HAYES v. COUNTY BANK

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Supreme Court, Appellate Division, Second Department, New York.

Patricia HAYES, etc., appellant, v. COUNTY BANK, respondent.

Decided: February 28, 2006

DAVID S. RITTER, J.P., GLORIA GOLDSTEIN, STEVEN W. FISHER, and JOSEPH COVELLO, JJ. Sheldon V. Burman, P.C., New York, N.Y., for appellant. Susan Verbonitz, Philadelphia, PA, pro hac vice and Pollack & Kaminsky, New York, N.Y. (Martin I. Kaminsky and W. Hans Kobelt of counsel), for respondent (one brief filed). Trial Lawyers for Public Justice, Washington, D.C. (Michael J. Quirk and Richard Frankel of counsel), New York Public Interest Research Group, Albany, N.Y. (Russ Haven of counsel), and AARP, Washington, D.C. (Deborah Zuckerman and Michael Schuster of counsel), amici curiae pro se and for amici curiae Greater Upstate Law Project/Public Interest Law Office of Rochester Neighborhood Economic Development Advocacy Project, and Consumer Federation of America.

In a class action commenced by the plaintiff Patricia Hayes on behalf of herself and others similarly situated, inter alia, for a judgment declaring that the arbitration provision contained in the defendant's loan documents is void and unenforceable, the plaintiff appeals from an order of the Supreme Court, Queens County (Kitzes, J.), dated June 4, 2003, which granted the defendant's motion to compel arbitration and stay the action.   Justice Covello has been substituted for former Justice Sondra Miller (see 22 NYCRR 670.1[c]).

ORDERED that the order is affirmed, with costs.

The plaintiff obtained several small, short-term loans from the defendant, a federally-insured bank located and chartered in the state of Delaware.   Each loan agreement contained an arbitration clause governed by the Federal Arbitration Act (hereinafter FAA) stating that all claims and disputes are to be resolved by binding arbitration.   The Supreme Court granted the defendant's motion to compel arbitration and stay the action.

 Contrary to the defendant's contention, this appeal is not barred by section 16(b) of the FAA, even though the parties designated that statute to govern the arbitration agreements at issue (see 9 USC §§ 1-16).   While the purpose of the FAA is to ensure that private arbitration agreements are enforced according to their terms (see Volt Info. Sciences v. Board of Trustees, Leland Stanford Jr. U., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488;  Matter of Salvano v. Merrill Lynch, Pierce, Fenner & Smith, 85 N.Y.2d 173, 181, 623 N.Y.S.2d 790, 647 N.E.2d 1298), the statute creates a body of substantive law (see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 625, 105 S.Ct. 3346, 87 L.Ed.2d 444) not affecting procedural rules applicable to state court proceedings (see Volt Info. Sciences v. Board of Trustees, Leland Stanford Jr. U., supra at 477 n. 6, 109 S.Ct. 1248;  Southland Corp. v. Keating, 465 U.S. 1, 16 n. 10, 104 S.Ct. 852, 79 L.Ed.2d 1).   Congress did not clearly manifest the intent to preempt state court rules of appealability (see Johnson v. Fankell, 520 U.S. 911, 922, 117 S.Ct. 1800, 138 L.Ed.2d 108;  California Div. of Labor Stds. Enforcement v. Dillingham Constr., 519 U.S. 316, 325, 117 S.Ct. 832, 136 L.Ed.2d 791;  Howlett v. Rose, 496 U.S. 356, 372, 110 S.Ct. 2430, 110 L.Ed.2d 332).   The state appealability rules are also not impliedly preempted, since they neither invalidate the arbitration agreements at issue nor impose unique obstacles to their enforcement (see Doctor's Assoc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902;  Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753).

 The Supreme Court correctly determined that the arbitration agreements at issue are valid and enforceable (see 9 USC § 2).   While the FAA preempts state law on the subject of the enforceability of arbitration agreements (see Fletcher v. Kidder, Peabody & Co., 81 N.Y.2d 623, 630, 601 N.Y.S.2d 686, 619 N.E.2d 998, cert. denied 510 U.S. 993, 114 S.Ct. 554, 126 L.Ed.2d 455), a state court may assess the enforceability of such agreements in the same manner as it construes the validity of contracts generally, without contravening the FAA (see 9 USC § 2;  Doctor's Assoc. v. Casarotto, supra at 687, 116 S.Ct. 1652;  Perry v. Thomas, 482 U.S. 483, 492 n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426).   The plaintiff contends that the arbitration agreements are procedurally and substantively unconscionable and therefore unenforceable (see Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10, 537 N.Y.S.2d 787, 534 N.E.2d 824;  State of New York v. Wolowitz, 96 A.D.2d 47, 68, 468 N.Y.S.2d 131).   However, the evidence in the record does not establish procedural unconscionability with regard to the arbitration agreements within the loan documents signed by this plaintiff.   The plaintiff set forth no evidence regarding her education, financial status, access to legal counsel, or the availability of other banks or lending institutions (see Gillman v. Chase Manhattan Bank, supra at 11, 537 N.Y.S.2d 787, 534 N.E.2d 824;  Davidovits v. DeJesus Realty Corp., 100 A.D.2d 924, 474 N.Y.S.2d 808;  Matter of Friedman, 64 A.D.2d 70, 87, 407 N.Y.S.2d 999).   Furthermore, the fact that the arbitration agreements effectively preclude her from pursuing a class action does not alone render them substantively unconscionable (see Ranieri v. Bell Atl. Mobile, 304 A.D.2d 353, 759 N.Y.S.2d 448;  Harris v. Shearson Hayden Stone, 82 A.D.2d 87, 441 N.Y.S.2d 70, affd. 56 N.Y.2d 627, 450 N.Y.S.2d 482, 435 N.E.2d 1097).

Contrary to the plaintiff's contention, there is no public policy prohibiting arbitration of the particular claims involved in this action (see Gillman v. Chase Manhattan Bank, supra at 16, 537 N.Y.S.2d 787, 534 N.E.2d 824;  Matter of New York City Tr. Auth. v. Transport. Workers Union of Am., Local 100, AFL-CIO, 99 N.Y.2d 1, 6, 750 N.Y.S.2d 805, 780 N.E.2d 490;  Fletcher v. Kidder, supra at 623, 601 N.Y.S.2d 686, 619 N.E.2d 998;  Singer v. Jefferies & Co., 78 N.Y.2d 76, 83, 571 N.Y.S.2d 680, 575 N.E.2d 98;  Brower v. Gateway 2000, 246 A.D.2d 246, 676 N.Y.S.2d 569).   The arbitration agreements at issue are broad and easily encompass the claims asserted by the plaintiff herein (see Matter of Marlene Inds. Corp., 45 N.Y.2d 327, 333-334, 408 N.Y.S.2d 410, 380 N.E.2d 239;  cf. Grovesteen v. New York State Pub. Empls. Fedn., AFL-CIO, 265 A.D.2d 784, 697 N.Y.S.2d 392;  Crespo v. 160 W. End Avenue Owners Corp., 253 A.D.2d 28, 687 N.Y.S.2d 79).

The plaintiff further contends that the loan agreements are void ab initio.   Given the breadth of the subject arbitration clause, however, we find that the legality of the underlying loan agreements is an issue for the arbitrator, not the court, to decide (see Weinrott v. Carp, 32 N.Y.2d 190, 344 N.Y.S.2d 848, 298 N.E.2d 42;  cf. Jenkins v. First Am. Cash Advance of Georgia, 400 F.3d 868, 880-882).

The plaintiff's remaining contentions are without merit.

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