Opinion ID: 75874
Heading Depth: 2
Heading Rank: 1

Heading: The District Court's Articulated Reason

Text: 11 As explained above, the district court expressly declined to enforce the arbitration agreement on the authority of this court's decision in Randolph. In that case, a panel of this court determined that an arbitration provision in a retail installment contract was unenforceable because it potentially gave rise to high costs to the party pursuing arbitration. See Randolph, 178 F.3d at 1158. Specifically, the arbitration clause said nothing about the payment of filing fees, the apportionment of the costs of arbitration, the ability to waive such fees and costs due to financial hardship, or the set of rules that would govern the arbitration. Id. The lack of specificity as to these matters meant that neither the court nor the parties possessed adequate information about how claimants would fare under the arbitration clause. Id. For this reason, the court determined that the clause potentially could lead to prohibitive costs and therefore failed to safeguard the plaintiff's ability to vindicate her rights. Accordingly, the court held that the clause was unenforceable. Id. 12 The Supreme Court reversed this holding because the record failed to show that the plaintiff in fact was likely to bear prohibitive costs if the dispute went to arbitration. See Randolph, 121 S.Ct. at 522. Although the plaintiff asserted that the American Arbitration Association (AAA) would conduct the arbitration, and therefore assumed that its filing fees and arbitrator fees would apply, the Court pointed out that no factual showing was made to support these assertions. Instead, the plaintiff relied entirely on unfounded assumptions, which provide[d] no basis on which to ascertain the actual costs and fees to which she would be subject in arbitration. Id. at n. 6. The only fact established by the record was that the arbitration clause was silent on the subject of fees and costs, and that fact alone was plainly insufficient to render the clause unenforceable. Id. at 522. As the party seeking to invalidate the arbitration clause on the basis of prohibitive costs, the plaintiff bore the burden of showing the likelihood of incurring such costs. Id. Because she failed to meet that burden, the Court rejected this court's conclusion that the clause was unenforceable. 13 Similarly, we must reject the district court's rationale for refusing to enforce the arbitration agreement in this case. Although Colburn attempts to distinguish the district court's holding from the rejected holding in Randolph, we find no meaningful distinction. The district court specifically found that the arbitration agreement does not specify the manner in which arbitration is to be commenced or the manner in which an arbitrator is to be chosen by the parties. Additionally, the district court found that, like in Randolph, the arbitration agreement is silent on the issue of arbitration costs. The district court then found, without any citation to the record, that the arbitrator's fee would be at least $150.00 per hour if the court were to appoint an arbitrator, and that the arbitration of Colburn's claims against PayDay would require at least four hours. Finally, without any findings about how these fees and costs would be allocated or what amount Colburn might actually be expected to pay, the district court concluded that Colburn could not afford the costs of arbitration. We have reviewed the record and can find no support for the district court's findings concerning the costs that Colburn likely would bear in arbitration or his ability to pay those costs. Because the record does not show that Colburn likely will incur prohibitive costs, this case is indistinguishable from Randolph. 14 We acknowledge that, unlike the arbitration clause in Randolph, the arbitration agreement in this case provides that arbitration will be conducted under the rules of the AAA. Colburn contends that the district court made findings of fact as to Colburn's costs under those rules, and therefore, this case is different from Randolph. We disagree for two reasons. First, although the district court discussed the fees and costs set forth under various rules of the AAA, it specifically found that there is no uniform set of AAA rules and that the arbitration clause failed to specify which set of rules were applicable. The district court could not have made any findings about Colburn's costs without finding which set of rules, and concomitantly, which set of fees and costs, applied to the dispute. Second, we note that the arbitration clause specifically states that the AAA will not conduct the arbitration unless the parties agree otherwise. Therefore, the arbitration clause remains ambiguous as to whether it even contemplates the fees and costs charged by the AAA, a fact conceded by Colburn. See Appellee's Br. Following Remand, at 25 (Because there is no indication of the organization which would perform the arbitration, customers are given no idea of what the costs of arbitration would be or whether the organization has a history of fairness to customers....). For these reasons, any discussion of Colburn's potential costs under the AAA rules necessarily is based on speculation and cannot provide an adequate basis for concluding that her costs likely would be prohibitively expensive. As was the case in Randolph, the record reveals only that the arbitration agreement is silent on the subject, and that fact alone is insufficient to render the agreement unenforceable. See Randolph, 121 S.Ct. at 522. Thus, the district court's articulated reason for denying the motion to compel arbitration is in error.