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The full case caption appears at the end of this opinion. OPINION The dispositive issue on appeal is whether the contract signed by the partiescontaining an arbitration agreement is enforceable. In 1986, the Internal Revenue Service first allowed taxpayers to electronically filetax returns, and defendant H & R Block (“Block”) began offering electronic filing through a programknown as “Rapid Refund” as a part of its tax preparation services. For the 1987 tax year, Block, in conjunction with various lenders, began promoting another service known as the “RefundAnticipation Loan” or “RAL”, which allows taxpayers to receive a loan from the lender using theiranticipated tax refund as collateral. Block customers given the RAL option, must first complete an application. Theapplication is then sent via “Compuserve” in Ohio to the lender, Beneficial National Bank, inDelaware. Once approved by the lender, within two to four days, a check is presented by Block tothe customer. In this process, the customer pays Block its usual preparation and electronic filingfees, and if the application is approved, the customer also pays the lender a finance charge. Plaintiff, Christine Berkley, contracted with Block in 1994, 1995, 1996 and 1997 toassist her in preparing her federal income tax returns for those years. Having been advised by Blockthat she could receive her refund much sooner if she obtained a RAL, plaintiff applied for RALs inat least three of those years. Plaintiff executed the standard RAL application form in 1997 for the 1996 tax year.The application disclosed the cost of the loan and included a specific warning that “because the APRon a RAL may be high in certain cases relative to other sources of credit, you may wish to use suchsources; e.g., credit cards, equity loans, etc., instead of a RAL.” Section 7 of the RAL application is an agreement to arbitrate. This provision, whichwas not in the applications of prior years, is as follows:
ARBITRATION: The parties to this RAL application, the Loan Agreement on theRAL check that I signed and any such prior agreements involving the same parties(collectively, the “Agreements”) hereby agree that any claim or dispute (whether incontract, tort or otherwise) in any way relating to the Agreements or relating to therelationships of such parties including the validity or enforceability of this arbitrationprovision or any part thereof, (collectively the “Claim”), shall be resolved, upon theelection of either party, by binding arbitration pursuant to this arbitration provisionand the Code of Procedure of the National Arbitration Forum in effect at the time theClaim is filed. No class actions are permitted to this arbitration without the consentof the parties. The parties agree that for purposes of this arbitration provision, H & RBlock, Inc., its subsidiaries, franchisees, affiliates, agents, and employees(collectively “Block”) shall be an intended third party beneficiary of the Agreementsand a party to this arbitration provision and any transaction made pursuant to theseAgreements involving Block shall be considered a Claim and resolved pursuant tothis arbitration provision. Rules and forms of the national Arbitration Forum maybe obtained by calling (800) 474-2371 and all Claims shall be filed by certified mailat any National Arbitration office or at Post Office Box 50191, Minneapolis,Minnesota 55405. Any participatory arbitration hearing that I attend will take placein the federal judicial district in which I live. This arbitration agreement is madepursuant to a transaction involving interstate commerce, and shall be governed by theFederal Arbitration Act, 9 U.S.C. Sections 1-16. The award of the Arbitrator shallapply relevant law and provide written, reasoned findings of fact and conclusions oflaw, and shall not be subject to appeal. Judgment upon the award may be entered inany court having jurisdiction. Nothing in this arbitration provision shall be construedto prevent BNB’s use of offset of other contractual rights involving my income taxrefund or other amount on deposit with BNB to pay off any RAL debts nor orhereafter owed by me to BNB or any other RAL Lender or ERO pursuant to theAgreements. The parties hereto acknowledge that they have a right to litigateclaims in court, but they prefer to resolve such claims through arbitration andhereby waive their rights to litigate such claims in court upon election ofarbitration by either party. The parties further agree that any Claim hereundershall be limited to no more than the claimant’s actual compensatory, economicdamages plus punitive damages, if any in the Arbitrator’s discretion, of no more than3 times the claimant’s respective actual compensatory, economic damages or $50,000whichever is lesser, and that each party shall bear the expense of their respectiveattorney’s fees regardless of which party prevails.

(Bold in original.) Plaintiff, in her complaint, charged Block with engaging in unfair or deceptiveconduct by, among other things, failing to disclose to her and other Block customers that it received”kickbacks” from the “Refund Anticipation Loan” program. Plaintiff’s complaint alleged a violationof the Tennessee Consumer Protection Act, T.C.A. �47-18-101 et seq; breach of Brock’s duty to dealwith her fairly and in good faith, and breach of Brock’s fiduciary duty and unjust enrichment.Subsequently, she filed a “First Amended Complaint” dropping the claim for breach of fiduciaryduty, and adding the claim for breach of principal-agency relationship. Subsequently, she movedto amend the complaint to particularize the factual allegations to seek injunctive relief and demanda jury. Subsequently, the Trial Court refused to compel arbitration, but granted aninterlocutory appeal, which this Court accepted, pursuant to Rule 9 of the Tennessee Rules ofAppellate Procedure. The arbitration agreement states that “any claim or dispute (whether in contract, tortor otherwise) in any way” relating to the RAL program “shall be resolved, upon the election of eitherparty, by binding arbitration.” Block has clearly announced its election to submit the dispute toarbitration.

The Federal Arbitration Act, 9 U.S.C. �2, provides: A written provision in any maritime transaction or a contract evidencing a transactioninvolving commerce to settle by arbitration a controversy thereafter arising out ofsuch contract or transaction, or the refusal to perform the whole or any part thereof,or an agreement in writing to submit to arbitration an existing controversy arising outof such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable,save upon such grounds as exist at law or in equity for the revocation of any contract.

The Supreme Court of Tennessee recently reiterated and emphasized the applicabilityof the FAA in the courts of this state in Frizzell Construction Co. Inc. v. Gatlinburg, L.L.C., 9S.W.3d 79 (Tenn. 1999). A contract “evidencing a transaction involving commerce” may be regulated byCongress as part of its authority to regulate interstate commerce, and includes intrastate activitiesthat have a substantial relation to interstate commerce. See Frizzell Construction, 9 S.W.3d at 83(citing United States v. Lopez, 514 U.S. 549, 557059 (1995)). In this case, the Agreement containingthe arbitration provision clearly is one that involves such commerce and is therefore within the scopeof the FAA. As the United States Supreme Court explained in Southerland Corp. v. Keating, 465U.S. 1 (1984), the FAA not only “declared a national policy favoring arbitration,” but actually”withdrew the power of the states to require a judicial forum for the resolution of claims which thecontracting parties agreed to resolve by arbitration.” 465 U.S. at 10. The FAA enforces arbitrationagreements according to the terms of those agreements, allowing the parties to determine the scopeof arbitration. In Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), the issue waswhether punitive damages could be properly considered under the parties’ arbitration agreement.The Court stated:

[W]e think our decisions in Allied-Bruce, Southland, and Perry, make clear that ifcontracting parties agree to include claims for punitive damages within the issues tobe arbitrated, the FAA ensures that their agreement will be enforced according to itsterms even if a rule of state law would otherwise exclude such claims fromarbitration. Thus, the case before us comes down to what the contract has to sayabout the arbitrability of petitioners’ claim for punitive damages.

514 U.S. at 52. In this case, the arbitration clause provides that all issues “including the validity orenforceability of this arbitration provision or any part thereof” shall be resolved by bindingarbitration. The United States Supreme Court has decided that parties may contract to arbitrate thistype of dispute under the FAA even if state law would prevent arbitration. See Mastrobuono at 52.The Tennessee Supreme Court has also recognized this principle, where the parties contract toarbitrate under the FAA. Frizzel Construction Company, Inc. v. Gatlinburg, LLC., 9 S.W.3d 79(Tenn. 1999), (holding that some issues may be excluded by law from arbitration where the partiesagree to be bound by Tennessee law.) It follows that the parties may contract to arbitrate thequestion of the validity and enforceability of the arbitration clause itself. See First Options ofChicago, Inc. v. Kaplan, 514 U.S. 938, 944-45 (1995) (holding that courts should not assume thatthe parties agreed to arbitrate arbitrability unless there is “clear and unmistakable” evidence that they did so.). C.f. Greentree v. Wampler, 949 So.2d 409, 415 (Ala. 1999), where the Supreme Court ofAlabama held that the issue of whether an arbitration clause is unconscionable is to be decided bya court of law and not arbitration. Because the contract specifically states that the parties agreed to arbitrate the questionof the validity or enforceability of the arbitration agreement, and because the choice of law clausestates that Federal law and Delaware law apply, the parties must submit the question of arbitrationto arbitration. [FOOTNOTE 1] The judgment of the Trial Court on this issue is reversed, and the cause remandedwith instructions to order the parties to arbitrate the validity and enforcement of the arbitrationclause. If the arbitrator finds the clause not enforceable, the Court will proceed to resolve thedisputes between the parties. If the arbitrator determines that the arbitration clause is enforceable,then the parties will be required to arbitrate all issues covered by the arbitration agreement. The cause is remanded, with the cost of the appeal assessed to appellee. :::FOOTNOTES::: FN1 As to Delaware law, the Tennessee Consumer Protection Acts states: T.C.A., �18-113(b).Any provision in any agreement or stipulation, verbal or written, restricting jurisdiction or venue toa forum outside this state, or requiring the application of the laws of another state with respect to anyclaim arising under or relating to the Tennessee Consumer Protection Act and related acts set forthin this title, is void as a matter of public policy. . . .

Berkley v. H & R Block Eastern Tax Services, Inc. IN THE COURT OF APPEALS OF TENNESSEEAT KNOXVILLE CHRISTINE BERKLEY, Individually and on behalf of all persons similarlysituated, etc., v. H & R BLOCK EASTERN TAX SERVICES, INC. Direct Appeal from the Circuit Court for Carter County No. C7219 Hon. Thomas J. Seeley, Jr., Circuit Judge No. E1999-00379-COA-R9-CV – Decided May 4, 2000 This is an interlocutory appeal from the Trial Judge’s refusal to enforce an arbitration agreemententered by the parties. Defendant has appealed. We reverse and remand with instructions to enforcethe arbitration agreement. Tenn. R. App. P.3 Interlocutory Appeal by Permission from the Trial Court; Judgment of theCircuit Court Reversed. FRANKS, J., delivered the opinion of the court, in which GODDARD, P.J., and SUSANO, J., joined. Gary C. Shockley and Alice Corker, Baker, Donelson, Bearman & Caldwell, Nashville, Tennesseeand N. Louise Ellingsworth, Daniel R. Young, and Michael D. Pospisil, Kansas City, Missouri, for Appellant. Gordon Ball, Knoxville, Tennessee for Appellees.
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