Ragab v. Howard, 10th Cir. (2016)
Ragab v. Howard, 10th Cir. (2016)
Elisabeth A. Shumaker
Clerk of Court
No. 15-1444
MUHAMMAD HOWARD,
individually and in his capacity as
owner, partner, and corporate officer,
ULTEGRA FINANCIAL PARTNERS,
INC., a Colorado corporation; CLIVE
FUNDING, INC., a Utah corporation,
Defendants - Appellants,
and
SEED CONSULTING, d/b/a Seed
Capital,
Defendant.
Background
In 2013, Mr. Ragab entered into a business relationship with the Ultegra
Defendants. The parties had six agreements: a Consulting Agreement, a
Membership Interest Purchase Agreement (Purchase Agreement), an Operating
Agreement, an Assignment of Limited Liability Company Interest Agreement
(Assignment Agreement), an Employment Agreement, and a Non Circumvention,
Non Disclosure & Confidentiality Agreement (Non-Circumvention Agreement).
Aplt. App. 11350.
The agreements contain conflicting arbitration provisions. See Aplt. App.
16787. Suffice it to say the conflicts involve (1) which rules will govern, (2)
how the arbitrator will be selected, (3) the notice required to arbitrate, and (4)
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For example:
(1) the Consulting Agreement states that arbitration will proceed under the
rules of Colorados Uniform Arbitration Act of 1975, but the Operating
Agreement, Membership Interest Purchase Agreement, and the Assignment of
LLC Membership Interest all require application of the AAA Commercial
Arbitration Rules, and the Confidentiality and Non-circumvention Agreement
requires Rules of the Colorado Court;
(2) the Consulting Agreement states that an arbitrator will be chosen by
consent of the parties, or appointed by a Colorado court if the parties cannot
agree; whereas the Operating Agreement, Membership Interest Purchase
Agreement, and the Assignment of LLC Membership Interest all require that the
arbitrator be chosen by the American Arbitration Association (AAA);
(3) the Operating Agreement requires a thirty-day notice period prior to
proceeding to arbitration, whereas the Membership Interest Purchase Agreement
and the Assignment of LLC Membership Interest require only ten days; and
(4) the Consulting Agreement requires each party to pay its own arbitration
costs and fees, but the Operating Agreement, Membership Interest Purchase
Agreement, and the Assignment of LLC Membership Interest all permit the award
of costs and fees to the prevailing party.
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Discussion
A.
novo and apply the same legal standard as the district court. Armijo v. Prudential
Ins. Co. of Am., 72 F.3d 793, 796 (10th Cir. 1995). We first address whether the
inconsistencies across the six arbitration provisions indicate that the parties failed
to have a meeting of the minds with respect to arbitration.
The Supreme Court has long recognized and enforced a liberal federal
policy favoring arbitration agreements. Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002) (quoting Moses H. Cone Meml Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 2425 (1983)); see also 9 U.S.C. 2 (A written provision in
any . . . contract evidencing a transaction involving commerce to settle by
arbitration a controversy thereafter arising out of such contract or transaction . . .
shall be valid, irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.). Therefore, all doubts must
be resolved in favor of arbitration. Armijo, 72 F.3d at 798.
However, whether a party agreed to arbitration is a contract issue, meaning
arbitration clauses are only valid if the parties intended to arbitrate. United
Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960); see
also Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S.
468, 478 (1989). No party can be compelled to submit a dispute to arbitration
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multiple arbitration provisions indicate that the parties did not agree to arbitrate.
See, e.g., NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 24 A.3d 777, 794
(N.J. Super. Ct. App. Div. 2011). At issue in NAACP were three agreements that
each contained an arbitration provision. 24 A.3d at 78182. The inconsistencies
across the six arbitration provisions in the case at hand almost mirror the
irreconcilable portions of the arbitration provisions in NAACP, including the
governing rules, the day by which the parties had to initiate arbitration, and which
party was responsible for the arbitration fees. Id. at 794. Based on these
inconsistencies, the court found that the arbitration provisions . . . [were] too
plagued with confusing terms and inconsistencies to put a reasonable consumer on
fair notice of their intended meaning. Id. The Ultegra Defendants and Clive
Funding, Inc. argue that NAACP is distinguishable because it involved an elderly
woman who was not well educated. Id. at 781; Aplt. Br. at 2425. This
distinction, however, is unavailing. As the court in NAACP explained, even if
the case involved a prudent purchaser one who reads arbitration clauses the
conflicting terms would have prevented her from understanding what the exact
terms and conditions of that arbitration process would be. 24 A.3d at 794.
Relying on AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344 (2011), the
court also recognized that the FAA does not require an arbitration provision to
F. Supp. 2d 967, 992 (C.D. Cal. 2012); Basulto v. Hialeah Auto., 141 So. 3d
1145, 1156 (Fla. 2014).
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be enforced if the provision is defective for reasons other than public policy or
unconscionability. Id. at 792. That is the case here.
Courts have granted motions to compel despite the existence of
conflicting arbitration provisions when the contracts themselves provide the
solution. For example, in Ex parte Palm Harbor Homes, Inc., 798 So. 2d 656, 660
(Ala. 2001), the parties had executed several agreements each containing a
different arbitration clause. Id. The court ordered arbitration according to the
arbitration provision in the contract which contained a merger clause, concluding
that provision superceded the others. 4 Id. Here, however, there is no language in
the six agreements that suggests one contract overrides the others, and we cannot
arbitrarily pick one to enforce because doing so could violate the other five.
The Ultegra Defendants and Clive Funding further argue that the court
should compel arbitration here because courts have compelled arbitration based
on a single provision that merely requires arbitration, but does not spell out any
other arbitration-related terms. Aplt. Br. at 3031; see Guthrie v. Barda, 533 P.2d
487, 487 (Colo. 1975) (upholding an arbitration provision that only stated that
claims shall be submitted to binding arbitration). But such a scenario is not
relevant to this case, which involves multiple, specific, conflicting arbitration
4
Typically, merger clauses are strong evidence that the parties did not
intend to include terms not expressly incorporated into the document containing
the clause. Summit Contractors, Inc. v. Legacy Corner, L.L.C., 147 F. Appx
798, 801 (10th Cir. 2005).
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Summary Trial
The Ultegra Defendants and Clive Funding also assert that the district court
erred in not granting them a summary trial in deciding whether the parties agreed
to arbitrate. Aplt. Br. at 44. Our review is de novo. See Howard v. Ferrellgas
Partners, L.P., 748 F.3d 975, 978 (10th Cir. 2014).
When parties do not dispute the material facts surrounding an arbitration
provision, then a district court, while viewing the facts most favorable to the nonmoving party, can decide as a matter of law whether the parties actually agreed to
arbitrate. Id. This standard is similar to the summary judgment standard. Id.
When there is a genuine dispute of material facts, district courts must proceed
summarily to the trial to resolve the factual disputes. 9 U.S.C. 4.
The district court found that there were genuine issues of material fact
regarding the parties agreement, and therefore denied the motion to compel
arbitration. Ragab, 2015 WL 6662960, at *6 (quoting Hancock v. AT&T Co., 701
F.3d 1248, 1261 (10th Cir. 2012)). Be that as it may, there are no material factual
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disputes in this case that we can see: the parties agreed that they entered into six
agreements, and do not dispute what the arbitration provisions say. What
remained was an application of law: did the provisions conflict to such an extent
that the parties could not have had a meeting of the minds? Armijo, 72 F.3d at
797. A summary trial on this issue was unnecessary.
AFFIRMED.
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the defendants have expressly acknowledged that his claims fall within the scope
of every single agreement. So it is the plaintiff need only choose which
procedures he likes best. Second, Colorados preference for arbitration has led it
to enforce even arbitration clauses that say no more than that disputes shall be
submitted to binding arbitration without any discussion of procedural details.
Guthrie v. Barda, 533 P.2d 487, 487 (Colo. 1975). In circumstances like these,
Colorado statutory law provides a method for appointing an arbitrator when the
agreement fails to do so, Colo. Rev. Stat. 13-22-211(1), and a means for the
arbitrator to determine any outstanding procedural issues, id. 13-22-215
(process); id. 13-22-217 (discovery); id. 13-22-221 (attorneys fees). The
Federal Arbitration Act contains similar provisions. See 9 U.S.C. 5; Green v.
U.S. Cash Advance Ill., LLC, 724 F.3d 787, 792-93 (7th Cir. 2013) (collecting
cases using 5 to complete detail-free arbitration clauses). We could simply
follow that well trodden path here too. Indeed, either of these routes would, it
seems to me, effectuate the intent of the parties much better than eradicating all
six arbitration agreements root and branch and allowing the plaintiff to escape the
consequences of a choice he once so clearly preferred but now simply regrets.
Consider an analogy outside arbitration. In the battle of the forms
purchasers and vendors agree to transact but each side memorializes the deal on
its own standard forms. See, e.g., Daitom, Inc. v. Pennwalt Corp., 741 F.2d 1569,
1574 (10th Cir. 1984). This court has interpreted the Uniform Commercial Code
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to mean that conflicting terms in these forms knock each other out but do not void
the contract. Id. at 1579. That is because a meeting of the minds occurs with
respect to the fundamentals of the deal even if not with respect to the details. Id.
at 1580 (explaining that the fundamental purpose of the U.C.C. . . . is to preserve
a contract and fill in any gaps if the parties intended to make a contract and there
is a reasonable basis for giving an appropriate remedy). Respectfully, I would
follow the same course here. Indeed, there may be an argument that both
Colorado law and the FAA require it. Colorado law given its strong support for
arbitration. See, e.g., Lane, 145 P.3d at 678 (Our constitution, our statutes, and
our case law all support agreements to arbitrate disputes.). And the FAA given
its non-discrimination principle that requires us to treat arbitration clauses with
no less solicitude than we afford to other contractual provisions, like those that
apply in the battle of the forms context. See 9 U.S.C. 2; AT&T Mobility LLC v.
Concepcion, 563 U.S. 333, 339 (2011).
In reaching the opposite judgment, my colleagues place great weight on
New Jersey cases that have voided arbitration agreements for inconsistency. But,
respectfully, I do not see the relevance of these authorities even taken on their
own terms. For example, in NAACP the court held that, as a matter of New Jersey
law, consumer contracts must convey with precision and consistency what
the exact terms and conditions of th[e] arbitration process [are]. NAACP of
Camden Cty. E. v. Foulk Mgmt. Corp., 24 A.3d 777, 794 (N.J. Super. Ct. App.
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Div. 2011). But the reasons for that rule find no purchase here. New Jersey
courts say they demand extra clarity in arbitration agreements to protect
consumers against unknowingly waiving their right to sue under the States
Consumer Fraud Act. See id. at 797; Rockel v. Cherry Hill Dodge, 847 A.2d 621,
623 (N.J. Super. Ct. App. Div. 2004). And they say they take particular care in
scrutinizing mutual assent in the consumer arena because arbitration provisions
are often embedded in contracts of adhesion. NAACP, 24 A.3d at 790-91; see
also Rockel, 847 A.2d at 627. But this case, by contrast, involves parties to a
commercial, not a consumer, transaction, with contracts actively negotiated by
both sides, not contracts of adhesion thrust upon the plaintiff. Indeed, three of
the six agreements before us contain handwritten modifications and, again, three
the plaintiff himself proposed (through his own attorney no less). Respectfully, it
seems to me that applying New Jerseys extra clarity requirement to this case
divorces a rule from its reasons. Because the plaintiff here resembles a merchant
much more than a consumer, the battle of the forms offers the better analogy.
Beyond even that and however instructive NAACP might be about New
Jersey law, I am also quite unsure whether it has anything to say about Colorado
law or whether it would survive a brush with the FAA. Colorado has not adopted
the same extra clarity requirement for consumer contracts that New Jersey has.
And until it does so I respectfully suggest we should prefer rules harmonious with
the States established policy in favor of arbitration and against erecting barriers
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received assent to three arbitration clauses he drafted and signed three others, all
in a commercial setting and while represented by counsel, I just dont see how he
can now seriously claim that he never intended to arbitrate or how we might
rightly rescue him from the consequences of his choice. I respectfully dissent.
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