Lashiya D. Ellis v. JF Enterprises, LLC d/b/a Jeremy Franklin's Suzuki of Kansas City, Condor Capital Corp.
2016 Mo. LEXIS 4
| Mo. | 2016Background
- In November 2013 Lashiya Ellis bought a 2012 Hyundai Sonata from JF Enterprises and signed a retail buyers order, a retail installment contract, and a contemporaneous arbitration agreement covering disputes arising from the purchase/financing.
- Ellis later sued JF Enterprises (and separately sued the financer) alleging violations of the Missouri Merchandising Practices Act based on JF’s failure to pass title, asserting that § 301.210 renders the sales contract (and related documents) fraudulent and void and asking the court to rescind the transaction and void the arbitration clause.
- JF Enterprises moved to stay proceedings and compel arbitration under the arbitration agreement and the Federal Arbitration Act (FAA).
- The trial court denied the motion, concluding the entire contract (including the arbitration clause) was void under § 301.210, so arbitration could not be compelled.
- JF Enterprises appealed. The Missouri Supreme Court reviewed de novo whether a valid arbitration agreement exists and whether Ellis’s claims fall within its scope, with the dispositive question being whether the arbitration clause is independently enforceable under the FAA.
Issues
| Issue | Plaintiff's Argument (Ellis) | Defendant's Argument (JF Enterprises) | Held |
|---|---|---|---|
| Whether the arbitration agreement is enforceable when the underlying sales contract is alleged void under § 301.210 | The arbitration clause is part of the sales contract; if the sales contract is void for failure to deliver title, the arbitration clause is void too | FAA preempts state law; arbitration clauses are severable and enforceable unless the clause itself is specifically challenged | Held: Arbitration agreement is severable and enforceable; court must compel arbitration |
| Whether a court may decide validity of the arbitration clause when the challenge attacks the contract as a whole (fraud/consideration) | The entire contract (including arbitration clause) is void ab initio; lack of consideration defeats formation of arbitration agreement | Under Prima Paint/Buckeye/Rent‑A‑Ctr, challenges to the whole contract go to arbitrator; only discrete attacks on the arbitration clause allow a court to refuse enforcement | Held: Court may decide only discrete challenges to the arbitration clause; here Ellis raised only a holistic challenge, so arbitrator decides contract‑wide issues |
| Whether Missouri § 301.210 can be applied to bar enforcement of the arbitration agreement | State statute renders the sales contract fraudulent and void, so state courts may refuse enforcement | FAA § 2 preempts state rules that would defeat arbitration clauses embedded in contracts alleged void under state law | Held: FAA preempts that application; state rule cannot bar enforcement absent a discrete clause‑specific defense |
| Whether lack of consideration (due to failure to convey title) invalidates arbitration clause | Failure to deliver title means no consideration for the deal or arbitration clause, so clause is unenforceable | That argument requires adjudicating the validity of the overall sales contract, which is for the arbitrator to decide unless the challenge targets the arbitration clause itself | Held: Lack‑of‑consideration defense tied to the entire contract is not a discrete challenge; arbitration compelled |
Key Cases Cited
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (arbitration provision severable from rest of contract; challenges to contract as a whole go to arbitrator)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) (distinguishes challenges to arbitration clause itself from challenges to entire contract; courts decide clause‑specific defenses)
- Southland Corp. v. Keating, 465 U.S. 1 (1984) (FAA creates federal substantive arbitration law applicable in state courts)
- Rent‑A‑Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (reiterates that only clause‑specific challenges permit court intervention; general contract defenses belong to arbitrator)