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Brown v. RAC Acceptance East, LLC.

Supreme Court of Georgia

January 29, 2018

BROWN et al.

          NAHMIAS, Justice.

         After RAC Acceptance East, LLC swore out a warrant for Mira Brown's arrest for theft by conversion of furniture that she had rented from RAC, Brown filed a lawsuit against RAC alleging malicious prosecution and other torts. The trial court entered an order granting RAC's motion to compel Brown to arbitrate her claims pursuant to the arbitration agreement incorporated into the parties' rental agreement. The Court of Appeals affirmed that order, concluding that whether RAC had waived its right to demand arbitration by its conduct in initiating the related criminal proceeding against Brown was a matter for the court to decide and that the trial court had correctly ruled that RAC did not waive arbitration. We granted certiorari, and we now affirm the Court of Appeals' judgment on the ground that the delegation provision in the parties' arbitration agreement clearly gave the arbitrator, not the courts, the authority to determine that RAC did not waive by prior litigation conduct its right to seek arbitration, and the arbitrator's decision on the waiver question cannot be properly challenged as legally erroneous.

         1. The record shows the following undisputed facts. In January 2012, Brown entered into a rental-purchase agreement with RAC to rent a bedroom set. The rental agreement incorporated by reference an attached arbitration agreement, which Brown also executed. The arbitration agreement says: "Either [Brown] or [RAC] may require any Claim to be arbitrated. Either [Brown] or [RAC] may do so before or after a lawsuit has been started over the Claim . . . ." A section of the arbitration agreement titled "What Claims Are Covered" says, with emphasis added:

"Claim" means any claim, dispute or controversy between you and us that in any way arises from or relates to the Rental-Purchase Agreement or the leased property, except "Claim" does not include any claim or action by either party seeking judicial determination of that party's right to possession of the leased merchandise, provided that such a claim or action does not involve a request for monetary relief of any kind.
"Claim" has the broadest possible meaning and, except as set forth above, includes initial claims, counterclaims, cross-claims and third-party claims. It includes disputes based upon contract, tort, fraud and other intentional torts, constitution, statute, regulation, ordinance, common law and equity (including any claim for injunctive or declaratory relief other than a declaration of a party's right to possession). It also includes disputes about the validity, enforceability, arbitrability or scope of this Arbitration Agreement or the Rental-Purchase Agreement.

         Brown did not make all payments required under the rental agreement. Beginning in April 2012, and repeatedly over the course of more than a year, RAC contacted Brown about her payment obligations and the requirement that she return the furniture. In January 2014, RAC submitted an arrest warrant application and affidavit in the magistrate court. The magistrate court scheduled a hearing for January 24, 2014, but Brown did not appear. At the hearing, the magistrate court issued an arrest warrant for theft by conversion. In February 2014, Brown returned the furniture. In June 2014, a police officer stopped Brown while she was driving with her children in the car, found that an arrest warrant for theft by conversion was outstanding, and arrested her. The prosecutor declined to prosecute, citing RAC's decision not to pursue charges because Brown had returned the furniture.

         In September 2014, Brown filed a complaint against RAC in the Superior Court of Fulton County (the "trial court"), asserting tort claims for malicious prosecution and arrest, negligent and intentional infliction of emotional distress, invasion of privacy, false imprisonment and arrest, and slander and libel. The complaint alleged among other things that RAC filed an arrest warrant application that falsely accused her of theft by conversion, that RAC told her that it would recall the warrant if she returned the furniture, that she agreed to return the furniture and did so, and that RAC then wrongfully failed to recall the warrant.

         RAC filed a motion to stay Brown's lawsuit and compel arbitration, arguing that the parties' arbitration agreement required Brown to arbitrate her claims. Brown objected, arguing among other things that RAC "waived any potential right to arbitration when [it] applied for and obtained a warrant for [her] arrest." In January 2015, the trial court entered an order granting RAC's motion, staying the lawsuit, and compelling arbitration. The court noted that Brown acknowledged the existence of the arbitration agreement and the applicability of the Federal Arbitration Act (FAA), 9 USC § 1 et seq., and concluded that Brown's tort claims against RAC were subject to arbitration under the parties' agreement. The court also noted that the arbitration agreement delegated to the arbitrator the responsibility to resolve "disputes about the validity, enforceability, arbitrability or scope of this Arbitration Agreement" and concluded that "whether the Arrest Warrant [was] a waiver should be decided at arbitration." The court ruled in the alternative that if it were to consider Brown's waiver argument on the merits, it would reject the argument, distinguishing this Court's decision in Taft v. Buttram, 254 Ga. 687 (333 S.E.2d 585) (1985).[1] Brown filed a motion for reconsideration and a request for a certificate of immediate review, both of which the trial court denied.

         An arbitration hearing was then held under the auspices of the American Arbitration Association. Brown argued among other things that Taft required a finding that RAC had waived its right to demand that she arbitrate her tort claims. In December 2015, the arbitrator ruled that "[w]hile it is a close question, . . . [RAC] did not waive arbitration in this action" by using the criminal warrant procedure. The arbitrator then ruled in favor of RAC on each of Brown's tort claims.

         In January 2016, RAC filed a motion in the trial court to confirm the arbitrator's award, and in February the court entered a confirmation order and a final judgment in favor of RAC. Brown then appealed, arguing among other things that the trial court erred in its initial order staying the lawsuit and compelling arbitration. In February 2017, the Court of Appeals affirmed in an unreported opinion, holding that because Brown's waiver argument was based on RAC's alleged litigation conduct, the trial court rather than the arbitrator had the primary power to decide the threshold issue of arbitrability. See Brown v. RAC Acceptance East, LLC, Case No. A16A1886, slip op. at 5-6 (Ga.App. Feb. 2, 2017). Reviewing that issue de novo, the Court of Appeals upheld the trial court's ruling that RAC had not waived its right to arbitration, again distinguishing Taft. See Brown, slip op. at 6-11. We granted Brown's petition for certiorari, directing the parties to address Taft. We now affirm, but on a different ground as to which Taft is not pertinent.[2]

         2. In this Court, Brown does not dispute that she signed the arbitration agreement with RAC, that the FAA governs the agreement, or that the agreement's broad definition of a "Claim" for which either party may demand arbitration encompasses her tort claims against RAC. Instead, citing Taft, Brown contends that she had the right to have her tort claims decided in court because RAC waived its right to enforce the arbitration agreement through its litigation conduct - specifically, by swearing out the warrant for her arrest. RAC disagrees that the decision in Taft applies to this case. Thus, Brown and RAC have a dispute about the enforceability of their arbitration agreement, in addition to their dispute over RAC's liability to Brown on her tort claims.

         (a) RAC asserts that pursuant to the parties' arbitration agreement, the dispute about enforceability was properly submitted to arbitration. That is correct. A dispute about the enforceability of an arbitration agreement is a classic "'gateway' question[] of 'arbitrability.'" Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68-69 (130 S.Ct. 2772, 177 L.Ed.2d 403) (2010) (citations omitted). See BG Group, PLC v. Republic of Argentina, 572 U.S.__, __(134 S.Ct. 1198, 1206-1208, 188 L.Ed.2d 220) (2014) (discussing various gateway, or "threshold, " issues of arbitrability). And as the U.S. Supreme Court explained in First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (115 S.Ct. 1920, 131 L.Ed.2d 985) (1995), "the question 'who has the primary power to decide arbitrability' turns upon what the parties agreed about that matter." Id. at 943 (emphasis in original).

         "Courts should not assume that the parties agreed to arbitrate arbitrability, " id. at 944, and "'in the absence of an agreement to the contrary, issues of substantive arbitrability . . . are for a court to decide, '" Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 85 (123 S.Ct. 588, 154 L.Ed.2d 491) (2002) (citation omitted). Thus, as the Court of Appeals recognized, "[g]enerally, courts decide issues of alleged 'conduct-based' waiver of arbitration rights." Brown, slip op. at 5. However, as the U.S. Supreme Court has explained but the Court of Appeals here failed to acknowledge, where there is "'clear and unmistakable' evidence that the parties wanted an arbitrator to resolve the dispute" about arbitrability, courts must give effect to the parties' agreement. Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 n.2 (133 S.Ct. 2064, 186 L.Ed.2d 113) (2013) (citation and brackets omitted). See also Rent-A-Center, 561 U.S. at 68-70 & n.1; Losey v. Prieto, 320 Ga.App. 390, 392 (739 S.E.2d 834) (2013).

         Arbitration agreements these days often contain what is known in arbitration law as a "delegation provision" - that is, "an agreement to arbitrate threshold issues concerning the arbitration agreement." Rent-A-Center, 561 U.S. at 68. In this case, the delegation provision clearly assigns responsibility for resolving "disputes about the validity, enforceability, arbitrability or scope of this Arbitration Agreement" to the arbitrator. And Brown's ...

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