MO Supreme Court Enforces Arbitration Agreement Despite Finding Portion of Clause Unconscionable
In 2009, Robert Eaton purchased a manufactured home from CMH. The purchase contract contained a clause required Mr. Eaton to arbitrate all claims for any dispute arising out of the purchase of the home, but contained a clause that specifically reserved the right for CMH to pursue a lawsuit in court to foreclose upon any collateral, to obtain a monetary judgment, or to enforce the security agreement. Furthermore, this reserve clause contained “anti-waiver” language that stated CMH’s right to bring such a lawsuit did not constitute a waiver to compel arbitration regarding any other dispute related to the contract.
Several years later, Mr. Eaton filed suit in Lincoln County circuit court, alleging that his manufactured home was defective and that CMH misrepresented the home as new at the time of sale. CMH moved to dismiss and compel arbitration pursuant to the sale contract, but the trial court overruled CMH’s motion to compel arbitration. The Eastern District Court of Appeals affirmed, holding that the arbitration clause was unenforceable because the reserve clause in favor of CMH Homes was unconscionable.
In an opinion issued last week, the Missouri Supreme Court reversed and found the arbitration agreement was enforceable despite the fact that it held that the anti-waiver clause was unconscionable. Eaton v. CMH Homes, Inc., No. SC 94374, 2015 WL 3387910 (Mo. banc May 26, 2015). In its opinion, the court held that the reserve clause was unconscionable because it “would prevent Mr. Eaton from bringing defenses to the suit filed by CMH or require him to proceed in two forums with possibly inconsistent results. Specifically, if CMH filed a foreclosure action and Mr. Eaton attempted to counterclaim, then enforcement of such a clause “could create the anomalous situation where his affirmative defenses and counterclaims must proceed in arbitration at the same time as CMH proceeds on those same claims in court.” Slip op. at *1, *6. Furthermore, the court found that this anti-waiver clause was severable from the arbitration agreement because the contract contained a severability clause and the court found the anti-waiver provision was not “essential to the agreement to arbitrate.” Id. at *7.
Importantly, the Missouri Supreme Court reiterated that whether an arbitration agreement is valid under the Federal Arbitration Act and the corresponding Missouri Uniform Arbitration Act, it is guided by the principles set forth by AT&T Mobility LLC v. Concepion,131 S.Ct. 1740 (2011) as interpreted by the court in Brewer v. Missouri Title Loans, 364 S.W.3d 486 (Mo. banc 2012). The court also reiterated that the lack of “mutuality of contract” does not by itself render an arbitration agreement unenforceable, “as long as the contract as a whole meets the consideration requirement.” Id. at *5, quoting State ex rel. Vincent v. Schneider, 194 S. W.3d 853, 858-59 (Mo. banc 2006).
Although this opinion was not issued in the context of a class action, this opinion reinforces the continuing trend that Missouri courts will enforce arbitration agreement, even when a provision of that agreement may be considered unconscionable under Missouri law.