In the

United States Court of Appeals

For the Seventh Circuit

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No. 03-3722

ROY CARBAJAL,

Plaintiff-Appellant,

v.

H&R BLOCK TAX SERVICES, INC., et al.,

Defendants-Appellees.

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Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 00 C 626—John A. Nordberg, Judge.

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ARGUED MAY 17, 2004—DECIDED JUNE 24, 2004

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Before BAUER, EASTERBROOK, and MANION, Circuit

Judges.

EASTERBROOK, Circuit Judge. In 1999 H&R Block

prepared Roy Carbajal’s 1998 federal tax return. Its calculations showed that Carbajal could expect a refund of

$5,001. Carbajal applied for what Block calls a “rapid

refund,” a transaction that couples a loan with the assignment of the refund as security for repayment. The documents underlying this refund-anticipation loan provide that

the lender also may use the money to retire any earlier

year’s loan (a balance due could exist if the actual refund

was less than anticipated and the taxpayer did not return
2 No. 03-3722

the excess), and that any dispute between the parties will

be arbitrated. After Carbajal signed on the dotted line, he

received about $1,800 in cash; the balance was used to pay

off an earlier loan that a lender in Block’s program contended was outstanding. Carbajal filed this suit under the

Fair Debt Collection Practices Act, plus other federal and

state laws, contending that he had been snookered. Block

and the other defendants asked the district court to refer

the dispute to arbitration.

Before the district judge had decided whether the dispute

must be arbitrated, Carbajal received a notice that he is a

member of a class in other litigation pending against Block.

Carbajal then asked Judge Zagel, before whom the class

suits had been consolidated, for leave to intervene and

represent a distinct subclass of persons whose refund loans

had been used to pay down earlier indebtedness. Judge

Zagel denied this motion and approved a settlement that

encompassed (and barred) all of Carbajal’s claims. We

reversed that decision and tossed out the settlement. See

Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th

Cir. 2002). Negotiations on a new settlement that would

include claims such as Carbajal’s came to naught, see

Reynolds v. Beneficial National Bank, 260 F. Supp. 2d 680

(N.D. Ill. 2003), and Judge Nordberg then turned to

Carbajal’s independent suit—which he dismissed in reliance

on the arbitration clause. 2003 U.S. Dist. LEXIS 16458 (N.D.

Ill. Sept. 16, 2003). An outright dismissal in favor of

arbitration is a “final decision,” see Green Tree Financial

Corp. v. Randolph, 531 U.S. 79 (2000), entitling Carbajal to

appeal under 28 U.S.C. §1291.

Paragraph 6 of the refund-anticipation loan (RAL)

agreement provides:

By signing this RAL application or endorsing my

1999 RAL check which contains the Loan

Agreement (collectively the “Agreements”) I hereby
No. 03-3722 3

agree that any claim or dispute (whether in contract, tort or otherwise) in any way relating to the

Agreements or such similar agreements for prior

years involving the same parties or relating to the

relationships of such parties, including the validity

or enforceability of this arbitration provision or any

part thereof (collectively the “Claim”), shall be

resolved, upon the election of either party, by binding arbitration pursuant to this arbitration provision and the Code of Procedure of the National

Arbitration Forum in effect at the time the Claim is

filed. No class actions are permitted without the

consent of the parties hereto. Rules and forms of

the National Arbitration Forum may be obtained by

calling 1-800-474-2371 and all Claims shall be filed

by certified mail at any National Arbitration Forum

office or at Post Office Box 50194, Minneapolis,

Minnesota 55405. Any participatory arbitration

hearing that I attend will take place in the federal

judicial district in which I live. This arbitration

agreement is made pursuant to a transaction

involving interstate commerce, and shall be governed by the Federal Arbitration Act, 9 U.S.C.

Sections 1-16. The award of the Arbitrator shall

apply relevant law pursuant to Section 3G above

and provide written, reasoned findings of act and

conclusions of law, and shall not be subject to

appeal, unless the arbitrator’s decision clearly

conflicts with applicable law. Judgment upon the

award may be entered in any court having jurisdiction. Nothing in this arbitration provision shall be

construed to prevent HB’s use of offset or other contractual rights involving payment of my income tax

refund or other amount on deposit with HB to pay

off any RAL debts or ERO or other fees now or

hereafter owed by me to HB or any other RAL

Lender or ERO or third party pursuant to the
4 No. 03-3722

Agreements or similar prior agreements. The parties hereto acknowledge that they have a right to

litigate Claims in court, but they prefer to resolve

any such Claims through arbitration and hereby

waive their rights to litigate such Claims in court

upon election of arbitration by either party. The

parties hereto further agree that any award hereunder shall be based on the claimant’s actual compensatory, economic damages, and equitable relief

as appropriate, plus proportional punitive damages,

if any are deemed appropriate in the Arbitrator’s

discretion. Each party hereto shall bear the expense

of their respective attorney’s fees regardless of

which party prevails. The decision of the Arbitrator

and the amount of any Award shall be kept confidential by the parties hereto. This arbitration

provision shall supersede any prior arbitration

provision contained in any previous RAL or RAC

application agreement.

It would be hard to draft a broader clause. This covers all

claims “relating to” the 1999 loan plus all disputes “relating

to” any earlier tax year and any preceding refund-anticipation loan. It also covers any dispute about “the validity

or enforceability of this arbitration provision or any part

thereof”—a clause evidently tailored to come within the

rule that people may agree to arbitrate whether a given

dispute is arbitrable. See First Options of Chicago, Inc. v.

Kaplan, 514 U.S. 938, 943 (1995); see also Prima Paint

Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395

(1967). If so, this litigation is pointless. Even if we indulge

the district court’s assumption that the court determines

arbitrability, Carbajal still must arbitrate.

Carbajal’s lead argument is that Block and the other

defendants waived their right to arbitrate by trying to

include him in the master settlement. Yet defendants have

urged arbitration from the get-go; it was Carbajal who tried
No. 03-3722 5

to intervene in the class action. The ensuing delay and

negotiation do not cancel the parties’ contractual choice of

forum in the event matters could not be resolved amicably.

American Patriot Insurance Agency, Inc. v. Mutual Risk

Management, Ltd., 364 F.3d 884 (7th Cir. 2004), says all

that is necessary about that subject. As in American

Patriot, defendants did not ask the judge for a decision on

the merits and fall back on arbitration only when things

turned sour; they have never sought judicial resolution of

any aspect of the dispute.

Is enforcement of this clause unconscionable? How could

it be? Arbitration is just a forum; people may choose freely

which forum will resolve their dispute. This is so when the

agreement concerns venue within a judicial system, see

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991),

and equally so when the agreement specifies a non-judicial

forum. See, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S.

105 (2001); Rodriguez de Quijas v. Shearson/ American

Express, Inc., 490 U.S. 477 (1989); Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).

The whole deal, including ¶6, was offered on a take-it-orleave-it basis, which leads Carbajal to call it a “contract of

adhesion,” but few consumer contracts are negotiated one

clause at a time. Forms reduce transactions costs and benefit consumers because, in competition, reductions in the

cost of doing business show up as lower prices (here, a

slightly lower rate of interest on the loan). The forumselection clause in Carnival Cruise Lines was printed on the

back of a ticket, and the Court nonetheless enforced it—just

as the terms of limited warranties and many other provisions not negotiated separately are enforced routinely. We

observed in Metro East Center for Conditioning and Health

v. Qwest Communications International, Inc., 294 F.3d 924

(7th Cir. 2002), that what holds true for warranties holds

true for arbitration. See also, e.g., Koveleskie v. SBC Capital
6 No. 03-3722

Markets, Inc., 167 F.3d 361 (7th Cir. 1999); Hill v. Gateway

2000, Inc., 105 F.3d 1147 (7th Cir. 1997).

Section 2 of the Federal Arbitration Act says that an

agreement to arbitrate “shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract.” Thus arbitration

specified in a form contract must be treated just like any

other clause of the form. Unless Delaware (whose law applies) would refuse to enforce limited warranties, clauses

curtailing the time available to file suit, and the like, then

this arbitration clause must be enforced. Carbajal does not

offer any reason to think that Delaware generally refuses to

enforce details on the back of an auto-rental contract or

equivalent form; thus this agreement to arbitrate is valid.

The cry of “unconscionable!” just repackages the tired assertion that arbitration should be disparaged as secondclass adjudication. It is precisely to still such cries that the

Federal Arbitration Act equates arbitration with other

contractual terms. See Allied-Bruce Terminix Cos. v.

Dobson, 513 U.S. 265, 270-71 (1995). People are free to opt

for bargain-basement adjudication—or, for that matter,

bargain-basement tax preparation services; air carriers that

pack passengers like sardines but charge less; and blackand-white television. In competition, prices adjust and both

sides gain. “Nothing but the best” may be the motto of a

particular consumer but is not something the legal system

foists on all consumers.

As for the contention that portions of this clause are incompatible with federal law—because, say, they require the

parties to bear their own costs, while the FDCPA entitles

prevailing litigants to recover attorneys’ fees— there are

two problems. First, the arbitrator rather than the court

determines the validity of these ancillary provisions. See

PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401

(2003); see also Green Tree Financial Corp. v. Bazzle, 539

U.S. 444 (2003); Howsam v. Dean Witter Reynolds, Inc., 537
No. 03-3722 7

U.S. 79 (2002). Second, no general doctrine of federal law

prevents people from waiving statutory rights (whether

substantive or procedural) in exchange for other things they

value more, such as lower prices or reduced disputation. See

Metro East, 294 F.3d at 928-29 (collecting authority).

Whether any particular federal statute overrides the

parties’ autonomy and makes a given entitlement nonwaivable is a question for the arbitrator.

AFFIRMED

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—6-24-04