Facts
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Larketta Randolph bought a mobile home in Alabama under a retail installment contract later assigned to Green Tree Financial Corporation–Alabama.
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The contract required Randolph to obtain insurance protecting the lender against default-related costs.
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The contract contained a broad arbitration clause covering disputes arising from or relating to the contract or resulting relationships.
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Randolph sued in federal court alleging:
- Truth in Lending Act violations for failing to disclose the insurance requirement as a finance charge; and
- Equal Credit Opportunity Act violations based on requiring arbitration of statutory claims.
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The district court compelled arbitration and dismissed Randolph’s action with prejudice.
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Randolph sought reconsideration, asserting she lacked resources to arbitrate and would have to forgo her claims.
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The arbitration clause did not allocate responsibility for filing fees, arbitrator compensation, or other arbitration costs.
Issues
- Whether an order compelling arbitration and dismissing all claims is a “final decision with respect to an arbitration” appealable under FAA § 16(a)(3).
- Whether an arbitration agreement is unenforceable solely because it is silent about arbitration costs and fees, given the possibility of prohibitively expensive arbitration preventing effective vindication of federal statutory rights.
Decision
- The Supreme Court held the district court’s order compelling arbitration and dismissing all claims was a “final decision” under FAA § 16(a)(3) and therefore immediately appealable.
- The Court held a cost-silent arbitration agreement is not unenforceable on that basis alone.
- The party resisting arbitration bears the burden to show a likelihood of incurring prohibitive arbitration costs.
- Randolph’s showing was insufficient because the claimed risk of prohibitive costs was speculative on the record presented.
- The Court affirmed the court of appeals on appellate jurisdiction, reversed on unenforceability, and remanded.
Legal Principles
- “Final decision” in FAA § 16(a)(3) carries its ordinary meaning: a decision ending the litigation on the merits and leaving nothing for the court to do but execute judgment.
- A district court order compelling arbitration and dismissing the underlying action is final and appealable under FAA § 16(a)(3).
- Large arbitration costs can, in some cases, prevent effective vindication of federal statutory rights, but a challenger must support that claim with evidence tied to the particular dispute.
- An arbitration clause’s silence about fees and costs does not itself establish unenforceability; speculation about possible expense is insufficient.
Conclusion
The Court ruled that a dismissal accompanying an order to arbitrate is immediately appealable under the FAA, and that an arbitration agreement lacking an express cost-allocation term remains enforceable unless the party opposing arbitration proves a likely, prohibitive cost barrier in the specific case.