Court Opinion

ID: 6320411
Source: CourtListenerOpinion
Date Created: 2022-03-04 22:00:32.314492+00
Date Added: 2024-06-11T09:02:27.168511
License: Public Domain

In the

    United States Court of Appeals
                  For the Seventh Circuit
                      ____________________

No. 21-2256
BRANDI CAMPBELL,
                                                    Plaintiff-Appellee,

                                  v.

KEAGLE INC. and EDWARD SALFELDER, JR.,
                                    Defendants-Appellants.
                      ____________________

              Appeal from the United States District Court
                  for the Central District of Illinois.
               No. 20-CV-2271 — Colin S. Bruce, Judge.
                      ____________________

     ARGUED JANUARY 7, 2022 — DECIDED MARCH 4, 2022
                      ____________________

   Before EASTERBROOK, ST. EVE, and KIRSCH, Circuit Judges.
    EASTERBROOK, Circuit Judge. When she started to work at
the Silver Bullet Bar in Urbana, Illinois, Brandi Campbell
signed a contract with Keagle Inc., the bar’s owner. Section 8
provides that “[a]ny controversy, dispute or claim arising out
of” her work will be arbitrated. Such a dispute has arisen, but
Campbell ﬁled a suit rather than a demand for arbitration.
The district judge denied Keagle’s motion to refer the maZer
2                                                            No. 21-2256

to arbitration, 2021 U.S. Dist. LEXIS 245472 (C.D. Ill. June 28,
2021), and Keagle appealed under 9 U.S.C. §16(a).
    The district judge deemed several parts of the arbitration
clause unenforceable because they are unconscionable as a
maZer of Illinois law. Unconscionability is a defense to arbi-
tration, if it is among “such grounds as exist at law or in eq-
uity for the revocation of any contract.” 9 U.S.C. §2. In other
words, arbitration is permissible to the extent, and only to the
extent, that state law would enforce other equivalent agree-
ments. The district judge thought that Illinois would not en-
force this agreement because some provisions in the arbitra-
tion clause are too favorable to Keagle.
    Section 8 of the contract provides that any dispute
    shall be exclusively decided by binding arbitration under the Fed-
    eral Arbitration Act. The owners of the Silver Bullet Bar reserve
    the right to choose the arbitrator and location of any such pro-
    ceedings. I agree that all claims between me and the Silver Bullet
    Bar, its owners, or management will not be litigated individually
    and that I will not consolidate or ﬁle a class suit for any claim
    against the Silver Bullet Bar, its owners, or management. I will pay
    the cost of my arbitration and legal costs, regardless of the out-
    come of any such action.

The district judge saw multiple lopsided aspects of this
clause. Keagle gets to choose the arbitrator and the location of
the arbitration; Campbell must bear all costs even if Keagle
loses on the merits and some state or federal statute requires
losers to foot the bill. The district judge added that the agree-
ment’s silence about arbitral procedures might enable Kea-
gle’s chosen arbitrator to use biased modes of decision
(though 9 U.S.C. §10 says otherwise). The judge recognized
that arbitration is not itself unconscionable, but he refused to
No. 21-2256                                                      3

order arbitration once details such as selection and location
had been stripped from the clause.
    The district court relied on Razor v. Hyundai Motor America,
222 Ill. 2d 75 (2006), which is among many decisions holding
that a one-sided contract is unconscionable. The judge did not
ﬁnd that the contract between Campbell and Keagle is one-
sided; instead he assumed that a rule applicable to a contract
as a whole must be true about each aspect of each clause in it.
That’s far from clear to us. Consider a contract with four
clauses. Clause 1 requires Seller to deliver 100 merchantable
widgets to Buyer. Clause 2 requires Buyer to pay $1 million to
Seller. Clause 3 provides that any dispute about the widgets’
merchantability will be resolved by an expert, chosen by
Buyer from a trade association’s list. Clause 4 provides that
Buyer has only 30 days to contest the widgets’ merchantabil-
ity, even though state law otherwise allows two years. Each
of these four clauses is one-sided, if considered in isolation;
Clauses 1 and 3 favor Buyer, while Clauses 2 and 4 favor
Seller. Yet no one would contend that the contract as a whole
is unconscionable (if widgets are worth roughly $10,000
apiece) or that any of the clauses is unenforceable.
    Keagle does not pursue this line of reasoning, however. It
accepts the district court’s holding that provisions for select-
ing an arbitrator, specifying venue, and paying costs are un-
enforceable. It maintains that its only goal is to arbitrate rather
than litigate—that the details don’t maZer, so the judge may
ﬁll in the blanks. This is its sole argument on appeal.
    Section 4 of the Federal Arbitration Act, 9 U.S.C. §4, ﬁlls in
one blank. It provides that, in the absence of a contrary agree-
ment, the arbitration takes place in the same judicial district
as the litigation—here, the Central District of Illinois. And the
4                                                 No. 21-2256

district judge himself stressed that “who pays” may be deter-
mined by some other state or federal statute, such as the Fair
Labor Standards Act, on which Campbell’s suit rests. See 29
U.S.C. §216(b) (prevailing plaintiﬀs recover costs and legal
fees). That leaves only the choice of arbitrator—who, once se-
lected, can prescribe the procedures if they are not otherwise
determined. For example, if the arbitrator were chosen from a
list maintained by the American Arbitration Association, the
AAA’s procedures would be used automatically.
    According to §5, 9 U.S.C. §5, “if for any … reason there
shall be a lapse in the naming of an arbitrator … then upon
the application of either party to the controversy the court
shall designate and appoint an arbitrator”. The use of “shall”
means that this is a judicial duty; a court cannot scuZle arbi-
tration by declining to name an arbitrator. See, e.g., Green v.
U.S. Cash Advance, LLC, 724 F.3d 787 (7th Cir. 2013).
    If the parties have made clear that they want to arbitrate
only under prescribed conditions, which cannot be fulﬁlled,
then litigation is the only remaining option. But this contract
does not imply that Campbell agreed to arbitration only be-
cause Keagle would choose the arbitrator. Keagle has that op-
tion—or had it, until the district judge said no—but people
may waive contractual entitlements. Keagle has done so by
accepting this aspect of the district court’s decision. As in
Green, the mutual assent to arbitration remains, and a federal
judge should implement the parties’ decision whenever pos-
sible. That can be done by naming an arbitrator under §5, and
everything else will take its own course.
    Campbell protests that this uses §5 to rewrite an arbitra-
tion clause. It would be beZer to say that §5 permits (indeed
requires) a judge to name an arbitrator, even if the only thing
No. 21-2256                                                     5

that survives a judge’s encounter with the clause is the fact
that the parties have agreed to arbitrate. That’s what hap-
pened in Green itself, and in the cases on which Green relied.
    One ﬁnal argument requires only brief comment. Keagle
contends that it does not aﬀect enough interstate commerce
to bring it within the scope of the Fair Labor Standards Act.
Maybe, maybe not. That will be for the arbitrator (and if nec-
essary a federal judge) to determine. Either way, the amount
of commerce concerns the coverage of the statute; Keagle is
wrong to think that it is an element of subject-maZer jurisdic-
tion. Campbell’s claim arises under federal law, so 28 U.S.C.
§1331 supplies jurisdiction. If she fails to prove all elements of
her claim, including the commerce element, then she loses on
the merits, not for want of jurisdiction. See, e.g., Bell v. Hood,
327 U.S. 678 (1946); United States v. Martin, 147 F.3d 529, 531–
33 (7th Cir. 1998).
   The district court’s decision is vacated, and the case is re-
manded with instructions to name an arbitrator, refer the dis-
pute to arbitration, and stay further judicial proceedings.