Court Opinion

ID: 28092
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:18:58+00
Date Added: 2024-06-11T14:55:20.413033
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                            FOR THE FIFTH CIRCUIT

                                No. 01-60594

AMERICAN HEALTH AND LIFE INSURANCE
COMPANY; TRITON INSURANCE COMPANY,

                                                           Plaintiffs - Appellees,
                                   versus

IVA JOHNSON
                                                       Defendant - Appellant.

                                  No. 01-60595

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
CO
      Plaintiffs - Appellees

 v.

ELLIS B LANG

       Defendant - Appellant

                                    No. 01-60596

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

       Plaintiffs - Appellees

 v.

CHARLES LAWRENCE

       Defendant - Appellant
                                No. 01-60597

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

REGINALD V LOWERY

      Defendant - Appellant

                                 No. 01-60598

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

ETTA MELTON

      Defendant - Appellant

                               No. 01-60599

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

HELEN MORANT

      Defendant - Appellant

                               No. 01-60600

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

                                         2
      Plaintiffs - Appellees

 v.

DANIEL DAVIS

      Defendant - Appellant

                               No. 01-60601

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

MARILYN FARMER

      Defendant - Appellant

                               No. 01-60602

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

ETHYL MAE GILL

      Defendant - Appellant

                               No. 01-60603

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

                                    3
ZETTIE GRAHAM

      Defendant - Appellant

                                   No. 01-60604

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

LAURA HAIRSTON

      Defendant - Appellant

                                No. 01-60605

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintifffs - Appellees

 v.

ROBERT HALBERT

      Defendant - Appellant

                                 No. 01-60606

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

LOUISE HARRELL

      Defendant - Appellant

                                        4
                                     No. 01-60607

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

TINA HART

      Defendant - Appellant

                               No. 01-60608

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

DAVID HILL; GLENDA ANN HILL

      Defendants - Appellants

                               No. 01-60609

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

WILLIE ARTHUR HODGES, SR; LULA D HODGES

      Defendants - Appellants

                               No. 01-60610

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

                                              5
      Plaintiffs - Appellees

 v.

VIOLET R JOHNSON

      Defendant - Appellant

                                No. 01-60611

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

ELLSWORTH NASH

      Defendant - Appellant

                               No. 01-60612

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

HOWARD PRATT

      Defendant - Appellant

                               No. 01-60613

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

                                               6
 v.

DELORES SANDERS

      Defendant - Appellant

                               No. 01-60614

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

JERRY SMITH

      Defendant - Appellant

                                 No. 01-60616

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

EARNEST STALLINGS; LUTISHIA STALLINGS

      Defendants - Appellants

                                 No. 01-60617

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

JOE STALLINGS

                                              7
      Defendant - Appellant

                               Case No. 01-60619

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

ANGEL SYKES

      Defendant - Appellant

                                 No. 01-60620

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

TWANDA BRAZZLE

      Defendant - Appellant

                                 No. 01-60621

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

CHARLIE BREWER; IZELLA BREWER

      Defendants - Appellants

                                 No. 01-60622

                                            8
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

MICHAEL W BROWN

      Defendant - Appellant

                               No. 01-60623

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

ARGAIL CARTER

      Defendant - Appellant

                               No. 01-60624

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

VELMA CLARK

      Defendant - Appellant

                               No. 01-60625

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

                                         9
       Plaintiffs - Appellees

 v.

GLORIA COTTON

       Defendant - Appellant

                                      No. 01-60626

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

       Plaintiffs - Appellees

 v.

LINDA TAYLOR

       Defendant - Appellant

                                 No. 01-60627

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

       Plaintiffs - Appellees

 v.

TRAVIS WILKINS; LOUISE WILKINS

       Defendants - Appellants

                                 No. 01-60628

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

                                           10
      Plaintiffs - Appellees

 v.

REGINALD WHITE; TYREE WHITE

      Defendants - Appellants

                                No. 01-60629

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

HENRY YOUNG; ANNIE YOUNG

      Defendants - Appellants

                                No. 01-60630

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

      Plaintiffs - Appellees

 v.

RICHARD SMITH

      Defendant - Appellant

                                No. 01-60631

AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY

                                          11
           Plaintiffs - Appellees

  v.

B J HARVEY; LOUISE HARVEY

           Defendants - Appellants

                               Appeals from the United States District Court
                                 for the Northern District of Mississippi
                                             (1:01-CV-110)

                                                  June 7, 2002

Before DAVIS, EMILIO M. GARZA, and STEWART, Circuit Judges.

PER CURIAM:*

        Iva Johnson (“Johnson”) appeals the district court’s order referring the above case to

arbitration pursuant to the Federal Arbitration Act (“FAA”). For the reasons stated herein, we affirm.

                              FACTUAL AND PROCEDURAL HISTORY

        This case involves the sale of credit-related insurance to Iva Johnson and several other

similarly situated individuals (collectively the “Defendants”). The Defendants obtained one or more

consumer loans from CitiFinancial, Inc. (“CFI”) at CFI’s Mississippi offices in Columbus,

Greenwood, Starkville, or Tupelo. As a prerequisite for receiving the loans, the Defendants were

* Pursuant to 5th CIR. R. 47.5, the court has determined that this opinion should not be published and is not
precedent except under the limited circumstances set forth in 5th CIR. R. 47.5.4.

                                                        12
required to purchase credit-related insurance. The purpose of credit-related insurance is to provide

security for the repayment of a loan, in the event that the borrower is disabled or injured, or collateral

is impaired. CFI gave the Defendants the option of purchasing their insurance from either American

Health and Life Insurance Company (“American”) or Triton Insurance Company (“Triton”).

American and Triton are wholly owned subsidiaries of CFI.             In connection with the loan, the

Defendants signed a document entitled “Disclosure Statement, Note and Security Agreement”

(“Agreement”), which essentially constituted the loan contract. The Agreement contained a

mandatory arbit ration provision, requiring that all claims or disputes in connection with the loan

transaction be submitted to binding arbitration. Despite this provision, the Defendants independently

filed suit in state court against American, Triton, and employees of CFI (the “Plaintiffs”) alleging

fraud, negligent misrepresentation, breach of fiduciary duty, and negligence in relationship to the

consumer loan transactions.

        Shortly thereafter, the Plaintiffs filed an action in federal district court seeking to compel

arbitration. They alleged that, in connection with the loan, the Defendants signed a contract

containing a mandatory arbitration clause, and thus, arbitration was required pursuant to the FAA.

The Defendants filed motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil

Procedure, asserting that Mississippi law forbids arbitration clauses in insurance policies. In support

of their contention, the Defendants submitted an affidavit from the Mississippi Insurance

Commissioner, and an opinion from the State Attorney General. By written order, the district court

denied the Defendants’ motions to dismiss, finding that the Defendants submitted evidentiary

materials that were outside of the pleading, and therefore could not have been considered in deciding

a 12(b)(6) motion to dismiss. Considering only the pleadings, the court found that the Defendants

                                                   13
failed to allege any set of facts that would entitle them to the relief they sought. Subsequently, the

Plaintiffs filed a motion for summary judgment. After evaluating all of the summary judgment

evidence, the district court granted their motion and ordered arbitration. The Defendants each timely

appealed to this Court. All of the Defendants’ independent actions were consolidated for purposes

of appeal.

                                     STANDARD OF REVIEW

        We review de novo a district court’s ruling on a motion to dismiss pursuant to Rule 12(b)(6)

of the Federal Rules of Civil Procedure. Shipp v. McMahon, 234 F.3d 907, 911 (5th Cir. 2000).

This motion examines the legal sufficiency of the claims stated in the complaint and must be evaluated

solely on the pleadings. Jackson v. Procunier, 789 F.2d 307, 309 (5th Cir. 1986). A district court’s

grant of summary judgment is also reviewed de novo. Exxon Corp. v. Baton Rouge Oil, 77 F.3d 850,

853 (5th Cir. 1996). Once a properly supported motion for summary judgment is presented, t he

burden shifts to the non-moving party to set forth facts showing that there is a genuine issue for trial.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Bros. v. Klevenhagen, 28 F.3d 452, 455

(5th Cir. 1994). We review “the facts drawing all inferences most favorable to the party opposing

the motion.” Matagorda County v. Russell Law, 19 F.3d 215, 217 (5th Cir. 1994). Therefore, the

entry of summary judgment is appropriate if “there is no genuine issue as to any material fact” and

“the moving party is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c); Rojas v. TK

Comms., Inc., 87 F.3d 745, 747 (5th Cir. 1996).

                                            DISCUSSION

        In enacting the FAA, Congress expressed a strong national policy favoring arbitration and

removed the states’ power to require judicial proceedings for the resolution of claims which the

                                                   14
parties contracted to resolve by arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10 (1984).

Under the Act, a written provision, in a contract that evidences a transaction involving commerce,

to settle by arbitration a controversy arising out of such contract is valid, irrevocable, and enforceable.

9 U.S.C. § 2 (1999). Whenever the scope of an arbitration clause is in question, the court should

construe the clause in favor of arbitration. Rojas , 87 F.3d at 747. If the issues in the case are within

the contemplation of the arbitration agreement, the FAA's stay-of-litigation provision is mandatory,

and there is no discretion vested in the district court to deny the stay. In re Complaint of Hornbeck

Offshore Corp., 981 F.2d 752, 754 (5th Cir. 1993).

        This Circuit has directed that district courts are to conduct a two-step inquiry when

determining whether parties’ claims should be submitted to arbitration. R.M. Perez & Assocs., Inc.

v. Welch, 960 F.2d 534, 538 (5th Cir. 1992). First, the district court must determine whether the

parties had a written agreement to arbitrate the dispute. Id. After the court concludes that the parties

agreed to arbitrate, “it must consider whether any federal statute or policy renders the claims

nonarbitrable.” Id. In the present case, the parties do not dispute that the Agreement contains the

following mandatory arbitration provision:

        Any claim, except those specified below in this provision, shall be resolved by binding
        arbitration in accordance with (i) the Federal Arbitration Act; (ii) the Expedited
        Procedures of the Commercial Arbitration Act; and (iii) this Provision.

The Agreement defines a “claim” as

        [A]ny case, controversy, dispute, tort, disagreement, lawsuit, or claim now or
        hereafter existing between You and Us. A Claim includes, without limitation,
        anything that concerns . . . any past, present, or future Credit Transactions. . .
        Examples of claims that are governed by this Agreement include those involving:
        State insurance, usury, and lending laws, fraud or misrepresentation, including claims
        for failing to disclose material facts.

                                                    15
The Agreement also states that the term “US” as used in the arbitration provision includes not only

the lender, but also the lender’s present and former parent corporations, subsidiary and affiliate

corporations, as well as any employees of these entities. Id. at 4 (emphasis added). The Plaintiffs

clearly fall within one or more of these categories. Thus, they are specifically covered by the

arbitration clause.

        Applying the two-prong test set out in R.M. Perez, the district court determined that the

written arbitration clause was “unambiguous, sufficiently broad to cover the Defendant[s]’ claims,

and susceptible to only one interpretation - that the parties intended to settle, through arbitration, the

claims the Defendant[s] [had] raised.” As for the second prong, the court found that there were no

federal statutes or policies rendering the claims raised in the complaint “nonarbitrable.” Id. Thus,

the court ordered arbitration.

        As an initial matter, we find that the district court properly found that the two-prong test for

determining whether the parties agreed to binding arbitration was met, and the Defendants do not

challenge this conclusion on appeal. Instead, they maintain that the entire loan agreement is invalid

because the Plaintiffs failed to submit their policy forms to the Mississippi Commissioner of Insurance

for approval as required by Mississippi law.2 This contention must fail because it ignores the fact that

the arbitration clause was in the loan agreement and not the insurance policy itself. Therefore,

Mississippi law applicable to the business of insurance is not at issue here, and there is no law in

Mississippi requiring that loan contracts must be presented to the Commissioner of Insurance for

        2
         Mississippi law requires that “All policies, certificates of insurance, notices of proposed
insurance, applications for insurance, endorsements and riders delivered or issued for delivery in this
state, and the schedules of premium rates pertaining thereto, shall be filed with the commissioner for
his approval prior to use.” MISS. CODE ANN. § 83-53-15 (1999).

                                                   16
approval.   See e.g. Federal Trade Comm’n v. Dixie Fin. Co., 695 F.2d 926, 931(5th Cir. 1983)

(holding that the wrongful sale of credit insurance during a loan transaction does not involve the

business of insurance). Because we find that the loan contract was valid, and that the two-prong test

set out in R.M. Perez was met, we conclude that the district court properly ordered mandatory
                                     3
arbitration pursuant to the FAA.         Since we are affirming the district court’s decision, the

Defendants’ motion to supplement the record is denied.

                                          CONCLUSION

       For the reasons stated above, we AFFIRM.

AFFIRMED.

       3
         The Defendants also allege that in their motion to dismiss, they argued that the application
of the FAA to this case is prohibited by the McCarran-Ferguson Act, which generally prohibits federal
interference in the state regulation of insurance. The record reveals, however, that the Defendants
did not raise this issue in their motion to dismiss as they contend. Because this preemption argument
is raised for the first time on appeal, we would generally review it only for plain error. Forbush v.
J.C. Penney Co., 98 F.3d 817, 822 (5th Cir. 1996). However, because we find that the disposition
of this case does not depend on the application of state insurance law, we do not address this
argument.

                                                 17