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Hooper v. Advance America

December 16, 2009


Appeal from the United States District Court for the Western District of Missouri.

The opinion of the court was delivered by: Riley, Circuit Judge.

Submitted: October 22, 2009

Before RILEY, BENTON, and SHEPHERD, Circuit Judges.

Litigation or arbitration? Patricia Hooper (Hooper)*fn1 and Josephine Vaughan (collectively, Plaintiffs) want to litigate a class action against their payday lender, Advance America, Cash Advance Centers of Missouri, Inc. (Advance America), in federal court. Advance America, invoking a clause in Plaintiffs' loans, wants to stay all litigation and compel Plaintiffs to binding arbitration. The district court*fn2 held Advance America waived its right to arbitration when it filed an extensive motion to dismiss. We affirm.


Plaintiffs and Advance America entered into a series of payday loan agreements.*fn3 Each agreement contains a mandatory arbitration clause.

On March 10, 2008, Plaintiffs filed a seven-count, putative class-action complaint against Advance America. In Count I, Plaintiffs asked the district court to declare the loan agreements' arbitration clauses unconscionable and unenforceable under Missouri's Declaratory Judgment Act, Mo. Rev. Stat. § 527.010. In Counts II through VII, Plaintiffs alleged Advance America violated various provisions of Missouri's Merchandising Practices Act (MPA), Mo. Rev. Stat. §§ 407.010-407.1132, and payday loan law, Mo. Rev. Stat. §§ 408.500, 408.505, and 408.562. Plaintiffs complained Advance America was engaged in unfair, deceptive, and illegal lending practices to the detriment of its Missouri borrowers.

On April 30, 2008, Advance America moved to dismiss Plaintiffs' complaint. Advance America sought dismissal of Count I for want of subject matter jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(1), and Counts II through VII for failure to state a claim upon which relief could be granted, pursuant to Fed. R. Civ. P. 12(b)(6). In the last sentence of its brief, Advance America purported to "reserve[] the right" to enforce the arbitration clauses in Plaintiffs' loan agreements, if the court denied its motion to dismiss.

Plaintiffs resisted Advance America's motion. Although the merits of the parties' arguments are largely irrelevant for present purposes, it bears mention that Advance America's motion was extensive and required the district court to navigate through uncharted territory in Missouri's consumer protection laws. As the district court would later observe, "[t]here is a dearth of case law on the issues" Advance America raised in its motion to dismiss.

On July 15, 2008, the district court granted in part and denied in part Advance America's motion to dismiss. The court dismissed Count I for lack of subject matter jurisdiction, but granted Plaintiffs leave to amend their complaint to assert an analogous claim under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. The court further dismissed Count VII as surplusage, but declined to dismiss Counts II through VI. The district court held Advance America had not shown Counts II through VI failed to state claims upon which relief could be granted.Plaintiffs later amended their complaint to comply with the district court's order.

On August 1, 2008, Advance America filed a motion to stay litigation and compel arbitration (motion for arbitration). Plaintiffs filed a resistance in which they argued Advance America had waived its right to arbitration. Plaintiffs recalled Advance America had filed a motion to dismiss and the parties had made initial discovery disclosures.*fn4

The district court denied Advance America's motion for arbitration. Applying the tripartite test set forth in Dumont v. Saskatchewan Gov't Ins., 258 F.3d 880 (8th Cir. 2001) and other cases, the district court found Advance America waived its right to arbitration because Plaintiffs had shown Advance America (1) knew it had a right to arbitration, (2) acted inconsistently with such right, and (3) prejudiced Plaintiffs. See id. at 886; Ritzel Commc'ns, Inc. v. Mid-Am. Cellular Tel. Co., 989 F.2d 966, 969 (8th Cir. 1993); Stifel, Nicolaus & Co. v. Freeman, 924 F.2d 157, 158 (8th Cir. 1991). Advance America appeals.

II. ...

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