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Missouri Supreme Court Rules Companies Cannot Rewrite Arbitration Clause

— November 2, 2018

Missouri Supreme Court Rules Companies Cannot Rewrite Arbitration Clause

The Missouri Supreme Court ruled this week that companies cannot rewrite the language of the arbitration contracts they require consumers to sign when it suits corporate interests.  The decision stemmed from a case involving the personal lender King of Kash (officially named A-1 Premium Acceptance) and the National Arbitration Forum (NAF).

When Meeka Hunter borrowed $800 from King of Kash in 2006, she signed contracts that included a provision requiring her to arbitrate any disputes before the NAF.  The agreements contended that “Any dispute, including a class action claim by Hunter, was to be resolved by binding arbitration by the National Arbitration Forum.”

In 2015, Hunter went into default and the National Arbitration Forum was no longer providing arbitration services on consumer loans.  It discontinued doing so in 2009 after entering a consent decree with the Minnesota attorney general to resolve allegations that it favored creditors.  The lawsuit “alleged NAF worked with creditors behind the scenes to ensure positive outcomes for creditors in intentionally and consistently one-sided arbitrations,” according to the Missouri Supreme Court.

Missouri Supreme Court Rules Companies Cannot Rewrite Arbitration Clause
Photo by Gabriele Diwald on Unsplash

A-1 Premium Acceptance filed a lawsuit against Hunter in state court in Jackson County, Missouri, alleging that she owed $275 in principal and nearly $7,000 in interest.  Hunter responded with a class action counterclaim on behalf of King of Kash borrowers, alleging a violation of Missouri’s consumer protection law.  A-1 then moved to compel arbitration even though NAF was no longer handling consumer arbitrations.  The company said Hunter agreed to arbitrate any disputes with A-1.

“The plain and unambiguous language of the agreement shows Hunter and A-1 agreed to arbitrate before – but only before – NAF,” wrote Judge Paul Wilson, appointed by Governor Jeremiah Jay Nixon. “A-1 drafted this provision and it freely chose to require such an agreement from Hunter (and other borrowers) as a condition of obtaining loans from A-1.  Having made the choice to insist upon NAF – and only NAF – as the arbitration forum, A-1 cannot now look to…expand the arbitration promise it extracted from Hunter in the agreement.”

The Missouri court distinguished between provisions in which the parties agree to arbitrate in general and those in which the two sides agree to arbitrate only in a particular forum. Under the first scenario, the court indicated the Federal Arbitration Act (FAA) authorizes courts to name a substitute arbitrator if the original is unavailable.  However, under the second scenario, the FAA doesn’t grant courts the authority to suggest a new arbitrator to appease companies.

“Nothing in the FAA authorizes (let alone requires) a court to compel a party to arbitrate beyond the limits of the agreement it made,” the Missouri court said.

Paul Bland of Public Justice, who argued Hunter’s case at the Missouri Supreme Court, said, “It is a great victory for consumers.  The court concluded there was no agreement because the selection of NAF was ‘integral’ to the parties’ agreement and NAF was closed by government enforcement.”

A-1 lawyer Mark Murphy “respectfully disagreed” with the Missouri Supreme Court’s distinction between contracts that specify arbitration and those that specify arbitration in a particular forum.  Many companies have been put in a similar position following NAF’s decision to back out.

“There’s a split all across the country,” Murphy said. “The time is ripe for the Supreme Court to settle it.”



Mo. top court: Consumer lender can’t rewrite arbitration clause to avoid class action

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