HALIL SULEYMAN OZERDEN, District Judge.
BEFORE THE COURT is the Motion [2] to Compel Arbitration or, Alternatively, Rule 12(b)(6) Motion to Dismiss for Failure to State a Claim upon Which Relief Can Be Granted filed by Defendant National Truck Funding, LLC. This Motion is fully briefed. Having considered the Motion [2], related pleadings, the record, and relevant legal authority, the Court is of the opinion that Defendant's Motion [2] should be granted to the extent it seeks to compel arbitration, and the parties will be ordered to submit the disputed matter to arbitration. This case will be dismissed.
This dispute arises out of Plaintiff Schlonda Donald's ("Plaintiff" or "Donald") rental of certain trucks from Defendant National Truck Funding, LLC ("Defendant" or "National Truck"). Donald "signed four separate rental agreements to purchase four different models of freightliners with National Truck Funding: June 30, 2014; August 8, 2014; and August 12, 2014." Pl.'s Aff. [6-1] at 1; see also Rental Agreements [1-2] at 16-41. "In addition to the written Commercial Truck Rental Agreements, Donald also purchased contract upgrades to hold National Truck liable for a percentage or the entirety for all covered repairs needed within a designated time period." Compl. [1-2] at 11.
The four Commercial Truck Rental Agreements between Plaintiff and National Truck were each six pages long, and each Agreement contained the following provisions on the sixth and final page:
Rental Agreements [1-2] at 21, 28, 35, 41.
The foregoing provisions of each Rental Agreement appear in the same font as the other sections of the respective Rental Agreements. See id. Donald executed each page of each Rental Agreement, including the last page containing the arbitration provision, which was also signed by a representative of National Truck. See id. Immediately above Donald's signature on the Rental Agreements as the "Customer" is a provision stating that "[t]he below-signed Customer does acknowledge that he/she has read this Rental Agreement in its entirety and agrees to all terms and conditions herein." Id.
On October 5, 2016, Donald filed a Complaint against National Truck in the County Court of Harrison County, Mississippi, First Judicial District, Compl. [1-2] at 9, alleging that "[s]hortly after taking possession of the trucks, Donald suffered serious mechanical breakdowns, by no fault of Donald's, making the use of the trucks for their intended purposes impossible," id. at 12. According to the Complaint, "[p]er the language of the contracts, Donald's necessary repairs were covered under the additional purchased contract upgrades; however, National Truck failed to properly remedy the problems." Id. In February 2014, "National Truck repossessed all trucks that were in possession of Donald." Id. The Complaint asserts claims for breach of contract, breach of the implied warranty of merchantability, breach of the implied warranty of fitness for a particular purpose, and conversion. Id. at 12-14.
On November 8, 2016, National Truck removed the case to this Court on the basis of diversity jurisdiction. Notice of Removal [1] at 1-2. On November 10, 2016, National Truck filed the present Motion [2] to Compel Arbitration or, Alternatively, Rule 12(b)(6) Motion to Dismiss for Failure to State a Claim upon Which Relief Can Be Granted. National Truck "seeks to compel contractually agreed-to arbitration between the parties," and alternatively asks that Donald's Complaint be dismissed for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Def.'s Mot. [2] at 1-2.
Plaintiff responds that the arbitration agreements are invalid and unenforceable because they are procedurally and substantively unconscionable under Mississippi law. Pl.'s Mem. [7] at 4-8. Plaintiff contends that the arbitration provisions are procedurally unconscionable because "[n]ot only did none of the Defendant's employees explain or mention the Arbitration Provision to Mrs. Donald, she also did not even have an opportunity to examine the Arbitration Provision herself." Id. at 5. Plaintiff maintains that the arbitration agreements appear on a standard, preprinted form drafted by Defendant which is in the same style and print as the remainder of the Rental Agreements, which supports a finding of procedural unconscionability. Id. at 5-6. Plaintiff argues that Donald has no legal training or knowledge of arbitration and was unaware of the constitutional rights that she was waiving. Id. at 5.
Plaintiff next asserts that the arbitration provisions are substantively unconscionable because the Rental Agreements constitute contracts of adhesion and because Donald did not knowingly, intelligently, and voluntarily waive her constitutional right to a jury trial. Id. at 6-8. According to Plaintiff,
Id. at 8. Plaintiff further maintains that she "cannot afford to pay the fees required to arbitrate this dispute that is before this Court and thus her access to justice would be denied," id. at 9, and that "to submit her case to arbitration, she would have to front at the minimum, roughly $750," id. at 8.
"Congress enacted the FAA [Federal Arbitration Act] to overcome judicial resistance to arbitration, and to declare a national policy favoring arbitration of claims that parties contract to settle in that manner." Vaden v. Discover Bank, 556 U.S. 49, 58 (2009) (quotations omitted). "To that end, § 2 [of the FAA] provides that arbitration agreements in contracts `involving commerce' are `valid, irrevocable, and enforceable.'" Id. (quoting 9 U.S.C. § 2). "[A]ll doubts concerning the arbitrability of claims should be resolved in favor of arbitration." Washington Mut. Fin. Grp., LLC v. Bailey, 364 F.3d 260, 263 (5th Cir. 2004).
Courts perform a two-step analysis to determine whether parties should be compelled to arbitrate a dispute. Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir. 2006). "First, a court must `determine whether the parties agreed to arbitrate the dispute in question.'" Id. (quoting Webb v. Investacorp., Inc., 89 F.3d 252, 258 (5th Cir. 1996)). This first step "consists of two separate determinations: `(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in question falls within the scope of that arbitration agreement.'" Id. (quoting Webb, 89 F.3d at 258). State law contract principles are applied to determine if there is a valid agreement to arbitrate. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995); Washington Mut. Fin. Grp., LLC, 364 F.3d at 263; Webb, 89 F.3d at 257. In this case, Mississippi law is the applicable state law.
The second step involves the determination of "whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims." Tittle, 463 F.3d at 418 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985)). If no party argues that external legal constraints have foreclosed arbitration of the claims at issue in the case, the court "need only conduct the first step of the analysis to resolve the arbitrability question." Id.
Donald argues that the Rental Agreements' arbitration provisions are unconscionable and thus unenforceable.
The Mississippi Supreme Court has held that
East Ford, Inc., 826 So. 2d at 714, 715-16 (quotation omitted).
A contract of adhesion is generally defined as "one that is drafted unilaterally by the dominant party and then presented on a `take-it-or-leave-it' basis to the weaker party who has no real opportunity to bargain about its terms." Id. at 716. "Such contracts are usually prepared in printed form, and frequently at least some of their provisions are in extremely small print." Id. (quotation omitted). According to the Mississippi Supreme Court, arbitration agreements are not inherently unconscionable, and contracts of adhesion are not automatically void. Id. (citing Hughes Training, Inc. v. Cook, 254 F.3d 588, 593 (5th Cir. 2001)).
Id.
Donald has presented an Affidavit [6-1] complaining that she was rushed to sign each of the four Rental Agreements and "never knew there was an arbitration provision within the agreement." Pl.'s Aff. [6-1] at 1. According to Donald, National Truck never read through the Rental Agreements with her, explained the Rental Agreements to her, or informed her of the arbitration provisions. Id. at 1-2. Donald also avers that she has "no legal training or experience." Id. at 2.
Under Mississippi law, "parties to a contract have an inherent duty to read the terms of a contract prior to signing." Hinds Cty. Econ. Dev. Dist. v. W & G Properties, LLC, 203 So.3d 49, 55 (Miss. Ct. App. 2016) (quotation omitted). "[A] party may neither neglect to become familiar with the terms and conditions and then later complain of lack of knowledge, nor avoid a written contract merely because he or she failed to read it or have someone else read and explain it." Id. (quotation omitted).
In this case, the arbitration provisions appear on the sixth page of each six-page Rental Agreement. They are easily identifiable as they follow a section heading printed in all capital letters and italicized in bold-faced type, clearly indicating that the section pertains to "
Other than Donald's professed lack of legal training or experience, Pl.'s Aff. [6-1] at 2, the record is devoid of any information regarding the alleged disparity in the sophistication of the parties. While Donald avers that she was "rushed" to sign the Rental Agreements, see id. at 1, there is no indication that she ever inquired of National Truck about the Rental Agreements' terms. Nor has Donald cited any authority that National Truck was required to "read through the rental agreements with [her] or explain[ ] the rental agreements," or verbally advise her of the arbitration provisions. See id. at 1-2. Based upon the facts of this particular case, the Court is not persuaded that Donald's allegations pertaining to her lack of opportunity to study the Rental Agreements is sufficient to establish that the arbitration provisions are procedurally unconscionable. See East Ford, Inc., 826 So. 2d at 715-16.
Donald further maintains that the Rental Agreements constitute contracts of adhesion. Assuming this is true, Donald has not alleged or shown that she was "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." East Ford, Inc., 826 So. 2d at 716. The arbitration clauses are not unconscionable based upon a lack of voluntariness.
In sum, there is insufficient evidence of a lack of knowledge or voluntariness on the part of a weaker party to support a procedural unconscionability claim. Donald's arguments to the contrary are unpersuasive.
"Substantive unconscionability may be proven by showing the terms of the arbitration agreement to be oppressive." East Ford, Inc., 826 So. 2d at 714. "A contract is substantively unconscionable if there 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." Caplin Enterprises, Inc., 145 So. 3d at 614 (quotation omitted). In order to determine whether a contract is substantively unconscionable, a court must "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." Id.
"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." Id. (quotation omitted). According to the Mississippi Supreme Court, "[i]t is not necessary that arbitration agreements contain `mutual promises that give the parties identical rights and obligations, or that the parties must be bound in the exact same manner.'" Id. (quoting 21 Williston on Contracts § 57:15 (4th ed. 2013)). However, "disparities in the rights of the contracting parties must not be so one-sided and unreasonably favorable to the drafter . . . that the agreement becomes unconscionable and oppressive." Id. (quoting Williston, supra, at § 57:15).
The Court has reviewed the four corners of each of the Rental Agreements and is of the opinion that the arbitration provisions in question are not substantively unconscionable. Donald argues that, while the arbitration provisions appear to afford the parties an equal opportunity to bring a suit in a small claims court within Harrison County, Mississippi, the provisions are actually "unfair to Mrs. Donald because there are no situations under this Agreement in which Mrs. Donald would be within the requisite amount to entertain bringing a suit in a small claims court." Pl.'s Mem. [7] at 7. Donald posits that National Truck could bring suit in small claims court "to recover payments owed to them, which would fall within the jurisdiction of the small claims court," id., and that this makes the arbitration provisions substantively unconscionable, id.
Donald's argument seems to implicate issues arising outside the four corners of the Agreements, and Donald has not cited any controlling legal authority which indicates that the Court could consider such issues. See id. Nevertheless, the Court does not find this theory persuasive. Donald has cited no evidence or authority to support the proposition that any claim Donald would bring against National Truck would necessarily be beyond the jurisdiction of the small claims court, while any claim by National Truck would fall within the jurisdictional maximum of the small claims court. These contractual provisions do not appear to be an unconscionable "ploy" by National Truck, as Donald argues. See id.
Nor is Donald's argument that National Truck "must demonstrate that she knowingly, intelligently, and voluntarily waived her constitutional rights" to a jury trial persuasive. Id. at 7-8 (citing D.H. Overmyer Co. v. Frick Co., 405 U.S. 174 (1972)). Overmyer did not involve an arbitration provision, but instead considered the constitutionality under the Due Process Clause of the Fourteenth Amendment of a cognovit note
Donald has not shown that the terms of the Rental Agreements are oppressive or substantively unconscionable. The terms of the Rental Agreements are not so one-sided and unreasonably favorable to the drafter, National Truck, that the Agreements are unconscionable and oppressive. Caplin Enterprises, Inc., 145 So. 3d at 614. The arbitration provisions are valid under Mississippi law.
There is a strong presumption in favor of arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983); Terminix Int'l, Inc. v. Rice, 904 So.2d 1051, 1054 (Miss. 2004). Accordingly, "[a]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration . . . ." Moses H. Cone, 460 U.S. at 24-25. Indeed, the Fifth Circuit has "held that arbitration should not be denied unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue." Neal v. Hardee's Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990) (quotation omitted).
In this case, the arbitration provisions encompass
Rental Agreements [1-2] at 21, 28, 35, 41 (emphasis added).
Language of this type is interpreted broadly. "The Mississippi Supreme Court has noted that broad terms defining the scope of an arbitration agreement such as `any controversy' are `broad sweeping' and expansive enough to include most claims related to the contract in question." New South Fed'l Savings Bank v. Anding, 414 F.Supp.2d 636, 651 (S.D. Miss. 2005) (citing Smith Barney, Inc. v. Henry, 772 So.2d 722, 725-26 (Miss. 2001)).
The contracts in this case contain both narrow language, "arising from," and broad language, "relating to." See Rental Agreements [1-2] at 21, 28, 35, 41. "[C]ourts distinguish `narrow' arbitration clauses that only require arbitration of disputes `arising out of' the contract from broad arbitration clauses governing disputes that `relate to' or `are connected with' the contract." Pennzoil Exploration & Prod. Co. v. Ramco Energy, 139 F.3d 1061, 1067 (5th Cir. 1998). The Fifth Circuit has held that such broad arbitration clauses "are not limited to claims that literally `arise under the contract,' but rather embrace all disputes having a significant relationship to the contract regardless of the label attached to the dispute." Id.
Donald's claims against National Truck both arise from and relate to the Rental Agreements containing the arbitration provisions. Accordingly, the Court concludes that National Truck is entitled to enforce the arbitration clauses. See id. An order compelling arbitration should issue in this case.
Other than the contractual defenses asserted by Donald, which the Court has previously considered and rejected, the parties do not argue that any legal constraints external to the parties' arbitration agreements foreclose arbitration of Donald's claims. See Caplin Enterprises, Inc., 145 So. 3d at 614 (holding that under the legal constraints prong of the arbitration analysis, a court must consider whether defenses available under state contract law such as fraud, duress, and unconscionability may invalidate the arbitration agreement). Nor does the Court find any legal constraints external to the arbitration agreements which foreclose arbitration. Arbitration of Donald's claims against National Truck is appropriate.
"Section 3 of the FAA mandates that when an issue is referable to arbitration pursuant to a written agreement, the district court must `stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.'" Williams v. Cigna Fin. Advisors, Inc., 56 F.3d 656, 659 (5th Cir. 1995) (quoting 9 U.S.C. § 3). "If a dispute is subject to mandatory . . . arbitration procedures, then the proper course of action is usually to stay the proceedings pending arbitration." Ruiz v. Donahoe, 784 F.3d 247, 249 (5th Cir. 2015).
"However, a dismissal may be appropriate `when all of the issues raised in the district court must be submitted to arbitration.'" Id. at 249-50 (quoting Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992)); see also Adam Techs. Int'l S.A. de C.V. v. Sutherland Glob. Servs., Inc., 729 F.3d 443, 447 n.1 (5th Cir. 2013) ("Although Section 3 of the Federal Arbitration Act directs district courts to stay pending arbitration, we are bound by our precedent which states that dismissal is appropriate `when all of the issues raised in the district court must be submitted to arbitration.'") (quoting Alford, 975 F.2d at 1164).
All of the issues raised in the Complaint are subject to binding arbitration. Accordingly, the Court will dismiss this case rather than stay it.
To the extent the Court has not addressed any of the parties' arguments, it has considered them and determined that they would not alter the result. National Truck Funding, LLC's Motion [2] to Compel Arbitration will be granted, and the parties will be ordered to submit the disputed matter to arbitration. This case will be dismissed.
