A federal district court in Missouri upheld a class action waiver in a used car dealer’s arbitration agreement because the agreement did not limit the claimant’s ability to seek relief.

In Bass v. Carmax Auto Superstores, Inc., No. 07-0883-CV-W-ODS, 2008 WL 2705506 (W.D. Mo. July 9, 2008), Bass purchased and financed a vehicle through Carmax. Bass paid a document preparation fee for a Retail Installment Contract and a Buyer’s Order and Bill of Sale. Both documents contained an agreement to arbitrate ‘claims,’ which was defined to have the broadest meaning possible.

Bass filed a class action lawsuit against Carmax, alleging that the document preparation fee violated Missouri statues prohibiting the unauthorized practice of law and the Missouri Merchandising Practice Act. In response, Carmax then filed a motion to compel arbitration.

The Court was not persuaded by Bass’ arguments opposing arbitration. Bass argued that her claims did not qualify as ‘claims’ under the agreement. The Court did not even address this argument because the parties had agreed that the arbitrator would decide questions of arbitrability

Bass also argued that only Missouri courts can decide whether conduct constitutes the unauthorized practice of law. The Court rejected this argument entirely and stated that it is the arbitrator’s duty to apply the law, regardless of the source, or "otherwise, no arbitrator could decide anything because arbitrators are not ceded any governmental power."

Finally, Bass argued that the class action waiver provision was unenforceable because the agreements were adhesion contracts. The Court looked to whether the terms of the agreement limited the drafting party’s obligations and liabilities, and determined that the arbitration agreement did not insulate Carmax from liability.

The arbitration agreement had provisions calling for Carmax to pay the costs of arbitration, and there were no limits on a claimant’s ability to obtain relief. Further, Bass was not obligated to sign the agreements as there were many other used car dealers and financing options, and she could have purchased and financed a car through another vendor.

The Court acknowledged that Carmax’s customers were unable to vindicate their rights via class action litigation. However, that fact alone did not render the arbitration agreement unconscionable. Claimants can seek relief in arbitration, or in small claims court, if the issue is found not to be arbitrable. The Court granted Carmax’s motion to compel arbitration.