State ex rel. Pinkerton v. Fahnestock
531 S.W.3d 36
| Mo. | 2017Background
- Pinkerton signed an enrollment agreement with Aviation Institute of Maintenance containing an arbitration clause stating disputes "shall be submitted for arbitration... in accordance with [AAA] commercial arbitration rules." He did not receive the AAA rules.
- AAA Rule R-7 (commercial rules) delegated to the arbitrator power to decide his or her own jurisdiction, including existence, scope, or validity of the arbitration agreement.
- Pinkerton sued the school asserting fraud, deceptive practices, and related claims; the school moved to compel arbitration and to stay discovery, arguing the AAA incorporation delegated threshold arbitrability questions to the arbitrator.
- The circuit court stayed briefing to permit limited discovery on formation and scope, then later granted the school’s renewed motion to compel arbitration, finding the incorporation of AAA rules provided "clear and unmistakable" evidence of delegation and that Pinkerton failed to specifically attack the delegation clause.
- Pinkerton sought writs (mandamus/prohibition) to overturn the compulsion or to require further discovery; the Missouri Supreme Court quashed the preliminary writ and held the delegation provision was valid and enforceable, so arbitrability issues must be arbitrated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether incorporation of AAA rules "clearly and unmistakably" delegates threshold arbitrability to arbitrator | Pinkerton: mere incorporation by reference is insufficient; an express clause is required and consumer context makes this ambiguous | School: specific reference to identifiable AAA commercial rules incorporated the delegation provision, meeting the clear-and-unmistakable standard | Court: incorporation of the AAA commercial rules was clear and unmistakable evidence of delegation; incorporation by reference is effective under Missouri contract law |
| Whether questions about formation/enforceability of the arbitration agreement are for court or arbitrator | Pinkerton: formation/unconscionability are matters for the court and cannot be delegated | School: formation/enforceability challenges can be delegated if parties agreed; delegation clause is severable | Court: formation/enforceability can be delegated; unconscionability is a generally applicable defense and may be delegated when the delegation clause is valid |
| Whether Pinkerton specifically challenged the delegation provision | Pinkerton: he challenged the delegation provision and argued unconscionability, lack of notice, and lack of consideration | School: Pinkerton challenged the arbitration agreement as a whole, not the delegation clause specifically | Court: Pinkerton’s only specific delegation challenge (that delegation to a financially interested decisionmaker is unconscionable) failed; other arguments targeted the agreement as a whole, so the delegation clause stands |
| Whether further arbitration-related discovery was required before ruling | Pinkerton: record was incomplete; he sought additional discovery to oppose the motion to compel | School: record sufficient; delegation clause enforceable without more discovery | Court: record sufficient; denied writ for additional discovery and enforced arbitration/stay |
Key Cases Cited
- Rent-A-Ctr., W., Inc. v. Jackson, 561 U.S. 63 (2010) (delegation clauses are separable and valid absent a specific challenge to the delegation provision)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (courts apply ordinary state-law contract principles to who decides arbitrability; clear-and-unmistakable evidence required to delegate arbitrability)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (2010) (arbitration is a matter of consent; courts must be satisfied an arbitration agreement was concluded before ordering arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (ambiguities concerning scope of arbitrable issues are resolved in favor of arbitration)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (distinguishes challenges to the arbitration clause itself from challenges to the contract as a whole)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (arbitration agreements are enforced under general contract law principles)
- Brennan v. Opus Bank, 796 F.3d 1125 (9th Cir. 2015) (incorporation of AAA rules can constitute clear-and-unmistakable delegation in commercial/sophisticated-party contexts)
- Fallo v. High–Tech Institute, 559 F.3d 874 (8th Cir. 2009) (upheld arbitration where contract referenced AAA rules; considered consumer context but enforced arbitration)