Court of Appeals of Tennessee,Eastern Section, at Knoxville

Court of Appeals of Tennessee,Eastern Section, at Knoxville

(“Defendant”). The plaintiffs asserted various claims, including a violation of the Tennessee Title Pledge Act, Tenn.Code Ann. § 45-15-101, et seq., and the Tennessee Consumer Protection Act, Tenn.Code Ann. § 47-18-101, et seq. Defendant moved to stay these judicial proceedings and to compel arbitration, relying on identical arbitration clauses contained within the title pledge agreements signed by all four named plaintiffs. The plaintiffs resisted the motion to compel arbitration arguing, among other things, that the arbitration clauses were unconscionable because the clauses reserved only to Defendant the right to a judicial forum. The Trial Court determined that the arbitration clauses were not unconscionable and granted Defendant’s motion to compel arbitration. We reverse.

The complaint in this case was filed by Dawn Brown, Anne Devries, Carly Hahn, and Greg Walton (“Plaintiffs”), individually, and on behalf of all other Tennessee residents similarly situated. The putative class comprised all individuals who were customers and borrowers of Defendant within the past one year. In general terms, Plaintiffs claim Defendant charged interest in excess of the statutory maximum amount and/or charged a “redemption premium fee” in excess of that allowed by the Tennessee Title Pledge Act, Tenn.Code Ann. § 45-15-101, et seq. Plaintiffs brought claims pursuant to the Tennessee Title Pledge Act and the Tennessee Consumer Protection Act, Tenn.Code Ann. § 47-18-101, et seq. Plaintiffs sought compensatory and punitive damages.

This interlocutory appeal involves a potential class action lawsuit filed by four named plaintiffs against Tennessee Title Loans, Inc

Defendant filed a motion to stay the judicial proceedings and to compel arbitration. Defendant relied on arbitration clauses contained within each of the contracts signed by the named Plaintiffs. The arbitration clauses provide as follows:

Any issue as to whether this Agreement is subject to arbitration shall be determined by the arbitrator

Arbitration Provision. Any and all disputes or disagreements between the parties arising out of this Agreement or any prior agreement between them (save and except the Lender’s rights to enforce the Pledgor(s)’ payment obligations, in the event of default, by judicial or other process) shall be decided by arbitration and in accordance with the procedural rules of the American Arbitration Association as presently published and existing. The parties agree to be bound by the decision of the arbitrator(s). The arbitration proceeding shall be a condition precedent to any other court proceeding and shall take place in Davidson County, Tennessee. Notwithstanding the applicability of any other law to any other provision of this Agreement, the Federal Arbitration payday loans GA Act ? shall control the construction, interpretation, and application of this paragraph.

Plaintiffs responded to the motion to compel arbitration claiming, among other things, that the arbitration clause was unconscionable because it reserved only to Defendant the right to a judicial forum in the event of default while limiting Plaintiffs solely to arbitration. Plaintiffs claimed that because the arbitration clause was unconscionable, it also was unenforceable pursuant to the Tennessee Supreme Court’s majority opinion in Taylor v. Butler, 142 S.W.3d 277 (Tenn.2004).

The Trial Court entered an order granting Defendant’s motion to compel arbitration after determining that the arbitration clause did not run afoul of Taylor v. Butler. Plaintiffs subsequently filed an application for permission to file an interlocutory appeal with the Trial Court. The Trial Court granted Plaintiffs’ motion, stating, in part, as follows:

The plaintiffs assert that the subject arbitration provision applicable in this case reserves the right of Tennessee Title to choose a judicial or arbitral forum and restricted the putative class members to only an arbitral forum. The plaintiffs contend that this Court’s Order [upholding the validity of the arbitration clause] is in direct contravention of the precedent set by Taylor v. Butler, 142 S.W.3d 277 (Tenn.2004).

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