Court Opinion

ID: 9909390
Source: CourtListenerOpinion
Date Created: 2023-12-13 15:02:03.510627+00
Date Added: 2024-06-11T12:49:18.664673
License: Public Domain

Cite as 2023 Ark. App. 591
                   ARKANSAS COURT OF APPEALS
                                      DIVISION II
                                      No. CV-22-506

                                               Opinion Delivered December 13, 2023

 VALIANT CONSULTANTS, INC.;
                                 APPEAL FROM THE PULASKI
 STEVEN MAYER; JUSTIN PREER; AND
                                 COUNTY CIRCUIT COURT, SIXTH
 MIKE FISHER
                                 DIVISION
                      APPELLANTS
                                 [NO. 60CV-21-1486]

 V.
                                               HONORABLE TIMOTHY DAVIS FOX,
                                               JUDGE
 COURTNEY LEWIS
                                 APPELLEE AFFIRMED IN PART; REVERSED AND
                                          REMANDED IN PART

                             CINDY GRACE THYER, Judge

       Appellants Valiant Consultants, Inc. (Valiant); Steven Mayer; Justin Preer; and Mike

Fisher bring this interlocutory appeal from the Pulaski County Circuit’s Court’s April 29,

2022 order denying their motion to compel arbitration. 1 On appeal, they argue that the

circuit court erred in denying arbitration, claiming there was a valid arbitration agreement

in place between Valiant and appellee Courtney Lewis and that her fraud claims fall within

its scope. Lewis asserts that because the underlying contract was induced by fraud, its

arbitration provision was invalid. Since claims of fraud in the inducement of the contract

       1
         An order denying a motion to compel arbitration is an immediately appealable order.
Ark. R. App. P.–Civ. 2(a)(12) (2023); Ark. Code Ann. § 16-108-228 (Repl. 2016); see IGF
Ins. Co. v. Hat Creek P’ship, 349 Ark. 133, 76 S.W.3d 859 (2002).
must be resolved by the arbitrator and not the courts, we reverse the court’s denial as to

Valiant. However, because Mayer, Preer, and Fisher have not provided us with any

convincing argument or legal authority as to why they, as nonsignatories to the agreement,

have the right to enforce the arbitration provisions of the contract, we affirm the court’s

denial as to them.

       In the spring of 2020, after reviewing Valiant’s online marketing materials, Lewis

entered into an agreement with Valiant to allow it to build and run a fully automated

Amazon store on her behalf.2 Before signing the agreement, Lewis spoke to CEO Mayer and

expressed reservations about Valiant’s business model. At that time, Mayer purportedly

reassured her and offered to give her a full refund if she was not satisfied with Valiant’s

performance. He allegedly told her that he could not reduce the guarantee to writing because

doing so would violate FTC guidelines.

       Soon after entering into the agreement and paying the thirty-thousand-dollar initial

setup fee as well as Valiant’s monthly fee, Lewis became dissatisfied with Valiant’s services.

She claims that the online testimonials she relied on had been prepared by Valiant employees

rather than satisfied customers and that those testimonials were false. Lewis attempted to

obtain a refund but was unsuccessful.

       Consequently, on March 1, 2021, Lewis filed suit against Valiant and its cofounders

and officers, Mayer, Preer, and Fisher, (collectively, “Defendants”), alleging claims of fraud,

       2
           The agreement was signed by Mayer as CEO on behalf of Valiant.

                                              2
constructive fraud, and violation of the Arkansas Deceptive Trade Practices Act. The

Defendants answered and filed a motion to dismiss and to compel arbitration. The

Defendants argued that the claims against Valiant arose out of, and were related to, the

agreement and, thus, were subject to arbitration. As for Mayer, Preer, and Fisher, the

Defendants alleged that their individual claims should be dismissed with prejudice for failure

to state facts upon which relief may be granted. In the alternative, they asserted that the

individual claims against them should be referred to arbitration.

       Lewis responded, asserting that there were sufficient facts alleged in the complaint to

support her fraud claims and that the arbitration clauses were invalid because the underlying

services contract was fraudulently induced. Moreover, even if the arbitration provision was

valid, she claimed that she had not agreed to arbitrate her claims against Mayer, Preer, or

Fisher. The Defendants replied that because Lewis’s claim was a challenge to the validity of

the contract as a whole and not a challenge to the arbitration provision, the matter should

be decided by the arbitrator in the first instance.

       The circuit court denied the motion to dismiss and the motion to compel. This

appeal followed.

       As it did below, Valiant first argues that Lewis’s claims against it are subject to the

arbitration provisions of the underlying contract and that Lewis’s claims of fraudulent

inducement must be decided by the arbitrator and not the courts. As a result, it claims the

circuit court erred in denying its motion to compel. We agree.

                                               3
       It is well settled that if a claim of fraudulent inducement relates to the contract

generally and the contract contains an arbitration provision, the language of the Federal

Arbitration Act provides that the dispute must be adjudicated by the arbitrator. Prima Paint

Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967); BDO Seidman, LLP v. SSW Holding

Co., Inc., 2012 Ark. 1, 386 S.W.3d 361. In Buckeye Check Cashing, Inc. v. Cardegna, the Court

found: “First, as a matter of substantive federal arbitration law, an arbitration provision is

severable from the remainder of the contract. Second, unless the challenge is to the

arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in

the first instance. Third, this arbitration law applies in state as well as federal courts.” 546

U.S. 440, 445–46 (2006); see also Nitro-Lift Techs., L.L.C. v. Howard, 568 U.S. 17 (2012).

        Here, Lewis’s fraud claim attacks the validity of the agreement as a whole and not

the arbitration clause specifically. Therefore, under Buckeye, the arbitrator, not the court,

determines the issue. Thus, the circuit court erred in denying Valiant’s motion to compel.

       However, the same cannot be said for Mayer, Preer, and Fisher’s individual attempts

to compel arbitration. Mayer signed the agreement only in his official capacity as Valiant’s

CEO. Preer and Fisher were not signatories to the contract at all. They provided no analysis

for their assertions at the circuit court level, and their challenge to the denial of their motion

to compel on appeal was asserted in a footnote and again provided no explanation as to how

or why they were entitled to enforce the arbitration provisions of the contract. The sole

                                                4
extent of their argument is a citation to a 2001 Eighth Circuit case3 for the proposition that

litigation between a signatory and nonsignatory to an arbitration agreement may be stayed

pending the completion of parallel arbitration proceedings that concern “common questions

of fact that are within the scope of the arbitration agreement.” Thus, the only case they cited

fails to support their assertion that they are entitled to an order compelling arbitration. As a

result, they have not presented a compelling argument or any applicable legal authority to

support their position. We do not consider assertions of error that are unsupported by

convincing legal authority or argument unless it is apparent without further research that

the argument is well taken. Kinard v. Kinard, 2023 Ark. App. 96, 661 S.W.3d 253; Pitchford

v. City of Earle, 2019 Ark. App. 251, 576 S.W.3d 103. It is not apparent here, without

significant further research or further development of the argument by the parties, that

arbitration is warranted. Thus, we affirm the court’s denial of the motion to compel as to

the individual defendants.

       Accordingly, we affirm in part as to the court’s order denying the motion to compel

as to Mayer, Preer, and Fisher, and we reverse the court’s order denying the motion as to

Valiant and remand for entry of an order consistent with this opinion.

       Affirmed in part; reversed and remanded in part.

       ABRAMSON and GRUBER, JJ., agree.

       Hyden, Miron & Foster, PLLC, by: James L. Phillips, for appellants.

       3
        AgGrow Oils, L.L.C. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 242 F.3d 777 (8th
Cir. 2001).

                                               5
Niswanger Law Firm PLC, by: Stephen B. Niswanger, for appellee.

                                      6