Opinion ID: 1779017
Heading Depth: 1
Heading Rank: 4

Heading: the lower court erred in holding the indemnity agreement unconscionable.

Text: ¶ 11. Entergy claims that the rules of unconscionability do not apply to a regulated contract such as the one in this case, but only to private arm's-length transactions in which one party might overreach. Alternatively, Entergy contends that there is no evidence of unconscionability in this case. Burdette Gin, on the other hand, maintains that the MPSC failed to adequately safeguard the public when it approved Entergy's service agreement language, and the circuit court was therefore correct in finding the indemnity clause unconscionable. Unconscionability has been defined as 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. To show that a provision is conscionable, the party seeking to uphold the provision must show that the provision bears some reasonable relationship to the risks and needs of the business. Bank of Indiana, Nat'l Ass'n v. Holyfield, 476 F.Supp. 104, 109 (S.D.Miss.1979) (citations omitted). In Terre Haute Cooperage v. Branscome, 203 Miss. 493, 35 So.2d 537 (1948), this Court defined an unconscionable contract as `... one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other....' In re Will of Johnson, 351 So.2d 1339, 1341 (Miss. 1977). ¶ 12. Here, Burdette Gin claims that the indemnity clause was procedurally unconscionable. The indicators of procedural unconscionability generally fall into two areas: (1) lack of knowledge, and (2) lack of voluntariness. A lack of knowledge is demonstrated by a lack of understanding of the contract terms arising from inconspicuous print or the use of complex, legalistic language, disparity in sophistication of parties, and lack of opportunity to study the contract and inquire about contract terms. A lack of voluntariness is demonstrated in contracts of adhesion when there is a great imbalance in the parties' relative bargaining power, the stronger party's terms are unnegotiable, and the weaker party is prevented by market factors, timing or other pressures from being able to contract with another party on more favorable terms or to refrain from contracting at all. Holyfield, 476 F.Supp. at 109-10 (citations omitted).
¶ 13. Entergy maintains that Burdette Gin failed to meet its burden of proof on the issue of unconscionability, because the evidence revealed that Burdette Gin's manager was a skilled businessman and signed the contract voluntarily. It points to York v. Georgia-Pacific Corp., 585 F.Supp. 1265 (N.D.Miss. 1984), to support its theory that procedural unconscionability cannot be shown where the complaining party is a skilled businessman of many years. York, 585 F.Supp. at 1278. However, in York, as in other cases analyzing procedural unconscionability, the relative sophistication of the parties was only one factor considered by the court. Additionally, the facts in York are clearly distinguishable from this case, because the complaining party in York prepared the contract terms himself. Id. ¶ 14. Burdette Gin maintains that its president, Rex A. Morgan, who originally signed the service agreement, although a businessman, was a farmer by trade and no match for Entergy's team of attorneys. There is little to no evidence in the record before this Court regarding the comparative business savvy of the contracting parties here. However, it is reasonable to assume that a large company such as Entergy holds the advantage in that respect. Contrary to Burdette Gin's assertion, the language in the indemnity clause is fairly straight-forward, not misleading or complex. However, based upon the legal resources available to Entergy as compared to most of its customers, we find that the factor of lack of knowledge weighs in favor of Burdette Gin in this case.
¶ 15. The voluntariness factor alone is enough to find the indemnity clause unconscionable in this case. Burdette Gin was unable to contract with another party since Entergy was the sole supplier of electricity in the area. Although Burdette Gin did not assert that it attempted to negotiate the terms of its service agreement with Entergy, evidence presented to the circuit court revealed that Entergy never negotiates the terms of its service agreement. Only one customer was ever allowed to negotiate the terms of the service agreement, and that was in a very large manufacturing contract. Based upon these facts, we hold that the indemnity clause was procedurally unconscionable and therefore unenforceable. Procedural unconscionability is most strongly shown in contracts of adhesion presented to a party on a `take it or leave it basis.' York, 585 F.Supp. at 1278 ( quoting Holyfield, 476 F.Supp. at 108). We find that where, as here, the contract is essentially a contract of adhesion, any indemnity clause is presumed unconscionable. ¶ 16. To refute Burdette Gin's proof that the indemnity clause is unconscionable, Entergy must show that the provision was reasonably related to the business risks of the parties. Holyfield, 476 F.Supp. at 109. Entergy asserts that the indemnity clause was reasonably related to the business risks assumed by the parties in avoiding personal injury. It asserts that the indemnity clause only reasonably required Burdette Gin what it was already legally required to do under the eight foot statute. However, as previously discussed, the purpose of the eight foot statute is to protect workers from injury, not to allow Entergy to shield itself from liability from its own potential negligence. Since it is possible that both the employer and the utility could be jointly liable in an accident such as the one at issue in this case, it is not reasonable to allow Entergy, with its significantly greater bargaining power, to essentially unilaterally impose the indemnity clause upon its customers such as Burdette Gin.