Opinion ID: 1844233
Heading Depth: 1
Heading Rank: 6

Heading: The Second Prong of Branch Overwhelming Bargaining Power

Text: American General Finance and Anderson argue that the trial court erred in finding the arbitration agreement unconscionable because, they argue, Mrs. Ashby failed to meet the second prong of the Branch unconscionability test. American General Finance and Anderson argue that the trial court ignored evidence presented indicating that there were lenders in the financial market available to the Ashbys that would make loans without requiring an arbitration agreement and that ignoring that evidence caused the trial court to err in concluding that the Ashbys had no meaningful choice and could not obtain an arbitration-free loan. Further, American General Finance and Anderson argue that Mrs. Ashby cannot meet the second prong of the Branch test because, they say, she failed to present any evidence indicating that she and Mr. Ashby actually shopped around for an arbitration-free loan. We reject these arguments. First, we note that the trial court limited the financial market it considered to be available to the Ashbys to those lenders advertising in the yellow pages of the Athens BellSouth telephone directory under financing at the time the Ashbys applied with American General Finance for their loan in April 1999. [5] This is exactly the type of comparison this Court made in Branch, and we find no error in this method of determining the applicable market available to the Ashbys. See Branch, 793 So.2d at 751 (considering the appropriate comparable financial market to be composed of those entities listed in the advertising pages of the Southern Directory Company telephone directory for the city nearest the plaintiff). Moreover, the trial court did not err in concluding that the arbitration agreement in the note and security agreement was unconscionable in the absence of evidence indicating that the Ashbys sought other alternatives to the American General Finance loan. Our decision in Branch regarding meaningful choice was based upon affidavits and stipulations regarding the practices of nearby lenders that were in the business of making loans comparable to the one Branch sought to obtain. In Branch, we stated: From the sample responses of the companies providing the kind of financing for which Branch was shopping in her geographical area, it follows that only 1 or 2 companies out of 16 might have allowed her to borrow money in November 1997 without agreeing to arbitrate. Branch would have had to expend considerable time and effort even to find these companies. 793 So.2d at 751 (first emphasis added; second emphasis in original). Thus, our holding in Branch was not based upon evidence showing that Branch had actually gone out and traveled a particular geographical area of the state in an unsuccessful attempt to obtain a loan free from the restriction of an arbitration clause. We concluded that American General Finance possessed overwhelming bargaining power because Branch would have had to expend considerable effort even to find the 1 or 2 of the 16 companies that would not have required arbitration. 793 So.2d at 751. In this case, Mrs. Ashby presented the same type of evidence we considered in Branch. Mrs. Ashby presented the trial court with evidence indicating that, at the time she and Mr. Ashby obtained their loan with American General Finance in 1999, 10 companies, including American General Finance, advertised in the yellow pages of the Athens BellSouth telephone directory under the category financing. Mrs. Ashby presented evidence indicating that 2 of those 10 companies did not make loans of the type sought by the Ashbys, [6] while 6 companies, including American General Finance, did make loans comparable to the one sought by the Ashbys. [7] Mrs. Ashby presented evidence indicating that all six of those companies required their customers to sign arbitration agreements. Thus, we conclude, as we did in Branch, that the Ashbys would have had to expend considerable time and effort to locate the remaining two companies, and it is unknown whether those companies would have insisted that the Ashbys sign an arbitration agreement. Justice Stuart, in her special writing, states that she would require evidence showing that the plaintiff actually shopped around for an arbitration-free loan. She relies upon the recent cases of Mason v. Acceptance Loan Co., 850 So.2d 289 (Ala. 2002); Vann v. First Community Credit Corp., 834 So.2d 751 (Ala.2002); and Green Tree Fin. Corp. v. Lewis, 813 So.2d 820 (Ala.2001). Her writing prompts additional observations. Anderson, the corporate defendants' agent and himself a defendant, admits that he knew that the Ashbys could not read the documents he presented to them. The operating procedures of American General Finance itself therefore required Anderson to explain those documents to the Ashbys, and Anderson did in fact undertake and purport to explain the documents to the Ashbys. These facts are undisputed. Mrs. Ashby, further, has submitted evidence indicating that she and Mr. Ashby requested an explanation of the documents and that Anderson withheld from the explanation he gave any mention of the presence or the effect of any arbitration agreement. Mason, on which Justice Stuart relies in her special writing, cites Mitchell Nissan, Inc. v. Foster, 775 So.2d 138, 140 (Ala. 2000), for the proposition that an illiterate person, `if he neglects to have [a document he signs] read, or to [i]nquire as to its contents,' cannot, `in the absence of fraud, deceit, or misrepresentation, avoid the effect of his signature because [he is] not informed of its contents.' (Quoting Beck & Pauli Lithographing Co. v. Houppert & Worcester, 104 Ala. 503, 506, 16 So. 522, 522 (1894).) Mrs. Ashby's evidence fulfills both exceptions to the binding effect of their signatures. First, they did [i]nquire as to ... [the] contents of the documents. Id. Second, Anderson did commit fraud, deceit, or misrepresentation, Foster, 775 So.2d at 140, if Mrs. Ashby's allegation that in explaining the documents he failed to mention the arbitration agreement be true. Neither Vann nor Lewis constitutes a retreat from Branch. Each turns on the utter failure of the plaintiffs to submit evidence of the scarcity of lenders that did not require arbitration agreements in the particular market in which the plaintiffs were seeking loans. Vann, 834 So.2d at 754, and Lewis, 813 So.2d at 825. Mrs. Ashby, like the plaintiff in Branch, did submit such evidence. Finally, the facts of this case do not logically present an issue whether the Ashbys should have actually shopped around for a lender that would not require that they execute an arbitration agreement. The Ashbys' inability to read the documents and agent Anderson's alleged failure to mention the arbitration agreement when he undertook and purported to explain the documents to them deprived the Ashbys of any reason to shop around for such a lender. The trial court also determined, and we agree, that the Ashbys had no input into negotiating the terms of or drafting the arbitration agreement. This evidence establishes that the Ashbys had no meaningful choice in accepting the arbitration agreement and that American General Finance had overwhelming bargaining power in obtaining the arbitration agreement. [8] For these reasons, we find that the evidence is sufficient to meet the second prong of the Branch unconscionability test.