367 P.3d 361
Mont.2016Background
- Plaintiff Susan Ossello enrolled in a debt‑relief program after a World Law solicitation and electronically signed a Dedicated Account Agreement (DAA) with Global Client Solutions that set up automatic withdrawals and a dedicated account for debt payments.
- Ossello alleges World Law/Global never provided promised legal services or creditor payments; she stopped paying creditors and was later sued by Discover Bank; she sued Global and World Law for fraud, consumer‑protection violations, unjust enrichment, unauthorized practice of law, and related claims.
- The DAA contains a broad arbitration clause (administered by AAA) requiring arbitration of disputes arising from the Agreement, but also separately reserves to Global the right to bring court “collection actions” for negative account balances and to recover court costs and attorneys’ fees.
- Global moved to compel arbitration and to dismiss; the District Court denied the motion, concluding the court — not an arbitrator — should decide arbitrability and that the arbitration clause was unconscionable (a contract of adhesion and one‑sided in favor of Global).
- On appeal, the Montana Supreme Court affirmed: it rejected Global’s contention that a delegation clause or incorporation of AAA rules clearly and unmistakably committed arbitrability to an arbitrator, and held the arbitration provision unenforceable under Montana unconscionability law because it lacked mutuality (Global could sue in court while Ossello would be compelled to arbitrate).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court or an arbitrator decides arbitrability | Ossello challenged the arbitration clause itself; court should decide arbitrability | Global: clause (and AAA rules incorporation) delegates arbitrability to arbitrator; delegation is clear | Court: district court properly decided arbitrability; clause did not clearly and unmistakably delegate that question |
| Whether incorporation of AAA rules constitutes delegation | Ossello: incorporation here (uncertain which AAA rules) does not clearly delegate | Global: incorporation of AAA rules and clause language shows clear delegation | Court: incorporation as presented was not clear/unmistakable on this record; does not prove delegation |
| Whether the arbitration clause is unconscionable / unenforceable | Ossello: clause is in adhesion contract, one‑sided, waives jury and is unconscionable | Global: FAA preempts state defenses that disproportionately affect arbitration; clause is enforceable | Court: clause unconscionable and unenforceable under Montana law because it lacks mutuality (Global may litigate collection actions in court while Ossello is compelled to arbitrate) |
| Whether FAA preempts Montana unconscionability analysis here | Ossello: state unconscionability defense permitted under FAA savings clause | Global: Concepcion/Mortensen preempt state defenses that disproportionately affect arbitration | Court: the lack of mutuality here is a generally applicable contract defense and does not frustrate FAA objectives; FAA does not preempt this result |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (preemption of state defenses that target arbitration)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (severability of arbitration clause challenges)
- Rent‑A‑Center, West, Inc. v. Jackson, 561 U.S. 63 (delegation clauses must be specifically challenged)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (fraud‑in‑the‑inducement rule and severability)
- Mortensen v. Bresnan Commc’ns LLC, 722 F.3d 1151 (9th Cir. 2013) (discussion of Concepcion’s displacement of some state unconscionability defenses)
- Iwen v. U.S. West Direct, 977 P.2d 989 (Mont. 1999) (arbitration clause unenforceable where drafter reserved court remedies for collection while forcing consumer arbitration)