Plaintiff Escapes Arbitration

            In Michael Waller v. Commerce Bank, et al., Commerce Bank appealed the interlocutory order of the Circuit Court of Jackson County, Missouri (“circuit court”), denying Commerce Bank’s motion to compel arbitration of Mr. Michael Waller’s (“Waller”) claims under the Missouri Human Rights Act (“MHRA”).  Because there was an unambiguous exclusion clause within the arbitration provision that was applicable to the undisputed facts of the underlying lawsuit relevant to this appeal, the Court of Appeals affirmed the circuit court’s denial of Commerce Bank’s motion to arbitrate.

[Waller] brought this action for Race Discrimination in Public Accommodation and Retaliation in Public Accommodation under the Missouri Human Rights Act after his request to open two business accounts was denied after several visits to two separate locations of Defendant Commerce Bank.  [Waller] claims he was denied the opportunity to open the business accounts because he is Black.

[Commerce Bank] filed a Motion alleging that “[Waller] agreed to the terms of a Deposit Agreement when opening his personal account with Commerce [Bank], and the Deposit Agreement require[d] Waller to arbitrate all claims related to or concerning his relationship with Commerce [Bank].”  However, the Dispute Resolution – Arbitration section of the Deposit Agreement contained a provision which stated “[t]his agreement to arbitrate shall not apply to any Claims or other disputes relating to business accounts or other non-personal accounts as such accounts are defined in Section II.I of this Agreement.  According to the Court, claim was related exclusively to [Waller’s] attempts to open business accounts.

On appeal, Commerce Bank contended the circuit court erred in denying its motion to compel arbitration.

According to the Court of Appeals “Motions to compel arbitration generally present two central issues:  (1) whether the parties to the lawsuit entered into an enforceable arbitration agreement; and (2) whether the scope of that agreement encompasses the disputes raised in the lawsuit.”  Maune v. Raichle, 721 S.W.3d 865, 869 (Mo. banc 2025).  “The parties, however, may agree to arbitrate either or both of these threshold issues by including in the arbitration agreement a delegation provision broad enough to encompass them.”  Id. (citing Brown v. GoJet Airlines, LLC, 677 S.W.3d 514, 521 (Mo. banc 2023)).  Here, neither party argues that either of these threshold issues have been delegated to arbitration and the arbitration agreement makes clear that those issues are not delegated to arbitration.

“Determining the scope of an arbitration agreement requires application of ‘the usual rules of state contract law and canons of contract interpretation’ in order to ‘ascertain the intent of the parties through the plain and ordinary meaning of the contract terms and give effect to that intent.’”  Nelson Trucking, LLC v. K&M Translogic, LLC, 696 S.W.3d 407, 417 (Mo. App. W.D. 2024) (emphasis added) (quoting Mackey, 640 S.W.3d at 798); see also Triarch Indus., Inc. v. Crabtree, 158 S.W.3d 772, 776 & n.5 (Mo. banc 2005) (collecting cases supporting the proposition that, “in determining whether the parties have entered into a valid agreement to arbitrate, the usual rules of state contract law and canons of contract interpretation apply”).

Here, the relevant provisions of the arbitration agreement that the parties entered into when Waller opened a personal banking account with Commerce Bank are plain, ordinary, and unambiguous terms.

The Court of Appeals agreed with Commerce Bank that the arbitration agreement defines “Claim” to have “the broadest possible meaning,” but noted that the same arbitration provision very plainly excludes from the definition of “Claim” any dispute “relating to business accounts.”  And, in this litigation, the entire dispute revolves around discrimination claims that “relate” to Waller’s attempt to open a “business account” with Commerce Bank and Commerce Bank’s refusal to open such business account, allegedly for a discriminatory reason.

In sum, because Waller’s claims related solely to his attempts to open business accounts with Commerce Bank, the claims brought in Waller’s petition fell within the scope of the exception to arbitration clause.  Thus, the circuit court did not err in denying Commerce Bank’s motion to compel arbitration.

COURT OF APPEALS REFUSES TO ENFORCE ARBITRATION PROVISION

 

           Earlier this year, the Missouri Court of Appeals affirmed a trial court’s refusal to enforce an arbitration provision within an operating agreement. Now we all know that arbitration agreements are difficult to circumvent, so what happened in this case?

            The case is Disruption 8, LLC v. Vertical Enterprises, LLC. To keep it simple, the parties executed three contracts, and only one of them contained an agreement to arbitrate. The plaintiff alleged that the defendant breached one of the three contracts. But the contract breached did not contain an arbitration provision.

            The Court of Appeals set forth a lot of great law for anyone litigating the enforceability of an arbitration provision, stating in part:

“When faced with a motion to compel arbitration, the motion court must determine whether a valid arbitration agreement exists and, if so, whether the specific dispute falls within the scope of the arbitration agreement… Whether or not a dispute is covered by an arbitration agreement is a question of law for the courts… Arbitration agreements are tested through a lens of ordinary state-law principles that govern contracts[.]…[a] party cannot be compelled to arbitration unless the party has agreed to do so… Policies favoring arbitration are ‘not enough, standing alone, to extend an arbitration agreement beyond its intended scope because arbitration is a matter of contract’…Therefore, “any curtailment of the right to a jury trial, which is what arbitration agreements do, “should be scrutinized with utmost care.”… Thus, to be a valid waiver of a party’s right to a jury trial, an arbitration agreement must be “clear, unambiguous, and conspicuous.”…When the contract at issue contains no express arbitration clause, arbitration may be compelled only if the circumstances demonstrate a clear agreement to arbitrate… “[m]ere reference” to another contract “is insufficient to establish that [a party] bound itself to the arbitration provision of the [other] contract”… If the parties contemporaneously execute documents “relating to the same subject,” and one of the documents contains an arbitration clause, arbitration may be compelled in a dispute involving a related document “unless ‘the realities of the situation’ indicate that the parties did not so intend.”… Contracts do not relate to the same subject, however, when they cover “distinct aspects of the parties’ transaction.” … When the claim is “independent of the contract terms [in the contract requiring arbitration] and does not require reference to the underlying contract, arbitration is not required.”

[Citations omitted]

Applying these principles, the Court concluded that the lawsuit alleging a breach of a loan agreement did not implicate the arbitration agreement in the parties’ operating agreement.

            Cosgrove Simpson is frequently confronted with motions to compel arbitration, particularly when dealing with entities such as registered investment advisers. A party’s right to have their matter heard by a jury is obviously critical, so be sure to carefully evaluate if and how to challenge any effort to thwart that right.

Wells Fargo Advisors, LLC wins FINRA Award sum of $15,300,000.00+ in Damage

     On February 2, 2023, a FINRA arbitration panel awarded the Claimant, Wells Fargo Advisors, LLC a sum of 15,300,000.00 in Compensatory Damages and over $4,000,000.00 in additional costs and attorney fees.

Case Summary:

            In October 2018, Kent Jackson Rhoades left his job at Wells Fargo Advisors, LLC in Mountain Home, Arkansas to start an independent financial consulting firm with Raymond James Financial Services, Inc. Rhoades not only left the corporate company to venture out on his own but also hired on a 12- person team, all of which worked under Rhoades at Wells Fargo, and named them the Financial Services and Investment Strategies Group. It is important to note that the Wells Fargo branch is no longer in business. 

            In August of 2020, Wells Fargo filed a complaint alleging Raymond James Financial Services and Kent Jackson Rhoades led a “coordinated raid.” What is a raid you might ask? A raid is poaching another financial advisor’s team or clients with the intent of harming that firm’s business. One might not see a case regarding “coordinated raids’ because they don’t happen frequently and are difficult to prove. FINRA rule 2010 states, “A member, in the conduct of its business, shall observe high standards of commercial honor and just and equitable principles of trade.” While a little vague, under this rule, a financial firm cannot ethically poach a significant portion of another firm’s team and/or clients, and in October 2018, Raymond James Financial Services did just that. 

Wells Fargo claimed Raymond James took the entire financial advisor team, as well as clients that Rhoades had been working with over the 20 years he worked at Wells Fargo. Wells Fargo sought damages, costs and fees against Raymond James Financial Services, Kent Jackson Rhoades and the 12-person team that collectively moved from Wells Fargo to Raymond James Financial Services. Rhoades claimed that the clients at Wells Fargo moved to his firm due to the “untruths and/or deception [which] caused clients to sever their relationships.” Rhoades and the 12 pursued a counterclaim award against Wells Fargo as well. However, on August 25,2022, Wells Fargo dropped the claim against the 12, and the 12 dropped the counterclaim against Wells Fargo, leaving just Rhoades and Raymond James Financial. 

After multiple hearings, FINRA awarded Wells Fargo Inc. $15.3M in compensatory damages (with a 6% annual interest rate), $3.5M in attorneys’ fee, $847,000 in costs, $1M in punitive damages, a $500 non-refundable claim filing fee, and $53,775 in hearing session fees totalling over $20M. The counterclaim was completely dismissed and all claims for relief for Raymond James Financial Services were denied. 

 

+ Awards are rendered by independent arbitrators who are chosen by the parties to issue final, binding decisions. FINRA makes available an arbitration forum—pursuant to rules approved by the SEC—but has no part in deciding the award.

Additional sources:

https://www.advisorhub.com/wells-fargo-advisors-wins-nearly-20m-in-raiding-claim-against-raymond-james/

https://www.advisorhub.com/wp-content/uploads/2019/08/Good-Moves-Bad-Moves-Bad-Move-Being-part-of-a-raid-1.pdf

Two New Arbitration Cases

            April 26, 2022, brought us two new arbitration rulings to sink our teeth into. One ruling was issued by the Supreme Court and the other by the Court of Appeals. I think the court of Appeals decision might get reversed.

            In Car Credit, Inc v. Pitts, the Supreme Court considered a challenge to a judgment confirming an arbitration award. The appellant claimed that the award should be vacated because the arbitration forum designated in the arbitration clause was not utilized because it was unavailable. In my opinion, the Supreme Court (and Federal courts) go out of their way to confirm arbitration awards. This case was no different, but it relied upon a rule that the Supreme Court has repeatedly articulated. It is highly technical but lawyers in this field need to know it. The Court found that the arbitration agreement contained an enforceable delegation clause and the appellant failed to challenge the validity and enforceability of that clause.

         The appellant did challenge the AAA arbitrator’s authority to hear the case on jurisdictional grounds. The arbitrator denied that challenge. But the appellant failed to challenge the arbitrator’s jurisdiction to make that ruling. Regardless, the Court of Appeals ruled in her favor. But the Supreme Court reversed, noting in part that “the delegation provision is an agreement to arbitrate threshold issues concerning the arbitration agreement”, citing the Seminal case of Rent-A-Center, W., Inc. v. Jackson.

            In what may be the next arbitration ruling to be reversed by the Supreme Court, the Court of Appeals ruled in favor of the appellant in Wind v. McClure. In that case, the Court of Appeals held that the Circuit Court was correct in refusing to enforce an arbitration agreement because its language and format failed to comply with state law mandates. To be specific, the arbitration agreement failed to include certain large font warnings, regarding the existence of an arbitration clause.  The requirement in question, however, is not included in the Federal Arbitration Act, the supremacy of which the Supreme Court strictly enforces. Perhaps the appellate will not appeal. Food for thought.

What to do about FINRA Customer Complaints

Trust is essential for a successful career as a securities broker. FINRA’s BrokerCheck website allows the public and employers to search a securities broker by name and discover any disciplinary actions that have been issued against that broker. A BrokerCheck report also lists any formal complaints by previous investors. This system helps prevent investors from getting involved with securities brokers with a history of fraudulent and/or negligent behavior. In some instances, however, BrokerCheck casts too wide a net, causing significant reputational harm to undeserving brokers.

When a customer complaint appears on a broker’s BrokerCheck report, it is originally listed as pending. This occurs whether or not the complaint actually has merit. Unfortunately, complaints can be listed as pending for years until settled or decided in an arbitration. If the Broker-Dealer or FINRA deny the complaint on its merits the status of the complaint changes from pending to denied; however, the complaint remains on the BrokerCheck report. Even though a complaint is listed as denied, investors may still find themselves weary of that broker when comparing them to a broker with a claim-free record.

Recognizing that BrokerCheck complaints can have a tremendous influence on a broker’s career, FINRA allows brokers to request expungement of claims on their BrokerCheck report.  Here at Cosgrove Law Group, LLC, we have experience helping securities brokers remove meritless complaints from their FINRA BrokerCheck report. If you are suffering under a meritless claim on your BrokerCheck report, please contact the Cosgrove Law Group, LLC for more information on how we can help. 

Authors: Alexander Oakes and Max Simpson

Please follow us on Twitter @CosLawGroup, on LinkedIn at Cosgrove Law Group, LLC, and on Facebook at Cosgrove Law Group, LLC. 

The Arbitration System

The premise that underlies the justification for the loss of rights in arbitration is simple: both parties knowingly agreed to binding arbitration. This presumption is based upon the presumptions that 1) signators read contracts before signing, 2) they have the time and knowledge to understand the implications of the arbitration provision, and 3) they have a viable ability to opt-out of agreeing to the provision. Arbitration's entire legitimacy is based upon these fairly specious presumptions. And there has been much written about these presumptions and whether or not binding arbitration is actually the product of an informed voluntary decision by both parties. See “Whimsy Little Contracts' with Unexpected Consequences: An Emperical Analyss of Consumer Understanding of Arbitration Agreements,” Jeff Sovern, Elayne Greenberg, Paul Kirgis, and Yuxiang Liu, St. John's Legal Studies Research Paper No. 14-0009, October 29, 2014 and “Arbitration Clauses Trap Consumers with Fine Print,” Jeff Sovern, AmericanBanker.com, December 2, 2014.

The position of the “Whimsy Little Contracts'...” study is that no one would voluntarily agree to have substantial rights resolved in a quasi-judicial system contaminated by bias. Take a look at this chart and decide for yourself if the system is fair and free of improper influence:

Finally, there is another false assumption that bolsters the presumption favoring arbitration: it is more efficient than the courts: Cheaper and quicker! Unfortunately, I could rattle off twenty examples demonstrating just how questionable this presumption is when presented as a general truth. I received an arbitration award from JAMS 7 years after the claim was filed. I just paid AAA over $20,000 before the Panel has ever convened, and the Respondent buried us in discovery. If I was in Federal Court, I would have a scheduling order protecting my client for approximately $200 in filing fees.

In sum, both the courts and the legislature need to take a hard and honest look at the jurisprudential legitimacy of binding arbitration. Food for thought.

FINRA Sanctions Against Oppenheimer & Co.

The Financial Industry Regulatory Authority (FINRA) sanctioned Oppenheimer & Co. Inc. more than $3.4 million in November of 2016 due to Oppenheimer’s failing to report required information to FINRA, failing to produce documents in discovery to customers who filed arbitrations, and for not applying applicable sales charge waivers to customers. The $3.4 million in sanctions included $1.575 million in fines and $1.85 million paid to customers. In regards to the customers who filed arbitrations, FINRA ordered Oppenheimer to provide the claimants with the documents that they failed to produce and pay said claimants more than $700,000. The remainder of the $1.85 million was paid to eligible customers who qualified for, but did not receive, applicable mutual fund sales charge waivers.

            These violations by Oppenheimer spanned several years and included failures to report “more than 350 required filings including securities-related regulatory findings, disciplinary actions taken by Oppenheimer against its employees, and settlements of securities-related arbitration and litigation claims.” Additionally, FINRA stated that Oppenheimer, on average, made these filings “more than four years late.” This incident was not Oppenheimer’s first run in with FINRA. Despite prior FINRA investigations resulting in Oppenheimer’s revision of its supervisory procedures, FINRA alleged that Oppenheimer had in fact failed to adopt adequate procedures for reporting regulatory events involving its employees. In March of 2015, FINRA fined Oppenheimer $2.5 million and ordered the firm to pay $1.25 million in restitution for failure to supervise former Oppenheimer broker Mark Hotton. In that instance, FINRA found that Oppenheimer “failed to make more than 300 required filings to FINRA about some of its brokers in a timely manner” with the filings being, on average, “238 days late.”

The FINRA news releases can be viewed at the following links:

http://www.finra.org/newsroom/2016/finra-sanctions-oppenheimer-co-34-million-reporting-violations-failing-comply

http://www.finra.org/newsroom/2015/finra-sanctions-oppenheimer-co-375-million-supervisory-failures

An example of a Motion for Sanctions in a FINRA arbitration can be found below:

The Opaque World of Arbitration Might Soon Become Clearer in New York

The New York Legislature has two bills pending in the Assembly and Senate which would make public, for the first time, details of private arbitrations. A09769 and S07146, sponsored by Matthew Titone and Brian Kavanagh respectively, are both crafted to provide information related to private arbitrations to the public. Information such as:

· the name of the non-consumer party,

· the state and zip code in which the consumer party resided at the time of arbitration, the type of  

  dispute involved,

· whether the consumer was the prevailing party,

· on how many occasions, if any, the non-consumer party has previously been a party in an 

  arbitration or mediation administered by that same private arbitration organization,

· the date the private arbitration organization received the demand for arbitration,

· the date the arbitrator was appointed,

· the date of disposition by the arbitrator or private arbitration organization,

· the type of disposition of the dispute, if known,

· the amount of the claim,

· the amount of any award or settlement, and any other relief granted,

· the name of the arbitrator,

· the arbitrator's total fee for the case,

· and the percentage of the arbitrator's fee allocated to each party.

The bills also define and prohibit certain financial conflicts of interest. Recurring parties as paying customers to the arbitrators is not listed as a financial conflict of interest and still remains a concern for consumers. The bills do provide for private causes of action and civil penalties for violations. The New York Attorney General would enforce the provisions. Neither Bill is retroactive.

The Senate bill was referred to the Consumer Protection Committee, but has not moved. The Assembly bill, however, was referred to the Consumer Affairs and protection Committee and passed on March 6, 2018. Should one of these bills pass, the impact on private arbitration in favor of consumers would be significant. Currently, businesses can bind customers with an arbitration agreement, have multiple arbitration claims brought against them and other customers and the general public would never know. Under these bills, customers would have access to the arbitration history a specific business has with a particular arbitration company. Should this pass, given arbitration’s significant and increasing prevalence, it is likely other states will look into passing similar consumer protections in an effort to shed light on the currently opaque arbitration process.

While these bills seem to strive to protect consumers by making important information public, some may argue the bills go too far by requiring the amount of a settlement, which is typically confidential. The bills could likely get to the same destination of providing important information to the public about companies without requiring this information.  

The Arbitration System

The premise that underlies the justification for the loss of rights in arbitration is simple: both parties knowingly agreed to binding arbitration. This presumption is based upon the presumptions that 1) signators read contracts before signing, 2) they have the time and knowledge to understand the implications of the arbitration provision, and 3) they have a viable ability to opt-out of agreeing to the provision. Arbitration's entire legitimacy is based upon these fairly specious presumptions. And there has been much written about these presumptions and whether or not binding arbitration is actually the product of an informed voluntary decision by both parties. See “Whimsy Little Contracts' with Unexpected Consequences: An Emperical Analyss of Consumer Understanding of Arbitration Agreements,” Jeff Sovern, Elayne Greenberg, Paul Kirgis, and Yuxiang Liu, St. John's Legal Studies Research Paper No. 14-0009, October 29, 2014 and “Arbitration Clauses Trap Consumers with Fine Print,” Jeff Sovern, AmericanBanker.com, December 2, 2014.

The position of the “Whimsy Little Contracts'...” study is that no one would voluntarily agree to have substantial rights resolved in a quasi-judicial system so blatantly contaminated by bias. Take a look at these charts and decide for yourself if the system is fair and free of improper influence:

Finally, there is another false assumption that bolsters the presumption favoring arbitration: it is more efficient than the courts: Cheaper and quicker! Unfortunately, I could rattle off twenty examples demonstrating just how bogus this presumption is when presented as a general truth. I recently received an arbitration award from JAMS 7 years after the claim was filed. I just paid AAA over $20,000 before the Panel has ever convened, and the Respondent is burying us in discovery. If I was in Federal Court, I would have a scheduling order protecting my client for approximately $200 in filing fees.

In sum, both the courts and the legislature need to take a hard and honest look at the jurisprudential legitimacy of binding arbitration. Food for thought.

Did the Eastern District Just Void Financial Adviser Independent Contractor Arbitration Clauses?

I think they may have done just that, at least in Missouri.  Us kids who work with or in the financial services industry know that brokers like Edward Jones frequently run to court when a broker leaves them.  They seek a TRO, ostensibly to prevent the broker from misusing confidential information or violating a non-complete agreement.  Fair enough. 

Now, ask yourself – When is the last time the financial adviser went to court to seek some kind of equitable relief?  Almost never, in part because the circumstances that would invite equitable relief for the adviser himself are much narrower.

According to the typical Investment Adviser Account Agreement between the financial adviser and the broker-dealer, both parties are required to resolve their disputes in a FINRA Arbitration.  Would that arbitration clause be binding in the Eastern District?  Or does it lack the requisite mutuality, since, in effect, only the broker-dealer can avail itself of the state and federal courts?

Last month, in the case of Jimenez v. Cintas Corp., No. ED 1011015 (2014), the Court of Appeals affirmed the trial court’s refusal to grant arbitration of Ms. Jimenez’ employment discrimination claim.  The Court’s affirmation rested upon its own conclusion that the parties’ “Employment Agreement” contained a binding arbitration clause that excluded claims for declaratory judgment or injunctive relief concerning the employees covenants only.  The covenants include confidentiality and competition obligations.  Id. at 3.[1]  Therefore, the agreement to arbitrate lacked uniformity.  As such, the employer’s “promise to arbitrate [was] devoid of mutuality of obligation.  Accordingly, [employer’s] professed promise to arbitrate [was] not valid consideration and does not support a determination that the parties formed a valid agreement.”  Id. at 14.

The Court of Appeals observed initially that the contract at issue was “bilateral”, and that valid consideration for a bilateral contract “rests solely on whether the parties promises to each other are mutually binding.”  Since, in effect, the employer could still side-step arbitration in non-compete matters, the promises to arbitrate were not equally binding.  Id. At 9.  More specifically, citing Frye v. Speedway Chevrolet Cadillac, 321 S.W.3d 429 (Mo. App. W.D. 2010), the Court stated: 

“A contract that purports to exchange mutual promises will be construed as lacking legal consideration if one party retains the right to unilaterally divest itself of an obligation to perform the promise initially made.”

The following analysis should bring a chill to the broker-dealer’s in-house counsel, or counsel for any party that blindly succeeds in divesting itself of a contractual obligation to perform a mutual promise, whether it be arbitration, confidentiality, or competition: 

Section 8 of the Agreement requires that Cintas and Jimenez arbitrate any unresolved “claims for damages, as well as reasonable costs and attorney’s fees, caused by [the other]’s violation of any provision of this Agreement or any law, regulation or public policy.”  However, it expressly exempts from arbitration:  “workers’ compensation claims, unemployment benefits claims, clams for a declaratory judgment or injunctive relief concerning any provision of Section 4 and claims not lawfully subject to arbitration. . . .” 

(Emphasis added). 

Defendants argue that the above terms in Section 8 plainly require both parties to arbitrate their disputes, with several exceptions, and these terms should be construed as “mutual in all relevant respects.”  On its face, we agree that the language in Section 8 plainly states that both parties must arbitrate all of their claims except:  workers’ compensation claims, unemployment benefits claims, claims not lawfully subject to arbitration, and “claims for a declaratory judgment or injunctive relief concerning any provision of Section 4 . . . .”

Jimenez, however, correctly points to additional language in Section 4, providing that only the: 

Employer[,] may apply to any court of competent jurisdiction for a temporary restraining order, preliminary injunction or other injunctive relief to enforce Employee’s compliance with the obligations, acknowledgments and covenants in this Section 4.  Employer may also include as part of such injunction action any claims for injunctive relief under any applicable law arising from the same facts or circumstances as any threatened or actual violations of Employee’s obligations, acknowledgments and covenants in this Section 4. 

The effect of the language in Section 4, Jimenez asserts, is that Cintas alone is exempted from arbitrating alleged violations of the Non-Compete Provisions.

Defendants reply that the plain terms of Section 8 do not specify which party may seek judicial relief for alleged violations of the Non-Compete Provisions of Section 4, and so we should construe Section 8 to mean that both parties are exempt from arbitrating alleged violations of the Non-Compete Provisions of Section 4.  But this interpretation would render meaningless the express language of Section 4, which provides that Cintas alone may apply “for a temporary restraining order, preliminary injunction or other injunctive relief to enforce [Jimenez]’s compliance with the obligations, acknowledgements and covenants in this Section 4.” 

We construe a contract as a whole so as not to render any terms meaningless.  See Chochorowski v. Home Depot U.S.A., 404 S.W.3d 220, 229 (Mo. banc 2013).  Furthermore, when construing the language of a contract, specific terms and provisions are given preference over general terms.  See General American Life Ins. Co. v. Barrett, 847 S.W.2d 125, 133 (Mo. App. W.D. 1993).  We, therefore, cannot ignore the specific language of Section 4.

We agree with Jimenez that Cintas alone is exempted from arbitrating disputes concerning Section 4’s Non-Compete Provisions, while Jimenez is bound to arbitrate those same claims.  We also agree that this exception allows Cintas to refrain from arbitrating those claims it is most likely to bring against Jimenez.  [Footnote excluded].  At the same time, Jimenez is bound to arbitrate all of those claims legally arbitrable.  [Footnote excluded].  Thus, the Agreement allows Cintas to seek redress through the court system for those claims it is most likely to have against Jimenez, while binding Jimenez to arbitrate all legally arbitrable claims she may have against Cintas. 

Equally critical to resolution of this issue is that the plain language of Section 4 allows Cintas to file “any claims for injunctive relief under any applicable law arising from the same facts or circumstances as any threatened or actual violation of Employee’s obligations . . . in this Section 4.”  (Emphasis added).  This expansive clause arguably renders illusory Cintas' promise to arbitrate, by permitting Cintas to seek redress in the courts based upon its bare allegation that such claims are tied to Section 4’s Non-Compete Provisions.  Cintas may litigate at its discretion, while Jimenez is bound to arbitrate all of her legally arbitrable claims. 

Where the practical effect of an arbitration agreement binds only one of the parties to arbitration, it lacks mutuality of promise and is devoid of consideration. 

Id. At 11-13.  Food for thought when evaluating the enforceability of an arbitration clause in Missouri.

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[1] Notably, the trial court rested its conclusion upon lack of consideration, as well as unconsciousability.

Arbitration's Cancer – The Systemic Bias Created by the Co-existence of Paid Arbitrators, Arbitrator Strikes, and Award Histories

It has been said: “because bias is so subtle, it's extremely effective.” So it should come as no surprise that one of the cornerstones of the rules of judicial ethics is that bias is to be avoided or ferreted out.  Bias should be no more acceptable in an arbitration forum than it would be in a federal court.  But it seems to be just that, as a confluence of procedures in our private arbitration forums produce an "extremely effective" systemic bias. 

These facts are known to any reasonably informed arbitrator:

1)      The FINRA Member, or private party that inserted AAA or JAMS in to its commercial contract, has a procedural right to strike and rank potential arbitrators, without cause or explanation.

2)      The FINRA Member or private party will have access to the details and magnitude of the arbitrator's prior compensatory, punitive, cost and fee awards.

3)      A federal court has never vacated an arbitration award on the grounds that the compensatory award to the investor or broker wasn't big enough, or because the panel failed to award punitive damages, costs, or fees. 

4)      JAMS, FINRA, and AAA can, and have, removed an arbitrator from their roster without explanation after the arbitrator chaired over the issuance of a substantive award.

In order to combat this bias, arbitrators must first be able to identify and somehow neutralize the bias these indisputable facts generate.  But since they are subconsciously biased, neutralizing this bias is a very tall order. It is certainly an unrealistic expectation. FINRA, JAMS, and AAA arbitrators are human. And even though most, no doubt, are individuals of high integrity and intelligence, they want to serve as arbitrators, and they are compensated to do so.  Many of them are full-time arbitrators, at least partially dependent upon that compensation. 

In order to eradicate the insidious bias created by the system in favor of (statistically undeniable) depressed compensatory awards and rejected punitive, cost and fee claims, the system must be changed.  Until it is, the federal courts' rather convenient strict adherence to a purported congressional policy (lobby) in favor of arbitration will be perverted by a money-bias--the same bias the judiciary espouses to be intolerable and inconsistent within its own jurisprudence.       

How do you remove this “extremely effective” bias pressing upon compensated private arbitrators?  The solution is “simple, but not easy:”

1)      Drastically reduce or eliminate arbitrator compensation, and/or

2)      Eliminate the granting of strikes and rankings to FINRA Members and to volume-consumers of other private arbitration services (e.g. Fisher Investments).

Until arbitrators are wholly ambivalent to what FINRA Members and arbitration consumers[1] with strikes think about their past Awards, arbitrators will suffer from a subtle but highly potent bias against claimants.

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[1]FINRA itself as well as the owners of for-profit arbitration services like JAMS and AAA could still, however, influence arbitrators.  For example, an arbitrator chairman that issued a multi-million dollar award to one of my clients was subsequently relieved of his duties by FINRA.  Probably just a coincidence, but... Do we need lifetime appointments for arbitrators?  Or minimum terms?