IN THE SUPREME COURT OF MISSISSIPPI

NO. 2005-CA-00621-SCT

EQUIFIRST CORPORATION

v.

MELVIN JACKSON, XAVIER MANNING AND

BRENDA MANNING

DATE OF JUDGMENT: 12/08/2004

TRIAL JUDGE: HON. W. ASHLEY HINES

COURT FROM WHICH APPEALED:

ATTORNEYS FOR APPELLANT: LEFLORE COUNTY CIRCUIT COURT

WILLIAM CLINTON PENTECOST

SHERYL BEY

ATTORNEYS FOR APPELLEES: FRANK S. THACKSTON, JR.

C. W. WALKER, III

NATURE OF THE CASE: CIVIL - CONTRACT

DISPOSITION: REVERSED AND REMANDED - 02/02/2006

MOTION FOR REHEARING FILED:

MANDATE ISSUED:

EN BANC.

EASLEY, JUSTICE, FOR THE COURT:

PROCEDURAL HISTORY

¶1. Melvin Jackson (Jacks on) and Xavier and Brenda Manning (the Mannings), collectively

known as “the Borrowers,” filed suit against EquiFirst Corporation (Equi First) and Mortgage

Stop, Inc., (Mortgage Stop) in the Circuit Court of Leflore County, Mississippi. The

Bor rowers alleged various causes of actions associated with the contention that Mortgage

Stop, with EquiFirst’s knowledge, consent, and encouragement, targeted individuals to purchase

h omes at inflated values. EquiFirst removed the case to federal court where EquiFirst filed its2

first motion to compel arbit ration. The case was remanded to the Circuit Court of Leflore

County.

¶2. EquiFirst then filed another motion seeking to compel arbitration. After conducting

a hearing, the trial court denied the motion to comp el arbitration. The trial court’s order

provided that the motion to compel arbitration was “denied without prejudice to [the]

Defendant’s right to assert the arbitration issue after discovery is complete.” EquiFirst sought

per mission for interlocutory appeal of the order denying the motion to compel arbitration

from the trial court. The trial court certified its ruling for interlocutory appeal. EquiFirst filed

its notice of appeal to this Court.

¶3. On appeal, EquiFirst raises the fo llowing issue: whether the trial court erred in denying

EquiFirst’s motion to compel arbitration.

FACTS

¶4. Jackson contacted Kenneth Ellis (Ellis) regarding a house for sale at 118 Sycamore

Street, Greenwood, Mississippi. Jackson obtained Ellis’s name from a Coldwell Banker’s “for

sale” sign in front of the house. Jackson contacted Mortgage Stop, a third-party, retail

mortgage broker, in Jackson, Mississippi, about purchasing th e home. Mortgage Stop

submitted Jackson’s applicati on to various wholesale mortgage lenders, including EquiFirst.

EquiFirst accepted the terms and conditions and entered into a mortgage with Jackson at the

loan closing. Ellis arranged the loan closing at the Fisher Law Office. Bobby Fisher is a

Greenwood attorney selected by EquiFir st to act as its closing attorney. Jackson was present

at the loan closing along with Ellis, Fisher, and the home sellers.3

¶5. Similarly, the Mannings contacted Ellis about he lping them purchase a home. The

Mannings decided they would purchase a home at 205 Fitzhugh in Itta Bena, Mississippi. The

Mannings contend Ellis supplied the nam e of someone at Mortgage Stop in Jackson for

financing. Mortgage Stop submitted the Mannings’ application to various wholesale mortgage

lenders, including EquiFirst. EquiFirst accepted the terms and conditions and entered into a

mortgage with the Mannings at th e loan closing. Ellis arranged the loan closing at the Fisher

Law Office. The Mannings were present at the closing along with Ellis, Fisher, Lee Pruitt, and

two unknown men.

DISCUSSION

¶6. EquiFirst contends the trial court erred in failing to com pel arbitration because the

parties agreed to arbitrat e the disputes in question. EquiFirst maintains the signed arbitration

provisions, arbitration riders, are not prohibited by a statute or policy or a ny external legal

constraints. The Borrowers contend the trial court properly denied the motion to compel

arbitration. The Borrowers do not contest that they signed the arbitration provisions. The

Borrower s state they were told the “title/name” of each document and told that they had to sign

each document and that one of the documents mentioned to them was an arb itration rider. The

Borrowers do not contend anyone prevented them from read ing the documents. However, they

admit they did not read the provisions or any of the documents signed at the loan closing.

¶7. Each of the arbitration riders were on a separate document and conta ined the following

language:4

Any claim, dispute or controversy (whether in contract, tort or otherwise)

arising from or related to the loan evidenced by the Note, including but not

limited to all statutory claims, any claim, dispute o r controversy that may arise

out of or is based on the re lationships which result from the Borrower’s

application to the lender for the loan, the closing of the loan, or the servicing of

the loan, or any dispute or controve r sy over the applicability or enforceability

of thi s arbitration agreement or the entire agreement between Borrower and

Lender (collectively “claims”), shall be resolved, upon the election of either

Borrower or Lender, by binding arbitration, and not by court action.

¶8. Furthermore, directly a bove the Borrowers’ signatures, all capital, bold-face

typesetting, the additional language provided:

NOTICE: WHEN YOU SIGN THIS ARBITRATION RIDER, YOU ARE

AGREEI NG THAT EVERY DISPUTE DESCRIBED ABOVE MAY BE

DECIDED EXCLUSIVELY BY ARBITRATION. YOU ARE GIVING UP

RIGHTS YOU MIGHT HAVE TO LITIGATE THOSE CLAIMS AND

DISPUTES IN A COURT OR JURY TRIAL OR TO PARTICIPATE AS A

REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS IN

CONNECTION WITH A C LAIM OR DISPUTE. DISCOVERY IN

ARBI TRATION PROCEEDINGS IS LIMITED IN THE MANNER

PROVIDED BY THIS AGREEMENT AND THE RULES OF

ARBITRATION. THE ARBITRATOR’S DECISION WILL GENERALLY

BE FINAL AND BINDING. OTHER RIGHTS THAT YOU WOULD HAVE

IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN

ARBITR A TION. IT IS IMPORTANT THAT YOU READ THIS ENTIRE

ARBITRATION AGREEMENT CAREFULLY BEFORE SIGNING THIS

ARBITRATION RIDER.

BY SIGNING BELOW, Borrower accepts and agrees to the provisions

contained in this Rider.

¶9. The deci sion to grant or deny a motion to compel arbitration is reviewed by this Court

de novo. D oleac v. Real Estate Professionals, LLC

., 911 So. 2d 496, 501 (Miss. 2005); Ea s t

Ford, Inc. v. Taylor , 826 So. 2d 709, 713 (Miss. 2002). "[A]rbitration is a matter of contract

and a party cannot be required to submit to arbitrat ion any dispute which he has not agreed so5

to submit." P

re-Pai d Legal Services, Inc. v. Battle , 873 So. 2d 79, 83 (Miss. 2004) (quoting

AT & T Technologies, Inc. v. Communications Workers of America

, 475 U.S. 643, 648, 106

S. Ct. 1415, 1418, 89 L. Ed. 2d 648 (1986)).

¶10. “Thi s Court has consistently recognized the existence of ‘a liberal federal policy

favoring arbitra

tion agreements.’” T

erminix International, Inc. v. Rice

, 904 So. 2d 1051,

1054-55 (Miss. 2004) (quoting Russell v. Performance Toyota, Inc., 826 So. 2d 719, 722

(Miss. 2002)). Arbitr ation is firmly embedded in both our federal and state laws. P ass

Termite & Pest Control, Inc. v. Walker

, 904 So. 2d 1030, 1032-33 (Miss. 2 004) (citing

Russell

, 826 So. 2d 719 (Miss. 2002); East Ford

, 826 So. 2d 709 (Miss. 2002); I P

Timberlands Operating Co. v. Denmiss Corp. , 726 So. 2d 96 (Miss. 1998)).

I. WHETHER THE ARBITRATION RIDER IS PAR T OF A

CONTRACT EVIDENCING INTERSTATE COMMERCE.

¶11. In Battle , 873 So. 2d at 82, the Court stated:

The Federal Arbitration Act provides:

A written provision in any

. . . contrac t evidencing a transaction

involving commerce to settl e by arbitration a controversy

there after arising out of such contract or transaction . . . shall be

valid, irrevocable, and enforceable, save upon such grounds as

exist at law or in equity for the revocation of any contract.

9 U. S .C. § 2. This Court "will respect the right of an individual or an entity to agree in advance

of a dispute to arbitration or other alternative disp ute resolution." R ussell, 826 So. 2d at 721-

22(¶ 6) (ci

ting IP Timberlands , 726 So. 2d at 104 (¶ 29)). This Court has endorsed the

undisputed province of the Federal Arbitration Act, 9 U.S.C. § § 1-16 (FAA), and recognized6

its clear authority to g

overn agreements formed in interstate commerce wherein a contractual

provision provides for alternative dispute resolution. IP Timberlands, 726 So. 2d at 107.

¶12. This Court has held:

In determining

the validity of a motion to compel arbitration under the Federal

Arbitration Act, courts generally conduct a two-pronged inquiry. The first prong

has two considerations: (1) whether there is a valid arbitration agreement and (2)

whether the parties' dispute is w ithin the scope of the arbitration agreement."

.

. . The second prong considers "whether legal co nstraints external to the parties'

agreement foreclosed arbitration of those claims.

Doleac

, 911 So. 2d at 501 (citing Sullivan v. Mounger

, 882 So. 2d 129, 132 (Miss. 2004)).

¶13. In Vicksburg Partners, L.P. v. Stevens , 911 So. 2d 507, 514-15 (Miss. 2005), we

stated:

A thresho ld determination which must be considered is whether the

parties' admission agreement falls wit hin the provisions of § 2 of the Federal

Arbitration Act. The FAA requires "that 'we rigorously enforce agreements to

arbitrate.' " East Ford , 826 So. 2d at 713 (citing S hearson/Am. Exp. Inc. v.

McMahon

, 482 U.S. 220, 226, 107 S. Ct. 2332, 2337, 96 L.E d.2d 185 (1987)).

Specif ically, § 2 of the Federal Arbitration Act, relates to the enforceability of

arbitration provisions . . . .

In Allied-Bruce Terminix Compa nies v. Dobson , 513 U.S. 265, 115 S.

Ct. 834, 130 L. Ed. 2d 753 (1995),

. . . the Supreme Co urt concluded that the

phrase "involving commerce" is to be interpreted broadl y and was the functional

equivalent of the phrase "affecting commerce", which signals Congress' intent

to exercise its Commerce Clause powers to the ful lest extent. I

d. at 273-74,

115 S. Ct. 834.

In 2003, the U.S. Supreme Court once again sou g ht to quantify the broad

effect of the FAA

as implemented through Congress' Commerce Clause power.

In Citizens Bank v. Alafabco, Inc.

, 53 9 U.S. 52, 123 S. Ct. 2037, 156 L. Ed. 2d

46 (2003),

. . . th

e U.S. Supreme Court held that "Congress' Commerce Clause

power 'may be exercised in individual cases without showing any specific effect

upon interstate comm

erce' if in the aggregate the economic activity in question7

woul d represent 'a general practice . . . subject to federal control.' " 539 U.S. at

56-57, 123 S. Ct. at 2040 (citing Mandevil le Island Farms, Inc. v. Am. Crystal

Sugar Co.

, 334 U.S. 219, 236, 68 S. Ct. 996, 92 L. Ed. 1328 (1948)). See also

Perez v. United St

ates , 402 U.S. 146, 154, 91 S. Ct. 1357, 28 L. Ed. 2d 686

(1971); Wickard v. Filburn

, 317 U.S. 111, 1 27-128, 63 S. Ct. 82, 87 L. Ed.

122 (1942).

This case clearly falls within the broad purview of the Federal Arbitration

Act. Accordingly, singular agreements between care facilities and care patients,

when taken in the aggregate, affect interstat e commerce. As stated in A lafabco

, "[o]nly the general practice need bear on interstate commerce in a subs tantial

way." 539 U.S. at 57, 123 S. Ct. at 2040 (citing M aryland v. Wirtz

, 392 U.S.

183, 196-97 n. 27, 88 S. Ct. 2017, 20 L. Ed. 2d 1020 (1968 ); NLRB v. Jones

& Laughlin Steel Corp

., 30 1 U.S. 1, 37-38, 57 S. Ct. 615, 81 L. Ed. 893

(1937)).

¶14. H ere, as in Vicksburg Partners

, the contract in the aggregate involves economic

activity affecting interstate commerce. I d. at 51 5. Furthermore, the Borrowers are all

resi dent citizens of Mississippi, and EquiFirst is a North Carolina corporation with its

pr incipal place of business in North Carolina. Therefore, we find the Federal Arbitration Act

is applicable. Id

.

II. WHETHER THE TRIAL COURT ERRED IN DENYING

EQUIFIRST’S MOTION TO COMPEL ARBITRATION.

¶15. We have distinguished between procedural and substantive unconscionability. East

Ford , 826 So. 2d at 714. In East Ford , this Court stated:

The courts have recognized "two types of uncon scionability, procedural

and substantive." P

ridgen v. Green Tree F in. Servicing Corp. , 88 F. Supp.2d

655 (S.D. Miss.2000) (quoting York v. Georgia-Pac. Corp

., 585 F . Supp. 1265,

1278 (N.D. Miss. 1984)). Procedural unconscionability may be proved by

showing "a lack of knowledge, lack of volunt a riness, inconspicuous print, the use

of comple x legalistic language, disparity in sophistication or bargaining power1 The Borrowers also argue that the attorney hired to handled the loan closing for

EquiFirst, Fisher, had an obligation to explain the cont racts to them. However, the Borrowers

acknowledge Fisher was acting as agent for EquiFirst and that he was hired by EquiFirst.

8 of the parties and/or a lack of opportunity to study the contract and inquire about

the contract terms." Id.

Substantive unconscionability may be proven by showing t he terms of the

ar bitration agreement to be oppressive. Y ork

, 585 F. Supp. at 1278.

Substantively unconscionable clauses have been held to include waiver of choice

of forum and waiver of certain remedies.

¶16. Here, the Borrower s’ allegations fall into the category of procedural unconscionability.

The substance of the Borrowers’ claims made in the affidavits of Melvin Jackson and Brenda

Manning are that they did not read the documents they signed at the lo an closing, including the

arbitration rider, to purchase their homes and the y were told that they had to sign each

document. The Borrowers admit in their affidavits they were told the “title/name” of each

document and that one of the documents was called an arbitration rider. Their contention is that

“no one told us we had the right to read any of the documents or to ask questions.” However,

nothing indicates that anyone prevented them from readi ng the documents or asking any

questions. 1

¶17. In McKenzie Check Advance of Mississippi, L.L.C. v. Hardy, 8 66 So. 2d 446, 455

(Miss. 2004), we stated:

It is well settled under Mississippi law that a contracting party is under a legal

obligation to re ad a contract before signing it. F irst Family Financial

S ervices, Inc. v. Fairley, 173 F. Supp. 2d 565, 572 (S.D. Miss. 2001). S ee

Godfrey, Bassett & Kuykendall Architects, Ltd. v. Huntington Lumber &

Supply Co.

, 584 So. 2d 1254, 12 5 7 (Miss. 1991). S ee also Koenig v. Calcote

,9

199 Miss. 435, 25 So. 2d 763 (1946); McC u bbins v. Morgan

, 199 Miss. 153,

23 So. 2d 926 (1945).

¶18. Jackson alleged in his affidavit that he had a twelfth grade education. Jackson contended

that, despite his education level, he has difficulty reading. However, Jackson does not claim

that he informed anyone at the loan closing that he had difficulty reading. Brenda Manning

alleg ed in her affidavit that she felt hurried because the loan closing could not be rescheduled

after 5:00 p.m. to accommodate her husband’s work schedule. She stated that her husband did

not get o ff work until 5:00 p.m. However, she stated they had approximately a week’s notice

of the loan closing date and time. Furthermore, her husband attended the loan closing.

¶19. In Northwest Fin. Miss., Inc. v. McDonald

, 905 So. 2d 1187, 1194 (Miss. 2005), this

Court addressed a similar situation where the borrowers claimed the lenders did not explain

what arbitration was and did not tell the borrowers they were givin g up their rights to a jury

trial. The Court held:

In Washingt o n Mutual Fin. Group, LLC v. Bailey

, 364 F.3d 260 (5th Cir.

2004), the court ruled that under Mississippi law, the inabi lity of borrowers to

read did not render them incapable of possessing adequate kn o wledge of the

arbitration agreement they signed. I d

. at 264-65. T he cour t also concluded

that the trial court erred by finding the agreeme nt unconscionable under

Mississippi law because the lende r s failed to specifically inform the

plaintiffs that they were signing an arbitration agreeme nt. In the present

case, each borrower s igned a single-page arbitration agreement, written in plain

language. None of the borrowers c laimed to be unable to read. T here is no

claim that the borrowers asked anyone to explain the process of

arbitration or to explain what arbitration meant; the borrowers simply

state that no one inf

ormed them that they were signing an arbitration agreement,

or told them what an

arbitration agreement was. A ny reasonable person

reading this document prior to signing it would expect to be subject to

arbitration and would know that they were waivi ng their right to a jury10

trial. There is also no evidence that a reasonable person would not sign

this document in return for a desired loan

.

Northwest , 905 So. 2d at 1194 (emphasis added).

¶20. As previously stated, the language clearly stated in bold typesetting above the signature

line that by signing the arbitration rider they were waivi ng their right to litigate those claims

and disputes in a court or jury trial or to participate as a representative or member of any class

of claimants in connection with a claim or dispute. The provision further stated that other

rights they would have if they went to court may also not be available in arbitration . Clearly,

a review of the arbitration rider reveals it was conspicuous, and the language was not

convoluted. In Russell , we held:

The arbitration agreement in the Purchase Agreement is preceded by boldface

and capitalized headings and was al most immediately succeeded by the signature

line

. In Mississippi, a person is charged with knowing the contents of any

document that he executes

. J .R. Watkins Co. v. Runnels , 252 Miss. 87, 96,

172 So. 2d 567, 571 (1965) (" A person cannot avoid a written contract

which he has entered into on the ground that he did not read it or have it

read to him .").

826 So. 2d at 726 (emphasis added).

¶21. Based on the analysis above, we find the trial court erred in denying EquiFirst’s motion

to compel arbitration under the arbitration rider signed by the Borrowers.

CONCLUSION

¶22. The trial court erred in denying EquiFirst's motion to compel arbitration. The

transaction involved interstate commerce, and the Borrowers signed the arbitration agreement.

The Federal Arbitration Act is applicable to the agreement bet ween the parties. There was no11

evidence presented tha t the Borrowers did not knowingly, intelligently, and voluntarily waive

their constitutional right to a jury trial when they signed the arbitration agreement with

Equ iFirst. Therefore, the judgment of the Circuit Court of Leflore County is reversed, and this

case is remanded to the trial court to compel arbitration.

¶23. REVERSED AND REMANDED.

SMITH, C.J., WALLER, P.J., CARLSON A ND DICKINSON, JJ., CONCUR.

COBB, P.J., CONCURS IN RESULT ONLY. GRAVES, J., DISSENTS WITHOUT

SEPARATE WRITTEN OPINION. DIAZ AND RANDOLPH, JJ., NOT PARTICIPATING.