In affirming an order compelling arbitration on an individual basis, the Eighth Circuit Court of Appeals held that a class waiver did not render an arbitration agreement unenforceable under Missouri law because the arbitration agreement did not limit the claimant's remedies, thus permitting the claimant to recover her attorney fees if she were to prevail on her statutory claim.

In Pleasants v. American Express Co., No. 07-3235, 2008 WL 4133390 (8th Cir. Sept. 9, 2008), American Express mailed three prepaid cards to Pleasants in exchange for her participation in an online survey. The cards could be used at any establishment accepting American Express credit cards. The terms and conditions of the card included an arbitration agreement and a class waiver requiring arbitration on an individual basis.

Pleasants used the cards to pay a restaurant bill, and the restaurant processed the card for $45 more than their stored value. Later, American Express contacted Pleasants asking her to pay the $45 difference along with a $10 late fee and $25 transaction fee.

Pleasants disputed the charges and subsequently filed a class action lawsuit alleging that American Express violated the Truth in Lending Act (TILA) by representing that the prepaid cards could not be used as a charge card. In response, American Express filed a motion to compel arbitration. The district court granted the motion.

On appeal, Pleasants argued that under Missouri law, the class waiver was unconscionable and therefore unenforceable. In making this argument, Pleasants relied largely on Whitney v. Alltel Communications, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005), in which the court held that a class waiver and other provisions rendered an arbitration agreement unenforceable under Missouri law.

The Court rejected the application of Whitney for two reasons. First and foremost, the Court found an important distinction between Whitney and the present case. In Whitney, the arbitration agreement expressly prohibited both an attorney fees award and several categories of damages, thus raising the concern that the cost of pursuing a low-value claim would necessarily exceed any prospective recovery. Conversely, in this case, the arbitration agreement did not limit Pleasants' remedies, which meant Pleasants, if successful, could recover her attorney fees under TILA's fee-shifting provision.

In addition to that important distinction, the Court also rejected Whitney as non-binding authority. Specifically, as the Court noted, "[t]he decision of an intermediate state appellate court is not binding on a federal court that seeks to determine state law."

Having determined that Whitney was both inapposite and non-binding, the Court rejected Pleasants' unconscionability challenge and upheld both the arbitration agreement and the class waiver. The Court thus affirmed the order compelling arbitration on an individual basis.

The Court's decision in this case casts doubt on the continued validity of Doerhoff v. General Growth Properties, Inc., No. 06-04099-CV-C-SOW, 2006 WL 3210502 (W.D. Mo. Nov. 6, 2006). In that case, the court relied on Whitney in holding that a class waiver rendered a gift card arbitration agreement unenforceable under Missouri law. And while Whitney is not binding on the Eighth Circuit, the Pleasants decision is binding on federal district courts within the Eighth Circuit. See, e.g., M.M. ex rel. L.R. v. Special School Dist. No. 1, 512 F.3d 455, 459 (8th Cir. 2008).