                       IN THE SUPREME COURT OF MISSISSIPPI

                                  NO. 2005-CA-00621-SCT

EQUIFIRST CORPORATION

v.

MELVIN JACKSON, XAVIER MANNING AND
BRENDA MANNING


DATE OF JUDGMENT:                           12/08/2004
TRIAL JUDGE:                                HON. W. ASHLEY HINES
COURT FROM WHICH APPEALED:                  LEFLORE COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT:                    WILLIAM CLINTON PENTECOST
                                            SHERYL BEY
ATTORNEYS FOR APPELLEES:                    FRANK S. THACKSTON, JR.
                                            C. W. WALKER, III
NATURE OF THE CASE:                         CIVIL - CONTRACT
DISPOSITION:                                REVERSED AND REMANDED - 02/02/2006
MOTION FOR REHEARING FILED:
MANDATE ISSUED:



       EN BANC.

       EASLEY, JUSTICE, FOR THE COURT:

                                 PROCEDURAL HISTORY

¶1.    Melvin Jackson (Jackson) and Xavier and Brenda Manning (the Mannings), collectively

known as “the Borrowers,” filed suit against EquiFirst Corporation (EquiFirst) and Mortgage

Stop, Inc., (Mortgage Stop) in the Circuit Court of Leflore County, Mississippi.           The

Borrowers alleged various causes of actions associated with the contention that Mortgage

Stop, with EquiFirst’s knowledge, consent, and encouragement, targeted individuals to purchase

homes at inflated values. EquiFirst removed the case to federal court where EquiFirst filed its
first motion to compel arbitration.       The case was remanded to the Circuit Court of Leflore

County.

¶2.       EquiFirst then filed another motion seeking to compel arbitration.           After conducting

a hearing, the trial court denied the motion to compel arbitration.           The trial court’s order

provided that the motion to compel arbitration was “denied without prejudice to [the]

Defendant’s right to assert the arbitration issue after discovery is complete.”        EquiFirst sought

permission for interlocutory appeal of the order denying the motion to compel arbitration

from the trial court.     The trial court certified its ruling for interlocutory appeal. EquiFirst filed

its notice of appeal to this Court.

¶3.       On appeal, EquiFirst raises the following issue: whether the trial court erred in denying

EquiFirst’s motion to compel arbitration.

                                                  FACTS

¶4.       Jackson contacted Kenneth Ellis (Ellis) regarding a house for sale at 118 Sycamore

Street, Greenwood, Mississippi.       Jackson obtained Ellis’s name from a Coldwell Banker’s “for

sale” sign in front of the house.           Jackson contacted Mortgage Stop, a third-party, retail

mortgage broker, in Jackson, Mississippi, about purchasing the home.                  Mortgage Stop

submitted Jackson’s application to various wholesale mortgage lenders, including EquiFirst.

EquiFirst accepted the terms and conditions and entered into a mortgage with Jackson at the

loan closing.    Ellis arranged the loan closing at the Fisher Law Office.         Bobby Fisher is a

Greenwood attorney selected by EquiFirst to act as its closing attorney.          Jackson was present

at the loan closing along with Ellis, Fisher, and the home sellers.

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¶5.     Similarly, the Mannings contacted Ellis about helping them purchase a home. The

Mannings decided they would purchase a home at 205 Fitzhugh in Itta Bena, Mississippi. The

Mannings contend Ellis supplied the name of someone at Mortgage Stop in Jackson for

financing.     Mortgage Stop submitted the Mannings’ application to various wholesale mortgage

lenders, including EquiFirst.    EquiFirst accepted the terms and conditions and entered into a

mortgage with the Mannings at the loan closing. Ellis arranged the loan closing at the Fisher

Law Office. The Mannings were present at the closing along with Ellis, Fisher, Lee Pruitt, and

two unknown men.

                                            DISCUSSION

¶6.     EquiFirst contends the trial court erred in failing to compel arbitration because the

parties agreed to arbitrate the disputes in question.       EquiFirst maintains the signed arbitration

provisions, arbitration riders, are not prohibited by a statute or policy or any external legal

constraints.     The Borrowers contend the trial court properly denied the motion to compel

arbitration.    The Borrowers do not contest that they signed the arbitration provisions.        The

Borrowers state they were told the “title/name” of each document and told that they had to sign

each document and that one of the documents mentioned to them was an arbitration rider. The

Borrowers do not contend anyone prevented them from reading the documents. However, they

admit they did not read the provisions or any of the documents signed at the loan closing.

¶7.     Each of the arbitration riders were on a separate document and contained the following

language:




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        Any claim, dispute or controversy (whether in contract, tort or otherwise)
        arising from or related to the loan evidenced by the Note, including but not
        limited to all statutory claims, any claim, dispute or controversy that may arise
        out of or is based on the relationships which result from the Borrower’s
        application to the lender for the loan, the closing of the loan, or the servicing of
        the loan, or any dispute or controversy over the applicability or enforceability
        of this arbitration agreement or the entire agreement between Borrower and
        Lender (collectively “claims”), shall be resolved, upon the election of either
        Borrower or Lender, by binding arbitration, and not by court action.

¶8.     Furthermore,    directly   above    the   Borrowers’   signatures,   all   capital, bold-face

typesetting, the additional language provided:

        NOTICE:   WHEN YOU SIGN THIS ARBITRATION RIDER, YOU ARE
        AGREEING THAT EVERY DISPUTE DESCRIBED ABOVE MAY BE
        DECIDED EXCLUSIVELY BY ARBITRATION. YOU ARE GIVING UP
        RIGHTS YOU MIGHT HAVE TO LITIGATE THOSE CLAIMS AND
        DISPUTES IN A COURT OR JURY TRIAL OR TO PARTICIPATE AS A
        REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS IN
        CONNECTION WITH A CLAIM OR DISPUTE.       DISCOVERY IN
        ARBITRATION PROCEEDINGS IS LIMITED IN THE MANNER
        PROVIDED BY THIS AGREEMENT AND THE RULES OF
        ARBITRATION. THE ARBITRATOR’S DECISION WILL GENERALLY
        BE FINAL AND BINDING. OTHER RIGHTS THAT YOU WOULD HAVE
        IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN
        ARBITRATION. IT IS IMPORTANT THAT YOU READ THIS ENTIRE
        ARBITRATION AGREEMENT CAREFULLY BEFORE SIGNING THIS
        ARBITRATION RIDER.

        BY SIGNING BELOW, Borrower accepts and agrees to the provisions
        contained in this Rider.

¶9.     The decision to grant or deny a motion to compel arbitration is reviewed by this Court

de novo. Doleac v. Real Estate Professionals, LLC., 911 So. 2d 496, 501 (Miss. 2005); East

Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002). "[A]rbitration is a matter of contract

and a party cannot be required to submit to arbitration any dispute which he has not agreed so


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to submit." Pre-Paid Legal Services, Inc. v. Battle, 873 So. 2d 79, 83 (Miss. 2004) (quoting

AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106

S. Ct. 1415, 1418, 89 L. Ed. 2d 648 (1986)).

¶10.   “This Court has consistently recognized the existence of ‘a liberal federal policy

favoring arbitration agreements.’” Terminix International, Inc. v. Rice, 904 So. 2d 1051,

1054-55 (Miss. 2004) (quoting Russell v. Performance Toyota, Inc., 826 So. 2d 719, 722

(Miss. 2002)). Arbitration is firmly embedded in both our federal and state laws.            Pass

Termite & Pest Control, Inc. v. Walker, 904 So. 2d 1030, 1032-33 (Miss. 2004) (citing

Russell, 826 So. 2d 719 (Miss. 2002); East Ford, 826 So. 2d 709 (Miss. 2002); IP

Timberlands Operating Co. v. Denmiss Corp., 726 So. 2d 96 (Miss. 1998)).

       I.      WHETHER THE ARBITRATION RIDER IS PART OF A
               CONTRACT EVIDENCING INTERSTATE COMMERCE.

¶11.   In Battle, 873 So. 2d at 82, the Court stated:

       The Federal Arbitration Act provides:

               A written provision in any . . . contract evidencing a transaction
               involving commerce to settle by arbitration a controversy
               thereafter arising out of such contract or transaction . . . shall be
               valid, irrevocable, and enforceable, save upon such grounds as
               exist at law or in equity for the revocation of any contract.

9 U.S.C. § 2. 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." Russell, 826 So. 2d at 721-

22(¶ 6) (citing IP Timberlands, 726 So. 2d at 104 (¶ 29)). This Court has endorsed the

undisputed province of the Federal Arbitration Act, 9 U.S.C. § § 1-16 (FAA), and recognized

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its clear authority to govern agreements formed in interstate commerce wherein a contractual

provision provides for alternative dispute resolution. IP Timberlands, 726 So. 2d at 107.

¶12.      This Court has held:

          In determining the validity of a motion to compel arbitration under the Federal
          Arbitration Act, courts generally conduct a two-pronged inquiry. The first prong
          has two considerations: (1) whether there is a valid arbitration agreement and (2)
          whether the parties' dispute is within the scope of the arbitration agreement." .
          . . The second prong considers "whether legal constraints external to the parties'
          agreement foreclosed arbitration of those claims.

Doleac, 911 So. 2d at 501 (citing Sullivan v. Mounger, 882 So. 2d 129, 132 (Miss. 2004)).

¶13.      In Vicksburg Partners, L.P. v. Stevens, 911 So. 2d 507, 514-15 (Miss. 2005), we

stated:

                   A threshold determination which must be considered is whether the
          parties' admission agreement falls within the provisions of § 2 of the Federal
          Arbitration Act. The FAA requires "that 'we rigorously enforce agreements to
          arbitrate.' " East Ford, 826 So. 2d at 713 (citing Shearson/Am. Exp. Inc. v.
          McMahon, 482 U.S. 220, 226, 107 S. Ct. 2332, 2337, 96 L.Ed.2d 185 (1987)).
          Specifically, § 2 of the Federal Arbitration Act, relates to the enforceability of
          arbitration provisions . . . .

                  In Allied-Bruce Terminix Companies v. Dobson, 513 U.S. 265, 115 S.
          Ct. 834, 130 L. Ed. 2d 753 (1995), . . . the Supreme Court concluded that the
          phrase "involving commerce" is to be interpreted broadly and was the functional
          equivalent of the phrase "affecting commerce", which signals Congress' intent
          to exercise its Commerce Clause powers to the fullest extent. Id. at 273-74,
          115 S. Ct. 834.

                  In 2003, the U.S. Supreme Court once again sought to quantify the broad
          effect of the FAA as implemented through Congress' Commerce Clause power.
          In Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 123 S. Ct. 2037, 156 L. Ed. 2d
          46 (2003), . . . the U.S. Supreme Court held that "Congress' Commerce Clause
          power 'may be exercised in individual cases without showing any specific effect
          upon interstate commerce' if in the aggregate the economic activity in question


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        would represent 'a general practice . . . subject to federal control.' " 539 U.S. at
        56-57, 123 S. Ct. at 2040 (citing Mandeville Island Farms, Inc. v. Am. Crystal
        Sugar Co., 334 U.S. 219, 236, 68 S. Ct. 996, 92 L. Ed. 1328 (1948)). See also
        Perez v. United States, 402 U.S. 146, 154, 91 S. Ct. 1357, 28 L. Ed. 2d 686
        (1971); Wickard v. Filburn, 317 U.S. 111, 127-128, 63 S. Ct. 82, 87 L. Ed.
        122 (1942).

                This case clearly falls within the broad purview of the Federal Arbitration
        Act. Accordingly, singular agreements between care facilities and care patients,
        when taken in the aggregate, affect interstate commerce. As stated in Alafabco,
        "[o]nly the general practice need bear on interstate commerce in a substantial
        way." 539 U.S. at 57, 123 S. Ct. at 2040 (citing Maryland v. Wirtz, 392 U.S.
        183, 196-97 n. 27, 88 S. Ct. 2017, 20 L. Ed. 2d 1020 (1968); NLRB v. Jones
        & Laughlin Steel Corp., 301 U.S. 1, 37-38, 57 S. Ct. 615, 81 L. Ed. 893
        (1937)).

¶14.    Here, as in Vicksburg Partners, the contract in the aggregate involves economic

activity affecting interstate commerce.    Id. at 515.      Furthermore, the Borrowers are all

resident citizens of Mississippi, and EquiFirst is a North Carolina corporation with its

principal place of business in North Carolina. Therefore, we find the Federal Arbitration Act

is applicable. Id.

        II.     WHETHER THE TRIAL COURT ERRED IN DENYING
                EQUIFIRST’S MOTION TO COMPEL ARBITRATION.

¶15.    We have distinguished between procedural and substantive unconscionability.            East

Ford, 826 So. 2d at 714. In East Ford, this Court stated:

               The courts have recognized "two types of unconscionability, procedural
        and substantive." Pridgen v. Green Tree Fin. Servicing Corp., 88 F. Supp.2d
        655 (S.D. Miss.2000) (quoting York v. Georgia-Pac. Corp., 585 F. Supp. 1265,
        1278 (N.D. Miss.1984)). Procedural unconscionability may be proved by
        showing "a lack of knowledge, lack of voluntariness, inconspicuous print, the use
        of complex legalistic language, disparity in sophistication or bargaining power



                                                 7
        of the parties and/or a lack of opportunity to study the contract and inquire about
        the contract terms." Id.

                 Substantive unconscionability may be proven by showing the terms of the
        arbitration agreement to be oppressive. York, 585 F. Supp. at 1278.
        Substantively unconscionable clauses have been held to include waiver of choice
        of forum and waiver of certain remedies.

¶16.    Here, the Borrowers’ allegations fall into the category of procedural unconscionability.

The substance of the Borrowers’ claims made in the affidavits of Melvin Jackson and Brenda

Manning are that they did not read the documents they signed at the loan closing, including the

arbitration rider, to purchase their homes and they were told that they had to sign each

document.     The Borrowers admit in their affidavits they were told the “title/name” of each

document and that one of the documents was called an arbitration rider. Their contention is that

“no one told us we had the right to read any of the documents or to ask questions.” However,

nothing indicates that anyone prevented them from reading the documents or asking any

questions.1

¶17.    In McKenzie Check Advance of Mississippi, L.L.C. v. Hardy, 866 So. 2d 446, 455

(Miss. 2004), we stated:

        It is well settled under Mississippi law that a contracting party is under a legal
        obligation to read a contract before signing it.       First Family Financial
        Services, Inc. v. Fairley, 173 F. Supp. 2d 565, 572 (S.D. Miss. 2001). See
        Godfrey, Bassett & Kuykendall Architects, Ltd. v. Huntington Lumber &
        Supply Co., 584 So. 2d 1254, 1257 (Miss. 1991). See also Koenig v. Calcote,



        1
          The Borrowers also argue that the attorney hired to handled the loan closing for
EquiFirst, Fisher, had an obligation to explain the contracts to them. However, the Borrowers
acknowledge Fisher was acting as agent for EquiFirst and that he was hired by EquiFirst.

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        199 Miss. 435, 25 So. 2d 763 (1946); McCubbins v. Morgan, 199 Miss. 153,
        23 So. 2d 926 (1945).

¶18.    Jackson alleged in his affidavit that he had a twelfth grade education. Jackson contended

that, despite his education level, he has difficulty reading.     However, Jackson does not claim

that he informed anyone at the loan closing that he had difficulty reading.         Brenda Manning

alleged in her affidavit that she felt hurried because the loan closing could not be rescheduled

after 5:00 p.m. to accommodate her husband’s work schedule. She stated that her husband did

not get off work until 5:00 p.m. However, she stated they had approximately a week’s notice

of the loan closing date and time. Furthermore, her husband attended the loan closing.

¶19.     In Northwest Fin. Miss., Inc. v. McDonald, 905 So.2d 1187, 1194 (Miss. 2005), this

Court addressed a similar situation where the borrowers claimed the lenders did not explain

what arbitration was and did not tell the borrowers they were giving up their rights to a jury

trial. The Court held:

        In Washington Mutual Fin. Group, LLC v. Bailey, 364 F.3d 260 (5th Cir.
        2004), the court ruled that under Mississippi law, the inability of borrowers to
        read did not render them incapable of possessing adequate knowledge of the
        arbitration agreement they signed. Id. at 264-65. The court also concluded
        that the trial court erred by finding the agreeme nt unconscionable under
        Mississippi law because the lenders failed to specifically inform the
        plaintiffs that they were signing an arbitration agreeme nt. In the present
        case, each borrower signed a single-page arbitration agreement, written in plain
        language. None of the borrowers claimed to be unable to read. There is no
        claim that the borrowers asked anyone to explain the process of
        arbitration or to explain what arbitration meant; the borrowers simply
        state that no one informed them that they were signing an arbitration agreement,
        or told them what an arbitration agreement was. Any reasonable person
        reading this document prior to signing it would expect to be subject to
        arbitration and would know that they were waiving their right to a jury


                                                   9
        trial. There is also no evidence that a reasonable person would not sign
        this document in return for a desired loan.

Northwest, 905 So. 2d at 1194 (emphasis added).

¶20.    As previously stated, the language clearly stated in bold typesetting above the signature

line that by signing the arbitration rider they were waiving their right to litigate those claims

and disputes in a court or jury trial or to participate as a representative or member of any class

of claimants in connection with a claim or dispute.          The provision further stated that other

rights they would have if they went to court may also not be available in arbitration.      Clearly,

a review of the arbitration rider reveals it was conspicuous, and the language was not

convoluted. In Russell, we held:

        The arbitration agreement in the Purchase Agreement is preceded by boldface
        and capitalized headings and was almost immediately succeeded by the signature
        line. In Mississippi, a person is charged with knowing the contents of any
        document that he executes. J.R. Watkins Co. v. Runnels, 252 Miss. 87, 96,
        172 So. 2d 567, 571 (1965) ("A person cannot avoid a written contract
        which he has entered into on the ground that he did not read it or have it
        read to him.").

826 So. 2d at 726 (emphasis added).

¶21.    Based on the analysis above, we find the trial court erred in denying EquiFirst’s motion

to compel arbitration under the arbitration rider signed by the Borrowers.

                                           CONCLUSION

¶22.    The trial court erred in denying EquiFirst's motion to compel arbitration. The

transaction involved interstate commerce, and the Borrowers signed the arbitration agreement.

The Federal Arbitration Act is applicable to the agreement between the parties. There was no


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evidence presented that the Borrowers did not knowingly, intelligently, and voluntarily waive

their constitutional right to a jury trial when they signed the arbitration agreement with

EquiFirst. Therefore, the judgment of the Circuit Court of Leflore County is reversed, and this

case is remanded to the trial court to compel arbitration.

¶23.    REVERSED AND REMANDED.

     SMITH, C.J., WALLER, P.J., CARLSON AND DICKINSON, JJ., CONCUR.
COBB, P.J., CONCURS IN RESULT ONLY. GRAVES, J., DISSENTS WITHOUT
SEPARATE WRITTEN OPINION. DIAZ AND RANDOLPH, JJ., NOT PARTICIPATING.




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