Opinion ID: 1589494
Heading Depth: 1
Heading Rank: 2

Heading: background on applicable law

Text: ¶ 7. We recognize that the use of arbitration to resolve disputes finds favor under federal and state law. In IP Timberlands Operating Co. v. Denmiss Corp., 726 So.2d 96 (Miss.1998), this Court discussed two conflicting lines of cases. Id. at 103-04. One favored arbitration, while the other would allow a contracting party to revoke an arbitration agreement if it did so while the agreement was still executory (before an award was made). Id. The Court settled the conflict as follows: This Court hereby overturns the former line of case law that jealously guarded the court's jurisdiction. Again, we expressly state that this Court will respect the right of an individual or an entity to agree in advance of a dispute to arbitration or other alternative dispute resolution. Id. at 104. The IP Timberlands Court also recognized that Congress, by enacting section two of the Federal Arbitration Act (FAA), `declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.' Id. at 107 (quoting Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1, 12 (1984)). IP Timberlands cites U.S. Supreme Court precedent for the proposition that [d]oubts as to the availability of arbitration must be resolved in favor of arbitration. IP Timberlands, 726 So.2d at 107 (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983)). However, the Moses H. Cone Court separately held that the FAA explicitly makes an exception where grounds [] exist at law or in equity for the revocation of any contract. Moses H. Cone, 460 U.S. at 24 (quoting Federal Arbitration Act, 9 U.S.C. § 2 (2006)). ¶ 8. Arbitration agreements and other contract terms should be on equal footing, in that state courts may not invalidate arbitration agreements under laws that affect only arbitration agreements. Doctor's Assocs. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 1656, 134 L.Ed.2d 902, 909 (1996). That is, arbitration clauses shall not receive especial treatment not otherwise available under basic state contract principles. This principle comports with the pronouncement of the U.S. Supreme Court in Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 2523, 96 L.Ed.2d 426 (1987), which held the only exceptions to the federal policy lie in contracts not evidencing interstate commerce or that are revocable upon such grounds as exist at law or in equity for the revocation of any contract. Id. at 489, 107 S.Ct. 2520 (quoting FAA, 9 U.S.C. § 2). ¶ 9. Applying FAA language and U.S. Supreme Court decisions, we have held that applicable contract defenses available under state contract law such as fraud, duress, and unconscionability may be asserted to invalidate the arbitration agreement without offending the Federal Arbitration Act. East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002) (citing Casarotto, 517 U.S. at 686, 116 S.Ct. 1652). ¶ 10. [E]quity has a long history of concern with the substantive conscionability of the exercise of rights given by agreement. 7-29 Corbin on Contracts § 29.2 (2009). One court explained its rationale for denying specific performance of an unconscionable contract as follows: a party who has offered and succeeded in getting an agreement as tough as this one is, should not come to a chancellor and ask court help in the enforcement of its terms. That equity does not enforce unconscionable bargains is too well established to require elaborate citation. Campbell Soup Co. v. Wentz, 172 F.2d 80, 83 (3d Cir.1948). ¶ 11. Corbin expounds on the meaning of unconscionable as follows: Unconscionable is a word that defies lawyer-like definition. It is a term borrowed from moral philosophy and ethics. As close to a definition as we are likely to get is that which `affronts the sense of decency.' A much-quoted judicial definition is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. 7-29 Corbin on Contracts § 29.4 (2009) (quoting Gimbel Bros. Inc. v. Swift, 62 Misc.2d 156, 307 N.Y.S.2d 952, 954 (1970); Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C.Cir.1965)). ¶ 12. Our precedent follows the Williams (absence of meaningful choice) language as quoted above from Corbin. See Entergy Miss., Inc. v. Burdette Gin Co., 726 So.2d 1202, 1207 (Miss.1998) (quoting Bank of Indiana, Nat'l Ass'n. v. Holyfield, 476 F.Supp. 104, 109 (S.D.Miss. 1979)). Unconscionability can be procedural or substantive. East Ford, 826 So.2d at 714. Under substantive unconscionability, we look within the four corners of an agreement in order to discover any abuses relating to the specific terms which violate the expectations of, or cause gross disparity between, the contracting parties. Stephens, 911 So.2d at 521. Substantive unconscionability is proven by oppressive contract terms such that there is a one-sided agreement whereby one party is deprived of all the benefits of the agreement or left without a remedy for another party's nonperformance or breach.... Holyfield, 476 F.Supp. at 110. One example of a one-sided agreement is one that allows one party to go to court, but restricts the other to arbitration. See Pridgen v. Green Tree Fin. Servicing Corp., 88 F.Supp.2d 655, 658 (S.D.Miss. 2000). ¶ 13. Our courts may remedy unconscionable agreements as follows: The law of Mississippi imposes an obligation of good faith and fundamental fairness in the performance of every contract ... this requirement is so pronounced that courts have the power to refuse to enforce any contract ... in order to avoid an unconscionable result. Section 75-2-302 of the Mississippi Code provides: If the court as a matter of law finds the contract to have been unconscionable... [it] may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. Jeffrey Jackson and Mary Miller, Encyclopedia of Mississippi Law, Vol. 3, § 21.54 (Mississippi Practice Series, 2001) (quoting Holyfield, 476 F.Supp. at 109). ¶ 14. Mississippi Code Section 75-2-302, a Uniform Commercial Code provision, has been applied by this Court to contracts other than for sales of goods. Miss.Code Ann. § 75-2-302 (Rev.2002). See Brown, 949 So.2d at 741; Stephens, 911 So.2d at 525; Sanderson Farms, Inc. v. Gatlin, 848 So.2d 828, 836 (Miss.2003) (raising livestock for owner). Corbin on Contracts states that the unconscionability provision has entered the general law of contracts and has been applied to numerous transactions outside the coverage of Article 2 of the UCC. 7-29 Corbin on Contracts § 29.3 (2009). The official comment to the statute states that a court, in its discretion, may refuse to enforce the contract as a whole if it is permeated by the unconscionability.... Miss.Code Ann. § 75-2-302 cmt. 2 (Rev.2002).