We granted Plaintiffs’ request for a Tenn

We granted Plaintiffs’ request for a Tenn

Ed

1. Forcing arbitration in this matter will be a deterrent to the Plaintiffs pursuing their claims and that review upon entry of final judgment is, and will be, ineffective;

2. Reversal would prevent the need for needless, extensive, and protracted arbitrations, as a reversal would probably lead to class certification under Rule 23 of the Tennessee Rules of Civil Procedure; and

3. There is a need to develop a uniform body of law as to the enforceability of such arbitration provisions as well as a need to determine whether this Court’s Memorandum Order conflicts with the ruling in Taylor.

R.App. P. 9 interlocutory appeal on the “sole issue of whether the Trial Court’s Memorandum Opinion of ? was in conflict with Taylor v. Butler, 142 S.W.3d 277 (Tenn.2004), and if so, was that error by the Trial Court.” To these two questions contained in the sole issue before us, we answer “yes” and “yes.”

The issue of whether an arbitration clause is unconscionable is a question of law. See Taylor v. Butler, 142 S.W.3d 277, 284-85 (Tenn.2004)(citing Lewis Refrigeration Co. v. Sawyer Fruit, Vegetable Cold Storage Co., 709 F.2d 427, 435 n. 12 (6th Cir.1983)). Our review of legal issues is conducted “under a pure de novo standard of review, according no deference to the conclusions of law made by the lower courts.” Southern Constructors, Inc. v. Loudon County Bd. Of Educ., 58 S.W.3d 706, 710 (Tenn.2001).

In Taylor v. Butler, 142 S.W.3d 277 (Tenn.2004), our Supreme Court discussed the validity of an arbitration clause contained in a contract titled “As Is Used Vehicle Retail Buyers Order.” Id. at 280. As in this case now before us, the arbitration clause in Taylor provided that it was to be governed by the Federal Arbitration Act, 9 U.S.C. § 2. The arbitration clause in Taylor applied to “all claims, demands, disputes or controversies of every kind or nature between [the parties] arising from the [sale of the vehicle].” Id. at 282. However, the arbitration clause further provided that the automobile dealer “may pursue recovery of the vehicle under the Tennessee Uniform Commercial Code and Collection of Debt due by state court action.” Id. at 284. In deciding whether the arbitration clause at issue in that case was enforceable, the Taylor Court pointed out that under the Federal Arbitration Act (“FAA”), States are able to regulate the validity of arbitration agreements under general contract law principles. According to the Court:

In determining whether there is a valid agreement to arbitrate, “courts generally ? should apply ordinary state-law principles that govern formation of contracts,” First Options of Chicago, Inc

v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.2d 985 (1995). As the United State Supreme Court noted in Allied-Bruce Terminix Cos. v. Dobson:

Section 2 [of the FAA] gives States a method for protecting consumers against unfair pressure to agree to a contract with an unwanted arbitration provision. States may regulate contracts, including arbitration clauses, under general contract law principles and they may invalidate an arbitration clause “upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.

513 U.S. 265, 281, 115 S.Ct. 834, 130 L.2d 753 (1995). “[G]enerally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening” the enforcement provisions of the FAA. Doctor’s Assoc., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.2d 902 (1996).

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Having determined that state law contract principles such as fraud and unconscionability or the like can be used to invalidate an arbitration clause governed by the FAA, the Taylor Court then proceeded to decide whether the arbitration clause at issue in that particular case was unenforceable in light of Tennessee contract law. The Court stated:

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