# FILED
April 19, 1999 Cecil Crowson, Jr. Appellate Cou rt Clerk 

### IN THE COURT OF APPEALS OF TENN ESSEE

AT NASHVILLE

PAMELA BROWN, ) ) Plaintiff/Appellee, ) ) Appeal No. ) 01-A-01-9807-CH-00368 VS. ) ) Davidson Chancery ) No. 97-2465-II KAREMOR INTERNATIONAL, INC. ) and HAGER MARKETING GROUP ) (a/k/a HMG), ) ) Defendants/Appellants. )
APPEALED FROM THE CHAN CERY COUR T OF DAVIDSO N COUNTY AT NASHVILLE, TENNESSEE THE HONORABLE CAROL L. MCCOY, CHANCELLOR

KEVIN H. SHARP CHRISTINE J. LAIRD 424 Church Street, Suite 2800 Nashville, Tennessee 37219 Attorneys for Plaintiff/Appellee SCOTT D. CAREY 511 Union Street, Suite 1700 Nashville, Tennessee 37219 Attorney for Defendants/Appellants

AFFIRMED AS MODIFIED AND REMANDED

BEN H. CANTRELL,

PRESIDING JUDGE, M.S.
CONCUR: CAIN, J. COTTRELL, J. 

## O P I N I O N- 2 - The Ch ancery Court of Davidson County refused to enforce an arbitration provision in a produc t distribution agreement. The court reasoned that the written agreement

was an adhesion contract and that the parties had not bargained
over the arbitration provi sion. We affirm as to the claims not related to the written agreement. As to the claim involving a breach of the agreement, we modify the lower court’s order to reflect that the question is stil l open

. I.

In July of 1997 Pamela Brown fil ed an action in the Chancery Court of Davidson County naming KareMor International, Inc. and Hag er Marketing Group as defendants. The complaint alleged that Kar eMor was a network

marketing company forMayor Pharmaceutic al Lab oratories, Inc., a marketer of vitamins and other nutrients. According to the complai nt Ms. Brown signed a distributor agreement with KareMor in Januar y o f 1996 an d purchased five boxes of prod uct for $2,790.00. About a week later she attended a Kar eMo r event in Atlanta and w as persuaded to purchase eight add itional b oxe s of product for $18,520. She later spoke w ith a KareMor area coordinator

who promised to help her get her money back. Still later, a KareMor vice presi dent promised Ms. Brown that the comp any would

make some adjustments to the product if she would return part of it to the company. She returned the product, but the company kept the produ ct and did not make the promised adjustments.

The complaint included counts of fraudul ent induc ement to enter into the distributo rship agreement, unfair and deceptiv e practices under the Tennessee Consumer

Protection Act, breach of the di stributorship agreement, and conversion of her prope rty.- 3 - KareMor filed an answer

admitting that Ms. Brow n became a distributor forthe company and purchas ed the product described in the co mplaint, but the
answer denied the other material al legati ons. The answer con tained a n affir mative defense alleging that Ms. Brown was contrac tually obligated to

arbitrate any dispute she had with KareMor.

KareMor then filed a motion for summary ju dgment o n the arbitration defense and attached a copy of the “Distrib uto r Application and Agreement. ” The form agreement contained some gen eral information on the front, filled in by Ms. Brown, and a section showing that she enrolled in a plan c alled “E-Plan: Golde n Showcase Enrollment System” at a pr ice of $2,790.00. Although titl ed “ A pplication and Agreement” the form does not show any accept ance by the company. In their statements of undis puted fac ts fi led in connection with the motion for summary judgment, however, the partiesagree that the form exhibit ed with the motion is a cop y of the agreement signed by M s. Brown.

The agreement also included the f ollowing statemen ts on the front page in very small print : “I hereby acknowl edge that I have receiv ed a copy of KareMor International’s Policies and Procedures. I have read and understand the Terms and Con d itions on the back of this agreement and ag ree to abide by the Polici es and Proced ures of KareMor International, Inc .” The back of the agreement conta ine d
se venteen “Terms and Conditions” in print only slightly larger than the q uo te d language on the front. The six teenth item stated: This Agreement, its interpret ation, construction, and enforcement, shall be governed by the la ws of the State of Nevada. Any controv ersy, dispute, or claim relating to this agreement between the parties shall be reso l ved by binding arbitration in Carson C ity, Nevada, in accordance with the rulesof the American Arbitration Associati on, and any j u dgement of the Arbitrator shall be entitled to enforceme nt b y any court havin g jurisdiction ov er the parties.- 4 -

At the bottom of the back pag e the c ompany’s address appeared as:“KareMor International, P. O. Box 21858, Phoenix, AZ 85036-1858.” There is no further proof in the record. Consequently, the record is silent as to the circumstances under which the parties entered into the ag reement.

II.

In 1983 our

legislature passed the U niform Arbitration Act, Tenn. Code Ann. § 29-5-301, et seq. A t long last an agreement to arbitrate became binding on the parties in Tennessee, contrar y to the common law rule and the inter pretation given
our prior statutes. See Meirowsky v. Phipps , 432 S.W.2d 885 (Tenn. 1968). But an agreementco ntaining an arbitraion provision does not require the parties to submit to arbitration disputes unr elated to the agreement. An arbi tration agreement in an employment

contract does not require the employ ee to submit to arbitration a claim under the Tennessee Human Rights Act. Jacobsen v. ITT Fin. Services C orp. , 762 F. Supp. 752 (E. D. Tenn. 1991). If a contract conta ining an arbitration provisi on i s procured by fraud, the plaintiff does not hav e to seek arbitration on the r ight to rescind. City of Blaine v. John Co leman Hayes

& Assoc. , 818 S.W.2d 33 (Tenn. App. 1991).

The language appearing on the back page of the agreement exhibited to the motion for

summary judgment says “any controversy, dispute or claim relati ng to this agree ment bet ween the p arties sh all be reso lved by binding ar bitration in Carson City, Nevada.” The complaint includes four coun ts, three of which are not related to the written agreement . A claim for fraud in the inducement is a tort claim not dependent on the agreement. The claims for violating the Tennessee Consumer Protection Act and for conversion of Ms. Brow n’s property are not cl aims “relatingto the agreement.” Even if w e assume that the arbitration p rovision in the agreement
was binding on the parties, Ms. Brown would not be r equired to arbitrate these claims.- 5 - The remaining count in the compl aint -- for breach of contract -- do es come within the language of the a greement. The chancellor, how ever held that “Based on the rationale used in [ Buraczynski ] thata contract of adhesion was si gned and the an alysis prov ided by that court, the cour t finds that this provisi on is in an adhesion contract and it is no t clear an d it was not fully discl osed at the time that it
was signed . . . .” The reference to Buraczynski was to Buraczynski v. Eyring, 919 S.W.2d 314 (Tenn. 1996) in which the Supreme Court upheld an arbitr ation provision in a cont ract between a physic ian and his patient. The Court did, however, issue a word of caution that “such agreements may co nstitute contracts of adhesion which must be c losely sc rutinized to determine if unconscionable or oppressive terms are imposed upon the patient . . . .” 919 S.W.2d at 316.

The Court defined an adhesion c ontr act as “a standardized contract form offered to consumers of goods and serv ices on essentially a ‘take it or leave it’ basis, without affording the consumer a realistic opportunity

to bargain . . . ” (cit ing Blac k’s Law Dictionary

40 (6th ed. 1990). Id. at 320. The C ourt went on to say, however, that an adhesion contract is n ot per se unenforceable. “Enforceabil ity generallydepends upon whether the terms of the contract are beyond the reasonable expectations of an ordinary person, or oppressive or unconscionable.” Id.

Our analysis of this question is hampered by the a bsence of any evidence in the record. The only thing that is established is the agreement, which Ms. Brown admits she signed, and she admits that it did contain the arbitration provision. There is no proo f concer ning the c ircumsta nces und er wh ich Ms. Brown signed the agreement. If the arbitration provision was br ought to her attention or the contract has
some connection to Carson City, Nevada, the facts must at thi s point remai n in the realm of speculation.- 6 - KareMor argues that Ms. Brow

n had the burden to furnish proof that the “Termsand Conditions” on the rev erse side of the agreement were not brought toher atten tion if she is to escape the application of the arbitration provision. W e think, however, that the burden was on KareMor to show that the parties actually bar gained
over the arbitration provisio n or tha t it was a reasonable ter m considering the circumstances. In Parton v. Pir tle Oldsmobile Cadillac-Isuzu, Inc. , 730 S.W.2d 634 (Tenn. App. 1987) we dealt wi th a contract containing bo ilerplate clauses and sai d, “a party who signs

a printed form furnished by the o ther party will

be bound by

t he pro visions in the form over which the parties actually bar gained and such other provisions

that are not unreasonable in view of the circ umst ances surrounding the transaction.” 730 S.W.2d at 638. Loo king at the four corners of the agreement in this
c ase, we could not say that a provision buried on the reverse side of a form agreement, alleged ly s igned in Tennessee, requir ing that any dispute ov er the agreement be arbitrated in C arson City, Nevada,was a reasonable prov ision.
Therefore, we think the question of whether

the parties were bound by the arbitration provis ion is still open. But the chancellor was cor rect i n den ying summary judgment to KareMor on that point.

The judgmentof the court below is affirmed as modified in this opin ion. The cause is remanded to the Chancery Court of Davids on County for further proceedings. Tax the costs on appeal to KareMor, International, Inc.

____________________________ BEN H. CANTRELL, PRESIDING JUDGE, M.S.

CONCUR:- 7 -

_____________________________ WILLIAM B. CAIN, JUDGE

_____________________________ PATRICIA J. COTTRELL, JUDGE