303 Ga. 172
Ga.2018Background
- Mira Brown signed a rental-purchase agreement with RAC Acceptance East, LLC that incorporated a broad arbitration agreement including a delegation clause assigning disputes about the agreement’s validity, enforceability, arbitrability, or scope to an arbitrator.
- Brown failed to make required payments; RAC repeatedly sought return of the furniture and ultimately procured a magistrate-issued arrest warrant for theft by conversion after Brown failed to appear at a hearing. Brown later returned the furniture and the prosecutor declined to pursue charges.
- Brown sued RAC in Fulton County Superior Court asserting malicious prosecution, false arrest/imprisonment, emotional distress, invasion of privacy, and defamation; RAC moved to compel arbitration and to stay the litigation under the Federal Arbitration Act (FAA).
- The trial court compelled arbitration, concluding the delegation clause covered the enforceability/waiver question; an arbitrator found RAC had not waived its right to arbitrate and awarded judgment for RAC; the trial court confirmed the award.
- The Court of Appeals affirmed (unpublished), reasoning courts decide conduct-based waiver; the Georgia Supreme Court granted certiorari and affirmed on the distinct ground that the delegation clause clearly and unmistakably committed waiver-of-arbitration disputes to the arbitrator.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RAC waived its right to arbitrate by obtaining an arrest warrant (conduct-based waiver) | Brown: RAC’s litigation conduct (swearing out warrant) waived arbitration and Taft requires court resolution favoring waiver | RAC: Arbitration agreement (including broad delegation clause) delegates arbitrability/waiver to the arbitrator; FAA requires enforcing that delegation | The delegation clause clearly and unmistakably assigned arbitrability (including conduct-based waiver) to the arbitrator; court must compel arbitration |
| Who decides arbitrability when waiver is alleged based on litigation conduct | Brown: Court should decide waiver under Taft precedent | RAC: Parties agreed to arbitrate arbitrability; arbitrator decides waiver | The parties’ delegation provision displaces the presumption that courts decide such gateway issues; arbitrator decides waiver |
| Whether a court may review arbitrator’s legal conclusions about waiver under FAA | Brown: If arbitrator wrongly rejected Taft, courts should reverse | RAC: FAA limits judicial review of arbitrator legal error; only statutory vacatur grounds apply | Courts cannot vacate an award for ordinary legal error; only extreme statutory grounds permit vacatur, so Brown could not prevail even if arbitrator erred |
| Applicability of Taft to this case | Brown: Taft supports finding waiver here | RAC: Taft not controlling where delegation clause exists and arbitrator resolved waiver | Court did not decide Taft’s application; held Taft is unnecessary because delegation clause sends waiver question to arbitrator and arbitrator’s ruling is not attackable for legal error under FAA |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (delegation provisions can be enforced; severability of delegation clause under FAA)
- Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (parties may clearly and unmistakably agree to arbitrate arbitrability)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (who decides arbitrability depends on parties’ agreement)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (distinguishes substantive arbitrability and procedural questions for courts vs. arbitrators)
- Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576 (FAA’s vacatur grounds are exclusive; courts cannot review arbitrator legal errors generally)
- Taft v. Burttram, 254 Ga. 687 (Ga. 1985) (earlier Georgia decision holding waiver where party invoked criminal process; discussed but not applied)
- Losey v. Prieto, 320 Ga. App. 390 (Ga. Ct. App. 2013) (upholding delegation language as clear and unmistakable)
- Jones v. Waffle House, Inc., 866 F.3d 1257 (11th Cir.) (similar language found to clearly delegate gateway issues to arbitrator)