MISSOURI SUPREME COURT FINDS CONSUMER LOAN ARBITRATION CLAUSE UNCONSCIONABLE DESPITE U.S. SUPREME COURT DECISION

The Missouri Supreme Court previously held in 2010’s Brewer v. Missouri Title Loans, Inc. (“Brewer I”) that the inclusion of a class arbitration waiver in consumer title loan agreements was per se unconscionable. A year later, in AT&T Mobility, LLC v. Concepcion (“Concepcion”), the United States Supreme Court interpreted §2 of the Federal Arbitration Act (“FAA”) to prohibit that result. The Brewer I decision was subsequently vacated and remanded back to Missouri for further consideration in light of Concepcion.

In a duo of decisions issued on March 6, 2012, the Missouri Court rebuffed renewed efforts by payday and title loan companies to enforce such clauses in light of Concepcion. In Brewer v. Missouri Title Loans (“Brewer II”), the Court found that the arbitration agreement was unconscionable and unenforceable despite Concepcion, due to disparities in bargaining position of the parties and the one-sidedness of the agreement. Likewise, in Robinson v. Title Lenders, Inc. d/b/a Missouri Payday Loans (“Robinson”), they reversed the trial court’s order dismissing the case in reliance on Brewer I, and remanded it to the trial court for consideration of whether the arbitration clause, taken as a whole, was unconscionable and unenforceable.

In both cases, the Missouri Court revealed serious concerns about the fairness of class arbitration waivers, and threw the future enforceability of such agreements into question. More broadly, these decisions may signal an increasing willingness of the Missouri courts to disregard boilerplate arbitration agreements — which have become standard practice in American business — where the terms of the agreement may be regarded as unfair or excessively favorable to the draftsman.