The Honorable Charles A. Shaw, United States District Judge for the Eastern 1 District of Missouri. 

## United States Court of Appeals FOR THE EIGHTH CIRCUIT

_____________ No. 97-4243

_____________ Charles S. Barker; Express Golf, Inc., *
* Appellants, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri. Golf U.S.A., Inc., *
* Appellee. *

_____________ Submitted: May 13, 1998 Filed: August 20, 1998

_____________ Before BOWMAN, Chief Judge, HEANEY, and HANSEN, Circuit Judges.

_____________ BOWMAN, Chief Judge. Express Golf, Inc., a franchisee, and Charles Barker, its owner, sued Gol f U.S.A., Inc., the franc hisor, for fraud in state court. The case was removed to federal district court on diversity grounds, whereupon Golf U.S.A. moved to dismiss on th e ground that an arbi tration clause in the franchise agreement required arbitration of the pla intiffs' claims. The District Court granted the motion, and Express and Barke r 1 appeal.-2-

The facts of the case are as follows. In a franchise agreement date d September 18, 1995, Golf U.S.A., an Oklahoma corporation, granted to Express, a Missouri co rporation, the right to operate a golf retail store using Golf U.S.A.' s methods, name, designs, system, and service marks. That same day, Charles Barker, the sole sh areholder of Express, agreed to guarantee the obligations of Express under the franchise agreement. The franchise agreement included the following provision:

Any and all disputes, claims and controversies arising out of or relatin g to t his Agreement, performance hereunder or breach hereof, except fo r monie s owed to Golf USA pursuant to this Agreement and except a s de scribed in Paragraph 18.5, shall be resolved by arbitration conducte d in Oklahoma County, State of Oklahoma, in accordance with the lates t exist ing Commercial Rules of Arbitration of the American Arbitratio n Association.

Franchise Agreement para. 18.1, at 29-30. A choice-of-law provision was included, whic h specified that the franchise agreement "shall be governed by and construed i n
accor dance with the laws of the State of Oklahoma." Id. para. 20.1, at 31. Th e agreement also contained a provision in 12-point bold-face type that stated, "Yo u acknowledge that You have received a blank copy of this Agreement in time to afford ample opportunity to seek legal counsel, an d to analyze the various provisions herein." Id. para. 20.13, at 33.

The retai l operation failed less than nine months after the execution of th e franchis e agreement. Soon thereafter, Express and Barker filed the present action , claiming that fraudule nt representations made by Golf U.S.A. about the operation and

succes s of the franchise induced Barker into signing the franchise agreement. Upo n removal to federal court, the District Court held that the parties' dispute must b e resolved by arbitration pursuant to the arbitration clause contained in the franchis e agreement. We affirm.-3-

Our analysis must begin by determining whether the franchise agreement i s subject to the Federa l Arbitration Act (FAA), 9 U.S.C. §§ 1-16 (1994). In an attempt to declare a na

tional policy favoring arbitration, Congress passed the FAA mandating the enforcement of arbitration agre ements. See 9 U.S.C. § 2. The Supreme Court has held that the FAA applies to arbitration provisions, thereby mandating thei r enforcement, subject to only two limitations. See Southland Corp. v. Ke ating , 465 U.S. 1, 10-11 (1984). First, the arbitration agreement "must be part of a written maritime contra ctor a contract 'evidencing a transaction involving commerce.'" Id. at 1 1 (quoting 9 U.S.C. § 2). Second, the agreement "may be revoked u pon 'grounds as exist at law or in equity for the revocation of any contract.' " Id. (quoting 9 U.S.C. § 2). The Di strict Court found, and the parties do not dispute, that the franchise agreemen t involves interstate commerce. The parties are located in different sta tes, Oklahoma and Missouri, and the agreement contemplates the transfer of inventory and money between the states. The parties do dispute, however, whether the arbitration clause contained in the franchise agreement is valid.
Initially, we must determine whether it is for the court or an arbitrator to decide the v alidity of the arbitration clause. Express and Barker claim that the arbitratio n clause lacks mutuality of obligation, is unconscionable, a nd violates public policy. The District Court held that thes e claims should be decided by an arbitrator. We disagree. In Prima Paint Corp. v. Flood & Conklin Manufacturing Co. , 388 U.S. 395, 403-0 4 (1967), the Supreme Court held that a claim of fraud in the inducement of a contract

as a whole must go to an arbitrator, but "issue[s] which [go] to the 'making' of th e agreement t o arbitrate" should be decided by a court. See also Houlihan v. Offerman & Co. , 31 F.3d 692, 694-95 (8th Cir. 1994). In this case, the underlying claim is for fraud in the inducement of the entire contract, but that is not the issue with which we are faced today. Rather, Express and Barker a ssert claims that go to the making of the arbitration agreement itself. Under Prima Paint , a court must decide whether th e agreement to arbitrate is valid.We find unpersuasive the reasons articulated in the dissenting opinion fo r 2 declaring the choice-of-law provision invalid.
-4- To decide whether t

he parties' agreement to arbitrate is valid, we look to state contract law. See Perry v. Thomas , 482 U.S. 483, 493-94 n.9 (1987) ("[S]tate law , whether of legislative or judici al origin, is applicable if that law arose to govern issues concerning the v alidity, revocability, and enforceability of contracts generally."). We may apply state law to arbitration agreements only to the extent that it applies t o contracts in general. See Allied-Bruce Terminix Cos. v. Dobson , 513 U.S. 265, 281 (1995). P ut another way, we may not invalidate an arbitration agreement under an y state law applicable only to arbitration pr ovisions; instead, we may apply only a state's general contract defenses. See Doctor's Assocs. v. Casarotto , 517 U.S. 681, 68 7 (1996).
The question then beco mes one of choice-of-law. Which state's laws are we to apply? Despite a choice-of-law provision in the franchise agreement designatin g Ok lahoma

law, Express and Barker argue that Missouri law should apply. N o persuasive rea son having been advanced for setting aside the choice-of-law provision upon wh ich the parties agreed in their contract, we reject this argument and conclude that Oklahoma law applies. 2

Express and Barker claim

that Golf U.S.A.'s promise to arbitrate is illusory and therefore fails for lack of mutuality. They argue that virtually any claim can b e converted into a claim for monies owed to Golf U.S.A. pursuant to the agreement and, as a result, Golf U.S.A. is pe rmitted to litigate any conceivable claim, while they must arbitrate their claims. To resolve this issue, "we are bound to apply [Oklahoma law]

as we are abl e to discern it from the rulings of [Oklahoma's] courts." Jackson v

. Anchor Packing Co. , 994 F.2d 1295, 1310 (8th Cir. 1993). The Oklahoma courts have not ru led on the issue of whether mutuality of obligation is required in an arbitratio n clause. For the reasons stated below, we believe that the Oklahoma Supreme Court-5-

would hold that mutuality in arbitration clauses is not required.

In Ditt o v. Re/Max Preferred Properties, Inc. , 861 P.2d 1000, 1004 (Okla. Ct

. App. 1993), the court of appeals held u nenforceable an arbitration clause that excluded one party from participating in the selection of an arbitrator. In the process, the court considered an

argument that the arbitration clause lacked mutuality of obligation. See Ditto , 861 P.2d at 1002. The court cited two cases in distinguishing its case from those that "involve truly one-sided oblig ations to arbitrate." Id. (citing R.W. Roberts Constr. Co. v. St. Jo hns River Water Management Dist. , 423 So.2d 630, 632 (Fla. Ct. App

. 1982) an d Arcata Graphics Corp. v. Silin , 399 N.Y.S.2d 738, 738-39 (1977)). Th e court's consideration of the issue, however, is pure dicta. Id. ("We reject [the lack of mutuality argument] as a proper ground to challenge the clause at issue [because] . . . [t]he trial court expressly rested its decision on the unfai rness of the arbitration panel ."). Furt her, the decision in Arcata Graphics to which the court cited has since bee n abrogated by Sablosky v. Gordon Co. , 73 N.Y.2d 133, 136-37 (1989), where in the New York Court of Appeals expressly held that mutuality is not required in arbitratio n provisions if ther

e exists consideration for the entire agreement. Thus, we do not read Ditto to indicate that the Oklahoma courts would require mutuality of obligation i n arbitration clauses where the entire agreement is supported by consideration.
We are further persuaded that the Oklahoma Supreme Court would not se parately require mutuality in arbitration clauses based on the more recent decision of Shaffer v. Je ffery , 915 P.2d 910 (Okla. 1996). In Shaffer , the Oklahoma Supreme Court, i n inte rpreting Oklahoma's arbitration act, rejected the Prima Paint separability doctrin e that "the arbitratio n clause is a severable part of the contract." Id. at 916. In addition, Oklahoma has espoused the policy that "'[t]he whole of a contract is to be take n together, so as to give effect to every part, if reasonably practic able, each clause helping to interpret the others.'" Pierc e Couch Hendrickson Baysinger & Green v. Freede , 936 P.2d 906, 911 (Okla. 1997) (quoting Okla. Stat. Ann. tit. 15, § 157 (West 1993)).The dissenting opinion relies on an unpublished opinion by the Oklahoma Court 3 of App eals in concluding that Oklahoma law requires mutuality of obligation i n arbit ration agreements and that this clause is thus violative. See Neighbors v. Lyn n Hickey Dodge, Inc. , No. 85676 (Okla. Ct. App. Aug. 6, 1996) (withdrawn fro m publication). Neighbors , however, should not be relied upon. After the court o f appeals in Neighbors rendered its decision and released the opinion f or publication, one of the parties petitioned to the Oklahoma Supreme Court for certiorari. O n November 12, 1996, the Oklahoma Supreme Court denied certiorari and issued a n order mandating that the opinion be withdrawn from publication. See Order Nov. 12, 1996. This overt act by the Oklahoma Supreme Court commands our restraint from relying on o r citing to the opinion because we do not know the reason for th e withdrawal. Of course, one possibility is that the supreme court did not agree with the result. W e find it unlikely, as the dissenting opinion suggests, that the opinion ma y have bee n withdrawn because it applies settled law. Our discussion in the text of the opini on illustrates that the issue is far from settled in the Oklahoma courts. Th e Neighbors opinion lack s precedential value, see 8th Cir. R. 28A(k); Okla. Sup. Ct. R. 1.200(b)(5) (unpublished opinions "shall not be considered as precedent by any court
or cited in any brief or other material presented to any court."), and, in thes e circumstances, also lacks persuasive value.
-6- Moreover, we find no indication that the Oklahoma Supreme Court would no t join the trend established by decisions holding that consideration for a contract as a whole covers the arbitration clause. See Doctor's Assocs. v. Distajo , 66 F.3d 438, 452 (2d Cir. 1995) ("Most courts facing th is issue have arrived at the same conclusion [that considera tion for the entire contract is sufficient to support the arbitration clause]." ) (citing cases), cert. denied , 517 U.S. 1120 (1996); see also Restatement (Second) o f Contracts § 79 (1979) ("If the requirement of consideration is m et, there is no additional requi rement

of . . . 'mutuality of obligation.'"). Finally, "[a] doctrine that require d separate consideration for arbitration clauses might risk running afoul of [the stron g federa lpolicy favoring arbitration]." Doctor's Assocs. , 66 F.3d at 453. For all thes e reasons, we conclude that, under Oklahom a law, mutuality of obligation is not required for arbitration clauses so long as the contract as a whole is supported by consideration. 3 In this case, the parties do not contend that the franchis e agreement lacks consideration.-7-

We also reject Express and Barker's argument that the arbitration clause i s
unc onscionable, void, and unenforceable. We dismiss the notion that, because th e contract is standardized, the arbitration provision should be void. Unconscionabilit y gener ally requires a showing that one party lacked a meaningful choice as to th e inc lusion of the challenged provision and that the challenged provision unreasonabl y favors the other party. See Coblentz v. Oklahoma Farm Bureau Mut. Ins. Co. , 915 P.2d 938, 9 40 (Okla. Ct. App. 1995). No such showing has been made in this case. W e similarly find that the clau se does not violate public policy. See Freeman v. Prudential Sec., Inc. , 856 P.2d 592, 594 (Okla. Ct. App. 19 93) ("Ordinarily, agreements of parties to bind themselves to mandatory arbitration are favored.").

We also r eject Express and Barker's final argument that Golf U.S.A. waived its right to arbit rate by filing with the District Court a claim for attorney fees after th e District Court's dismissal. "[A]s a matter of federal law, any doubts concerning th e scope of arbitrable i ssues [such as an allegation of waiver] should be resolved in favor of arbitration . . . ." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24-25 (1983). We will find tha t a party waived its right to arbitrate where that party "(1) knew of an existing right to arbitrati on; (2) acted inconsistently with that right; and (3) prejudiced the other party by the se inconsistent acts." Ritzel Communications, Inc.

v. Mid-Amer ican Cellular Tel. Co. , 989 F.2d 966, 969 (8th Cir. 1993) (citing Stifel , Nicolaus & Co. v. Fre eman , 924 F.2d 157, 158 (8th Cir. 1991)). In Ritzel , the district court denied several defendants' motion for arbitration, and they appealed. While the appeal was pending, those defendants continued to litigate the merits of the case i n district court. They filed answers, responded to interrogatories and requests fo r produ ction, participated in depositions and pre-trial conferences, and filed numerou s motions and documents in preparation for trial. The case was eventually tried in a sixday bench tri al and judgment was entered against the defendants. We held that th e defendants had waived their right to arbitration "[b]y failing to make the simple effort of reques ting a stay in this court and by proceeding to trial on the merits in the district court." Id. at 970 (emphasis added). In this case, Golf U.S.A. has not actedSection 187 of the Restatement provides: 4
(1) The law of the state chosen by the parties to govern their contractual
-8- inconsi stently with its right to arbitration because Golf U.S.A. has not attempted t o litigate the merits of the case. To the contrary, it has resisted litigation and ha s per suaded the District Court to dismiss the plaintiffs' lawsuit in favor of arbitration

. Furthermore, Express and Barker have not shown any prejudice to themselves. Even if the District Court grants Golf U.S.A.'s pending motion for attorney fees, that is not pre judice to Express and Barker for purposes of the rules applicable in determinin g whether a waiver of a right to arbitration has occurred.

In conclusion, we believe that the ar bitration provision is valid upon "grounds as exist at law," 9 U.S.C. § 2, and therefore hold that the FAA mandates the enforcement of the arbitration clause. We affirm the judgment of the District Court dismissing the complaint.
HEANEY, Circuit Judge, dissenting.
I respectfully dissent. As a preliminary matter, I believe tha t Missouri law, rather than Oklahoma law, applies. “Federal district courts must apply the choice of law rules of the sta te in which they sit when jurisdiction is based on diversity of citizenship. ” Whirlpool Corp. v. Ritter , 929 F.2d 1318, 1320 (8th Cir. 1991) (citing Klaxon Co. v. Stent or Elec. Co. , 313 U.S. 487, 496 (1941)). We review de novo the district court’s determination of which state’s l aw to apply. See Salve Regina College v. Russell , 499 U.S. 225, 230 (1991).
Express f iled this case in the Eastern District of Missouri. Therefore, we apply Misso uri’s choice of law rules. Missouri courts follow the Restatement (Second) o f Conflicts when analyzing contractual agre ements. See Fruin-Colnon Corp v. Missouri 4ri ghts and duties will be applied if the particular issue is one which th e

parti es could have resolved by an explicit provision in their agreemen t directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will be

applied, even if the particular issue is one which the p arties could not have resolved by an explicit provision in thei r agreement directed to the issue, unless . . .

. . . (b) applicatio n

of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially gr eater interest than the chosen state in the determination of the particular issu e and which . . . would be the state of the applicable law in th e absence of an effective choice of law by the parties.
Restatement (Second) Conflicts § 187 (1988).
-9- Highway & Transp. Comm’n , 736 S.W.2d 41, 44 (Mo. 1987). Because Missouri has greater cont acts, its law would govern the case absent a valid choice of law by th e parties. See Restatement (Second) Conflicts § 187(1)(b). Having carefully reviewed the record, I also fi nd that Missouri has a materially greater interest in the effect of the forum-selection clause than Oklahoma. Id. Fi nally, to determine whether the choice of law provi sion is valid, we must ask whether the arbitration clause at issue violates a fundamental policy of Missouri. Id. I conclude that it does.

In Electrical & Magneto Service Co. v. Ambac International Corp. , 941 F.2d 660 (8th Cir. 1991), our court reviewed Missouri statutes concerning franchise agreements and c oncluded that “the Missouri Legislature created a legislative presumption tha t franchisees are in an inferior bargaining position with respect t o franchisors and thus are entitled to protection from the oppressive use of the franchisor’s s uperiority.” Id. at 663 n.3. Although the majority is correct that “we may not invalidate an arbitration-10-

agreeme nt under any state law applicable only to arbitration provisions[,]” ante at 4, I

wou ld invalidate this arbitration agreement, because rather than single out specifi c prote ctions afforded only to arbitration agreements under Missouri law, the Missour i legislative scheme at issue “is desi gned to regulate the marketplace to the advantage of those traditionally thought to have unequal bargaining power as well as those who may fall victi m to unfair business practices.” Id. at 663. In my judgment, the arbitratio n provision that allows Golf U.S.A. to sue in court, but requires Express to arbitrat e without the possibility of ever receiving a jury t rial, violates a fundamental policy under Missouri law.

The Missouri Supreme Court has explicitly approved the legislative schem e designed to protect Missouri franchisees and has invalidated a forum-selection clause where the clause was “unreasonable” and unfairly prejudiced the franchisee. See High Life Sales Co. v. Brown-Forman Corp. , 823 S.W.2d 493, 500 (Mo. 1992). In agreeing with our Ambac decision and in interpreting Missouri franchise law, the court in High Life sta ted: “The Eighth Circuit Court of Appeals . . . recognized the strong publi c policy r eflected in Chapter 407 generally” in protecting franchisees and “the very fact that this legislation is paternalistic in nature indicates that it is a fundamental policy.” Id. at 498 (citing Restatement (Second) of Conflicts § 187 comment g). Consistent with holdings of our court and the Missouri Supreme Court, I would inva lidate the arbitration clause becau se under Missouri law it is unreasonable and unfairly prejudices Express.

Even assuming that Oklahoma law applies, the provision at issue violates th e Oklahoma Constitution. The Oklahoma Supreme Court has held that “‘[o]ne party may

no t unilaterally decide to have someone other than a jury determine the issues an d thereby destroy the other’s right to a jury trial.’” Massey v. Farmers Ins. Group , 837 P.2d 880, 884 ( Okla. 1992) (quoting Molodyh v. Truck Ins. Exch. , 744 P.2d 992, 998 (Or. 1987)).Once one closely examines the fran chise agreement, it is not hard to understand 5 why the arbitration agreement is so truly one-sided. Clause 16.4.2 of the franchis e agreement, for example, provides that Golf U.S.A. may terminate the agreement:

If You [Express] fail to cure a default hereunder, where such defaul t mater ially impairs the goodwill associated with the Golf USA name , service mark or logo; but only after You have been given written notice to cure said default and have failed to do so after 24 hours. (J.A. at A-55). Because the provision quoted above is so broad, if Golf U.S.A. determin ed that Express “materially impair[ed] the goodwill associated with the Golf USA nam e,” Golf U.S.A. could terminate the agreement within twenty-four hour s notice and sue Express in co urt for monies owed as a result of the alleged breach. On the other hand, as in this case, where Express claims that Golf U.S.A. materiall y breached their agreement, Express is forced to submit to arbitration. Although Oklahoma Supreme Court rules provide that unpublished opinion s 6 hav e no precedential effect, see Okla. Sup. Ct. R. 1.200(b)(5), and “shall not be . .

. cited in an y brief or other material presented to any court,” courts interpreting thi s provision have found that unpublished opinions may be used for p ersuasive value. See , e.g. , Tillon v. Capital Cities/ABC Inc. , 938 F. Supp. 751, 753 n.1 (N.D. Okla. 1995) (“Al though. . . Oklahoma Court of Appeals’ unpublished opinion[s] [do] not hav e precedentia l value, . . . [they may] be persuasive.”); see also Farmers Ins. Group v

. Stark , 924 P.2d 798, 800 (Okla. Ct. App. 1996 ) (“The trial court found persuasive and follo wed . . . an unpublished opinion . . . of this court.”); Employers Mut. Cas. v

. Mosby , 943 P.2d 593, 594 (Okla. 1997) (discussing Northland v. Nance , a n unpublished court of appeals opinion analyzed in Farmers , and while overruling Nance because a published court of appeals opi nion was on point, never suggested that lower
cour ts could not use unpublished opinion for persuasive value). Our court has als o stated that one may cite an unpublished opinion of our court if, although lackin g -11- In my view, Golf U.S.A has the unilateral right to decide to have someone other than a ju ry determine the issues and thereby destroy Express’s right to a jury trial

. While Golf

U.S.A. can sue in court for anything involving money damages, Expres s may never

demand a jury trial and must submit to arbitration. My position that th e 5 arbitration provision violat es Oklahoma law is bolstered by an unpublished opinion of 6precedential value, it has persuasive value on a material issue and no published opinion would serve as we ll. See 8th Cir. R. 28A(k). In this regard, I do not agree that th e cases cited by the majority sufficiently address the issues before us.
In Cannon v. Lane , 867 P.2d 1235 (Okla. 1993), the Oklahoma Supreme Court 7 stated: “Because we hold that the contract before this Court is one ‘with reference to insura nce’ and therefore an exception to the Uniform Arbitration Act, we need no t address the constitutional issue of whether the contract for ar bitration of future disputes deprives the petitioner of a jury trial and violates his constitutional rights under . . . the Constitution of the State of Oklahoma.” Id. at 1239 n.7. Although the court did not reach the issue, it is clear that, at the very least, it considered the question open whether arbitration clauses may deprive one of the right to a jury trial in violation of th e Okl ahoma

Constitution. This fact, in conjunction with the holdings in Massey an d Neighbors , clearly shows the error made by the majority. Interestingly, the court in Neighbors considered the Shaffer opinion, relied on 8
so heavily by the majority, and yet still found that the arbitration clause violated th e Ok lahoma

Constitution. See Neighbors , 85.676, at 7 (J.A. at A-117.) One ma y question why the Oklahoma Supreme Court withdrew Neighbors from publication , rather than simply overru ling it. Perhaps the reason is that “[o]pinions of the Court of Civil A ppeals which apply settled precedent and do not settle new questions of la w shall not be released for publication.” 20 O.S. 1991, § 30.5.
-12- the Oklahoma Court of Appeals. That court explicitly stated: “Because of the special guarantee of jury trials granted by our const itution, we hold that a contractual provision purporting to grant a unilateral right to elect alternative dispute resolution procedures is not enforc eable against the party demanding a jury trial.” See Neighbors v. Lyn n Hickey Dodge, Inc. , No. 85. 676 at 9 (Okla. Ct. App. Aug. 6, 1996) (J.A. at A-111, A119) (emphasis in original). There can be no doubt that the Neighbors holding is both 7 persuasive and on point with respect to this case. 8

We are empo wered to predict how the Oklahoma Supreme Court would decide this matter. In my vi ew, Oklahoma law compels us to find that the unilateral right that Golf U.S.A. possesses in this case directly contravenes its constitution. It is for this-13-

reason that

I respectfully dissent and hope that our court en banc, or the United States Supreme Court, corrects this transparent misapprehension of our role when hearin g diversity cases.

A true copy.

Attest.

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.