Lead Opinion
Steven Pinkerton seeks a writ of mandamus or, in the alternative, a writ of prohibition requiring the circuit court to overrule the motion to compel arbitration filed by Aviation Institute of Maintenance (the school). In the alternative, Mr. Pinkerton seeks, a writ of mandamus requiring the circuit court to enforce discovery and allow him to file additional opposition to the school’s motion to compel arbitration. Mr. Pinkerton contends the circuit court improperly sustained the school’s motion to compel arbitration because: (1) the school’s incorporation of the delegation provision into the arbitration agreement by reference to the American Arbitration Association’s commercial rules was not clear and unmistakable evidence the parties intended to arbitrate threshold questions of arbi-trability;
This Court issued a preliminary writ and now holds the incorporation of the American Arbitration Association (AAA) rules into the arbitration agreement provided clear and unmistakable evidence the parties intended to delegate threshold issues of arbitrability to the arbitrator. Mr. Pinkerton’s only specific challenge to the delegation provision—that it would be unconscionable to delegate a determination of unconscionability to a person with a direct financial interest in the outcome— was without merit, and he did not otherwise specifically challenge the validity or enforceability of the delegation provision. Accordingly, the circuit court properly sustained the school’s motion to compel arbitration, stayed the case, and ordered the parties to arbitrate threshold issues of ar-bitrability. The preliminary writ is quashed.
Factual and Procedural Background
In 2009, Mr. Pinkerton e-mailed the school and requested information about becoming an aircraft technician.
The enrollment agreement listed information about the program’s duration, graduation requirements, tuition and fees, scheduling, and its policies regarding cancellation, termination, withdrawal, and refunds. The enrollment agreement also included an arbitration agreement. The arbitration agreement was about three-fourths from the top of the enrollment agreement’s first page. The heading “Arbitration Agreement” was in bold face type, and the terms of the arbitration agreement were in the same type size as the remainder of the enrollment agreement. The arbitration agreement provided:
I agree that any controversy, claim or dispute of any sort arising out of or relating to matters including, but not limited to: student admission, enrollment, financial obligations and status as a student, which cannot be first resolved by way of applicable internal dispute resolution practices and procedures, shall be submitted for arbitration, to be administered by the American Arbitration Association located within Virginia Beach, Virginia, in accordance with its commercial arbitration rules. All fees and expenses of arbitration shall be shared equally and any award rendered in favor of a student will be limited to the total amount paid to the School by the student. Any award or determination rendered by the arbitrator(s) shall be final and entered as a judgment by a court of competent jurisdiction.
Mr. Pinkerton did not receive a copy of the AAA commercial rules.
The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitra-bility of any claim or counterclaim.
Mr. Pinkerton signed the enrollment agreement and received a copy. An admissions representative and another school official also signed the agreement.
On September 28, 2009, Mr. Pinkerton began attending classes. Almost six months later, he requested to switch from the school’s 100-week aviation maintenance technical engineer program to a shorter 80-week aviation technician program. The enrollment agreement he signed for the aviation technician program was dated March 24, 2010, and contained a change in the credit hours required for graduation, the cost of books per semester, the total length of the program, and the estimated total student cost per quarter. Otherwise, the enrollment agreement for the aviation technician program included the same information as the enrollment agreement for the aviation maintenance technical engineer program as well as the same arbitration agreement.
In 2011, Mr. Pinkerton graduated from the school as the valedictorian of the night program. Having fulfilled the graduation requirements, he received a certificate of aviation maintenance, which entitled him to take the federal aviation administration examinations to become an airline mechanic. He took both required examinations and received his temporary airman certificate from the federal aviation administration in 2012. Despite having obtained his certification, Mr. Pinkerton alleges he cannot find employment in the aviation field.
In 2014, Mr. Pinkerton filed a lawsuit against the school, Mr. Rothrock, and the school’s owner, W. Gerald Yagen, alleging the school engaged in fraud, misrepresentation, and deception related to the ■school’s graduation and job placement, rates, starting salaries, and the costs and benefits of its educational programs. The lawsuit included claims for violations of the Missouri . Merchandising Practices Act, fraudulent misrepresentation, negligent misrepresentation, money had and received, and unjust enrichment.
The school moved to dismiss, or in the alternative, to compel arbitration and stay the proceedings, citing the arbitration agreement in the enrollment agreement requiring Mr. Pinkerton to arbitrate “any controversy, claim or dispute.” The school further. contended the arbitration agreement 'delegated threshold arbitrability disputes, such as whether an arbitration clause is enforceable or its applicability to the dispute at issue, to the arbitrator by incorporating by reference the AAA’s' jurisdictional rule into the arbitration agreement. The school requested the circuit court enforce this delegation’ provision if Mr. Pinkerton challenged the arbitration agreement. The school also filed a motion to stay discovery and all other pending pretrial proceedings.
The school subsequently renewed its motion to compel arbitration, contending Mr. Pinkerton had not specifically challenged the delegation provision but challenged only the arbitration agreement as a whole. In response, Mr. Pinkerton argued he had challenged the existence of the delegation provision by challenging the existence of any arbitration agreement—including any agreement to delegate issues of arbitrability—in his preliminary.opposition. Mr. Pinkerton also contended, for the first time, that the delegation provision was not clearly and unmistakably incorporated into the arbitration agreement, that both,, the arbitration • agreement and the delegation provision lacked consideration, and that the delegation provision was unconscionable.
After conducting a hearing on-the matter, the circuit court sustained the school’s motion to compel arbitration.
Mr. Pinkerton petitions this Court for a writ of mandamus or prohibition, requesting the Court order the circuit court to overrule the school’s motion to compel arbitration or, in the alternative, order the circuit court to enforce discovery and allow Mr. Pinkerton to file additional opposition to the school’s motion to compel arbitration. This Court issued a preliminary writ of prohibition. Mo. Const, art. V, sec. 4.
Standard of Review
This Court has the authority to “issue and determine original remedial writs,” Id. Writs of prohibition or mandamus are appropriate mechanisms to challenge whether, a motion to compel, arbitration was improperly sustained. State ex rel. Hewitt v. Kerr,
Analysis
Mr. Pinkerton contends the circuit court erred in sustaining the school’s motion' to compel arbitration. He asserts the school’s incorporation of the AAA commercial rules into the arbitration agreement did not “clearly and unmistakably” express the parties’intent to delegate threshold issues
The Delegation Provision
The circuit court determined the arbitration agreement contained an enforceable delegation provision delegating issues of arbitrability to the arbitrator. Mr. Pinkerton contends his signature on the enrollment agreement was not evidence he agreed to delegate threshold issues of arbi-trability to the arbitrator because the delegation provision was not included as part of the arbitration agreement but was instead incorporated by reference to the AAA commercial rules.'Mr. Pinkerton argues that incorporating a delegation provision by reference does not meet the “clear and unmistakable” standard required to show the parties intended an arbitrator to decide issues'of arbitrability.
Generally, any silence or ambigur ity “concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
This presumption of arbitrability, however, is reversed when considering whether a court or an arbitrator should decide threshold questions of arbitrability. First Options,
The United States Supreme Court has addressed why different standards are necessary when considering “whether a particular merits-related disputé-is arbitra-ble” versus “who (primarily) should decide arbitrability.” First Options,
[T]his difference in treatment [between whether a particular merits-related dispute, is arbitrable or who (primarily) should decide arbitrability] is understandable. The latter question ariseswhen the parties have a contract that provides for arbitration of some issues. In such circumstances, the parties likely gave at least some thought to the scope of arbitration. And given the law’s permissive policies in respect to arbitration, one can understand why the law would insist upon clarity before concluding that the parties did not want to arbitrate a related matter. On the other hand, the former question—the who (primarily) should decide arbitrability question—is rather arcane. A party often might not focus upon that question or upon the significance of having arbitrators decide the scope of their own powers. And, given the principle that a party can be forced to arbitrate only those issues it specifically has agreed to submit to arbitration, one can understand why courts might hesitate to interpret silence or ambiguity on the “who should decide arbitrability” point as giving the arbitrators that power, for doing so might too often force unwilling parties to arbitrate a matter they reasonably would have thought a judge, not an arbitrator, would decide.
Id. at 945 (internal quotations and citations omitted) (emphasis omitted).
Mr. Pinkerton interprets the “clear and unmistakable” standard to prohibit the delegation provision from being incorporated by reference into an arbitration agreement. He contends that no clear and unmistakable evidence exists of the parties’ mutual assent to the delegation provision unless the delegation provision is expressly written into an arbitration agreement. Mr. Pinkerton incorrectly assumes that a contract is silent or ambiguous about who should decide arbitrability if the delegation provision is incorporated into an arbitration agreement by reference.
While the Supreme Court has referred to the “clear and unmistakable” standard as a “heightened standard,” First Options explains it is “heightened” insofar as it is a higher standard than the “presumption of arbitrability” standard applied when interpreting “silence” or “ambiguity” related to the scope of arbitration provisions. Rent-A-Ctr.,
Interpretation of a written contract is a question of law. Webbe v. Keel,
Here, the parties’ arbitration agreement specifically references the AAA’s commercial arbitration rules. At the time Mr. Pinkerton signed the enrollment agreement, the AAA’s “Commercial Arbitration Rules with Supplementary Procedures for Consumer-Related Disputes” governed all consumer arbitration disputes. The reference to the AAA’s commercial rules in the arbitration agreement was not a mere passing reference to these rules; instead, it was a clear reference to an identifiable, ascertainable set of rules. Such a. reference establishes the parties’ intent to incorporate the AAA commercial arbitration rules into the enrollment agreement.
This finding is consistent with most federal circuit courts, which have concluded arbitration agreements containing similar language were sufficient to incorporate by reference the delegation provision in the AAA rules. For example, arbitration agreements stating disputes will be “settled by,” “conducted by,” and “determined by” arbitration “in accordance with” specific rules containing a delegation provision have been held to have “clearly and unmistakably” incorporated the delegation provision into the arbitration agreement. Brennan v. Opus Bank,
The dissenting opinion asserts whether Mr. Pinkerton intended to incorporate the AAA rules is a factual question that should be put to the parties’ proof. But for purposes of contract interpretation, the intent of the parties is a question of law to be determined from the four corners of the contract. Whelan Sec. Co. v. Kennebrew,
The dissenting .opinion recognizes these principles but contends this Court must look at the “context” of an agreement— including who signed it and the nature of the agreement—-to determine ambiguity. More specifically, the dissenting opinion asserts that the unsophisticated nature of a party is- key to the determination of ambiguity and that “when a consumer contract purports to incorporate by reference another writing, the court should determine whether the parties actually- know and understand the provisions to be included.”
But-the dissenting opinion is mis-characterizing the general proposition that “ambiguity depends on context” to conclude “context” means consideration of the parties’ circumstances and whether they actually know and understand the incorporated provision. Such a subjective standard is nót what this Court means by considering the “context” of an agreement. Rather, “context” means the reading of the agreement as a whole to determine whether an ambiguity exists. J. E. Hathman,
Furthermore, while the dissenting opinion cites to cases that mention the sophistication of the parties, such cases do not support the subjective “context” standard advocated for by the dissenting opinion. Instead, such cases address specific contract provisions or clauses—such as exculpatory clauses, indemnity clauses, forum selection clauses, and jury trial waivers— that impose additional requirements for a specific provision or clause to be enforceable.
For instance, in addressing exculpatory and indemnity clauses, this Court held limitations or shifts of liability in contracts are enforceable if the exculpatory or indemnity clause contains clear, unambiguous, unmistakable, and conspicuous language. Alack v. Vic Tanny Intern. of Mo., Inc.,
Similarly, in High Life Sales Co. v. Brown-Forman Corp.,
Finally, in Malan Realty Investors, Inc. v. Harris,
It follows that none of the cases considering the sophistication of the parties addresses arbitration agreements, and each case presents an exception to general principles of contract law. The United States Supreme Court has held arbitration can be limited only by application of principles of general contract law, AT&T Mobility LLC v. Concepcion,
Finally, were this Court to adopt the dissenting opinion’s approach, its impact would extend beyond interpretation of arbitration agreements. Arbitration agreements are placed “on an equal footing with other contracts,, and courts will examine arbitration agreements in the same light as they would examine any contractual agreement.” Triarch Indus., Inc. v. Crabtree,
Applying Missouri’s general contract principles to this case, Mr. Pinkerton agreed the AAA commercial arbitration rules, which include a delegation provision, would govern arbitration disputes. By clearly referencing the AAA commercial arbitration rules, the parties expressed their intent to arbitrate any dispute under these rules, including the AAA’s “jurisdiction” rule providing that the “[arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to l|ie existence, scope or validity of the arbitration agreement ” Accordingly, the delegation provision clearly and unmistakably, evidences the parties’ intent to delegate threshold issues of arbi-trability to the arbitrator.
Enforceability of the Delegation Provision
Upon finding the parties clearly and unmistakably intended to delegate threshold issues to the arbitrator, the circuit court concluded the delegation provision was enforceable and compelled arbitration. Mr. Pinkerton asserts the circuit court erroneously compelled arbitration because state and federal arbitration law require the circuit court to adjudicate the threshold question of whether an arbitration agreement was formed. But such an argument ignores the nature of his challenges to the arbitration agreement, the severability of the delegation provision,
First, Mr. Pinkerton contends threshold issues of the formation of an arbitration agreement cannot be delegated to an arbitrator. Under the Federal Arbitration Act (FAA),
Nevertheless, Mr. Pinkerton does not challenge whether the arbitration agreement was formed or concluded. Instead, Mr. Pinkerton challenges the con-scionability of such arbitration agreement. While this Court has held unconscionability is a state law defense to contract formation, see Brewer v. Mo. Title Loans,
Mr. Pinkerton’s mischaracterization of the issue of unconscionability as a formation issue rather than enforceability has no impact on the resolution of this case, however, because both issues of formation and enforceability of arbitration clauses can be delegated to an arbitrator. Mr. Pinkerton does not cite any case law prohibiting issues of formation from being delegated to the arbitrator. Mr. Pinkerton relies on Baker v. Bristol Care, Inc.,
Mr. Pinkerton also cites Jimenez v. Cintas Corp.,
Mr. Pinkerton further asserts the circuit court erroneously concluded the delegation provision was enforceable. As the circuit court reasoned, however, the delegation provision is a severable, antecedent agreement to arbitrate threshold issues Mr. Pinkerton failed to specifically challenge.
The FAA provides:
A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon, such grounds as exist at law or in equity for the revocation of any contract,
9 U.S.C. § 2. “The FAA thereby places arbitration agreements on an equal footing .with other contracts, and requires courts to enforce them according to their terms.” Rent-A-Ctr.,
To invalidate an arbitration agreement a specific challenge must be made to the arbitration agreement, not to the contract as a whole. Ellis v. JF Enters., LLC,
It is under this framework that the Supreme Court determined a delegation provision is an additional, severable agreement to arbitrate threshold issues that is valid and enforceable unless a specific challenge is.levied against the delegation provision. Rent-A-Ctr.,
Similarly, in seeking to compel arbitration, the school sought enforcement of the incorporated delegation provision, The delegation provision, as an additional, antecedent agreement to arbitrate threshold issues, is valid and enforceable under the FAA unless specifically challenged by Mr. Pinkerton.
The only specific challenge Mr. Pinkerton raised before the circuit court as to the enforceability of the delegation provision was his contention the delegation provision was unconscionable on the sole ground that “[i]t would be unconscionable to delegate such a determination [of unconsciona-bility] to a person with a direct financial interest in the outcome.” Such a contention, however, is defeated by the Supreme Court’s holding in Rent-A-Center that issues of unconscionability can be delegated to an arbitrator.
Although Mr. Pinkerton now claims, on appeal, he raised other challenges to the validity or enforcement of the .delegation clause separate from his' challenges1 to the arbitration agreement as a -whole, he did not, Mr. Pinkerton’s various challenges were to ■ the arbitration agreement as a whole. For example, Mr. Pinkerton asserted “there was no meeting of the minds as to the arbitration clause” because “its terms are incomprehensible.” Mr. Pinkerton also asserted the “print of the arbitration clause is too small as to be virtually unreadable” and the “arbitration clause is, both on its face and in practice, a model of unconscionability.” While a party may challenge a delegation provision by arguing “common procedures as applied to the delegation provision' rendered that- provision unconscionable,” id. at 74,
Additionally, Mr. Pinkerton asserts the arbitration agreement is 'unconscionable because the “clause' purports to require the parties to share arbitration expenses
Mr. Pinkerton also asserts the arbitration clause “facially and in practice unilaterally imposes arbitration on only one party—the student” and “no student has ever ,.. been allowed to opt out of the arbitration provision.” Because both the school and Mr. Pinkerton are required to submit threshold questions of arbitrability to the arbitrator, these challenges could only refer to the arbitration provision defining the scope of arbitrable claims. Likewise, Mr. Pinkerton contended that this “arbitration clause is facially incomprehensible as to what claims would be covered by it” and, specifically, whether “the arbitration clause ... applies to a claim by a student against [the school] for fraud.” Again, such contentions apply only to the arbitration provision that defines the scope of claims that are arbitrable. Similarly, Mr. Pinkerton’s contention that “the clause purports to limit students’ remedies” also refers only to the arbitration of specific disputes arising out of “student admission, enrollment, financial obligations and status as a student” and not the arbitration of threshold issues of arbitrability. Accordingly, none of these challenges are directed specifically to the delegation provision.
Although Mr. Pinkerton challenges the validity of the arbitration agreement as a whole, his only specific challenge to the delegation agreement—that it was unconscionable to delegate formation issues to an arbitrator—is without merit, and he did not otherwise direct any specific challenges to the delegation provision.
Conclusion
The arbitration agreement clearly and unmistakably evidences the parties’ intent to delegate threshold issues of arbitrability to the arbitrator. Because Mr. Pinkerton’s only specific challenge to the delegation provision—that it would be unconscionable to delegate a determination of unconscion-ability to a person with a direct financial interest in the outcome—is without merit, the delegation provision is valid and enforceable under the FAA. The circuit court, therefore, properly sustained the school’s motion to compel arbitration, staying the case and ordering the parties to proceed to arbitration. The preliminary writ is quashed.
Notes
. The school is the Missouri affiliate of Technical Education Services, Inc., a Virginia-based corporation operating aviation maintenance schools throughout the United States.
. At the time the parties signed the underlying agreement, the "Commercial Arbitration Rules with Supplementary Procedures for Consumer-Related Disputes” governed consumer arbitration disputes. The "Supplementary Procedures for Consumer-Related Disputes” provided that the "AAA’s most current rules will be used when the arbitration is started.” In 2014, the AAA replaced the "Supplementary Procedures for Consumer-Related Disputes” with "Consumer Arbitration Rules.” The consumer rules contain the same jurisdiction clause as the commercial rules.
. Because the two enrollment agreements contained the same arbitration agreement, they will be referred to as the singular "enrollment agreement” throughout the remainder of the opinion.
. In accordance with section 435,355.4, RSMo 2000, the circuit court denied the school’s motion to dismiss and held the case was properly stayed.
. Only the Tenth Circuit has held an arbitration agreement that specifically referenced the AAA commercial arbitration rules did not clearly and unmistakably delegate "whether an arbitration agreement exists or what the scope of the agreement is” to an arbitrator. Riley Mfg. Co., Inc. v. Anchor Glass Container Corp.,
. The dissenting opinion relies on 50 Plus Pharmacy v. Choice Pharmacy Systems, LLC,
. The dissenting opinion argues that finding the parties incorporated the'AAA commercial arbitration rules by reference conflicts with this Court’s analysis in Hewitt,
. Neither party contests that the FAA governs the arbitration agreement in the enrollment agreement. 9 U.S.C. §§ 1-16 (2006). The FAA governs the validity, irrevocability, and enforcement of agreements to arbitrate in contracts "evidencing a transaction involving commerce.” 9 U.S.C. § 2. Because the school is a Virginia-based corporation operating aviation maintenance schools throughout the United States, its enrollment agreement with Mr. Pinkerton is a contract falling within the purview of the FAA. 9 U.S.C. § 1 (defining commerce as "commerce among the several States”).
. Issues as to whether a contract has been "concluded” include whether: a contract was signed by the obligor, a signor lacked authority to sign a contract to commit a principal, or a signor lacked the mental capacity to sign a contract. Buckeye,
. Moreover, Mr. Pinkerton did not raise this specific challenge in his pleadings before the circuit court. In his opposition to the defendants’ motion to stay the circuit court’s September 8 order, Mr. Pinkerton lists the general factors of unconscionability, stating: "Each of these factors supports a finding of uncon-scionability with regard to the arbitration agreements and delegation provisions utilized by Defendants in their Enrollment Agreements.” No specific challenge to the fee sharing provision of the arbitration agreement was made in his pleadings before the circuit court. See Rule 84.13(a).
. In his brief before this Court, Mr. Pinkerton also references arguments from his reply in support of his motion to stay briefing and his sur-reply in opposition to the defendants’ motion to stay discovery. The circuit court overruled Mr. Pinkerton’s motion for leave to file these documents; therefore, these arguments were not before the circuit court. Following the school's renewed motion to compel arbitration, Mr, Pinkerton filed opposition to the school’s motion and had an opportunity to raise these additional arguments in the circuit court.
. The dissenting opinion contends the record clearly shows Mr. Pinkerton specifically challenged the delegation provision and points to a motion he filed stating in capital letters that he "disputes the existence and enforceability of any agreement to delegate issues of arbitra-bility to an arbitrator.” What the dissenting opinion ignores is that Mr. Pinkerton then proceeded to challenge the arbitration agreement as a whole. Again, a delegation provision is a severable agreement that is enforceable unless a specific challenge is levied against the provision. Rent-A-Ctr.,
. In the alternative, Mr. Pinkerton seeks a writ of mandamus requiring the circuit court to enforce discovery and allow him to file additional opposition to the school’s motion to compel arbitration. In support of his alternative theory, Mr. Pinkerton asserts: "If this Court finds the record is not yet sufficient to deny the motions to compel arbitration, [he] should be afforded the remainder of the arbitration-related discovery he seeks, and an opportunity to adduce all the relevant evidence and his arguments.” Because this Court does not find the record to be insufficient, this Court rejects Mr. Pinkerton’s alternative grounds for a writ of mandamus.
Dissenting Opinion
dissenting.
I dissent.
The United States Supreme Court has held, “When deciding whether the parties agreed to arbitrate a certain matter (in-eluding arbitrability), courts generally ... should apply ordinary state-law .principles that govern the formation of contracts.” First Options of Chi., Inc. v. Kaplan,
The majority fails to give meaning to this high standard of proof when it holds “clear and unmistakable” evidence of such intent is irrebuttably provided based solely on the fact Mr. Pinkerton signed a contract referencing the American Arbitration Association’s rules of arbitration and one of the unattached commercial AAA rules at that time delegated issues of arbitrability to an arbitrator. Regardless of whether this is a valid conclusion for commercial or sophisticated parties—as numerous federal courts have held—Mr. Pinkerton undeniably is an unsophisticated consumer, and only one of the cases on which the majority relies involved an unsophisticated party.
Despite the majority’s refusal to so recognize, Missouri historically has required greater specificity and protection for eon-sumer
Applying these principles here, it is error to find the contract’s mere incorporation of the unattached and undescribed AAA rules would have unambiguously signaled to an unsophisticated consumer that an arbitrator rather than a judge would determine whether the arbitration provision itself was valid. The contract’s reference to the AAA rules is but one fact among many the courts must consider in determining the factual issue' of whether the parties “dearly and unmistakably” intended tó delegate the arbitrability issue to the arbitrator.
I. THE CONTRACT DID NOT UNAMBIGUOUSLY DELEGATE THE ISSUE OF CONTRACT FORMATION TO THE ARBITRATOR
I agree with the majority'that the intention of the parties as to the meaning of a contract becomes a factual issue requiring a court to resort to parol evidence only when an1 ambiguity arises and “cannot be resolved within the four corners of the contract.” Whelan Sec. Co. v. Kennebrew,
While Missouri law provides that matters incorporated by reference into a contract “are as much a part of the contract as if they had been set out in the contract,” Dunn Indus. Grp., Inc. v. City of Sugar Creek,
This Court recently applied these rules in the arbitration context in State ex rel. Hewitt v. Kerr,
At best, under the terms of the constitution and bylaws, Mr. Hewitt agreed to arbitrate by undefined terms that the commissioner would establish. But these terms also lack certainty; Mr. Hewitt had no way to identify these terms and had no way to know that the NFL intendedthe guidelines to govern arbitration proceedings. Given the ambiguity of any .terms actually referenced, Mr. Heyñtt could not assent to them.
Moreover, Mr. Hewitt did not bear the burden to seek out cm unknown document not clearly identified in his employment contract or the constitution and bylmus. Though'the NFL and the Rams may have intended to incorporate the guidelines into the constitution and bylaws and the employment contract, respectively, it is a well-settled rule that “[i]f ambiguous, [a contract] will be construed against the drafter.” Triarch Indus., Inc. v. Crabtree,158 S.W.3d 772 , 776 (Mo. banc 2005). The Rams had the burden to incorporate the terms in such a way that Mr. Hewitt could manifest his consent. Having failed to do so, Mr. Hewitt did not assent, to the essential terms of arbitration found in the guidelines.
Id. (emphasis added).
While the majority says that no Missouri arbitration case -has looked at the context of an agreement to arbitrate in determining its ambiguity, Hewitt did just that. In determining whether the contract was ambiguous, Hewitt did not merely note that the Rams contract said it incorporated another matter and conclude this fact alone unambiguously made the incorporated matter a part of the contract. Instead, it looked at the terms, looked at the rules incorporated, determined the incorporated rules were not clear as to where to find the guidelines they in-turn incorporated, and determined the contract, therefore, was ambiguous and must be interpreted against the drafter. Id.
Even more directly on point is 50 Plus Pharmacy v. Choice Pharmacy Systems, LLC,
The Missouri .Court of Appeals recently followed 50 Plus Pharmacy in Dolly v. Concorde Career Colleges, Inc., - S.W.3d -, -,
The question of who the parties are and what parties in their situation would understand the contract to mean also has been recognized by other states in determining whether a delegation clause in an arbitration agreement is ambiguous. As the Supreme Court of Kentucky noted in Dixon v. Daymar Colleges Group, LLC,
While Dixon conceded “the delegation provision was clear,” it noted “the language of the delegation provision is largely beside the point.” Id. Instead, the decision confirmed “a trial court is tasked with determining whether there exists a 'valid, binding arbitration agreement’ before it may order a case to arbitration.” Id. at 341, quoting, JPMorgan Chase Bank, N.A. v. Bluegrass Powerboats,
The majority does not formally disagree with these principles. But these principles are inconsistent with the majority’s determination that the mere incorporation of AAA rules is inherently unambiguous. To so hold is error. The majority is required to look at the contract as a whole, including who signed it and the nature of the contract, and of the matters incorporated, before it can determine whether incorporation of the AAA rules “clearly and unmistakably” informed an unsophisticated party such as Mr. Pinkerton that he was delegating to an arbitrator the right to determine the validity of the arbitration clause itself.
In particular, the majority is required to consider the fact that this is a contract between a sophisticated business entity and a consumer. The majority suggests Missouri law just does not allow it to consider this fact unless it first finds the contract ambiguous, even though it is consideration of the unsophisticated nature of the plaintiff that is key to the determination of ambiguity in the first instance. Indeed, the majority even concedes Missouri does consider the sophistication of the parties when considering the validity of a waiver of the right to sue the other party for their own negligence. But, it says, that is an isolated exception, not relevant here. The majority is wrong on all counts.
Many Missouri cases, addressing a wide variety of issues and in a myriad of contexts, have stated that the sophistication of the parties properly is considered in determining an agreement’s meaning and validity. These cases are part of a long history of Missouri cases recognizing that cases involving the giving up by an unsophisticated party of a litigation right requires more exacting scrutiny and consideration of the unsophisticated nature of the signer
50 Plus Pharmacy specifically recognized “a general reference to ‘the then Existing Commercial Arbitration Rules of the American Arbitration Association^] ... [is] not the sort [of express delegation] addressed or contemplated by the Rent-A-Center court as dictating delegation of the gateway matter of the question of arbi-trability to the arbitrator.”
Perhaps the most well-known decision about whether the sophistication of the party determines the validity of the waiver is Purcell Tire & Rubber Co. v. Executive Beechcraft, Inc.,
The majority incorrectly suggests these eases have no. application here and just mean more specific language must be used in to waive the seller’s negligence. This misses the point. The reason more specific language must be used is that an unsophisticated purchaser would not understand the more general language was intended to waive negligence unless that fact were spelled out in the contract. The analogy is exact. Unsophisticated persons such as Mr. Pinkerton would not understand that incorporation of the AAA rules meant that an arbitrator 'would decide issues of arbi-trability unless that fact'were spelled out in-the contract.
Moreover, Purcell’s recognition of the importance of whether a party is sophisticated is not, as the majority would suggest, an isolated instance. The principle the majority adopts—that a provision that would be clear to a sophisticated party may not be clear to ah unsophisticated one—has been applied time.and again to attempts to get an unsophisticated consumer to contract to waive the right to sue for negligence.
Similarly,...numerous . other Missouri cases have applied the principle that ambiguity depends on context and the sophistication of the consumer to other types of contract provisions that attempt to limit an unsophisticated party’s rights. Importantly, this.Court applied these principles to a contract purporting to waive the right to jury trial in Malan Realty Investors, Inc. v. Harris,
Various federal courts similarly have applied Purcell’s, analysis and principles, considering the sophistication of the parties in deciding whether fundamental rights may be contractually waived. See, e.g., Lift Truck Lease & Serv., Inc. v. Nissan Forklift Corp., N. Am.,
This Court has recognized’ the importance of the sophistication of the parties in considering the validity of a forum selection clause as well. In High Life Sales Co. v. Brown-Forman Corp.,
Missouri cases similarly have considered the sophistication of the parties in determining the validity of the terms of a lease waiver provision in Halls Ferry Investments, Inc. v. Smith,
These cases are not merely “exceptions” that can be ignored in determining the meaning of the arbitration clause. They are the rule in cases involving the validity under Missouri law of a waiver of rights by an unsophisticated consumer. When dealing with a contract in which the parties have such unequal bargaining power, the principle set out in Pureell that “ambiguity depends on context” and the sophistication of the party is not an exception to the general rule regarding interpretation, applicable (for some unexplained reason) only in the case of waivers of the right to sue for negligence. Indeed, it would make no sense to allow consideration of a party’s sophistication in that context but no other. Rather, these are established principles of Missouri contract law, applicable to the many kinds of waivers of litigation rights contained in contracts between sophisticated and unsophisticated parties.
For these reasons, when, as here, the issue is the validity of an unsophisticated consumer’s waiver of litigation rights,’ Missouri’s consistent rule has been to consider the lack of sophistication of one of the parties in 'determining how that party would interpret the waiver. This is the only way to treat an arbitration clause the same as other contract clauses are treated under Missouri law, which the majority concedes is required by the Federal Arbitration Act (FAA). The waiver of the right to have a judge determine the issue of arbitrability, like the a waiver of the right to sue for negligence, the right to jury trial, and the right to select one’s forum, should be considered “in context” and in light of the relative Sophistication of the parties. Indeed, it must be considered in the same way as are other comparable contractual waivers in Missouri. See Rent-A-Ctr.,
The majority does not cite any contrary Missouri cases. Instead, it relies on a number of United States court of appeals cases. While most of those cases do hold incorporation of-the AAA rules unambiguously waives the right to have a court determine arbitrability,-those cases do not govern here for numerous reasons.
First, the FAA leaves the question of who should decide contract formation issues to the parties to determine by contract; it does not require that these issues be delegated to the arbitrator. Second, as noted earlier, the FAA’requires arbitration
Third, and even more importantly, all of the federal cases addressing delegation of the arbitrability issue by incorporation of the AAA rules except Fallo v. High-Tech Institute,
The unsophisticated consumer issue has been directly determined in numerous district court cases in the Ninth Circuit. Even prior to Brennan, the district court in Tomkins v. 23andMe, Inc.,
Since Brennan, “Every district court decision in [the Ninth Circuit] to address the question ... has [followed the Tomkins approach and] held that incorporation of the AAA rules was insufficient to establish delegation in consumer contracts involving at least one unsophisticated party.” Ingalls,
For example, in Meadows, after noting “an inquiry about whether the parties clearly and unmistakably delegated arbi-trability by incorporation should first consider the position of those parties,” the court concluded it is “much less reasonable” to find ‘“clear and unmistakable’ evidence of delegation” for an “inexperienced individual, untrained in the law,” such as a restaurant franchisee, than it is for “a large corporation ... or a sophisticated attorney.”
Similarly, in Aviles, a truck driver filed suit against the defendant trucking company, which moved to compel arbitration.
Again, in Vargas, an “unsophisticated luggage delivery driver” signed an arbitration agreement that included a delegation provision incorporating the AAA rules “without an opportunity to review the documents or consult with an attorney.”
In Galilea, the court held the plaintiffs, who had formed an LLC for the purpose of owning a boat, were “individuals] not well-versed in arbitration law” and, therefore, “unlikely to be aware that the AAA' rules provide for the arbitrator to determine his own jurisdiction.”
Finally, in Money Mailer, the court held incorporation of the AAA rules did not “show a ‘clear and unmistakable’ intent to delegate questions of arbitrability” when the bound party was a “small business owner ... [with] no legal experience.”
The middle district of Alabama in Palmer v. Infosys Technologies Ltd., Inc.,
The . single United States court of appeals case on which the majority relies involving- a. consumer. Fallo, simply assumed the incorporation rule applied in the consumer context before it, without recognizing the cases it relied on were commercial cases.
Far more persuasive is the decision by the Montana Supreme Court in Global Client Solutions v. Ossello,
In Morgan v. Sanford Brown Institute,
The majority just waves off these cases by saying they are not consistent with Missouri law.'But for all of the reasons already discussed, they are indeed consistent with Missouri law’s recognition that the sophistication of the signer affects the
Under these- settled principles of Missouri law, while a consumer signing a student enrollment form including an arbitration agreement may understand the right to sue over certain types of claims in court are being-waived, that does not apprise the student that. the validity of the waiver itself will be determined by the arbitrator rather than by a court. Just as Purcell and the other cited cases recognized that use of general language about waivers might be insufficient in a consumer context involving an unsophisticated party, so here use of general incorporation by reference language should not be sufficient to constitute irrebuttable proof of an intent to delegate arbitrability. Indeed, the concerns expressed in those cases have even greater application because the United States Supreme Court has held the party seeking to require arbitration has the burden of proving by “clear and unmistakable” evidence that the other party intended to delegate arbitrability to the arbitrator. - ■
At a minimum, this is a question' of fact that should be put to the parties’ proof, not decided by an irrebuttable presumption. As Alack stated, “our law on such an important point cannot be so out of step with the understanding of our citizens.”
Applying these principles here, Mr. Pinkerton was a young, non-college educated student who was trying to go to school- to learn how to repair aircraft en-. gines. The school he attended is a large for-profit corporation. The school did not provide Mr. Pinkerton with a copy of the AAA rules. Nothing in -the contract explains the content of the AAA rules even generally, nor does the contract explain where and how to find them. The contract does not explain that, while the referenced rules were called “commercial” rules at that time, they nonetheless applied to consumers like Mr. Pinkerton and precluded him from having a court decide whether the agreement or the delegation provision was enforceable or binding. An average consumer might well presume the rules are simply that: rules governing the procedural aspects of arbitration, not “rules” that actually take áway the consumer’s rights. Certainly nothing in the contract mentioned delegation of arbitration decisions to an arbitrator. It is not surprising that both Mr. Pinkerton and the school’s agent testified they had no idea what the AAA rules contained and no idea what they required the arbitrator or the court to decide. Neither .said they understood the rules delegated to an arbitrator the arbi-trability issue itself.
- On these facts, a trial court certainly could find Mr. Pinkerton did not . “clearly and unmistakably” intend to delegate arbi-trability to an arbitrator. This Court should remand the case for a factual determination whether Mr. Pinkerton actually knew and understood what the provisions of the AAA rules were, where he could find them, and whether, as a matter of fact, he clearly and unmistakably showed an intent to delegate arbitrability issues to an arbitrator.
II. MR. PINKERTON SPECIFICALLY CHALLENGED THE DELEGATION PROVISION
The majority notes the Supreme Court has held that to challenge1 the delegation of
III. UNCONSCIONABILITY IS A CONTRACT FORMATION ISSUE
While the majority recognizes “this Court has held that unconscionability is a state law defense to contract formation,” the majority nonetheless unnecessarily creates uncertainty by suggesting it is not sure why this is the case because “con-scionability is not an essential element of contract formation. As such, while uncon-scionability is a defense to contract formation and, therefore, a contract’s validity and enforceability, it is not an issue of whether a contract has ever been concluded.” Slip op. at *20 (citations and quotation omitted).
This dicta interprets the term “contract formation” more narrowly than does the Supreme Court. Indeed, as this Court explained in Brewer v. Missouri Title Loans,
While Missouri courts traditionally have discussed unconscionability under the lens of procedural unconscionability and substantive unconscionability, Concepcion instead dictates a review that limits the discussion to whether state law defenses such as unconscionability impact the formation of a contract. ... Accordingly, the analysis in this Court’s ruling today—as well as this Court’s ruling in Robinson v. Title Lenders, Inc.,-no longer focuses on' a discussion of procedural unconscionability or substantive unconscionability, but instead is limited to a discussion of facts relating to uncon-scionability impacting the formation of the contract.
(Citations and quotation omitted.)
In other words, the unconscionability of the terms of a contract may be such that it negates the formation of the contract at all, or the unconscionability may instead impact enforcement of particular terms or of the contract as a whole. Robinson pointed out the former type of unconscionability in formation is exemplified by “procedural” unconscionability such as “high pressure sales tactics, unreadable fine print, or misrepresentation among other unfair issues in the contract formation process.” Robinson v. Title Lenders, Inc.,
The Supreme Court has recognized un-conscionability may affect contract formation or may be an issue of contract enforcement.
For these reasons, I dissent from the majority’s holding that Mr. Pinkerton did not preserve the issue of delegation, its questioning of the fact that unconscionability has been recognized as an issue of contract formation, and its holding that, in a consumer ease such as this, the mere reference to incorporation of the AAA rules, without their attachment and without specifically referencing the incorporation of the delegation provision, is unambiguous. I believe the language would be ambiguous to an unsophisticated party if the Court does as Purcell requires and considers the context and the parties’ relative sophistication. The case should be remanded for determination of the factual question whether an unsophisticated student such as Mr. Pinkerton clearly and unmistakably intended to delegate the issue of arbitrability to the arbitrator.
. In addition to Purcell, numerous other Missouri cases have followed the same rationale in the context of liability waivers. See Village of Big Lake v. BNSF Ry. Co.,
. See Petrofac, Inc. v. DynMcDermott Petroleum Operations Co.,
. While the court in Zenelaj v. Handybook Inc.,
. The Supreme Court recognizes two types of challenges to the validity of arbitration: "One type challenges specifically the validity of the agreement to arbitrate. ... The other challenges the contract as a whole....” Buckeye Check Cashing, Inc. v. Cardegna,
. E.g., Granite Rock Co. v. Int’l Bhd. of Teamsters,