MS Credit Ctr., Inc., et al. v. Horton
| Docket Number: | 2004-CA-01699-SCT Linked Case(s): 2004-CA-01699-SCT |
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| Oral Argument: | 11-29-2005 | |
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| Supreme Court: | Opinion Link Opinion Date: 02-23-2006 Opinion Author: Dickinson, J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Contract - Arbitration agreement - Procedural unconscionability - Waiver Judge(s) Concurring: Smith, C.J., Waller and Cobb, P.JJ., Easley, Carlson and Randolph, JJ. Non Participating Judge(s): Diaz, J. Concurs in Result Only: Graves, J. Procedural History: Bench Trial Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 08-16-2004 Appealed from: Sunflower County Circuit Court Judge: Richard Smith Disposition: Denied Appellant's Motion to Compel Arbitration Case Number: 2002-0732-CI |
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| Party Name: | Attorney Name: | |||
| Appellant: | MS CREDIT CENTER, INC., d/b/a MS LOAN
CENTER, AMERICAN BANKERS LIFE
ASSURANCE COMPANY OF FLORIDA AND MS
CASUALTY INSURANCE COMPANY |
TAYLOR NICHOLSON FERRELL,
WALTER D. WILLSON, KENNA L. MANSFIELD, JR. |
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| Appellee: | CATHERINE HORTON | SUZANNE GRIGGINS KEYS |
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| Topic: | Contract - Arbitration agreement - Procedural unconscionability - Waiver |
| Summary of the Facts: | Catherine Horton made three loans from MS Credit Center, Inc., d/b/a MS Loan Center. In her second loan transaction, Horton purchased credit life and disability insurance from MS Life Insurance Company and MS Casualty Insurance Company. In the third transaction, Horton purchased credit life and disability insurance from American National Insurance Company and credit property insurance from American National Property and Casualty Company. In connection with her third loan, Horton signed a separate document entitled: “ARBITRATION AGREEMENT AND WAIVER OF JURY TRIAL.” Horton filed suit against MS Credit and the Insurance Defendants, alleging they did not adequately disclose the terms of her purchases of credit insurance. Horton asserted causes of action for Breach of Fiduciary Duties, Breach of Implied Covenants of Good Faith and Fair Dealing, Fraudulent Misrepresentation and/or Omission, Negligent Misrepresentation and/or Omission, Civil Conspiracy, Negligence, and Unconscionability. She asserts that the entire set of loan transactions were procedurally and substantively unconscionable. The Insurance Defendants asserted as an affirmative defense that “some or all of the claims advanced herein are subject to binding arbitration under the loan agreements and/or the Federal Arbitration Act.” MS Credit did not include an arbitration defense in its original answer but did so in its answer to the Amended Complaint. MS Credit - joined by Bankhead and Sloan - filed a Motion to Compel Arbitration of Horton’s claims. The motion asserted that when Horton signed the arbitration agreement in connection with her third loan, she agreed to submit all claims to binding arbitration. The Insurance Defendants joined in MS Credit’s Motion and filed a separate motion to address their standing to compel arbitration. The trial court denied the motion to compel arbitration, and MS Credit, MS Casualty, and MS Life appeal. |
| Summary of Opinion Analysis: | Each of Horton’s claims against the defendants either arise out of or relate to loan transactions with MS Credit, and the arbitration provision provides that all claims arising out of or relating to “a transaction involving us and one or more third parties” are subject to arbitration. Therefore, the arbitration agreement applies to all of Horton’s claims because the loan and insurance transactions involved here affect interstate commerce, and the claims are included within those to be arbitrated; the first prong of the inquiry under the FAA is satisfied. The evidence is clear that both Horton and MS Credit signed the arbitration agreement. Horton’s arguments that she did not knowingly and voluntarily agree to the terms of the arbitration agreement are averments of procedural unconscionability. Factors considered by the court in determining where arbitration provisions are procedurally unconscionable include lack of knowledge; lack of voluntariness; inconspicuous print; complex legalistic language; disparity in sophistication or bargaining power; and lack of opportunity to study the contract and inquire about the contract terms. Horton may not escape the agreement by simply stating she did not read the agreement or understand its terms, and she cannot attribute her lack of knowledge to Defendant’s failure to explain. There is no evidence to suggest Horton requested removal of the arbitration agreement or negotiation of any of the terms of the loan transaction. Therefore, Horton has failed to establish that she did not voluntarily enter the arbitration agreement. The arbitration agreement signed by Horton was at least as open and obvious as other contractual provisions. The arbitration language in Horton’s agreement clearly states that the parties agreed to arbitrate any and all disputes arising out of, or in any way related to, the loan transaction at issue, including any and all claims premised upon any insurance policies purchased in connection therewith. The record does not show Horton’s alleged lack of sophistication in financial matters or indicate that Horton could not have obtained a loan with another financial institution, had she so desired. Thus, Horton has failed to demonstrate lack of sophistication sufficient to render the arbitration agreement unenforceable. There is no indication she was rushed or hurried into completing the loan transaction by a set time; nor was she prevented from studying and inquiring as to the terms. Given these factors, the agreement was not procedurally unconscionable. Arbitration can be waived, however, where a party actively participates in a lawsuit or takes other action inconsistent with the right to arbitration. The Defendants asserted their right to compel arbitration in their respective answers. However, rather than proceeding within a reasonable time to file a motion to compel arbitration and request a hearing on the motion, defendants proceeded to substantially engage the litigation process by consenting to a scheduling order, engaging in written discovery, and conducting Horton’s deposition. A party who invokes the right to compel arbitration and pursues that right will not ordinarily waive the right simply because of involvement in the litigation process, and a party who seeks to compel arbitration after a long delay will not ordinarily be found to have waived the right where there has been no participation in, or advancement of, the litigation process. However, where – as here – there is a substantial and unreasonable delay in pursuing the right, coupled with active participation in the litigation process, the court will find a waiver of the right to compel arbitration. The Defendants did not file a motion to compel arbitration or otherwise pursue their right to arbitrate until eight months after filing their answers, all the while participating in the litigation process. In fact, a defendant’s failure to timely and reasonably raise and pursue the enforcement of any affirmative defense or other affirmative matter or right which would serve to terminate or stay the litigation, coupled with active participation in the litigation process, will ordinarily serve as a waiver. The circuit court’s finding that the arbitration agreement was procedurally unconscionable is reversed and rendered, but the circuit court’s denial of Defendant’s Motion to Compel Arbitration is affirmed. |
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