Roy Carbajal v. H&r Block Tax Services , Inc .

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 03-3722
R OY C ARBAJAL ,
Plaintiff-Appellant,
v.
H&R B LOCK T AX S ERVICES , I NC ., et al.,
Defendants-Appellees.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 00 C 626—John A. Nordberg, Judge.
____________
A RGUED M AY 17, 2004—D ECIDED J UNE 24, 2004
____________
Before B AUER , E ASTERBROOK , and M ANION , Circuit
Judges.
E ASTERBROOK , Circuit Judge. In 1999 H&R Block
prepared Roy Carbajal’s 1998 federal tax return. Its cal-
culations showed that Carbajal could expect a refund of
$5,001. Carbajal applied for what Block calls a “rapid
refund,” a transaction that couples a loan with the assign-
ment of the refund as security for repayment. The docu-
ments underlying this refund-anticipation loan provide that
the lender also may use the money to retire any earlier
year’s loan (a balance due could exist if the actual refund
was less than anticipated and the taxpayer did not return

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2 No. 03-3722
the excess), and that any dispute between the parties will
be arbitrated. After Carbajal signed on the dotted line, he
received about $1,800 in cash; the balance was used to pay
off an earlier loan that a lender in Block’s program con-
tended was outstanding. Carbajal filed this suit under the
Fair Debt Collection Practices Act, plus other federal and
state laws, contending that he had been snookered. Block
and the other defendants asked the district court to refer
the dispute to arbitration.
Before the district judge had decided whether the dispute
must be arbitrated, Carbajal received a notice that he is a
member of a class in other litigation pending against Block.
Carbajal then asked Judge Zagel, before whom the class
suits had been consolidated, for leave to intervene and
represent a distinct subclass of persons whose refund loans
had been used to pay down earlier indebtedness. Judge
Zagel denied this motion and approved a settlement that
encompassed (and barred) all of Carbajal’s claims. We
reversed that decision and tossed out the settlement. See
Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th
Cir. 2002). Negotiations on a new settlement that would
include claims such as Carbajal’s came to naught, see
Reynolds v. Beneficial National Bank, 260 F. Supp. 2d 680
(N.D. Ill. 2003), and Judge Nordberg then turned to
Carbajal’s independent suit—which he dismissed in reliance
on the arbitration clause. 2003 U.S. Dist. L EXIS 16458 (N.D.
Ill. Sept. 16, 2003). An outright dismissal in favor of
arbitration is a “final decision,” see Green Tree Financial
Corp. v. Randolph, 531 U.S. 79 (2000), entitling Carbajal to
appeal under 28 U.S.C. §1291.
Paragraph 6 of the refund-anticipation loan (RAL)
agreement provides:
By signing this RAL application or endorsing my
1999 RAL check which contains the Loan
Agreement (collectively the “Agreements”) I hereby

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No. 03-3722 3
agree that any claim or dispute (whether in con-
tract, tort or otherwise) in any way relating to the
Agreements or such similar agreements for prior
years involving the same parties or relating to the
relationships of such parties, including the validity
or enforceability of this arbitration provision or any
part thereof (collectively the “Claim”), shall be
resolved, upon the election of either party, by bind-
ing arbitration pursuant to this arbitration provi-
sion and the Code of Procedure of the National
Arbitration Forum in effect at the time the Claim is
filed. No class actions are permitted without the
consent of the parties hereto. Rules and forms of
the National Arbitration Forum may be obtained by
calling 1-800-474-2371 and all Claims shall be filed
by certified mail at any National Arbitration Forum
office or at Post Office Box 50194, Minneapolis,
Minnesota 55405. Any participatory arbitration
hearing that I attend will take place in the federal
judicial district in which I live. This arbitration
agreement is made pursuant to a transaction
involving interstate commerce, and shall be gov-
erned by the Federal Arbitration Act, 9 U.S.C.
Sections 1-16. The award of the Arbitrator shall
apply relevant law pursuant to Section 3G above
and provide written, reasoned findings of act and
conclusions of law, and shall not be subject to
appeal, unless the arbitrator’s decision clearly
conflicts with applicable law. Judgment upon the
award may be entered in any court having jurisdic-
tion. Nothing in this arbitration provision shall be
construed to prevent HB’s use of offset or other con-
tractual rights involving payment of my income tax
refund or other amount on deposit with HB to pay
off any RAL debts or ERO or other fees now or
hereafter owed by me to HB or any other RAL
Lender or ERO or third party pursuant to the

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4 No. 03-3722
Agreements or similar prior agreements. The par-
ties hereto acknowledge that they have a right to
litigate Claims in court, but they prefer to resolve
any such Claims through arbitration and hereby
waive their rights to litigate such Claims in court
upon election of arbitration by either party. The
parties hereto further agree that any award here-
under shall be based on the claimant’s actual com-
pensatory, economic damages, and equitable relief
as appropriate, plus proportional punitive damages,
if any are deemed appropriate in the Arbitrator’s
discretion. Each party hereto shall bear the expense
of their respective attorney’s fees regardless of
which party prevails. The decision of the Arbitrator
and the amount of any Award shall be kept confi-
dential by the parties hereto. This arbitration
provision shall supersede any prior arbitration
provision contained in any previous RAL or RAC
application agreement.
It would be hard to draft a broader clause. This covers all
claims “relating to” the 1999 loan plus all disputes “relating
to” any earlier tax year and any preceding refund-anti-
cipation loan. It also covers any dispute about “the validity
or enforceability of this arbitration provision or any part
thereof”—a clause evidently tailored to come within the
rule that people may agree to arbitrate whether a given
dispute is arbitrable. See First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 943 (1995); see also Prima Paint
Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395
(1967). If so, this litigation is pointless. Even if we indulge
the district court’s assumption that the court determines
arbitrability, Carbajal still must arbitrate.
Carbajal’s lead argument is that Block and the other
defendants waived their right to arbitrate by trying to
include him in the master settlement. Yet defendants have
urged arbitration from the get-go; it was Carbajal who tried

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No. 03-3722 5
to intervene in the class action. The ensuing delay and
negotiation do not cancel the parties’ contractual choice of
forum in the event matters could not be resolved amicably.
American Patriot Insurance Agency, Inc. v. Mutual Risk
Management, Ltd., 364 F.3d 884 (7th Cir. 2004), says all
that is necessary about that subject. As in American
Patriot, defendants did not ask the judge for a decision on
the merits and fall back on arbitration only when things
turned sour; they have never sought judicial resolution of
any aspect of the dispute.
Is enforcement of this clause unconscionable? How could
it be? Arbitration is just a forum; people may choose freely
which forum will resolve their dispute. This is so when the
agreement concerns venue within a judicial system, see
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991),
and equally so when the agreement specifies a non-judicial
forum. See, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S.
105 (2001); Rodriguez de Quijas v. Shearson/ American
Express, Inc., 490 U.S. 477 (1989); Mitsubishi Motors Corp.
v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).
The whole deal, including ¶6, was offered on a take-it-or-
leave-it basis, which leads Carbajal to call it a “contract of
adhesion,” but few consumer contracts are negotiated one
clause at a time. Forms reduce transactions costs and ben-
efit consumers because, in competition, reductions in the
cost of doing business show up as lower prices (here, a
slightly lower rate of interest on the loan). The forum-
selection clause in Carnival Cruise Lines was printed on the
back of a ticket, and the Court nonetheless enforced it—just
as the terms of limited warranties and many other provi-
sions not negotiated separately are enforced routinely. We
observed in Metro East Center for Conditioning and Health
v. Qwest Communications International, Inc., 294 F.3d 924
(7th Cir. 2002), that what holds true for warranties holds
true for arbitration. See also, e.g., Koveleskie v. SBC Capital

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6 No. 03-3722
Markets, Inc., 167 F.3d 361 (7th Cir. 1999); Hill v. Gateway
2000, Inc., 105 F.3d 1147 (7th Cir. 1997).
Section 2 of the Federal Arbitration Act says that an
agreement to arbitrate “shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” Thus arbitration
specified in a form contract must be treated just like any
other clause of the form. Unless Delaware (whose law ap-
plies) would refuse to enforce limited warranties, clauses
curtailing the time available to file suit, and the like, then
this arbitration clause must be enforced. Carbajal does not
offer any reason to think that Delaware generally refuses to
enforce details on the back of an auto-rental contract or
equivalent form; thus this agreement to arbitrate is valid.
The cry of “unconscionable!” just repackages the tired as-
sertion that arbitration should be disparaged as second-
class adjudication. It is precisely to still such cries that the
Federal Arbitration Act equates arbitration with other
contractual terms. See Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 270-71 (1995). People are free to opt
for bargain-basement adjudication—or, for that matter,
bargain-basement tax preparation services; air carriers that
pack passengers like sardines but charge less; and black-
and-white television. In competition, prices adjust and both
sides gain. “Nothing but the best” may be the motto of a
particular consumer but is not something the legal system
foists on all consumers.
As for the contention that portions of this clause are in-
compatible with federal law—because, say, they require the
parties to bear their own costs, while the FDCPA entitles
prevailing litigants to recover attorneys’ fees— there are
two problems. First, the arbitrator rather than the court
determines the validity of these ancillary provisions. See
PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401
(2003); see also Green Tree Financial Corp. v. Bazzle, 539
U.S. 444 (2003); Howsam v. Dean Witter Reynolds, Inc., 537

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No. 03-3722 7
U.S. 79 (2002). Second, no general doctrine of federal law
prevents people from waiving statutory rights (whether
substantive or procedural) in exchange for other things they
value more, such as lower prices or reduced disputation. See
Metro East, 294 F.3d at 928-29 (collecting authority).
Whether any particular federal statute overrides the
parties’ autonomy and makes a given entitlement non-
waivable is a question for the arbitrator.
A FFIRMED
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-24-04

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