513 P.3d 94
Utah Ct. App.2022Background
- Brent and Vernold Livingston financed a vehicle purchase with Finco Holdings (Lender) and signed a consumer loan agreement plus an arbitration rider presented by Lender. The rider contained a borrower signature block but no creditor signature block.
- The rider stated it was incorporated into loan documents, defined “we/us” as the creditor signing below, and said the FAA governs arbitrability.
- Lender signed the loan agreement, funded the loan conditioned on the Livingstons signing the rider, retained the executed rider, and later sought to enforce it. Lender’s signature on the rider was absent at origination and was added later.
- After an alleged default, Lender repossessed and sold the vehicle; the Livingstons sued (repossession, right to redeem, etc.). Lender Defendants responded, moved to dismiss in part, and (after a contested removal/remand to federal court) moved to compel arbitration ~15 months after suit began.
- The district court found the Livingstons had signed the rider, concluded Lender manifested assent to arbitration despite the absence of a contemporaneous creditor signature, found no prejudice from delay, compelled arbitration, and later confirmed an arbitration award for Lender Defendants. The Livingstons appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration rider (formation) | Rider required the creditor’s signature to form a binding arbitration agreement; without a timely creditor signature there was no mutual assent. | Signature not required; Lender manifested assent by drafting/presenting the rider, signing the loan, conditioning funding on the borrower’s signature, retaining the rider, and seeking to enforce it. | Court: Rider enforceable. Utah contract principles allow assent by conduct; absence of creditor signature did not prevent formation. |
| Waiver of arbitration by litigating (prejudice) | Lender substantially participated in litigation, delayed >15 months, incurred litigation advantage and costs, and forum-shopped — so they waived arbitration and Livingstons were prejudiced. | Delay did not create prejudice: issues litigated (motions to dismiss, removal) would have arisen in arbitration; federal removal was rejected and fees awarded to Livingstons; no unrecoverable costs or unique discovery advantage. | Court: No waiver. Livingstons failed to show prejudice from delay; waiver requires both litigation inconsistent with arbitration and prejudice. |
Key Cases Cited
- Perry v. Thomas, 482 U.S. 483 (interpreting the FAA and noting state-law contract formation principles apply when deciding enforceability)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (state-law principles govern whether parties agreed to arbitrate)
- Chandler v. Blue Cross Blue Shield of Utah, 833 P.2d 356 (Utah 1992) (Utah waiver test: participation inconsistent with arbitration plus prejudice)
- Peterson v. Shearson/American Express, Inc., 849 F.2d 464 (10th Cir. 1988) (waiver factors: invoked litigation machinery, inconsistent actions, use of judicial discovery, and prejudice)
- ASC Utah, Inc. v. Wolf Mountain Resorts, LC, 245 P.3d 184 (2010 UT 65) (when waiver decision is based on documentary evidence, appellate review is for correctness)
- Nunley v. Westates Casing Services, Inc., 989 P.2d 1077 (Utah 1999) (contract formation can present mixed fact-law questions)
- Ellsworth v. American Arbitration Ass’n, 148 P.3d 983 (2006 UT 77) (arbitration is a matter of contract law; state contract principles apply)
- Medical Dev. Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th Cir. 1973) (FAA requires a writing but not necessarily a signature)