U.S. Supreme Court declines review of Missouri Supreme Court’s Application of Concepcion

by David Cosgrove

My partner and I are currently drafting a petition for Writ of Certiorari to the United States Supreme Court in a case we have against Fisher Investments, Inc. I can take a moment to pen this blog because it is my partner’s turn with the draft. It will be back on my desk in the morning.

Have you ever tried to reconcile the ever-fluid federal arbitration jurisprudence with state arbitration jurisprudence? In some respects the dynamic between the two gives the impression of a chaotic game of cat and mouse. The federal courts seem to be continually narrowing the already limited access to the courts for the thousands of Americans who enter contracts containing arbitration clauses on an almost daily basis. The justification for this evolution is the congressional intent behind the Federal Arbitration Act and the purported, but often illusory, benefits of arbitration. State courts on the other hand are rightly protective of both their state public policy and jurisprudence, as well as those state citizens that find themselves directed to an arbitration forum with unanticipated pitfalls, such as undisclosed costs, lost remedies, bias, and incompetence.

Earlier this month, the U.S. Supreme Court took a pass on the opportunity to embrace or jettison the Missouri Supreme Court’s application upon remand of the hallmark opinion in AT&T Mobility, LLC v. Concepcion, 131 S.Ct. 1740 (2011). If you are a frequent participant in arbitrable matters, the case is a must read, regardless of your home state. The case is Brewer v. Missouri Title Loans, 346 S.W.3d 486 (2012) (“Brewer II”). The U.S. Supremes denied certiorari on October 1, 2012.

In Brewer II, Judge Teitelman leads a 4-3 majority through a delicate distinction between the categorical declaration of unconscionability (based on state public policy prohibitions of class action waivers) and the case-by-case application of state law contract formation defenses to the actual function of a clause or waiver that federal FAA pre-emption protects from categorical invalidation. With this distinction rooted in a melding of Scalia’s majority and Thomas’ concurring Concepcion opinions, the Missouri Supreme Court goes on to evaluate the arbitration provision at play in Brewer II. Brewer, 364 S.W.3d at 492-495. After evaluating a variety of characteristics of the clause as applied in that case, the Court concluded that the arbitration agreement as a whole was unconscionable. In doing so, it aptly noted that one of the purposes of the unconscionability doctrine was to prevent unfair surprise, and that the unfair surprise may not become evident until “later.” Id at 493.

This brings us back full circle to the U.S. Court of Appeals decision in Wootten v. Fisher Investments, Inc., No. 11-2476, U.S. App. 8th Cir. (2011)–the case for which we seek the attention of the U.S. Supreme Court. In Fisher Investments, the 8th Circuit concluded that the “complete arbitration rule” divested the federal court of jurisdiction until the arbitration is complete. But if the unfair surprise rears its ugly head during the arbitration—must a litigant consummate the arbitration at the behest of an invalid arbitration agreement? Indeed, if it is insufficient for a consumer to speculate before an arbitration commences about the potential unconscionable application of the arbitration clause, and yet once the arbitration commences he is without relief and sentenced to a fate of at least two arbitrations and one federal court litigation, are the purported benefits of arbitration–prompt and efficient dispute resolution–and the Congressional intent behind the FAA really being preserved by such an unwavering application of the complete arbitration rule? I know that was a long sentence, but food for thought.