, the Eleventh Circuit in
this case expressly rejected it in favor of the minority
approach adhered to by two other courts of appeals. See
Armijo v. Prudential Ins. Co., 72 F.3d 793, 797, 799
(10th Cir. 1995); Arnold v. Arnold Corp., 920 F.2d
1269, 1275-76 (6th Cir. 1990). These courts of appeals
13
reject the “independent/embedded” framework and in-
stead employ a case-by-case analysis developed largely on
the basis of their review of statements culled from the
legislative history of Section 16. Specifically, the minority
approach looks to the label affixed by the district court
to an order compelling arbitration as the means for deter-
mining whether such order constitutes a “final decision”
immediately appealable under Section 16(a)(3). This
minority approach undermines the express purpose of the
FAA by forcing parties to appeal when there is doubt,
thereby causing delay and increasing the costs of the arbi-
tration process even when a district court has concluded
that claims brought in a lawsuit should, in accordance
with the parties’ agreement, be resolved in an arbitration.
The Court should grant certiorari to resolve this dis-
pute and adopt the majority view that dismissals in favor
of arbitration are not appealable where the relief sought
in the district court is broader than a determination
whether a controversy is subject to arbitration. This case
squarely presents that controversy. Indeed, the Eleventh
Circuit correctly acknowledged that if it “followed the
other circuits (save the Sixth and Tenth),” then it would,
contrary to its ultimate conclusion, “lack jurisdiction
here.” Pet. App. 11a. In short, this case presents a
recurring issue of paramount importance to the congres-
sional scheme governing arbitration under the FAA that
has generated substantial conflicts among the courts of
appeals.
Even if the court of appeals had jurisdiction to review
the district court’s order compelling arbitration, the Elev-
enth Circuit’s analysis and holding that the arbitration
provision was unenforceable independently calls for plen-
ary review by this Court. While recognizing that the arbi-
tration provision was “silent” on issues such’ as the filing
fees, arbitrators’ fees and other “costs of arbitration,” the
court of appeals’ approach adopted a presumption against
14
arbitration and imposed the burden of proof on petitioners
to establish that arbitration would not undermine respond-
ent’s ability to vindicate her statutory rights. That ap-
proach conflicts with clear rulings by this Court and de-
cisions of the courts of appeals that properly interpret
such provisions in light of the strong federal policy favor-
ing arbitration and impose the burden of proving unen-
forceability on the party seeking to avoid arbitration.
If left unreviewed, the decision below would have a
dramatic effect on the ability of parties to order their
affairs by adopting arbitration as their chosen means to
resolve potential disputes. Under the Eleventh Circuit's
analysis, an arbitration agreement must anticipate and
expressly address in a comprehensive manner all of the
potential costs and procedural issues associated with
arbitration lest an omission be construed against arbitra-
tion, rendering the agreement to arbitrate unenforceable.
I. THE CASE SQUARELY PRESENTS AN IMPOR-
TANT ISSUE REGARDING THE SCOPE OF AP-
PELLATE JURISDICTION OF ORDERS DISMISS-
ING CASES IN FAVOR OF ARBITRATION UNDER
THE FEDERAL ARBITRATION ACT THAT
HAS SHARPLY DIVIDED THE COURTS OF
APPEALS.
The decision of the court of appeals deepens an already
mature conflict among the Circuits on the recurring issue
of whether an order compelling arbitration in “embedded
proceedings” is a “final decision with respect to an arbi-
tration” subject to immediate review under 9 U.S.C.
-§ 16(a)(3). As acknowledged by the court of appeals
in this case, the decision below is flatly inconsistent with
holdings by five other courts of appeals and conflicts with
the reasoning of at least three others. Pet. App. 7a-9a.
By contrast, the legal standard adopted below is sup-
ported by that of two other courts of appeals. Further
review by this Court is plainly warranted to provide uni-
formity on a fundamental issue involving the FAA.
15
a. On one side of this legal divide are courts of ap-
peals that distinguish between “independent” and “em-
bedded” proceedings as the means for determining whether
a district court order compelling arbitration is “a final
decision with respect to an arbitration that is subject to
{Title 9].” 9 U.S.C. § 16(a). These courts have held
that an order compelling arbitration in an embedded pro-
ceeding cannot be appealed immediately, regardless of
whether the district court enters a stay or dismisses the
case in its entirety.
In Seacoast Motors of Salisbury, Inc. v. Chrysler Corp.,
143 F.3d 626 (1st Cir. 1998), the First Circuit dismissed
for want of jurisdiction an appeal by an auto dealership
from an order compelling arbitration and dismissing the
case with costs. Jd. at 627. Recognizing that “other cir-
cuits have been divided on the issue,” id. at 628, the Sea-
coast Court sided with the “circuits [that] have focused on
the distinction between embedded and independent pro-
ceedings to determine whether jurisdiction exists over an
appeal from a dismissal of an order favoring arbitration,”
id. Expressly rejecting the analysis of several other courts
of appeals, id., and adopting the analysis of the Ninth,
Eighth, Seventh, Fifth, and Fourth Circuits, id. at 628-
29, the Seacoast Court held that it lacked jurisdiction
under Section 16(a)(3) to review whether an order com-
pelling arbitration was proper and explained that its anal-
ysis “avoid{ed] elevating form over substance and pro-
mote[d] both the pro-arbitration purposes of the FAA and
the institutional goal of avoiding piecemeal appeals and
systemic delays.” Id. at 629.
The ruling in Seacoast built directly on the Seventh
Circuit’s decision in Napleton v. General Motors Corp.,
138 F.3d 1209 (7th Cir. 1998). There, the court of
appeals considered whether the dismissal of an embedded
case “ ‘to allow for arbitration’ constitutes an appealable
—i.e. final—decision.” Id. at 1212. Noting that other
16
circuits had addressed similar questions without reaching
“unanimity in their answers,” id., the Seventh Circuit ex-
plained that “the jurisdictional lodestar of appealability is
whether the decision favoring arbitration is from an in-
dependent or from an embedded proceeding,” id. (em-
phasis added). The Seventh Circuit held that “it is the
nature of the underlying action, not the style of the dis-
trict court’s decision requiring arbitration, that determines
whether we have jurisdiction over appeals from decisions
granting arbitration.” Jd. In contrast, adoption of the
contrary rule, would render determinative “whether the
district judge dismissed rather than stayed an action,”
thereby permitting the district court to manipulate whether
a “party seeking to avoid arbitration could appeal im-
mediately,” an arbitrary result that Congress could not
have intended. Id. at 1213. Accordingly, the Napleton
court concluded that it would have “jurisdiction over ap-
peals from independent proceedings” and would “decline
to find jurisdiction over appeals from embedded proceed-
ings.” Id. at 1212.8
Similarly, in McCarthy v. Providential Corp., 122 F.3d
1242 (9th Cir. 1997), the Ninth Circuit considered an
appeal from an order requiring plaintiffs to arbitrate their
claims under the TILA and dismissing the underlying ac-
tion. Id. at 1243. Applying the bright-line embedded/
independent “analysis” that had “been followed by the
majority of courts,” the McCarthy Court concluded that
the order compelling arbitration arose in an embedded
proceeding and therefore was not a “final decision” under
9 U.S.C. § 16(a)(3). Id. at 1244 (identifying conflict-
ing analysis by Tenth and Sixth Circuits). Relying on
precedent from the Eighth Circuit, the McCarthy Court
6 Accord Perera v. Siegel Trading Co., 951 F.2d 780, 786 (7th
Cir. 1992) (holding that order compelling arbitration and entering
judgment under Rule 54(b) was not a final decision under Section
16(a)(3)).
ee ee eee
17
rejected a separate test for cases where the district court
ordered dismissal, rather than a stay, of the judicial pro-
ceeding because that distinction would “ignor[e] the clear
dictates of the FAA” and would contravene the intent of
Congress. Id. at 1245.
In Gammaro vy. Thorp Consumer Discount Co., 15
F.3d 93 (8th Cir. 1994), the Eighth Circuit dismissed
an appeal from the district court’s decision ordering the
parties to proceed to arbitration to resolve allegations
arising under the TILA and dismissing plaintiffs’ class
action allegations. Id. at 94. Relying on “a number of
well-reasoned decisions handed down” by other courts of
appeals, the Eighth Circuit agreed that in enacting Sec-
tion 16, “Congress simply ‘built upon the distinction the
courts had previously recognized between so-called “in-
dependent” proceedings and so-called “embedded” pro-
ceedings.’” Id. at 95 (quoting Filanto, 984 F.2d at 60)
(noting that Sixth Circuit adopted conflicting analy-
sis). The Gammaro court explained that this “bright-line
rule” was a “product of Congress’s purpose” which would
be undermined if the court of appeals adopted “a more
attenuated, case-by-case determination of jurisdiction.”
Id. at 96 (citing Humphrey v. Prudential Sec. Inc., 4
F.3d 313, 318 (4th Cir. 1993)). Indeed, warning that
it would “brook no delay in requiring compliance with
orders compelling arbitration,” the Eighth Circuit made
clear that “[f]uture appeals from such orders in embedded
proceedings will be subject to dismissal without opinion,
sua sponte if necessary.” Id.
Finally, in Humphrey v. Prudential Securities Inc., 4
F.3d 313 (4th Cir. 1993), the Fourth Circuit dismissed
for lack of jurisdiction an appeal of a decision ordering
arbitration of all the substantive claims raised in a com-
plaint. Id. at 314, 319. There, the district court “re-
tained jurisdiction through - its stay only to enforce or
vacate a forthcoming arbitration award.” Id. at 317. ‘As
T8
a result, the Court was required to address “whether an
embedded action may give rise to a final decision subject
to section 16(a)(3) review when all the claims in which
the arbitration issue is embedded are disposed of.” Jd. at
318. Concluding that Congress intended courts to rely
upon “ ‘preexisting judicial interpretation’” to define the
term “ ‘final decision,’” the Fourth Circuit ruled that “ ‘ar-
bitration orders [are] final if arbitration is the sole issue
before the court and interlocutory if raised in an em-
bedded proceeding.’” Jd. (alteration in original) (quot-
ing Perera v. Siegel Trading Co., 951 F.2d 780, 784, 785
(7th Cir. 1992)). Accordingly, the Humphrey Court
held “that an embedded proceeding may not give rise
to a final decision subject to section 16(a)(3) review.”
Id."
Taken together, these cases establish that the clear ma-
jority of the courts of appeals have adoned the embedded/
independent framework as the “jurisdictional lodestar of
appealability.” Napleton, 138 F.3d at 1212. Accordingly,
the order in this case compelling arbitration in an em-
bedded proceeding could not give rise to a “final decision”
under section 16(a)(3) in those Circuits and thus the
arbitration proceeding would have had to run its course
before the courts could intervene. By the happenstance
of geography, that majority rule was not followed by the
court below.
b. On the opposite side of this debate are decisions by
the Sixth and Tenth Circuits and the decision by the
7 See also John Hancock Mut. Life Ins. v. Olick, 151 F.3d 132, 185-
36 (3d Cir. 1998) (adopting embedded/independent analysis to as-
sess whether order constitutes final decision appealable under 9
U.S.C. § 16(a)(8)); Altman Nursing, Inc. v. Clay Capital Corp., 84
F.3d 769, 771 (5th Cir. 1996) (“[T]here can never be an interlocu-
tory appeal from an embedded proceeding”); Filanto, S.p.A. v.
Chilewich Int’l Corp., 984 F.2d 58, 60 (2d Cir. 1993) (holding that
orders directing arbitration in embedded proceedings “are not im-
mediately appealable” ).
eee See eee
19
Eleventh Circuit in this case, each of which has exercised
jurisdiction under 9 U.S.C. § 16(a)(3) to review arbitra-
tion orders in embedded proceedings.
The earliest of these cases was Arnold vy. Arnold Corp.,
920 F.3d 1269 (6th Cir. 1990), where the Sixth Cir-
Cuit considered an appeal from an order compelling ar-
bitration and dismissing plaintiff's claims under the Secur-
ities and Exchange Act of 1934. Jd. at 1272, 1273.
Relying on snippets culled from the legislative history,
the Sixth Circuit concluded, in a circular fashion, that “a
final order [under section 16] is one which dismisses ‘an
action in deference to arbitration’ and enters a final judg-
ment.” Id. at 1275 (quoting Committee on the Judiciary,
Section by Section Analysis on $1482, 134 Cong. Rec.
$16,284 (daily ed. Oct. 14, 1988)). The Sixth Circuit
argued that by enacting Section 16, Congress “rejectfed]
the prior distinction made between orders brought solely
to compel specific performance of an agreement to arbi-
trate and orders granting or denying requests to compel
arbitration entered into . . . in an ongoing action for
legal relief on the underlying claims.” Jd. at 1276. See
also Security Watch, Inc. v. Sentinel Sys., Inc., 176 F.3d
369, 371 (6th Cir. 1999) (relying on Arnold to con-
clude that “an order dismissing an action in favor of ar-
bitration is a final order appealable under § 16(a)(3)”),
petition for cert. filed, 68 USLW 3291 (U.S. Oct. 18,
1999) (99-669).
Similarly, in Armijo v. Prudential Insurance Cm, 78
F.3d 793 (10th Cir. 1995 ), the Tenth Circuit held that
it had jurisdiction to review the district court’s decision
compelling arbitration of plaintiffs’ federal and state dis-
crimination claims and dismissing plaintiff's lawsuit. Id.
at 797. The Tenth Circuit drew a distinction between
orders compelling arbitration in which the lawsuit was
stayed—which were “non-final”—and orders compelling
arbitration and dismissing the proceedings—which were.
20:
“final order[s]” for which 9 U.S.C. § 16(a)(3) expressly
provided immediate appeal. Jd. Because the district
court’s decision ordering arbitration also dismissed the
case—rather than entering a stay—the Tenth Circuit con-
cluded that it was a “final order” expressly appealable
under 9 U.S.C. § 16(a)(3). Id.
Finally, in this case, the Eleventh Circuit acknowledged
the conflict among the courts of appeals, recognized that
the case before it implicated that conflict, and embraced
the minority position that an order compelling arbitration
and dismissing the case is a “final decision” for which
an immediate appeal lies under 9 U.S.C. § 16(a)(3).
First, the Eleventh Circuit identified the deep conflict
among the courts of appeals on the question “whether a
district court’s order compelling arbitration in an em-
bedded proceeding is an appealable ‘final decision’ where
it dismisses the remaining claims.” Pet. App. 9a. Second,
the court of appeals acknowledged that this case impli-
cated that conflict because, if it followed “the other cir-
cuits (save the Sixth and the Tenth),” then it would “lack
jurisdiction here.” Id. at 1la. Third, the court of appeals
placed itself firmly in the camp with the Sixth and Tenth
Circuits by rejecting reliance on the “embedded/inde-
pendent” framework and adopting instead a case-by-case
approach where “appeals should be available where there
is nothing left to be done in the district court.” Id. at 13a.
c. As demonstrated above, the issue whether an order
dismissing a case in favor of arbitration is a “final deci-
sion” under 9 U.S.C. § 16(a)(3) has generated a deep
and persistent conflict among the courts of appeals.
Courts on both sides of this debate have acknowledged
the existence of the conflict and criticized the approach
taken by the other side. See, e.g., Seacoast, 143 F.3d
at 628 (“[{O]ther circuits have been divided on this ‘is-
sue.”); Pet. App. 9a (“We are thus faced with a circuit
split on the question whether a district court’s order
2f
compelling arbitration in an embedded proceeding is an’
appealable ‘final decision’ where it dismisses the re~
maining claims.”). Under the majority view, it is clear
that the Eleventh Circuit would have lacked jurisdiction
to review the district court’s order because this case in-
disputably is an embedded proceeding in which the arbitra-.
tion issue arose in the midst of claims for other relief.
See, e.g., Perera, 951 F.2d at 784 (defining “embedded”
proceeding); Filanto S.p.A. v. Chilewich Int'l Corp., 984
F.2d 58, 60 (2d Cir. 1993) (same). Accordingly, this
case presents an ideal vehicle for resolving the dispute re-
garding the proper analysis for determining whether an
order is a final decision under Section 16(a)(3) of the
FAA.
Moreover, this issue is a matter of considerable im-
portance to the statutory scheme governing arbitration
adopted by Congress in 1988. Courts on both sides of
the conflict acknowledge that the 1988 amendments sought
to promote arbitration by delaying the review of decisions
in favor of arbitration until after the arbitration had taken
place. See, e.g., Arnold, 920 F.2d at 1274 (noting that
under section 16, “interlocutory orders directing the par-
ties to arbitration are not appealable”) ; Filanto, 984 F.2d
at 60 (Congress “endeavored to promote appeals from
orders barring arbitration and limit appeals from orders
directing arbitration”). Absent corrective action by this
Court, however, that legislative policy favoring arbitra-
tion over litigation will be frustrated by the circuits ap-
plying the minority rule. In those circuits, orders dismis-
sing an action in favor of arbitration may result in lengthy
appeals that will result in unnecessary delay and ex-
pense associated with the appellate process even before
an arbitration has begun. See, e.g., Napleton, 138 F.3d
at 1214 (“the most economical approach is not to allow
an intermission for appellate review, but rather for the
parties to proceed expeditiously to arbitration”). That
22
result cannot be reconciled with the language of 16(a)(3),
which permits an appeal only from “a final decision with
respect to an arbitration” or with the strong federal policy
favoring arbitration over litigation.
Finally, the minority approach adopted by the Sixth,
Tenth and Eleventh Circuits allows district courts to
manipulate the jurisdiction of an appellate court based
solely on the label they choose to affix to orders com-
pelling arbitration, an absurd result that Congress simply
could not have intended. See, e.g., id. at 1213 (identi-
fying instance where district court entered Rule 54(b)
judgment because it “seemingly wanted the appellate
court to extend jurisdiction over [the] appeal”). As the
court of appeals in McCarthy explained when it rejected
the minority approach:
[D]istinguishing between stays and dismissal for pur-
poses of appellate review would condition the result
on the district court’s decision. If the circumstances
compelled the court to stay the action, the case
would proceed to an arbitrator; if the court dismissed
all claims the case could be appealed immediately.
We do not believe that Congress intended this arbi-
trary result when it barred appellate review of inter-
locutory orders compelling arbitration. We interpret
the bar on appellate review to be just that, regardless
of the terminology used by the trial court.
122 F.3d at 1245; see also Napleton, 138 F.3d at 1213
(refusing to “elevate the form of a district court’s order
over its substance”); Seacoast, 143 F.3d at 629 (same).
In short, this case squarely presents an issue that has
generated an acknowledged conflict among the courts of
appeals on an important and recurring issue of federal
jurisdiction. Further review by this Court is accordingly
warranted.
23
If. THE COURT OF APPEALS’ DECISION THAT THE
ARBITRATION CLAUSE WAS UNENFORCEABLE
PRESENTS AN IMPORTANT ISSUE OF FEDERAL
LAW THAT HAS GENERATED A CONFLICT
AMONG THE COURTS OF APPEALS
Even if the panel had jurisdiction to reach the merits
prior to the arbitration, it resolved the challenge to the en-
forceability of the arbitration provision in a manner that,
if left unreviewed, would have a profound effect on the
ability of parties to choose arbitration instead of litiga-
tion as the means by which they wish to resolve their
disputes. Under the court of appeals’ decision, arbitration
provisions that are “silent” as to the costs of arbitration or
as to the manner in which those costs wil be allocated
among the parties would be unenforceable because those
costs “might” be substantial and the claimant “might” be
required to bear them. That conclusion contravenes the
strong federal interest favoring arbitration expressed in
decisions by this Court and conflicts with decisions by
the courts of appeals.
Section 2 of the FAA provides that arbitration agree-
ments “shall be valid, irrevocable, and enforceable, save
upon such grounds as exist at law or in equity for revoca-
tion of any contract.” 9 U.S.C. §2. In Moses H. Cone
Memorial Hospital v. Mercury Construction Corp., 460
U.S. 1 (1983), this Court explained that “Section 2 is
a congressional declaration of a liberal federal policy favor-
ing arbitration agreements,” id. at 24, and therefore, “as
a matter of federal law, any doubts concerning the scope
of arbitrable issues should be resolved in favor of arbitra-
tion, whether the problem at hand is the construction of
the contract language itself or an allegation of waiver,
delay, or a like defense to arbitrability,” id. at 24-25: ac-
cord Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20, 26 (1991). Moreover, the “duty to enforce arbitra-
24
tion agreements is not diminished when a party bound by
an agreement raises a claim founded on statutory rights.”
Shearson/American Express Inc. v. McMahon, 482 USS.
220, 226 (1987); see also Mitsubishi Motors Corp. V.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985)
(same). Indeed, “we are well past the time when judicial
suspicion of the desirability of arbitration and of the com-
petence of arbitral tribunals inhibited development of ar-
bitration as an alternative means of dispute resolution. /d.
at 626-27. Accordingly, “there is no reason to assume at
the outset that arbitrators will not follow the law.”
McMahon, 482 U.S. at 232. In fact, review of arbitra-
tion awards, though limited, “is sufficient to ensure that
arbitrators comply with the requirements of the statute.”
Id. To be sure, while the FAA’s mandate in favor of
arbitration agreements “may be overridden by a contrary
congressional command,” the “burden is onthe party
opposing arbitration . . . to show that Congress intended
to preclude a waiver of judicial remedies for the statutory
right at issue.” Id. at 226-27.
Here, however, the panel trampled on these settled
standards in its rush to invalidate the arbitration provision.
By contrast, the enforceability of the arbitration provision
involved in this case has been upheld by the Alabama
Supreme Court on numerous occasions. Green Tree Fi-
nancial Corp. v. Vintson, No. 1972191, 1999 WL 778496,
at *6 (Ala. Oct. 1, 1999); Green Tree Financial Corp. v.
Wampler, Nos. 1970983, 191029, 1999 WL 667292, at
*8 (Ala. Aug. 27, 1999); Ex Parte Smith, 736 So. 2d
604, 612-13 (Ala. 1999); Patrick Home Ctr. Inc. v.
-Karr, 730 So. 2d 1171, 1174 (Ala. 1999); Ex Parte
Parker, 730 So. 2d 168, 172 (Ala. 1999); Green Tree
Financial Corp. v. Davis, 729 So. 2d 329, 329 (Ala.
1999); Ex Parte Napier, 723 So. 2d 49, 54 (Ala. 1998);
Green Tree Agency, Inc. v. White, 719 So. 2d 1179,
1180 (Ala. 1998); Ex Parte Gates, 675 So. 2d 371, 375
ee ee ee
25
(Ala. 1996). Indeed, in Wampler, the Alabama Su-
preme Court rejected the analysis of the Eleventh Circuit
in this case and instead held that “{w]here a... contract
is silent on a particular question,” a reviewing court must
not “indulg[e] an assumption that the proof would sup-
port a ‘worst case’ scenario.” 1999 WL 667292, at *6.
Indeed, the Third Circuit has expressly upheld the Green
Tree arbitration provision against a challenge that it was
unconscionable. Harris v. Green Tree Financial Corp.,
183 F.3d 173, 182-84 (3d Cir. 1999).
Not only is the enforceability of this specific provision
a matter of conflict among the lower courts, but the Elev-
enth Circuit’s fundamental approach to enforceability is
flatly at odds with decisions of other courts of appeals
and with the strong federal policy favoring arbitration.
First, the panel disregarded the obligation to resolve
doubts regarding arbitrability in accordance with the
“ ‘the federal policy favoring arbitration.’ ” Gilmer, 500
U.S. at 26 (quoting Moses H. Cone, 460 USS. at 24).
Instead, the panel resolved doubts against arbitration by
assuming the worst possible outcome. That analysis con-
flicts with the Eighth Circuit’s decision in Dobbins v.
Hawk’s Enterprises, No. 99-1582, 1999 WL 1256184
(8th Cir. Dec. 23, 1999) and the District of Columbia
Circuit’s decision in Cole v. Burns International Security
Services, 105 F.3d 1465 (D.C. Cir. 1997).
In Dobbins, plaintiffs filed suit claiming damages based
on alleged statutory violations of TILA. Defendant
sought to compel arbitration. After initially compelling
8 Further, this arbitration clause has been scrutinized and upheld
by other federal and state courts throughout the country. See, e.g.,
Dorsey v. H.C.P.S. Sales, Inc., 46 F. Supp. 2d 804, 806-08 (N.D.
Ill. 1999) ; In re Pate, 198 B.R. 841, 844-46 (Bankr. S.D. Ga. 1996) ;
Lackey v. Green Tree Financial Corp., 498 S.E.2d 898, 902-05 (S.C.
Ct. App. 1998); Pierman v. Green Tree Financial Servicing Corp.,
933 P.2d 955, 956-57 (Okla. Ct. App. 1997).
26
-arbitration, the district court ultimately ruled that the ar-
bitration provision was unenforceable because the “final
fee determination” of $23,000 precluded the Dobbinses
“from availing themselves of the arbitral forum.” Jd. at
*1. The Eighth Circuit reversed. It held that the Dob-
binses were required “to fully explore” whether they could
reduce the fees by seeking a waiver or by making a “more
realistic demand for damages.” Jd. at *2 & n.3. More-
over, even if these avenues proved to be fruitless and
failed to reduce the arbitration fee to a reasonable
amount, the court of appeals directed the district court
to “accept appellant’s offer to pay the arbitration ‘fees.”
Id. at *6 (footnote omitted).
Similarly, in Cole, the court of appeals considered an
arbitration agreement that was “silent” on the issue of
who would bear the costs of arbitration. 105 F.3d at
1485. Unlike the Eleventh Circuit, however, the Cole
Court concluded that “the arbitration agreement .. .
{was] valid and enforceable” because it interpreted the
agreement to require the employer “to pay all arbitrators’
fees in connection with the resolution of [the employee’s
Statutory] claims.” Jd. at 1485, 1486. In doing so, the
District of Columbia Circuit explained that it adopted
that interpretation “to uphold the validity of the parties’
contract.” Jd. at 1486.
Second, the Eleventh Circuit aggravated its error by
improperly imposing upon petitioners the burden of dis-
proving the parade of horribles imagined by the court.
For example, when petitioners informed the panel that
“the arbitrator may apportion the fees of the arbitration
in his award,” the panel responded that petitioners’ failed
to “guarantee that a consumer successfully arbitrating
under {the arbitration clause] will not be saddled with a
prohibitive costs order.” Pet. App. 18a. When petitioners
informed the panel that “no filing fees are required,” the
“27
panel responded that “whether there are fees is likely to
depend on who conducts the arbitration, something the
arbitration clause is silent about.” Jd.
That analysis conflicts with the Seventh Circuit’s deci-
sion in Koveleskie v. SBC Capital Markets, Inc., 167
F.3d 361 (7th Cir.), cert. denied, 120 S. Ct. 44 (1999)
and the First Circuit’s decision in Rosenberg v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 170 F.3d 1, 15-16
(1st Cir. 1999). In those cases, plaintiffs argued that an
arbitration agreement was unenforceable in the context
of claims arising under Title VII because the industry
arbitrators “routinely fail to follow Title VII’s fee-shifting
principle by refusing to award statutory attorneys’ fees to
prevailing plaintiffs and by charging plaintiffs expensive
forum fees.” Koveleskie, 167 F.3d at 366; Rosenberg,
170 F.3d at 15. In rejecting that claim, the Seventh
and First Circuits explained that the record failed to
establish that “a plaintiff is asked to bear forum fees.”
Koveleskie, 167 F.3d at 366 (internal quotation marks
omitted); accord Rosenberg, 170 F.3d at 15.
The panel below sought to distinguish Rosenberg, but
in doing so highlighted that it had shifted the burden of
proof to petitioners. Specifically, the panel below stated
that
the court in Rosenberg had before it a record sug-
gesting that most successful arbitral claimants were
awarded fees and costs; we lack similar information
about how claimants fare under Green Tree’s arbi-
tration clause.
Pet. App. 18a-19a. But in Rosenberg, the party seeking
to invalidate the arbitration attempted to satisfy her bur-
den of proof by “plac[ing] in the record” evidence of
“thirty-three arbitration cases.” 170 F.3d at 16. The rec-
ord developed by Rosenberg, however, simply did not
support the conclusion about the alleged misconduct of
(28
arbitrators because “only one plaintiff who prevailed on
Statutory grounds was denied fees and costs.” Id.
In this case, as in Rosenberg and Koveleskie, the rec-
ord evidence did not support the conclusion that the ar-
bitrators would violate governing federal statutes and re-
quire respondent to “bear substantial costs of the arbitra-
tion even if she were to prevail.” Pet. App. 19a.
Nevertheless, the panel concluded that this absence of
record evidence provided a basis for invalidating the ar-
bitration provision. In doing so, the Eleventh Circuit
shifted the burden of proof onto petitioners in contraven-
tion of well-established precedent. McMahon, 482 US.
at 227 (“The burden is on the party opposing arbitration
.... ). Indeed, because there was no evidence in the
record supporting the conclusion that the arbitrator would
disregard the law, the panel decision further violated
settled precedent because it assumed, without any legiti-
mate basis, that the arbitrator would disregard the statu-
tory requirements of TILA. McMahon, 482 U.S. at 232
(“[T]here is no reason to assume at the outset that arbi-
trators will not follow the law. . . .”).®
In sum, the Eleventh Circuit’s decision violates well-
settled principles that require a reviewing court to resolve
doubts about the arbitrability of statutory claims in favor
of arbitration and to impose the burden of proving that
an arbitration provision is unenforceable squarely on the
party opposing the arbitration. Here, the Eleventh Cir-
8 Moreover, in contrast to the decision below, the First and Sev-
enth Circuits ruled that even if an arbitrator might impose, in a
particular case, unreasonable costs in violation of federal statutory
rights, that result “could be presented by the [claimant] to the
reviewing court” after the arbitration under section 10 of the FAA.
Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170
F.3d 1, 16 (1st Cir. 1999) (citing Cole v. Burns Int’l Sec. Servs.,
105 F.3d 1465, 1486 (D.C. Cir. 1997)); accord Koveleskie vy. SBC
Capital Markets, Inc., 167 F.3d 361, 366 (7th Cir. 1999).
—~
ets
729
cuit, resolved any and all doubts against arbitration and
imposed the burden of proof Squarely—and improperly—
on the party seeking arbitration of the underlying statu-
tory claims. The decision below conflicts with numerous
appellate decisions and sets a dangerous precedent that,
if left uncorrected, would sow substantial confusion in an
area of law where settled and clear standards are of para-
mount importance. The error is doubly disturbing be-
Cause it is the product of an equally fundamental error by
the court below in exercising appellate jurisdiction. Be-
cause the holding below raises two fundamental questions
arising out of the proper enforcement of the FAA, this
Court should grant review.
CONCLUSION
The petition for a writ of certiorari should be granted.
Respectfully submitted,
ROBERT A. HUFFAKER CARTER G. PHILLIPS *
WILLIAM H. WEBSTER PAUL J. ZIDLICKY
RUSHTON, STAKELY, JOHNSTON SIDLEY & AUSTIN
& GARRETT, P.A. 1722 Eye Street, N.W.
184 Commerce Street Washington, D.C. 2000¢
Montgomery, AL 36101-0270 (202) 786-8000
(334) 206-8100
Counsel for Petitioners
January 21, 2000 * Counsel of Record
PPENDICES
la
APPENDIX A
UNITED STATES COURT OF APPEALS
ELEVENTH CIRCUIT
No. 98-6055
LARKETTA RANDOLPH, on behalf of herself
and all others similarly situated,
Plaintiff-A ppellant,
Vv.
GREEN TREE FINANCIAL CoRP.—ALABAMA;
and GREEN TREE FINANCIAL CORPORATION,
Defendants-A ppellees.
Appeal from the United States District Court
for the Middle District of Alabama
June 22, 1999
Before HATCHETT and CARNES, Circuit Judges,
and FARRIS *, Senior Circuit Judge.**
* Honorable Jerome Farris, Senior U.S. Circuit Judge for the
Ninth Circuit, sitting by designation.
** This decision is rendered by a quorum, due to the retirement
of then-Chief Judge Hatchett on May 14, 1999. 28 U.S.C. § 46(d).
24
CARNES, Circuit Judge:
Plaintiff Larketta Randolph appeals the district court’s
order compelling arbitration of her claim against defend-
ants Green Tree Financial Corporation and Green Tree
Financial Corp.—Alabama (collectively, “Green Tree”),
' which financed her purchase of a mobile home. She
alleges that Green Tree’s financing documents violate the
Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”),
that its mandatory arbitration requirement violates the
Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f
(“Equal Credit Act”), and that the TILA precludes the
arbitration of disputes arising under that legislation. The
district court ordered the parties to proceed to arbitration
and dismissed the action with prejudice. Green Tree chal-
lenges our jurisdiction to hear this appeal. We conclude
that the district court’s judgment was an appealable “final
decision.” We also hold that the arbitration agreement in
this case defeats the remedial purposes of the TILA and
is unenforceable.
I. BACKGROUND
This case stems from Randolph’s January 25, 1994,
purchase of a mobile home from Better Cents Home
Builders, Inc., in Opelika, Alabama. Randolph financed
her purchase through Green Tree Financial Corp.—Ala-
bama, a wholly-owned subsidiary of Green Tree Financial
Corporation. Randolph contends that Green Tree re-
quired her to obtain “vendor’s single interest” insurance,
which protects a vendor or lienholder against the costs of
repossession in the event of default, but did not mention
this requirement in its Truth in Lending Act disclosure.
Randolph’s retail installment contract with Better Cents,
which names Green Tree Financial Corp. as the assignee,
3a
contains an arbitration provision. It reads, in pertinent
part:
17. ARBITRATION: All disputes, claims, or con-
troversies arising from or relating to this Contract
or the relationships which result from this Contract,
or the validity of this arbitration clause or the entire
Contract, shall be resolved by binding arbitration
by one arbitrator selected by Assignee with consent
of Buyer(s). This arbitration Contract is made pur-
Suant to a transaction in interstate commerce, and
shall be governed by the Federal Arbitration Act at
9 U.S.C. Section 1. Judgment upon the award ren-
dered may be entered in any court having jurisdic-
tion. The parties agree and understand that they
choose arbitration instead of litigation to resolve
disputes. The parties understand that they have a
right or opportunity to litigate disputes through a
court, but that they prefer to resolve their disputes
through arbitration, except as provided herein. THE
PARTIES VOLUNTARILY WAIVE ANY RIGHT
THEY HAVE TO A JURY TRIAL EITHER
PURSUANT TO ARBITRATION UNDER THIS
CLAUSE OR PURSUANT TO A COURT AC-
TION BY ASSIGNEE (AS PROVIDED HERE-
IN). The parties agree and understand that all dis-
putes arising under case law, statutory law, and all
other laws including, but not limited to, all con-
tract, tort, and property disputes will be subject to
binding arbitration in accord with this Contract. The
parties agree and understand that the arbitrator shall
have all powers provided by the law and the Con-
tract . . . {including] money damages, declaratory
relief, and injunctive relief. Notwithstanding any-
thing hereunto the contrary, Assignee retains an
option to use judicial or nonjudicial relief to enforce
4a
a security agreement relating to the Manufactured
Home secured in a transaction underlying this arbi-
tration agreement, to enforce the monetary obligation
secured by the Manufactured Home or to foreclose
on the Manufactured Home.... The initiation and
maintenance of an action for judicial relief in a
court [on the foregoing terms] shall not constitute
a waiver of the right of any party to compel arbitra-
tion regarding any other dispute or remedy subject
to arbitration in this Contract, including the filing of
a counterclaim in a suit brought by Assignee pursu-
ant to this provision.
Randolph brought this suit in district court in January,
1996, alleging that Green Tree violated the TILA by
failing to include the requirement of vendor’s single in-
terest insurance in its TILA disclosure, and violated the
Equal Credit Act by requiring arbitration of all claims.?
She sought certification of a class of indivisaals who had
entered into similar agreements with Gree» Tree. In re-
sponse, Green Tree moved to compel Randolph to arbi-
trate her complaint pursuant to the arbitration agreement.
It also moved to stay’ the action pending arbitration or,
in the alternative, to dismiss it.
The district court granted the motion to compel arbi-
tration, and declined to certify a class. See Randolph v.
Green Tree Fin. Corp., 991 F.Supp. 1410, 1424-25
(M.D.Ala. 1997). Because it concluded that all the issues
raised in Randolph’s complaint must be submitted to arbi-
1 Her suit also named as a defendant Green Tree Financial Serv-
icing Corporation. The district court dismissed this party from the
action.
2In her initial complaint, Randolph also alleged fraud in the in-
ducement of the arbitration agreement, but she omitted that claim
in her amended complaint. It was deemed waived by the district
court, and Randolph does not raise it on appeal.
Sa
tration, it denied the motion to Stay the action and in-
stead dismissed her claims with prejudice. See id. Ran-
dolph filed this appeal. Green Tree subsequently moved
to dismiss the appeal for lack of jurisdiction.
II. STANDARD OF REVIEW
The jurisdictional issue is a question of law, which we
review de novo. See, e.g., Triggs v. John Crump Toyota,
Inc., 154 F.3d 1284, 1287 (11th Cir.1998). We review
de novo the district court’s order compelling arbitration.
See, e.g., Sunkist Soft Drinks, Inc. v. Sunkist Growers,
Inc., 10 F.3d 753, 756 (11th Cir.1993).
Ill. ANALYSIS
A. WHETHER THE DISTRICT COURT’S ORDER
WAS APPEALABLE AS A “FINAL DECISION”
UNDER THE FEDERAL ARBITRATION ACT
As a threshold matter, we decide whether we have juris-
diction over this appeal. Though we would normally look
to 28 U.S.C. § 1291 to determine our jurisdiction over the
dismissal of this action, “Congress has set forth special
rules governing appeals from a district court’s arbitration
order.” McCarthy v. Providential Corp., 122 F.3d 1242.
1243 (9th Cir.1997). Those rules are set forth in section
16 of the Federal Arbitration Act, 9 U.S.C. § 16. That
provision states:
(a) An appeal may be taken from—
(1) an order—
(A) refusing a stay of any action under
section 3 of this title,
(B) denying a petition under section 4 of
this title to order arbitration to pro-
ceed,
6a
(C) denying an application under section
206 of this title to compel arbitration,
(D) confirming or denying confirmation of
an award or partial award, or
(E) modifying, correcting, or vacating an
award;
(2) an interlocutory order granting, continuing,
or modifying an injunction against an arbi-
tration that is subject to this title; or
(3) a final decision with respect to an arbitra-
tion that is subject to this title.
(b) Except as otherwise provided in section 1292(b)
of title 28, an appeal may not be taken from an
interlocutory order—
(1) granting a stay of any action under section
3 of this title;
(2) directing arbitration to proceed under sec-
tion 4 of this title;
(3) compelling arbitration under section 206
of this title; or
(4) refusing to enjoin an arbitration that is
subject to this title.
9 U.S.C. § 16. Put succinctly, the provision “identifies
two broad classes of cases in which an appeal is possible,
and one in which it is not.” Napleton v. General Motors
Corp., 138 F.3d 1209, 1216 (7th Cir. 1998) (Wood, J.,
dissenting). Subsection § 16(a)(1)-(2) allows appeals
“from orders that somehow prevent arbitration from going
forward”; conversely, § 16(b) bars appeals “from inter-
locutory orders that in one way of another allow the
arbitration to proceed.” Id.
7%
The other circumstance under which appeals are al-
lowed is set out in § 16(a)(3)—“a final decision with
respect to an arbitration that is subject to this title.” The.
question here is whether the district court’s order com-
pelling arbitration of the issues raised in Randolph’s com-
plaint and dismissing her claims with prejudice falls within
that category. If it does, we have jurisdiction. If it does
not, the parties must proceed to arbitration.
In arguing that we lack jurisdiction, Green Tree dis-
tinguishes between “embedded” and “independent” pro-
ceedings, a distinction which has been drawn by a num-
ber of circuits that have considered § 16(a)(3). An “em-
bedded” proceeding is one in which the arbitration issue
arises as part of a broader action dealing with other issues.
In this case, for example, Randolph’s action alleges a sub-
stantive violation of the TILA as well as raising the arbi-
trability question; indeed, the motion to compel arbitra-
tion was filed by the defendant, Green Tree. In an “inde-
pendent” proceeding, the motion to compel arbitration is
the only issue before the court.
Several circuits have held that orders compelling arbi-
tration which arise in embedded proceedings must be
treated as interlocutory and non-appealable, not as “final
decisions” under § 16(a)(3). See, e.g., John Hancock
Mut. Life Ins. Co. v. Olick, 151 F.3d 132, 135-36 (3d
Cir.1998); Seacoast Motors of Salisbury, Inc. v. Chrysler
Corp., 143 F.3d 626, 628 (1st Cir.1998) (“The general
rule governing what constitutes a final decision under sec-
tion 16 is that an order compelling arbitration is not final,
and therefore not immediately reviewable, if the arbitra-
bility issue is ‘embedded’. . . .”); Napleton, 138 F.3d at
1212 (7th Cir.) (“[T]he jurisdictional lodestar of appeal-
ability is whether the decision favoring arbitration is from
an indenendent or from an embedded proceeding.”): Mc-
Carthy, 122 F.3d at 1244 (9th Cir.) (“ ‘{I]f the motion
8a
to compel arbitration is “embedded” in a substantive suit
pending before that court, the district court’s decision to
compel arbitration of some or all of the claims before it
is not considered to be final, and therefore not review-
able.’” (quoting Prudential Ins. Co. »f Am. v. Lai, 42
F.3d 1299, 1302 (9th Cir.1994))); In re Pisgah Con-
tractors, Inc., 117 F.3d 133, 136 (4th Cir.1997); Altman
Nursing, Inc. v. Clay Capital Corp., 84 F.3d 769, 771
(Sth Cir.1996) (“An order involving an embedded pro-
ceeding is always an interlocutory order; an order involv-
ing an independent claim is always final.”); Gammaro v.
Thorp Consumer Discount Co., 15 F.3d 93, 95 (8th Cir.
1994); Filanto, S.p.A. v. Chilewich International Corp.,
984 F.2d 58, 60-61 (2d Cir. 1993).
In most embedded proceedings treating orders compel-
ling arbitration as interlocutory makes sense, because after
the arbitrability issue has been decided, other issues remain
in the case for the district court to resolve; so an order
directing the parties to proceed to arbitration could not
possibly be considered a “final decision” under § 16(a)(3).
In cases like this one, however, where the district court’s
dismissal of the action leaves no additional issues for it
to resolve, treating the distinction between embedded and
independent proceedings as decisive makes less sense.
Nevertheless, a number of circuits have adhered, with a
concededly “myopic[]” focus, to the embedded /independ-
ent distinction when determining whether they had juris-
diction to hear an appeal under § 16(a)(3). See Naple-
ton, 138 F.3d at 1213 (“[T}his Circuit has focused, al-
most myopically, on whether a proceeding is independent
or embedded.”).
The circuits taking this approach have insisted that a
district court’s order compelling arbitration in an em-
bedded proceeding is interlocutory and non-aprealable.
even if the district court dismisses the remaining claims.
9a
See, e.g., Seacoast, 143 F.3d at 628-29 (dismissal of em-
bedded proceeding without prejudice is non-appealable);
Napleton, 138 F.3d at 1212 (same); McCarthy, 122 F.3d
at 1244-45 (arbitration order in embedded proceeding not
appealable where district court dismissed action and or-
dered court clerk to close file); Altman Nursing, 84 F.3d
at 771 (arbitration order in embedded proceeding non-
appealable, even though district court’s order ended all
litigation); Gammaro, 15 F.3d at 95-96 (arbitration order
non-appealable where court dismissed remaining issues).
By contrast, both the Sixth and Tenth Circuits have
taken a less mechanical approach to the question of
whether an arbitration order is an appealable “final de-
cision” under §$ 16(a)(3). In Armijo v. Prudential Insur-
ance Co. of America, 72 F.3d 793, 797 (10th Cir.1995),
the Tenth Circuit treated the district court’s dismissal of
the plaintiffs’ remaining claims, apparently with prejudice,
as an appealable final decision. Similarly, in Arnold v.
Arnold Corp.—Printed Communications for Business, 920
F.2d 1269, 1276 (6th Cir.1990), the Sixth Circuit recog-
nized its appellate jurisdiction over an order compelling
arbitration in an embedded proceeding, relying on the fact
that the district court had entered final judgment and had
“nothing left . . . to do but execute the judgment.” See
also Napleton, 138 F.3d at 1214-15 (Wood, J., dissent-
ing); McCarthy, 122 F.3d at 1246-47 (Pregerson, J., dis-
senting); Filanto, S.p.A., 984 F.2d at 61 n.3 (dicta
noting that at least a limited appeal might have been
available “[h]ad the complaint been dismissed”).
We are thus faced with a circuit split on the question
whether a district court’s order compelling arbitration in
an embedded proceeding is an appealable “final decision”
where it dismisses the remaining claims. This question is
one of first impression in our circuit. In answering it. we
begin by recognizing that “final decision” is a term of art
-10a
which was of long standing when Congress enacted § 16
(a)(3), and we will therefore take guidance from prior
judicial interpretations of the term. See, e.g., Napleton,
138 F.3d at 1211. In interpreting this term, however, we
proceed from a different position than circuits such as the
Seventh Circuit, because we have never accorded the same
degree of “talismanic significance,” id., that others have to
the distinction between independent and embedded
proceedings.
Instead, our interpretation of the term “final decision”
has generally followed “the simplest traditional definition
of finality: the decision has disposed of all the issues
framed by the litigation, leaving nothing to be done but
execute the order.” 15B Charles Alan Wright. Arthur R.
Miller & Edward H. Cooper, Federal Practice and Proce-
dure § 3914.17, at 18-19 (2d ed.1992). See also Catlin
v. United States, 324 U.S. 229, 233. 65 SCt. 631. 633.
89 L.Ed. 911 (1945) (decision of the district court is
final if it “ends the litigation on the merits and leaves
nothing for the court to do but execute the iudgment.”).
We have taken that approach both with resnect to the
general provision dealing with the anrealabilitv ‘of final
decisions of the district courts. 28 U.S.C. § 1291% see,
e.g, Shannon v. Jack Eckerd Corn., 55 F.3d 561. 563
(11th Cir.1995). and with respect to the FAA itself. see
Thomson McKinnon Securities. Inc. v. Salter. 873 F 2d
1397. 1399 (11th Cir.1989).* See also Morewitz v. West
328 US.C. § 1291 states that “[t]he courts of appeals .. . shall
have jurisdiction of appeals from all final decisions of the district
courts of the United States... .”
_ 4In Thomson McKinnon, we held that under what is now 9 US.C.
8 16(a)(3), “decisions of the district court are final if they ‘end[]
the litigation on the merits and leave[] nothing for the [district]
court to do but execute the judgment.’” Thomson McKinnon, 873
F.2d at 1399 (quoting Catlin, 324 U.S. at 238, 65 S.Ct. at 633).
We also noted, however, that the finality of an order granting or
“dla
of England Ship Owners Mut. Protection & Indem. Ass'n
(Luxembourg), 62 F.3d 1356, 1361 (11th Cir.1995)
(FAA case holding that decisions of the district court are
final if they leave the district court with nothing to do
but execute judgment, but relying on 28 U.S.C. § 1291,
not 9 U.S.C. § 16(a)(3)).
In most arbitration appeals there will be little difference
between the traditional definition of “final decision” and
one that relies on the distinction between embedded and
independent proceedings. If the district court’s order com-
pelling arbitration in a so-called embedded proceeding
leaves other issues unresolved, the court will have more
left to do than simply execute the judgment, so there will
be no final decision. But that is not true in cases such
as this one, where the district court dispensed with the
remaining issues by dismissing the case. Only if we fol-
lowed the other circuits (save the Sixth and Tenth) and
attached excessive significance to the “embedded” versus
“independent” proceeding distinction, instead of applying
the venerable definition of “final decision,” would we lack
jurisdiction here.
That we decline to do. Nothing in the plain language
of the statute requires us to make the embedded /independ-
ent distinction decisive. Moreover, the history of § 16(a)
denying a request to compel arbitration may depend on whether
the order was “entered in the course of ongoing actions for legal
or equitable relief on the underlying claims.” Jd. We held that
because the sole question before the district court was subject to
arbitration, its decision was final and appealable. We thus recog-
nized the embedded/independent distinction (without using those
labels), but did not need to decide whether an order like the one
here, dismissing all the plaintiffs’ claims in an embedded proceeding
with prejudice, is a “final decision.” More importantly, we did not
attach a “talismanic significance” to the distinction between em-
bedded and independent proceedings, but treated it as a part of our
usual inquiry into whether the district court’s decision leaves noth-
ing for it to do but execute the judgment.
12a
(3)’s enactment favors our standard reading of “final deci-
sion,” and counsels against attaching undue significance to
the embedded/independent distinction. Section 16 was
enacted against the background of the demise of the
Enelow-Ettelson doctrine, which had employed the old
distinction between law and equity to determine when a
stay could be appealed. See Ettelson v. Metropolitan Life
Ins. Co., 317 U.S. 188, 191-92, 63 S.Ct. 163, 164-65,
87 L.Ed. 176 (1942); Enelow v. New York Life Ins. Co.,
293 U.S. 379, 382-83, 55 S.Ct. 310, 311-12, 79 L.Ed.
440 (1935). The Supreme Court, applying the Enelow-
Ettelson doctrine to arbitration law, acknowledged that
the continuing application of this doctrine illustrated “the
persistence of outmoded procedural differentiations.” Balti-
more Contractors v. Bodinger, 348 U.S. 176, 184, 75
S.Ct. 249, 254, 99 L.Ed. 233 (1955), but it did so none-
theless, “leaving Congress to make such amendments as
it may find proper.” Id. at 185, 75 S.Ct. at 254.
Ultimately, the Court abandoned the Enelow-Ettelson
doctrine altogether. See Gulfstream Aercspace Corp. Vv.
Mayacamas Corp., 485 U.S. 271, 287, 108 S.Ct. 1133,
1142, 99 L.Ed.2d 296 (1988). Soon after, Congress
stepped in to “make Gulfstream, and the case law that it
overruled, largely academic on the arbitration scene” by
enacting what is now 9 U.S.C. § 16 as part of the Judicial
Improvements and Access to Justice Act of 1988, Pub.L.
100-702, Title X, § 1019(a), 102 Stat. 4642, 4671
(1988). See David D. Siegel, Practice Commentary, 9
U.S.C. § 16, at 501 (West 1999).
In short, § 16 was enacted to clear away the deadwood
and “furnish a clear rule for appealability of orders re-
lating to arbitration proceedings,” not to erect a set of
distinctions as esoteric as the law-equity distinction.
Napleton, 138 F.3d at 1217 (Wood, J., dissenting); see
also Arnold, 920 F.2d at 1275 n. 5 (“[OJne purpose in
ee -
13a
passing the amendment was to give clarity to an area of
the law that had become confused, obscure and relied on
the procedural posture of the case.”); Campbell v.
Dominick & Dominick, Inc., 872 F.2d 358, 361 (11th
Cir.1989) (quoting a statement by Senator Howell
Heflin that “under the prior doctrine, ‘[t]he appealability
of orders that direct arbitration, stay arbitration, or stay
judicial proceedings depend[ed] on accidents of procedure
that c[id] not respcnd to any rational needs of either
appeals timing or arbitration.’ 134 Cong. Rec. $16284,
$16309 (daily ed. Oct. 14, 1988).”). The intent behind
§ 16 is equally evident in the provision’s legislative history,
especially the Senate Judiciary Committee’s statement that
“under the proposed statute, appealability does not turn
solely on the policy favoring arbitration. Appeal can be
taken from .. . a final judgment dismissing an action in
deference to arbitration. These appeals preserve the gen-
eral policy that appeals should be available where there is
nothing left to be done in the district court.” Arnold,
920 F.2d at 1274-75 (quoting Committee on the Judi-
ciarv, Section by Section Analvsis on $1482, 100th Cong.,
2d Sess.. 134 Cong. Rec. $16284, Oct. 14, 1988) (al-
teration in original omitted).
Our view that the embedded/independent distinction
ought not defeat our jurisdiction in this case is also sup-
ported by logic and common sense. The Fifth Circuit’s
assertion that “[a]n order involving an embedded proceed-
ing is always an interlocutory order,” Altman Nursing,
Inc., 84 F.3d at 771 (emphasis added), is wrong. “While
orders compelling arbitration in all independent arbitra-
bility proceedings are necessarily final decisions, it does
not logically follow that orders in all embedded arbitra-
bility proceedings are necessarily interlocutory.” Mc-
Carthy, 122 F.3d at 1247 (Pregerson, J., dissenting)
(emphasis omitted).
14a
That proposition is confirmed by this case. The district
court could have stayed Randolph’s claim pending arbitra-
tion, but it determined that all of the issues raised were
arbitrable. Accordingly, it dismissed the case. Moreover,
the dismissal was with prejudice. That is a feature that
apparently was not present in most of the cases decided
by circuits relying on the embedded/independent distinc-
tion. The opinions in those cases either involved dismis-
sals without prejudice or did not clearly state the nature
of the dismissal. “‘A dismissal with prejudice clearly is a
decision that ends the litigation on the merits and leaves
nothing for the court to do but execute a judgment.’”
Morewitz, 62 F.3d at 1361 (quoting Nichols v. Mobile
Bd. of Realtors, Inc., 675 F.2d 671, 673 (5th Cir. Unit
B 1982) (quotations omitted) ).5
Thus, our reading of § 16(a)(3) compels our conclu-
sion that where the district court effectively disposes of all
other issues by issuing an order compelling arbitration and
dismissing the remaining claims with prejudice, we have
appellate jurisdiction over the case. Whatever usefulness
the terms “embedded” and “independent” may have in
describing some proceedings involving arbitration claims,
we decline to follow the same “myopic and talismanic ad-
herence to the independent/embedded distinction,” Naple-
ton, 138 F.3d at 1217 (Wood, J., dissenting) (quotations
and citation omitted), that some circuits have exhibited.
Because the district court’s dismissal of Randolph’s action
with prejudice left it with “nothing . . . to do but execute
the judgment,” Morewitz, 62 F.3d at 1361 (quotation and
5 We have no occasion to decide whether an appeal from an order
compelling arbitration in an embedded proceeding is a “final deci-
sion” when the district court dismisses the action without prejudice.
We do note that this court has said that “dismissals wihout preju-
dice may be appealable [under 28 U.S.C. § 1291], [but] they are
only appealable if they are ‘final orders.’” Grayson v. K Mart
Corp., 79 F.8d 1086, 1094 n.7 (11th Cir.1996) (citation omitted).
‘15a
citation omitted), we hold that its order compelling arbi-
tration was an appealable “final decision” under 9 U.S.C.
§ 16(a) (3).
B. THE ENFORCEABILITY OF THE ARBITRA-
TION CLAUSE
Having determined that we have jurisdiction over this
appeal, we now turn to the question whether the TILA
_ precludes the enforcement of the arbitration clause in the
retail installment agreement signed by Randolph. Be-
cause the arbitration clause signed by Randolph in this
case fails to provide the minimum guarantees required to
ensure that she can vindicate her statutory rights under
the TULA, we conclude that the arbitration clause in this
case is unenforceable. eae
As an initial matter, we recognize that “[a]rbitration
ordinarily brings hardships for litigants along with poten-
tial efficiency. . . . In light of a strong federal policy
favoring arbitration,” some “inherent weaknesses” in the
procedural apparatus of an arbitration “should not make
an arbitration clause unenforceable.” Paladino v. Avnet
Computer Technologies, Inc., 134 F.3d 1054, 1062 (11th
Cir.1998). The Supreme Court has stated, “ {S]o long
as the prospective litigant effectively may vindicate [his
or her] statutory cause of action in the arbitral forum,
the statute will continue to serve both its remedial and
deterrent function.’” Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 28, 111 S.Ct. 1647, 1653, 114
L.Ed.2d 26 (1991) (quoting Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637, 105
“Ct 3346 3359, 87 L.Ed.2d 444 (1985).)
Nevertheless, we held in Paladino that some ‘proce-
dural flaws present such barriers to a would-be litigant’s
xercise of his or her statutory rights that they render an
-16a
arbitration clause unenforceable. “When an arbitration
clause has provisions that defeat the remedial purpose of
[a] statute, . . . the arbitration clause is not enforceable.”
Paladino, 134 F.3d at 1062 (citation omitted). As the
Tenth Circuit has stated,
As Gilmer emphasized, arbitration of statutory
claims works because potential litigants have an ade-
quate forum in which to resolve their statutory
claims and because the broader social purposes be- -
hind the statute are adhered to. This supposition[ ]
falls apart, however, if the terms of an arbitration
agreement actually prevent an individual from effec-
tively vindicating his or her statutory rights. Ac-
cordingly, an arbitration agreement that prohibits
use of the judicial forum as a means of resolving
statutory claims must also provide for an effective
and accessible alternative forum.
Shankle v. B-G Maintenance Management of Colorado,
Inc., 163 F.3d 1230, 1234 (10th Cir.1999) (citations
omitted). While the arbitral forum usually serves as just
such an alternative, some barriers of access to that forum
may render an arbitration clause unenforceable. See id.
at 1234 n. 3.
In particular, we held in Paladino that forcing a plain-
tiff to bear the brunt of “hefty” arbitration costs and
“steep filing fees” constitutes “a legitimate basis for a
conclusion that the [arbitration] clause does not comport
with statutory policy.” Paladino, 134 F.3d at 1062.
Thus, we held that an employer’s arbitration agreement
did not “comport with [the] statutory policy” of Title
VII because the plaintiff would have had to pay a filing
fee of $2000 to arbitrate her claim of gender discrimina-
tion, and might have had to bear at least half the sub-
stantial cost of the arbitration. Id.
174
Other courts have raised similar concerns. See Shankle,
163 F.3d at 1234-35 & n. 3 (concluding that a “fee-
splitting” provision of an arbitration agreement substan-
tially limited an employee’s use of the arbitral forum and
therefore rendered the arbitration agreement unenforce-
able); Cole v. Burns International Sec. Services, Inc., 105
F.3d 1465, 1484-85 & n. 12 (D.C. Cir.1997) (requiring
an employer to bear the sole costs of an arbitrator’s fees
where the arbitration was imposed by the employer, and
noting but declining to address the question whether an
arbitrator’s “refusal to waive filing and other administra-
tive fees could preclude enforcement of an arbitration
agreement”).
The arbitration clause in this case raises serious con-
cerns with respect to filing fees, arbitrators’ costs and
other arbitration expenses that may curtail or bar a plain-
tiffs access to the arbitral forum, and thus falls within
our holding in Paladino. This clause says nothing about
the payment of filing fees or the apportionment of the
costs of arbitration. It neither assigns an initial respon-
sibility for filing fees or arbitrators’ costs, nor provides
for a waiver in cases of financial hardship. It does not
say whether consumers, if they prevail, will nonetheless
be saddled with fees and costs in excess of any award.
It does not say whether the rules of the American Arbi-
tration Association, which provide at least some guide-
lines concerning filing fees and arbitration costs, apply to
the proceeding, whether some other set of rules applies,
or whether the parties must negotiate their own set of
rules.
At oral argument, Green Tree asserted that arbitra-
tions arising under this clause typically do not use the
AAA rules, but did not specify what set of rules applies.
Nor did Green Tree describe the atypical cases in which
ia
the AAA rules do apply. Green Tree also asserted at
oral argument that the arbitrator may apportion the fees
of the arbitration in his award, but that provides no guar-
antee that a consumer successfully arbitrating under this
clause will not be saddled with a prohibitive costs order,
despite the small sum that is likely to be the object of
the dispute in arbitrations of this kind. Finally, Green
Tree stated to us that no filing fees are required, but the
arbitration clause itself says nothing about that, and
whether there are filing fees is likely to depend on who
conducts the arbitration, something the arbitration clause
is silent about.
Accordingly, we conclude that the arbitration clause
in this case is unenforceable, because it fails to provide
the minimum guarantees required to ensure that Ran-
dolph’s ability to vindicate her statutory rights will not
be undone by steep filing fees, steep arbitrators’ fees, or
other high costs of arbitration. See Paladino, 134 F.3d
at 1062 (“When an arbitration clause has provisions that
defeat the remedial purpose of the statute, . . . the arbi-
tration clause is not enforceable.” (citation omitted) ).
The facts of this case distinguish it from cases in which
other circuits have held that an arbitration agreement was
enforceable despite substantial arbitration costs. In Rosen-
berg v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 170
F.3d 1, 15-16 (1st Cir.1999), the First Circuit rejected
an argument that the New York Stock Exchange’s arbi-
tration procedures were unenforceable to arbitrate a
Title VII claim merely because plaintiffs could be charged
high forum fees. But the court in Rosenberg had before
6 The court did find, however, that the plaintiff should not be
compelled to arbitrate her claims, because she was not given ade-
quate notice that her statutory claims would be subject to arbitra-
tion. See Rosenberg, 170 F.3d at 20-21.
194
it a record suggesting that most successful arbitral claim-
ants were awarded fees and costs; we lack similar infor-
mation about how claimants fare under Green Tree’s
arbitration clause. Because the clause is silent on the
subject of arbitration fees and costs, Randolph might be
required to bear substantial costs of the arbitration even if
she were to prevail on her TILA claim.
Another distinguishable case is Doctor's Associates,
_ Inc. v. Stuart, 85 F.3d 975 (2d Cir.1996). There, the
defendants argued that an arbitration agreement was un-
conscionable and unenforceable because of high filing
fees and arbitrators’ costs. The Second Circuit held that
the agreement was not unconscionable. See Stuart, 85
F.3d at 980-81; see also Doctor’s Assocs., Inc. v. Hamil-
ton, 150 F.3d 157, 163 (2d Cir.1998) (relying on Stuart
to find an arbitration agreement enforceable in a similar
case, where the plaintiff's estimated total costs of arbitra-
tion were between $28,000 and $32,000). But the arbi-
tration clause in Stuart arose in the context of a commer-
cial franchise agreement, see Stuart, 85 F.3d at 977-78,
not a small consumer transaction (as in this case) or an
employment agreement (as in Paladino). It was chal-
lenged on the general grounds that the clause was uncon-
Scionable, whereas Randolph argues that the clause in
this case prevents her from vindicating specific statutory
rights under the TILA.
We conclude that the arbitration clause at issue here
is unenforceable. Because we decide the issue on this
ground, we need not decide whether the TILA precludes
all arbitration agreements.
IV. CONCLUSION
For these reasons, we REVERSE the district court’s
order and REMAND for further proceedings consistent
with this opinion.
20a
APPENDIX B
UNITED STATES DISTRICT COURT
M.D. ALABAMA
NORTHERN DIVISION
No. 96-D-11-N
LARKETTA RANDOLPH, et al.,
9 Plaintiffs,
GREEN TREE FINANCIAL CorpP., et al.,
Defendants.
Nov. 26, 1997
MEMORANDUM OPINION AND ORDER
DE MENT, District Judge.
On January 25, 1994, Plaintiff Larketta Randolph pur-
chased a mobile home from Better Cents Home Builders,
Inc. in Opelika, Alabama. Randolph financed her pur-
chase through Green Tree Financial Corp.—Alabama.
Her financing documents required “vendors single inter-
est” insurance, which protects the vendor or lienholder
against the costs of repossession in the event of a default.
(See Pl.’s Am.Compl., Ex. A.) The installment contract
also contains an arbitration provision requiring the reso-
lution of disputes “arising from or relating to” the con-
tract.1 (See Pl.’s Am.Compl., Ex. B, 4 17.)
1The arbitration provision contained in Plaintiff’s installment
contract reads in pertinent part:
2la
On January 3, 1996, Randolph filed the instant action.
Her Complaint, as amended on December 10, 1996 and
September 29, 1997, seeks recovery from Green Tree
Financial Corp.—Alabama, Green Tree Financial Corp.,
and Green Tree Financial Servicing corporation (collec-
tively “Green Tree”)? under two theories: (1) violation
17. ARBITRATION: All disputes, claims or controversies
arising from or relating to this Contract or the relationships
which result from this Contract, or the validity of this arbitra-
tion clause or the entire contract, shall be resolved by binding
arbitration. ... This arbitration Contract is made pursuant to
a transaction in interstate commerce, and shall be governed by
the Federal Arbitration Act at 9 U.S.C.A. Section 1.... The
parties agree and understand that they choose arbitration in-
stead of litigation to resolve disputes. The parties understand
that they have a right or opportunity to litigate disputes
through a court, but that they prefer to resolve their disputes
through arbitration, except as provided herein. THE PAR-
TIES VOLUNTARILY AND KNOWINGLY WAIVE ANY
RIGHT THEY HAVE TO A JURY TRIAL EITHER PUR-
SUANT TO ARBITRATION UNDER THIS CLAUSE OR
PURSUANT TO A COURT ACTION BY ASSIGNEE (AS
PROVIDED HEREIN). The parties agree and understand
that all disputes arising under case law, statutory law, and all
other laws including, but not limit 1 to, all contract, tort and
property disputes will be subject ~~ binding arbitration in
accord with this Contract.
(See Compl., Ex. B) (emphasis in original).
Paragraph 16 of Plaintiff’s contract also states:
16. WAIVER OF JURY TRIAL. I hereby waive any right to
a trial by jury that I have in any subsequent litigation between
me and the seller, or me and any assignee of the Seller, where
such litigation arises out of, is related to, or is in connection
with any provisions of this Contract whether the Contract is
asserted as the basis for a claim, counterclaim, or cross claim,
or a defense to a claim, counterclaim, or cross claim.
(Id.)
2 The retail installment contract executed by Randolph identifies
Green Tree Corp. as the assignee. Green Tree—Alabama provides
contract services for, and is a wholly owned subsidiary of, Green
Tree Corp. Defendants contend that Green Tree Financial Servic-
22a
of the Truth In Lending Act (“TILA”) for failure to
disclose the “vendors single interest” requirement; and
(2) violation of the Equal Credit Opportunity Act
(“ECOA”) for requiring waiver of statutory causes of
action? Randolph also brings this action on behalf of a
similarly situated class. (Am.Compl. §§ 12-19.)
In lieu of an Answer, Green Tree filed a Motion To
Stay Action and Compel Arbitration, as well as several
subsequent briefs and memorandums in support thereof.
Pursuant to a request from the court, Green Tree filed
one consolidated pleading on October 31, 1997 styled
“Motion Of [Green Tree] to Compel Arbitration, Motion
To Stay, Or, In The Alternative, Motion To Dismiss And
ing Corporation was not involved with Randolph’s transaction, and
that its activities in Alabama have not involved consumer finance
transactions. Defendants submitted the Affidavit of Brian F. Corey
in support of these contentions. Plaintiff has not presented any
evidence in rebuttal, nor does the record disclose any evidence of
Green Tree Financial Servicing Corporation’s involvement in Ran-
dolph’s transaction, or, consequently, the propriety of it remaining
in this action. Accordingly, the court finds that Green Tree Finan-
cial Servicing Corporation is due to be dismissed from the above-
styled action. See Fed.R.Civ.P. 12(b)(6); Fed.R.Civ.P. 41(b).
3 Plaintiff has filed a total of three Complaints: her original on
January 3, 1996, a “Second Amended Complaint” on December 10,
1996, and an “Amended Complaint” on September 29, 1997. Her
Second Amended Complaint alleges that the “procurement of the
arbitration contract is a fraudulent scheme effectuated by the su-
perior bargaining power of defendant to prevent litigation, in that
it is placed in an inconspicuous place on the contract, and is there-
fore void and unenforceable.” (PI.’s Second Am.Compl. 12.) Her
Second Amended Complaint alleges that this “fraudulent scheme”
amounts to fraud in the inducement of the arbitration contract.
(Id. 29-33.) In her subsequent Amended Complaint, however,
Plaintiff does not reallege any fraudulent scheme on the part of
Green Tree, nor do her subsequent pleadings on dispositive motions
address this contention. The sole issue before the court, however,
is the enforceability of the arbitration provision in Plaintiff’s con-
tract, not the merits of Plaintiff’s Complaint.
23a.
Brief In Support Thereof.” (“Defs.’ Consolidated Mot.”)
These Motions are the subject of this Memorandum Opin-
ion and Order. After careful consideration of the argu-
ments of counsel, relevant law, and the record as a whole,
the court finds that the collective Green Tree Motion To
Compel Arbitration is due to be granted. Rather than
stay this action, however, the court finds that dismissal
with prejudice is appropriate. Accordingly, the court
finds that the collective Green Tree Motion To Stay Ac-
tion is due to be denied, but that the Motion To Dismiss
is due to be granted. Finally, the court finds that Green
Tree Financial Servicing Corp. is due to be dismissed as a
party to this action.
JURISDICTION
The court properly exercises subject matter jurisdiction
pursuant to 28 U.S.C.A. § 1331 (federal question) and
15 U.S.C.A. § 1640. The parties do not contest personal
jurisdiction or venue.
DISCUSSION
Section 2 of the Federal Arbitration Act (“FAA”)
provides that a written agreement to arbitrate in a con-
tract involving interstate commerce “shall be valid, irre-
vocable, and enforceable, save upon such grounds as exist
at law or in equity for the revocation of any contract.” 4
9 US.C.A. § 2. The effect of § 2 is “to create a body of
4The parties do not contest the question of whether Plaintiffs’
contract in this action satisfies the nexus to interstate commerce
requirement of the FAA. (See Pl.’s Opp. at 6, n.2; Defs.’ Con-
solidated Mot. at 2-8.) Accordingly, the court finds that for the
purposes of this Memorandum Opinion and Order, Plaintiff’s con-
tract satisfies this jurisdictional prerequisite of the FAA. Sce gen-
erally, Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 US.
265, 115 S.Ct. 834, 180 L.Ed.2d 753 (1995) ; Staples v. Money Tree,
Inc., 936 F.Supp. 856 (M.D.Ala. 1996).
24a i
federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the Act.”
Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,
460 US. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
Section 3 provides for the stay of proceedings in federal
district courts when an issue in the proceedings is refer-
able to arbitration. 9 U.S.C.A. § 3. Section 4 provides
for orders compelling arbitration when one party has
failed, neglected, or refused to comply with an arbitration
agreement. 9 U.S.C.A. § 4.
Whether an arbitration provision is enforceable, as op-
posed to the merits of the underlying dispute, is a ques-
tion for the court. Dean Witter Reynolds, Inc. v. Byrd,
470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158
(1985); Kelly v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 985 F.2d 1067 (11th Cir.1993). Any doubts about
the scope of arbitrable issues should be resolved in favor
of arbitration, even if the result is piecemeal litigation.
See Byrd, 470 U.S. at 218-21; Moses H. Cone, 460 U.S.
at 24; Kelly, 985 F.2d at 1069.
In enacting the FAA, Congress manifested a “liberal
federal policy favoring arbitration agreements.” Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111
S.Ct. 1647, 114 L.Ed.2d 26 (quoting Moses H. Cone, 460
U.S. at 24). The Act’s purpose “was to reverse the long-
standing judicial hostility to arbitration agreements that
had existed at English common law and had been adopted
by American courts, and to place arbitration agreements
upon the same footing as other contracts.” Jd. at 24.
Therefore, “questions of arbitrability must be addressed
with a healthy regard for the federal policy favoring ar-
bitration,” Moses H. Cone, 460 U.S. at 24, and courts
must “rigorously enforce agreements to arbitrate.” Byrd,
470 US. at 221.
25a
Even with this strong federal policy in mind, however,
arbitration is a matter of contract, and a party cannot be
compelled to arbitrate any claims which he or she has
not agreed to submit to arbitration. AT & T Technolo-
gies, Inc. v. Communications Workers of Am., 475 U.S.
643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Ac-
cordingly, “as with any other contract, the parties’ in-
tentions control, but those intentions are generously con-
Strued as to issues of arbitrability.” Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, Inc., 473 US. 614,
627, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Section
2 of the FAA allows courts to give relief where the party
Opposing arbitration presents “well Supported claims that
the agreement to arbitrate resulted from the sort of fraud
or overwhelming economic power that would provide
grounds ‘for the revocation of any contract.’” Rodriguez
De Quijas v. Shearson/ American Express, Inc., 490 U.S.
477, 483-84, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989)
(quoting Mitsubishi Motors, 473 US. at 627; 9 U.S.C.A.
§ 2).
Plaintiff bears the burden of demonstrating why the
arbitration agreement in this action should not bind the
parties, Shearson/American Express, Inc. y. McMahon,
482 U.S. 220, 225-26, 107 S.Ct. 2332, 96 L.Ed2d 185
(1987), and raises several grounds as to why the court
should not compel arbitration. Alternatively, Plaintiff
requests that the court certify a class before ordering
arbitration.
I. Enforcement Of The Arbitration Provision Is Not
Statutorily Barred
A. Background
Plaintiff contends that Green Tree’s actions both in
requiring “vendors single interest” insurance and in re-
quiring arbitration of her claims violates her rights under
26a
the TILA and #ke ECOA. Plaintiff's first argument is that
requiring “vendors single interest” insurance “imposes an
extra charge for insurance each year in the approximate
amount of $15.00 and constitutes a clear violation of the
[TILA],” because this charge was not disclosed.> (PI's
Opp. at 1.) The TILA requires the disclosure of certain
credit charges articulated in the Act. See 15 US.C.A.
§ 1601, et seq.
Additionally, Plaintiff contends that under 15 U.S.C A.
§ 1691(a)(3), a provision of the ECOA, “a consumer
who wishes to reserve the right to iudicial redress for such
violations cannot be denied credit.” (Pl.’s Opp. at 11.)
Plaintiff further cites regulation B implementing the
ECOA. which she contends “prohibits presenting terms
which violate the Act to a consumer in such a manner
as to convey the impression to a reasonable consumer that
thev are mandatory.” (PI.’s Renlv at 3 (citire 12 C.F R
§ 902.4(1). Commentarv).) Plaintiff argues that “in order
to finance with Green Tree. it is necessary to eybmit all
dicnntes .. . to arbitration.” (PI.’s Renlv at 1.) Accord-
ingly, “[blv reaviring consumers to sign a contract waiv-
ing statutory causes of action, Green Tree violates {the
ECOAI which prohibits a creditor from requiring 1 waiver
of rights.” (Am Compl. € 27.) Ecsentiallv. Plaintiff con-
5 Plaintiff contends that: (1) “Green Tree is a creditor within
the meaning of TILA;” (2) “The notes and security instruments
signed by plaintiff and borrowers for the purchase of mobile homes
were extensions of credit subject to TILA ;” (3) “The requirement
that insurance policies contain provisions covering Green Tree’s
possible repossession expenses are credit charges as defined by
TILA and occur annually when each policy is renewed ;” and (4)
“No TILA disclosures are given by Green Tree.” (See Am.Compl.
{| 21-23.) Green Tree does not rebut these contentions and instead
only addresses the merits of the arbitration issue. In this Memo-
randum Opinion and Order, however, the court only addresses the
question of whether Plaintiff may be compelled to arbitrate her
claims, not the merits of the underlying claims themselves.
27a
tends that “{a] creditor may not condition the ex-
tension of consumer credit upon the consumer’s waiving
his right to judicial redress for violations of [TILA].”
(Pl.’s Opp. at 19; see also Pl.’s Reply at 1.) In other
words, “a creditor cannot insist that the consumer sign
a predispute arbitration clause covering claims under
[TILA].” (Pl.’s Opp. at 12.).
Hence, Plaintiff contends that because Green Tree fails
to disclose the “vendors single interest” requirement in its
TILA disclosures, she is entitled to damages, including
attorney’s fees and litigation expenses pursuant to 15
U.S.C.A. § 1640. (Am.Compl. at 6.) She requests simi-
lar damages for the alleged ECOA violations. (Am.
Compl. at 7.)
Green Tree argues that “[e]nforcement of arbitration in
the context of TILA claims does not run afoul of any
of the provisions of the [ECOA]. Plaintiff has available to
her the full panoply of rights granted by the ECOA, and
the only limitation imposed is that her remedies be pur-
sued in arbitration rather than in the judicial arena.”
(Defs.’ Consolidated Mot. at 3.)
B. Analysis
In determining whether Congress intended to preclude
waiver of judicial remedies, the Supreme Court has pre-
scribed a two-step inquiry. First, the court must determine
whether the Parties’ agreement to arbitrate reaches the
Statutory issues, and then, upon finding it does, the court
must consider whether legal constraints external to the
Parties’ agreement foreclosed the arbitration of those
claims. Mitsubishi Motors, 473 U.S. at 629; see also Mc-
Mahon, 482 U.S. at 226-27.
As for the first prong of the Mitsubishi Motors test, and
resolving all doubts in favor of arbitration, Byrd, 470 U.S.
28a
at 218-21; Moses H. Cone, 460 U.S. at 24; Kelly, 985
F.2d at 1069, the court finds that the arbitration provision
at issue here reaches the statutory issues. The arbitration
provision provides for binding arbitration of “{ajll dis-
putes, claims or controversies arising from or relating to
this Contract or the relationships which result from this
Contract, or the validity of this arbitration clauses or the
entire contract.” (See supra, n. 1.) The provision also
provides that “[t]he parties agree and understand that all
disputes arising under case law, statutory law, and all
other laws, including, but not limited to, all contract, tort
and property disputes will be subject to binding arbitration
in accord with this Contract.” Jd. The court finds the
terms of the provision to be sufficiently broad to encom-
pass Plaintiff's TILA, ECOA, and other claims in this
suit, notwithstanding Plaintiffs’ protestations that the pro-
vision does not specifically reference applicable statutes.
(Pl.’s Reply at 4); see, e.g. Green Tree v. Lipham, CV-
96-D-208-N (M.D.AI=.1997) (De Ment, J.) (broadly
construing same provision at issue here); Ex parte Isbell,
1997 WL 531100 (Ala., August 29, 1997) (same); Ex
parte Gates, 675 So.2d 371 (Ala.1996) (same); see also
McCarthy v. Providential Corp., 1994 WL 387852 (N.D.
Cal. July 19, 1994) (enforcing arbitration provision ap-
plicable to “any controversy or claim arising out of or re-
lating to” loan documents even though it did not speci-
fiically reference any federal statute); Lopez v. Plaza Fi-
nance Co., 1996 WL 210073 (N.D.IIl. April 25, 1996)
(similar).
As for the second prong of the Mitsubishi Motors anal-
ysis, in McMahon, the Supreme Court stated that “[t]he
Arbitration Act, standing alone, . . . mandates enforce-
ment of agreements to arbitrate statutory claims.” 482
US. at 226. Indeed, as the Mitsubishi Motors court noted:
29a
By agreeing to arbitrate a statutory claim, a party
does not forgo the substantive rights afforded by the
strtute; it only submits to their resolution in an ar-
bitral, rather than a judicial, forum. It trades the
procedures and opportunity for review of the court-
room for the simplicity, informality, and expedition
of arbitration. We must assume that if Congress in-
tended the substantive protection afforded by a given
statute to include protection against waiver of the
right to a judicial forum, the intention will be de-
ductible from text or legislative history.®
Mitsubishi Motors, 473 U.S. at 628. The Supreme Court
found “no warrant in the Arbitration Act for implying in
every contract within its ken a presumption against ar-
bitration of statutory claims.” Jd. at 625.
Even though there is no presumption against the arbit-
rability of statutory claims, and courts are to “rigorously
enforce agreements to arbitrate,” Byrd, 470 U.S. at 221,
the party opposing arbitration may show that “Congress
intended to preclude a waiver of judicial remedies for the
statutory rights at issue,” and avoid arbitration. Mc-
Mahon, 482 US. at 227. “If Congress did intend to limit
or prohibit waiver of a judicial forum for a particular
claim, such an intent ‘will be deductible from [the stat-
ute’s] text or legislative history,’ . . . or from an inherent
conflict between arbitration and the statute’s underlying
6 See also Gilmer, 500 U.S. at 28 (holding that claims arising
under the Age Discrimination In Employment Act may be subject
to arbitration); Rodriguez de Quijas, 490 U.S. at 480-83 (holding
that claims arising under § 12(a)(2) of the Securities Act of 1933,
15 U.S.C.A. § 77l(a) (2), may be subject to arbitration) ; McMahon,
482 U.S. at 238-42 (holding that claims arising under the Racketeer
Influenced and Corrupt Organizations Act, 18 U.S.C.A. §§ 1961-
1968, may be subject to arbitration) ; Mitsubishi Motors, 473 U.S.
at 629 (holding that claims arising under the Sherman Act, 15
U.S.C.A. §§ 1-7, may be subject to arbitration).
- 30a
purpose.” /d. (citing Mitsubishi Motors, 473 U.S. at
632-37; Byrd, 470 U.S. at 217). Accordingly, Plaintiff
must show that Congress intended to preclude a waiver of
judicial remedies from either the text of the statute(s),
their legislative histories, or from an inherent conflict be-
tween arbitration and the statutes’ underlying purposes.
Id. at 227; see also Gilmer, 500 U.S. at 26-27. Green
Tree argues, and the court agrees, that Plaintiff does not
meet her burden.
First, Plaintiff does not cite any provision of the text
or legislative history of either the TILA or the ECOA
that expressly precludes waiver of judicial remedies. In
other words, Plaintiff has not shown that Congress in-
tended for all disputes arising thereunder to be resolved
solely by the courts. Instead, Plaintiffs’ principal argu-
ment is based on her perceived conflict between arbitra-
tion and the statutes’ underlying purpose: “[u]nder TILA,
a consumer has a statutory right to judicial redress, in-
cluding the right to bring a class action.” (Pl.’s Opp. at
11 (citing 15 U.S.C.A. § 1640).) The possibility of class-
action exposure, argues Plaintiff, “ ‘is essential to the pro-
phylactic intent of the Act, and is necessary to elevate
truth-in-lending lawsuits from the ineffective nuisance
category to the type of suit which has enough sting to
insure that management will strive with diligence to
achieve compliance.’” (Pl.’s Opp. at 12 (citing Banto-
lina v. Aloha Motors, 419 F.Supp. 1116, 1120 (D.Haw.
1976);) see also Pl.’s Reply at 1-2). Plaintiff argues that
“flew, if any, borrowers will submit claims to arbitration
in this amount [$15-20 per year]. The purpose of the
Truth in Lending Act will thus be completely thwarted
by allowing an arbitration clause to stand.” (PI.’s Reply
at 2-3.)
Further, Plaintiff argues that under 15 U.S.C.A. § 1691.
“a consumer who wishes to reserve the right to judicial
3la
redress for such violations cannot be denied credit.”
(Pl.’s Opp. at 11.) Section 1691 provides in pertinent
part:
(a) It shall be unlawful for any creditor to dis-
criminate against any applicant, with respect to
any aspect of a credit transaction—
(3) because the applicant has in good faith exer-
cised any right under this chapter.
15 U.S.C.A. § 1691(a)(3). Plaintiff contends that this
provision prevents a creditor from requiring a consumer
to waive their “statutory right” to judicial redress under
the TILA. (PIl.’s Opp. at 11-12.) Because of this “statu-
tory right,” Plaintiff contends that “a creditor cannot dis-
criminate with respect to the extension of credit if the con-
sumer insists on preserving the right to seek judicial re-
dress.” In essence, Plaintiff's argument is that “a creditor
cannot insist that the consumer sign a predispute arbitra-
tion clause covering claims under [TILA].” (Pl.’s Opp.
at 12.)
As an initial matter, the court notes that contrary to
Plaintiffs’ assertion, a creditor insisting that a consumer
sign a predispute arbitration clause is not similar to a
creditor discriminating with respect to the extension of
credit if the consumer insists on preserving the right to
seek judicial redress. (See Id. at 12.) Indeed, Plaintiff
apparently recognizes as much when she argues that
Green Tree admits that: “fI]f Plaintiff had asked to
obtain credit without an arbitration clause so she could
nursue rights under TILA and been denied, plaintiff would
have an ECOA claim.’ (PIl.’s Reply at 3.) It is important
7Green Tree contends that contrary to Plaintiff's assertion, it
does not “admit” to anything. (Defs.’ Consolidated Mot. at 27,
n. 9.) Regardless of this dispute, the court merely utilizes Plain-
tiff’s statement to show that Plaintiff recognizes the distinction
between a creditor bargaining for an arbitration provision in its
32a
to note that Plaintiff’s statutory argument is not that she
was denied credit because she refused to sign an arbitra-
tion clause. Rather, Plaintiff concedes that she signed the
contract with the arbitration provision. Her contention
is merely that arbitration should not be required under
the TILA and the ECOA3
A creditor can bargain for any provision in a contract,
including an arbitration provision, as long as it is legal
or does not violate public policy. A consumer who volun-
tarily enters into a contract with a creditor is bound by
the terms and conditions of that contract, assuming no
applicable legal or equitable conditions work to render
the contract void or voidable. The situation where a con-
sumer enters into a contract containing an arbitration pro-
vision, and thus precludes judicial remedies, is much dif-
ferent from the consumer being denied credit because he
or she refuses to sign a contract with an arbitration pro-
vision. In this action, Green Tree is merely attempting to
enforce a predispute arbitration provision. Contrary to
Plaintiffs suggestions in her pleadings, she does not argue
that she was forced to sign an arbitration provision against
her will, or that she was denied credit because she refused
to sign a contract with an arbitration provision. She
merely contends that requiring arbitration, even though
she signed a contract agreeing to arbirate, would violate
the underlying purpose of TILA in two ways: (1) by
precluding class action litigation as provided for in the
statute: and (2) by thwarting the underlying consumer
protection purposes of the Act.
Plaintiff relies on the provisions of 15 U.S.C.A. § 1640
for the proposition that because Congress provided for
contract, and a creditor refusing to extend credit to a consumer
because the consumer refuses to accede to an arbitration provision.
8 Plaintiff also proffers various contractual grounds for not en-
forcing the arbitration provision which the court addressess infra.
—————————
33a
class actions under the TILA, Green Tree cannot condi-
tion credit on preclusion of class actions or other judicial
remedies. Plaintiff also contends that 15 U.S.C.A. § 1691
(a)(3) prohibits the conditioning of the extension of
credit on a consumer’s waiver of rights provided under
the TILA and other consumer protection statutes. How-
ever, § 1640 does not create a “statutory right” to pursue
class action litigation or other judicial redress, as Plaintiff
contends. Section 1640 merely provides for jurisdictional
requirements and liability limitations. See 15 U.S.C.A.
§ 1640; see also Lopez, 1996 WL 210073 at *3; Trucken-
brodt v. First Alliance Mortgage Co., 1996 WL 422150
(N.D.11.1996). Providing for class action litigation does
not necessarily preclude any other type of dispute resolv-
tion or provide Plaintiff with a substantive “right.” As the
Gilmer court noted: “the fact that the [statute] provides
for the possibility of bringing a collective action does not
mean that individual attempts at conciliation were in-
tended to be barred.” 500 US. at 32.
The underlying purposes of a statute may, however,
preclude waiver of class claims, regardless of contractual
provisions entered into between the parties. See Mitsu-
bishi Motors, 473 U.S. at 632-37; Byrd, 470 US. at 217.
But, a statute containing provisions governing class action
litigation, without more, does not provide a plaintiff with
the substantive right to bring her claims as the repre-
sentative of a similiarly situated class. The Supreme Court
addressed this argument in Gilmer, where, in the context
of the Age Discrimination In Employment Act, it stated
that submitting a claim to arbitration does not operate to
waive the consumer’s rights: “By agreeing to arbitrate a
statutory claim, a party does not forgo the substantive
rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial forum.”
Gilmer, 500 U.S. at 26; see also Rodriguez de Quijas, 490
34a
U.S. at 480; McMahon, 482 U.S. at 229-30. Congress
did not explicitly preclude arbitration or other nonjudicial
resolution of TILA and/or ECOA claims, and Plaintiff
has not shown such intention discernible from the text or
legislative history.
Additionally, permitting binding arbitration of these
Statutory claims is consistent with statutory provisions,
such as 15 U.S.C.A. § 1640(e), that grant concurrent
State and federal jurisdiction for hearimg such claims.
Where Congress provides for alternate fora, it does not
necessarily follow that Congress intended tto preclude fora
not specifically provided for in the statutte. Nor does it
follow that Congress intended to limit fora to only those
specifically enunciated. Unless otherwise indicated, Con-
gress is merely providing procedural avenues of redress
that do not necessarily preclude other avenues; Congress
is not providing a substantive right to pursue a class ac-
tion. As the Gilmer court noted: “arbitration agreements,
‘like the provision for concurrent jurisdiction, serve to ad-
vance the objective of allowing [claimants] a broader
right to select the forum for resolving disputes, whether it
be judicial or otherwise.’” 500 U.S. at 29 (quoting Rod-
riguez de Quijas, 490 U.S. at 483). Cliass actions are
procedural devices, while “arbitration is contractual and
therefore substantive.” Sanders v. Robinson Humphrey/
American Exp. Inc., 634 F.Supp. 1048, 1065 (N.D.Ga.
1986), aff'd in part, Kirkpatrick v. J.C. Bradford & Co.,
827 F.2d 718, 725 n. 5 (11th Cir.1987) (noting the
Supreme Court’s holding in McMahon precluding class
treatment of plaintiffs subject to an arbitration agree-
ment). Procedural devices may not supersede substantive
rights. Jd.
The court finds unpersuasive Plaintiff's reliance on
case law holding that § 1691(a)(3) bars a creditor from
conditioning an extension of credit on the release of po-
354
tential claims for TILA violations arising in the past.
(Pl.’s Opp. at 12-14.) In this regard, Plaintiff relies
heavily on Parker v. DeKalb Chrysler Plymouth, 673 F.2d
1178 (11th Cir.1982). In that case, the sole issue be-
fore the Eleventh Circuit was “whether a general release
discharging [a creditor] from any claims arising out of the
purchase of an automobile constitutes a valid waiver of
(Plaintiff's) claims under TILA.” Jd. at 1179. More
specifically, the court was solely addressing the question
of “whether a person may waive a TILA claim.” Id. at
1180 (emphasis added). The court held that under the
Jacts of that case, the particular release executed by the
Plaintiff did not bar a claim under TILA. 7d. at 1182.
Although it discussed the statutory purpose behind TILA,
the court specifically held only that the plaintiff's release
“{did] not bar her TILA claim because we are convinced
that she was unaware that the release encompassed her
TILA rights.” Id. (emphasis added). The court did not
explicitly base its holding on the underlying purpose of
the TILA, but rather on the plaintiff’s level of knowledge.
As Green Tree notes, “there is a vast distinction be-
tween an instrument which completely absolves a creditor
from liability for a previously committed TILA violation
(a release) and an instrument which preserves the
debtor’s rights to pursue future claims against the cred-
itor but prescribes that these claims be resolved by arbi-
tration (an arbitration clause).” (Defs.’ Consolidated
Mot. at 14.) Preclusion of a claim through a release is
fundamentally different from an arbitration provision spe-
cifying the particular forum for resolution of a claim.
The former prevents a claim from being brought at all;
the latter merely provides the forum for its resolution—
it does not preclude the consumer from bringing a claim.
See Gilmer, 500 U.S. at 26; see also Rodriguez de Quijas,
490 U.S. at 480; McMahon, 482 US. at 229-30.
36a
In that context—the preclusion of bringing a TILA
claim—the Parker court noted that:
The public benefits from enforcement of TILA be-
cause it creates a system of disclosure that improves
the bargaining posture of all borrowers. To ensure
the realization of this goal, Congress granted con-
sumers a minimum recovery, plus costs and reason-
able attorney’s fees, without having to prove actual
damages. ... This type of remedy provides a deter-
rent comparable to exemplary damages because it
encourages individuals to bring TILA actions and
discourages noncompliance. Strict technical compli-
ance, regardless of actual injury, promotes the stand-
ardization of credit terms for the benefit of all bor-
rowers, not just the individual claimant.
Not only does TILA contemplate a public inter-
est in the enforcement of individual rights, but the
public must rely largely on the efforts of individual
consumers acting as “private attorneys general” to
achieve the disclosure system envisioned by the Act.
... If these private attorneys general are permitted
to waive TILA claims in circumstances such as those
presented in this case, the public interest in Ceterring
inconsistent and undecipherable lending practices
would be greatly hampered. The significance of this
possibility becomes clearer when we consider that
the confusion, and perhaps ignorance, that has led
consumers in the past to accept draconian credit
terms leaves them equally vulnerable when the len-
der gives them a general release of prospective
claims to sign. The Truth In Lending Act was nec-
essary exactly because borrowers could not force
creditors to provide voluntarily a system of credit
within which consumers could function intelligently.
AREA OM HEN IRR RYN wR EN AN OR TN RAUL RANTIM INL oe Se SS
37a
Parker, 673 F.2d at 1181 (citations omitted). Signifi-
cantly, the Parker court spoke only of the conflict be-
tween a release and the underlying purposes of the TILA.
Noticeably absent from the above quoted passage is any
discussion of conflict, actual or apparent, between arbi-
tration and the TILA’s underlying purpose. As noted,
a release precludes claims; in contrast, an arbitration pro-
vision merely prescribes the forum for hearing those
claims. See also Kelly vy. UHC Management, Co., Inc.,
967 F.Supp. 1240, 1258 (N.D. Ala.1997) (noting dis-
tinction between a complete release of liability and an
arbitration provision’s mere choice of forum).
Plaintiff also relies on Parker for the proposition that
“TILA is imbued with a public purpose with individuals
and their attorneys serving as private attorneys-general.
The specific grant of the right to bring class action litiga-
tion is part of enforcing that public purpose. ... {T]he
removal of class action relief through arbitration would
in essence eliminate compliance with TILA.” (Pl.’s Re-
ply at 4.) A close reading of Parker, however, shows that
the Eleventh Circuit noted that to “ensure realization”
of the enforcement of TILA’s system of disclosure (com-
pliance), “Congress granted consumers a minimum re-
covery, plus costs and reasonable attorney’s fees, without
having to prove actual damages. 15 U.S.C. § 1640(a).
This type of remedy provides a deterrent comparable to
exemplary damages because it encourages individuals to
bring TILA actions and discourage non-compliance.
Strict technical compliance, regardless of actual injury,
promotes the standardization of credit terms for the bene-
fit of all borrowers, not just the individual claimant.”
Parker, 673 F.2d at 1181.
Thus, although the language of Parker could be con-
strued to support the assertion that class action litigation
acts to ensure compliance in addition to the provisions
38a
for minimum recovery without having to prove actual
damages, the Eleventh Circuit has not expressly so held
An equally logical reading of the class action provisions
of the TILA, absent Parker, could be that because they
provide for limits on recovery in class actions, Congress
was actually concerned with consumers inundating credi-
tors with class actions and securing large recoveries, and
thus § 1640 was enacted to actually protect creditors as
opposed to ensuring compliance with the Act as Plaintiff
contends.
The court emphasizes that it is not indicating that this
was the actual intent of Congress. Parker, however, is
essentially inapplicable to the facts of this action. The
Eleventh Circuit addressed a preclusion of claims through
a release rather than an arbitration provision’s prescrip-
tion of a forum for hearing those claims. Further, the
Eleventh Circuit limited its holding in Parker to the facts
of the case before it. Parker, 673 F.2d at 1182. Con-
sequently, Parker falls out of the analysis, and the court
is left with Plaintiff's bare assertion, without supporting
authority, of what she perceives to be the Congressional
intent behind § 1640. While it is true that compliance
with TILA, and realization of its deterrent effect, is even
more likely if creditors are subject to class actions in
addition to Plaintiffs not being required to show actual
damages, Plaintiff fails to cite any compelling evidence
in support of her position. Absent such evidence, the
court finds that Plaintiff has failed to meet her burden of
showing why the arbitration provision in her contract
should not be enforced.®
9 Plaintiff also cites Prudential Ins. Co. v. Lai, 42 F.3d 1299
(9th Cir. 1994) in support of her position. The court deems it
sufficient to note that: (1) the factual situation in Lai was far
removed from the facts of this case, and are not analogous; (2)
Lai is not binding precedent in this Circuit; and (3) a multitude of
39a
II. Plaintiff's Contractual Arguments Fail
As noted supra, “arbitration is a matter of contract,
and a party cannot be required to submit to arbitration
any dispute which he has not agreed so to submit.”
United Steelworkers v. Warrior & Gulf Navig. Co., 363
U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960);
see also, Volt Info. Sciences, Inc. y. Board of Trustees,
489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488
(1989) (citing Byrd, 470 USS. at 219); AT & T Tech.,
475 U.S. at 648. Plaintiffs contends that there is no
consideration for the arbitration clause in her financing
documents because the arbitration clause requires the con-
sumer to arbitrate all suits, but gives Green Tree the
option of using judicial or non-judicial relief to enforce
a security agreement. (PI.’s Reply at 5; Pl.’s Opp. at 15.)
In other words, the arbitration provision “requires the
consumer to arbitrate everything but does not require
Green Tree to arbitrate anything.” (Pl.’s Opp. at 15-16.)
Plaintiff also contends that she did not knowingly agree
to arbitrate her statutory claims. (PI.’s Opp. at 20.)
Plaintiff argues that “a litigant can only be required to
arbitrate a federal Statutory claim ‘if she has knowingly
agreed to submit such disputes to arbitration.’ ” (7d.
(quoting Lai, 42 F.3d at 1305).) In response, Green
Tree admits that a contract generally requires considera-
tion, but argues that the provision at issue in this action
was amply supported by consideration. Green Tree also
contends that Plaintiff did, in fact, knowingly agree to
arbitrate her claims.
Because Plaintiff's contractua! arguments are directed
exclusively to the arbitration provisions, and not to her
courts have either limited Lai’s holding or restricted its applica-
tion. (See Defs.’ Consolidated Mot. at 16, n.4, and accompanying
text.)
40a
contract as a whole, the court may properly address these
issues. See Prima Paint Corp. v. Flood Conklin Mfg.
Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270
(1967); Wheat, First Securities, Inc. v. Green, 993 F.2d
814 (11th Cir.1993); Boyd v. Homes of Legend, Inc.,
981 F.Supp. 1423, 1441-42 (M.D.Ala.1997). In doing
so, the court applies state law governing the formation of
contracts, keeping in mind the strong federal policy favor-
ing arbitration. See First Options of Chicago v. Kaplan,
514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995);
Volt Info., 489 U.S. at 468; American Express Fin. Ad-
visors v. Makareiwicz, 122 F.3d 936, 940 (11th Cir.
1997); Roberson v. Money Tree of Ala., 954 F.Supp.
1519, 1528 (M.D.Ala.1997).
A. The Arbitration Provision Is Supported By Consid-
eration
Plaintiff contends that the arbitration provision requires
the consumer to arbitrate everything, but does not re-
quire Green Tree to arbitrate anything. (Pl.’s Opp. at
15-16.) Pursuant to Hull v. Norcom, Inc., 750 F.2d
1547 (11th Cir.1985), Plaintiff argues such “one-way”
arbitration clauses are not enforceable. (/d.) Plaintiff's
consideration argument, essentially, is that the arbitration
provision is unenforceable for lack of mutuality of obli-
gation. See WMX Technologies, Inc. v. Jackson, 932
F.Supp. 1372, 1374 (M.D. Ala.1996) (“mutuality of ob-
ligation is properly viewed as an elaboration of the con-
cept of consideration”).
In Hull, the Eleventh Circuit, utilizing New York law,
addressed an arbitration agreement that required one
party to arbitrate but left the other party free to choose
between arbitration and judicial enforcement. 750 F.2d
at 1549-50. The Eleventh Circuit held that under New
York contract law, “the consideration exchanged for one
4la
Party’s promise to arbitrate must be the other party’s
Promise to arbitrate at least some specified class of claims.
Mere presence of an arbitration clause is insufficient to
enforce the arbitration provision.” Jd. at 1550. New
York law required mutuality; an arbitration provision was
unenforceable unless both parties to the contract ex-
changed reciprocal promises to arbitrate.
Hulls mutuality requirement, based on New York law,
has not been widely acepted. Indeed, New York itself
has subsequently overruled its mutuality requirement. See
Sablosky v. Edward S. Gordon Co., 73 N.Y.2d 133, 538
N.Y.S.2d 513, 535 N.E.2d 643, 646 (1989) (“mutuality
of remedy is not required in arbitration contracts. If
there is consideration for the entire agreement that is suffi-
cient; the consideration supports the arbitration option, as
it does every other obligation in the agreement”); see also
Latifi v. Sousa, 1996 WL 735260 at *5 ( recognizing
same and quoting Design Benefit Plans, Inc. vy. Enright,
940 F.Supp. 200, 204 (N.D. 111.1996) (“as far as New
York law is concerned, Hull is no longer good law”) ).
Latifi also notes Hull’s lackluster reception in a multitude
of jurisdictions, including distinguishment on the grounds
that Hull’s mutuality requirement was unique to New
York state, or outright rejection of its holding. See Latifi,
1996 WL 735260 at *4; see also Kelly, 967 F.Supp. at
1259 (declining to follow Hull because New York law
was inapplicable); W.L. Jorden & Co. v. Blythe Ind.,
Inc., 702 F.Supp. 282, 284 (N.D. Ga.1988) (same).
Because the Hull court was following New York law, and
Alabama law is applicable in the instant action, Plain-
tiff’s reliance on Hull is misplaced.
Contrary to Plaintiff's assertions, Alabama law is not
similar to pre-Sablosky New York law, the law interpreted
in Hull; in Alabama, mutuality in arbitration provisions
is not required. Under Alabama law, mutuality:
42a
[D]oes not mean equal rights under the contract, or
that each party is entitled to the same rights or cove-
nants under the contact. So long as there is a valu-
able consideration moving from one side to the other,
or there are binding promises on the part of each
party to the other, there is adequate consideration
for a valid contract.
Marcrum v. Embry, 291 Ala. 400, 282 So.2d 49 (1973).
“If there is consideration, there need to be” mutuality of
obligation. Sherrill v. Alabama Appliance Co., 240 Ala.
46, 197 So. 1 (1940). Further, in a recent decision, the
Alabama Supreme Court acknowledged that no severable
or identical consideration is required for an arbitration
provision to be enforceable. Northcom, Ltd. v. James, 694
So.2d 1329, 1335-36 (Ala.1997). The court merely re-
quired ample consideration between the parties in the
contract the arbitration provision governs. /d.; see also
Goodwin v. Ford Motor Credit Co., 970 F.Supp. 1007,
1011 (M.D.Ala.1997).
Alabama contract law does not require mutuality—
“equal or reciprocal consideration is not required... . So.
under Alabama law, even a unilateral arbitration agree-
ment is enforceable, so long as the contract in which it is
contained contains some consideration given by each side.”
Latifi, 1996 WL 735260 at *5 (citing in accord WMX
Technologies, 932 F.Supp. at 1375). Having noted that
Plaintiff's contentions are unsupported by Hull or by Ala-
bama law, the court finds that the contract between the
parties at issue here—and consequently the arbitration
provision contained therein—is supported by ample con-
sideration. There are mutually enforceable promises in
the contract. Plaintiff's argument accordingly fails.
43a
B. Plaintiff Knowingly Consented To Arbitration
Plaintiff contends that “a litigant can only be required
to arbitrate a federal Statutory claim if ‘she knowingly
agreed to submit such disputes to arbitration.’ ” (P1.’s
Opp. at 20 (citing Lai, 42 F.3d at 1305) (emphasis
added).) She argues that Parker supports her contentions
because the Eleventh Circuit “held that a release was in-
effective to bar plaintiff's TILA claim ‘because we are con-
vinced that she was unaware that the release encom-
passed her TILA rights.’” (Jd. at 20-22 (citing Parker,
673 F.2d at 1182) (emphasis added).) Essentially, Plain-
tiff is arguing that she has to have “knowledge” of any
“right” that she is waiving.
Green Tree contends that “if Plaintiff did not know of
the existence of the arbitration provision, it was because
she did not take the time to read the installment contract.”
(Defs.’ Consolidated Mot. at 47.) Green Tree points to
portions of Plaintiff's deposition which it contends estab-
lishes that “any lack of knowledge on her part was not
because she could not have read and understood the ar-
bitration clause when she entered into it but, instead, was
because of her lack of diligence in taking the time to read
the contract when she signed.” (Jd. at 48.)
In arguing that Parker precludes enforcement of the
arbitration provision, Plaintiff is arguing that enforcement
is only appropriate if she “knowingly” agreed to arbitra-
tion. In other words, Plaintiff contends that the arbitration
provision requires her to waive what she contends to be a
substantive right (the right to proceed with a class ac-
tion), and Parker requires the waiver of a substantive
right to be made with knowledge. In Parker, the Eleventh
Circuit held that the plaintiffs release did not bar her
TILA claims because “she was unaware that the release
encompassed her TILA rights.” Parker, 673 F.2d at 1182
(emphasis added).
44a
As noted, supra, a release operates as a waiver of
substantive rights—the right to pursue claims. In con-
trast. an arbitration provision docs not operate to waive
substantive rights (claims), it merely prescribes the forum
for enforcing those rights and resolving those claims.
Accordingly, Parker's holding that on the facts of that
case the release did not bar plaintiff's TILA claims be-
cause the plaintiff was unaware that the ;elease operated
to waive such claims, is inapplicable to the facts of this
action. Plaintiff's argument that because Parker requires
a knowing waiver of rights in a release, the same standard
of knowledge should be applied to an arbitration provision
is simply incongruous. Again, the court notes the Supreme
Court's language in Gilmer: [A] party does not forgo the
substantive rights afforded by the statute, it only submits
to their resolution in an arbitral, rather than a judicial,
forum.” 500 U.S. at 26 (citing Mitsubishi Motors, 473
U.S. at 628). Plaintiff's agreement to arbitrate does not
involve a waiver of a substantive right, and the heightened
knowledge standard articulated in Parker is not applicable
to the case at bar. See also Puentes v. United States Serv.,
Inc., 86 F.3d 196, 198 (11th Cir.1996) (applying know-
ing and voluntary standard to employee’s release of em-
ployer from Title VIT and 42 U.S.C. § 1981 liability);
Kelly, 967 F.Supp. at 1257-58.
In her deposition, Plaintiff states that when she received
the contract containing the arbitration provision, she “went
over the front and glanced over the back.” (Randolph
Dep. at 51, See Green Tree Evidentiary Submission In
Supp.. Ex 3.) At that time, she did not see anything that
caused her any concern. (/d.) Plaintiff admits that she
could have taken the time to look at the hack of the cen-
tract if she had wanted to. (/d. at 79.) Plaintiff also ad-
mits that Green Tree representatives did not say anything
to her on a visit to her home that she now contends was
VY ROR
45a
false or untrue. (Pl.’s Dep. at 73.) Nor is there any
contention elsewhere in Plaintiff's deposition or pleadings
that Green Tree intentionally misled her, made statements
that she now contends are false or untrue, or coerced
her in anyway into signing her contract.
Plaintiff's deposition testimony establishes that she read
the front of her contract, and “glanced” at the back.
Green Tree did not pressure Plaintiff or force her to sign
the contract without reading it—she admits she could
have taken more time if she had wanted to. Nothing con-
cerned her at that time. There is no evidence that Green
Tree made any false statements to Plaintiff, or misled her
in any way. The evidence merely shows that Plaintiff did
not read the back page of her contract—where the arbi-
tration provision was located.
Plaintiff cannot complain now about an agreement to
arbitrate she admittedly did not read at the time she
signed the contract. Kelly, 967 F.Supp. at 1257. Plain-
tiff’s failure to read what she signed does not insulate her
from her contractual obligations, including the agreement
to arbitrate. Coleman v. Prudential Bache Sec. Inc., 802
F.2d 1350 1352 (11th Cir.1986) (per curiam) (“absent
a showing of fraud or mental incompetence, a person who
signs a contract cannot avoid her obligations under it by
showing that she did not read what she signed”); Ex parte
Stripling, 694 So.2d 1281, 1283-84 (Ala.1997) (holding
that even though plaintiffs did not read the contracts be-
fore signing, “ordinarily when a competent adult, having
the ability to read and understand an instrument, signs a
contract, he will be held to be on notice of all the pro-
visions contained in that contract and will be bound
thereby”).
This action does not involve a release of liability. as
did Parker. Instead, it involves an agreement to arbitrate
claims arising out of or related to Plaintiff's contract
46a
rather than pursuing those claims in a court of law. Plain-
tiff had an unfettered opportunity to read her contract.
Yet, by Plaintiff's own admission, she merely “glanced
over” the back—the page with the arbitration provision.
Plaintiff! cannot argue that she did not knowingly enter
into the arbitration provision based on her admitted failure
to read those provisions dealing with arbitration. Under
these facts. the court finds that Plaintiff voluntarily and
knowingly entered into her contract, including the arbitra-
tion provisions contained therein, notwithstanding Plain-
tiffs contentions that Parker's heightened knowledge re-
quirement applies. The court finds that a release is suffi-
ciently dissimilar in terms of legal effect so as to distin-
guish the facts and holding of Parker from the facts
of this case. Accordingly, Plaintiff's argument that she
did not knowingly enter into an agreement to arbitrate
must fail.
Ill. The Court Declines To Certify A Class
It is true that compelling arbitration in this instance
will eliminate Plaintiff's ability to arbitrate her claims on
behalf of a class. Nevertheless, Congress has not created
a statutory right—as opposed to a procedural mechanism
—to bring class actions under the TILA. Further, the
Supreme Court has repeatedly emphasized that courts are
to rigorously enforce the partics’ agreement as they wrote
it; the FAA “requires piecemeal resolution when necessary
to give effect to an arbitration agreement.” Moses H.
Cone, 460 U.S. at 21 (emphasis in original); see also
Byrd, 470 US. at 221.
In addition, Plaintiff mistakenly asserts that “the Court's
authority to certify a class to proceed in arbitration is
questionable.” (Pl.’s Opp. at 22.) It is not. In Protective
Life Ins. v. Lincoln Nat. Life Ins., 873 F.2d 281 (11th
Cir.1989) (per curiam), the Eleventh Circuit addressed
poh ented Pichi the
47a
the issue of “whether a district court may consolidate ar-
bitration proceedings if the parties have not provided for
consolidation in their arbitration agreements.” Jd. at 282.
The Eleventh Circuit concluded “that [a district court]
may not.” /d. The court noted that § 4 of the FAA “lim-
its the power of the court to determining whether a writ-
ten arbitration agreement exists, and if it does, to enforc-
ing it ‘in accordance with its terms.’" /d. (citing 9 U.S.C.
§ 4). The court quoted the Ninth Circuit’s observation in
Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d
635, 637 (9th Cir.1984), cert. denied, 469 U.S. 1061,
105 S.Ct. 544, 83 L.Ed.2d 431 (1984), that:
this interpretation of section 4 “comports with the
statute’s underlying premise that arbitration is a
creature of contract, and that ‘[a]n agreement to
arbitrate before a special tribunal is, in effect. a
specialized kind of forum-selection clause that posits
not only the situs of suit but also the procedure to be
used in resolving the dispute.’" /d. (quoting Scherk
v. Alberto-Culver Co., 417 U.S. 306, 94 S.Ct. 2449,
41 L.Ed.2d 270 (1974)). Parties may negotiate for
and include provisions for consolidation of arbitra-
tion proceedings in their arbitration agreements, but
if such provisions are absent, federal courts may
not read them in.
Protective Life, 873 F.2d at 282.
The court went on to hold that the agreements between
the parties in Protective Life “contain their own arbitra-
tion clauses, and each clause requires arbitration only
between the parties to that agreement. The [parties]
never agreed to consolidated arbitration.” J/d.; see also
Kirkpatrick, 827 F.2d at 725, n. 5. Therefore, because
the contracts did not provide for arbitration on a class
basis, the Eleventh Circuit declined to read such a pro-
48a
vision into them, and instead, merely enforced the terms
of the contract requiring individualized arbitration. The
Second, Fifth, Sixth, Seventh, Eight and Ninth Circuits
have also held that absent either an express provision in
an arbitration clause or statutory authority, courts should
not order consolidated arbitration. See, ¢.g., Champ v.
Siegel Trading Co., Inc., 55 F.3d 269 (7th Cir.1995);
Government of United Kingdom v. Boeing Co., 998 F.2d
68 (2d Cir.1993); American Centennial Ins. v. National
Casualty Co., 951 F.2d 107 (6th Cir.1991); Baesler v.
Continental Grain Co., 900 F.2d 1193 (8th Cir.1990);
Del E. Webb Constr. v. Richardson Hosp. Auth., 823
F.2d 145 (5th Cir.1987); Weyerhaeuser Co., 743 F.2d at
635: c.f. Compania Espanola de Petroleos S.A. v. Nereus
Shipping, S.A., 527 F.2d 966, 975 (2d Cir.1975), cert.
denied. 426 U.S. 936, 96 S.Ct. 2650, 49 L.Ed.2d 387
(1976) (holding that a district court could order consoli-
dated arbitration pursuant to Federal Rules of Civil Pro-
cedure 42(a) and 81(a)(3)).
Accordingly, regardless of the wisdom of denying class
certification because the agreement between the parties
did not provide for class certification for arbitration pur-
poses, see Champ, 55 F.3d at 277-78 (Ilana Diamond
Rovner, J., concurring), this court is bound by circuit
precedent, and thus is required to decline Plaintiff's invi-
tation to certify a class.
TV. Conclusion
Section 3 of the FAA allows a court to stay the pro-
ceeding in an action and compel arbitration. 9 U.S.C.A.
§ 3. However, where all of the issues raised in a com-
plaint must be submitted to arbitration, dismissal of an
action is appropriate. See Alford v. Dean Witter Revn-
olds. Inc.. 975 F.2d 1161. 1164 (Sth Cir.1992): Bovd v.
Homes Of Legend, Inc., 981 F.Supp. 1423, 1997 WL
toed Mahl Ey ob tabs
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49a
619208 *20 (M.D.Ala. 1997); McCarthy, 1994 WL
387852 at *9. Accordingly, the court will dismiss Plain-
tiffs’ claims, with prejudice, and compel her to submit
them to binding arbitration pursuant to the arbitration
provision in her contract.
Based
50a
ORDER
on the foregoing, it is CONSIDERED and
ORDERED that:
(1)
(2)
(3)
(4)
(5)
The collective Defendants’ Motion To Compel
Arbitration be and the same is_ hereby
GRANTED.
The collective Defendants’ Motion To Stay Ac-
tion be and the same is hereby DENIED.
The collective Defendants’ Motion To Dismiss
be and the same is hereby GRANTED. Such
dismissal is WITH PREJUDICE.
Defendant Green Tree Financial Servicing Cor-
poration be and the same is hereby DISMISSED
as a party Defendant to this action.
Plaintiff is herewith ENJOINED and RE-
STRAINED from failing forthwith to arbi-
trate her claims against the remaining Green
Tree Defendants.
sea!
Sia
APPENDIX C
[Filed Jan. 5, 1998]
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
Case No. 96-D-11-N
LARKETTA RANDOLPH, et al.,
Plaintiff,
Vv.
GREEN TREE FINANCIAL CoRP.—ALABAMA, et al.,
Defendants.
ORDER
Before the court is Plaintiff's Motion For Reconsidera-
ation filed December 10, 1997. Defendants filed a re-
sponse on December 29, 1997. Plaintiff initially filed suit
alleging violations of the Truth In Lending Act (“TILA”)
and the Equal Credit Opportunity Act (““ECOA”). Plain-
tiff also brought this action on behalf of a similarly situ-
ated class. On November 26, 1997, the court issued a
Memorandum Opinion and Order (“Order”) granting
Defendants’ Motion To Compel Arbitration, denying
Plaintiff's request to certify a class, dismissing this action,
with prejudice, and enjoining Plaintiff from failing to arbi-
trate her claims against the Defendants.
In its November 26, 1997 Order, the court noted that
the only way Plaintiff could avoid arbitration would be
through a showing of Congress’ intent to preclude arbi-
tration of TILA or ECOA claims. (Order at 9-11.) Such
52a
an intent must be shown either through the text of the
Acts, their legislative histories, or from an inherent con-
flict between arbitration and the Acts’ underlying pur-
poses. (Order at 11.) Plaintiff bore the burden of show-
ing why the arbitration agreement at issue in this case
should not bind the parties. (Order at 6.)
In her Motion For Reconsideration, Plaintiff asserts that
the court ignored “the only binding precedent with respect
to this particular issue,” namely Wilson v. Waverlee
Homes, Inc., 954 F. Supp. 1530 (M.D. Ala. 1997), aff'd
127 F.3d 40 (11th Cir. 1997). (Mot. For Recons. at 1
(emphasis in original).) Plaintiff contends that Waverlee
Homes, a decision rendered pursuant to the Magnuson-
Moss Warranty-Trade Commission Improvement Act, con-
trols the court’s disposition of this action. In Waverlee
Homes, the court analyzed highly detailed and specific
provisions of the Magnuson-Moss Act and concluded that
Congress intended to preclude binding arbitration of writ-
ten warranty claims arising under the Act. Id. at 1537-39;
see also Boyd v. Homes of Legend, Inc., 1997 WL 619-
208, *12-13 (M.D. Ala. 1997). In Boyd, however, the
court concluded that non-written and implied warranty
claims arising under the Magnuson-Moss Act could be
subject to arbitration. Boyd, 1997 WL 619208 at *18.
In other words, the court found that even though Con-
gress intended to preclude arbitration of written warranty
claims under the Magnuson-Moss Act, it did not intend
to preclude arbitration of non-written or implied warranty
claims. Boyd, 1997 WL 619208 at *14, *18.
Significantly, these findings were made even though the
Congressional intent of the Magnuson-Moss Act was to
“improve the adequacy of information available to con-
sumers, [and] prevent deception,” see Boyd, 1997 WL
619208 at *11. The court in Waverlee Homes rested its
findings on other, specific provisions of the Act, not solely
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Seedy
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534
on Congress’ stated intent in passing the Act. If it had,
Boyd may have been decided differently. Indeed, in Boyd,
the court ordered the arbitration of non-written and im-
plied warranty claims arising under the Magnuson-Moss
Act, see Boyd, 1997 WL 619208 at *14, even though it
declined to do so for written warranties in Waverlee
Homes. Waverlee Homes, 954 F. Supp. at 1537-39. Ac-
cordingly, not only are Waverlee Homes and Boyd in-
. applicable to the court’s analysis under the TILA and the
ECOA, Plaintiff is simply wrong in asserting that “[i]n
both Boyd and [Waverlee Homes], the Court found that
enforcement of the arbitration clause at issue would over-
ride the desires of Congress in creating the legislation,”
(Mot. For Recons. at 2); wrong in asserting that “there
is no distinction to be drawn between [Magnuson-Moss
and TILA] (/d. at 7); and misguided in asserting as sup-
port the fact that “all of these consumer protection statutes
were passed in a relatively short period of time between
1968-1974.” (1d.)
The court finds unpersuasive Plaintiff's assertions re-
garding class certification and finds it unnecessary to re-
visit that portion of its Order denying Plaintiff's request
to certify a class. (Mot. For Recons. at 7-9.) Finally,
Plaintiff requests that the court reconsider its Order en-
joining Plaintiff from failing to arbitrate her claims against
the Defendants. (Mot. For Recons. at 9.) Plaintiff asserts
that she does not have the resources to arbitrate and that
consequently her “only option... is to forego any
claims that she may hav
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