Opinion ID: 76850
Heading Depth: 3
Heading Rank: 1

Heading: Bargaining Power/Adhesion

Text: The district court found the Arbitration Agreements were “procedurally oppressive” because the “type of consumer loans that Defendants offer 14 unquestionably places the consumer at a severe bargaining disadvantage.” Jenkins, 313 F. Supp. 2d at 1374. The court stated “[c]onsumers who are willing to borrow money at such [high] interest rates would foreseeably sign anything.” Id. The court further explained consumers were unable to negotiate the terms of the preprinted contracts. After a customer, like Jenkins, filled out a loan application at First American’s offices, the application would be electronically transmitted to FNB. FNB would then send a completed Consumer Loan Agreement, including an Arbitration Agreement, back to First American for the borrower to sign. The court found the contracts to be adhesive because the borrower was unable to discuss or negotiate “the amount and conditions of the preprinted agreement.” Id. Before considering the merits of the adhesion argument, we must first decide whether this issue is one for an arbitrator or a court to resolve. The FAA “provides a remedy to a party seeking to compel compliance with an arbitration agreement.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403, 87 S. Ct. 1801, 1806 (1967). Such a party can move the district court for an order compelling arbitration. 9 U.S.C. § 4 (2000). Section four of the FAA instructs the federal court to grant the motion and order arbitration once it is satisfied “that the making of the agreement for arbitration . . . is not in issue.” Id. If, however, the 15 making of the arbitration agreement is in question, then the federal court may first adjudicate that issue. Id. In interpreting this section of the FAA, the Supreme Court has distinguished between claims that challenge the contract generally and claims that challenge the arbitration provision itself. See Prima Paint Corp., 388 U.S. at 403–04, 87 S. Ct. at 1806. In Prima Paint, the plaintiff sought to rescind a contract on the grounds that the contract was fraudulently induced. Id. at 398, 87 S. Ct. at 1803. The defendant, on the other hand, sought to invoke the contract’s arbitration clause and moved to stay the action pending arbitration. Id. at 398–99, 87 S. Ct. at 1803. The Supreme Court explained: [I]f the claim is fraud in the inducement of the arbitration clause itself—an issue which goes to the “making” of the agreement to arbitrate—the federal court may proceed to adjudicate it. But the statutory language [of the FAA] does not permit the federal court to consider claims of fraud in the inducement of the contract generally. Id. at 403–04, 87 S. Ct. at 1806. The Court concluded that because the fraudulent inducement claim related to the underlying contract generally, and not to the arbitration clause specifically, it was a matter to be resolved by the arbitrator, not the federal court. Id. at 406, 87 S. Ct. at 1807. This Court has applied the Prima Paint rule to claims of adhesion and unconscionability. We have held that “[i]f . . . [the party’s] claims of adhesion, 16 unconscionability, . . . and lack of mutuality of obligation pertain to the contract as a whole, and not to the arbitration provision alone, then these issues should be resolved in arbitration.” Benoay v. Prudential-Bache Secs., Inc., 805 F.2d 1437, 1441 (11th Cir. 1986) (citations omitted). Here, the adhesion arguments relied on by the district court pertain to the underlying Consumer Loan Agreements as a whole, and not to the Arbitration Agreements specifically. As explained above, the adhesion arguments were (1) that the consumers lacked bargaining power because these “type[s] of consumer loans . . . would only appeal to extremely desperate consumers,” and (2) that the consumers were allegedly unable to negotiate the terms and conditions of the preprinted agreements. Jenkins, 313 F. Supp. 2d at 1374. These claims do not relate to the Arbitration Agreements themselves; rather, they allege the Consumer Loan Agreements, in general, were adhesive. Under the Supreme Court’s decision in Prima Paint and our decision in Benoay, the FAA does not permit a federal court to consider claims alleging the contract as a whole was adhesive. We conclude, therefore, Jenkins’ adhesion claims are for an arbitrator, not a federal court, to decide. 17