     Case: 18-60749   Document: 00515370075     Page: 1   Date Filed: 04/02/2020




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT
                                                                United States Court of Appeals
                                                                         Fifth Circuit

                                                                       FILED
                                 No. 18-60749                       April 2, 2020
                                                                  Lyle W. Cayce
CATHY J. BOWLES,                                                       Clerk


             Plaintiff - Appellant

v.

ONEMAIN FINANCIAL GROUP, L.L.C.,

             Defendant - Appellee




                Appeal from the United States District Court
                  for the Southern District of Mississippi




Before JOLLY, JONES, and ENGELHARDT, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
      Cathy Bowles appeals the district court’s order compelling the
arbitration of her federal age discrimination suit against OneMain Financial.
Bowles objected to arbitration on the grounds that a valid arbitration
agreement was never formed between her and OneMain for two reasons: first,
there was no meeting of the minds and, second, the circumstances surrounding
the arbitration agreement’s formation render it procedurally unconscionable.
We hold that the district court correctly rejected Bowles’s meeting of the minds
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                                       No. 18-60749

argument and correctly held that her procedural unconscionability 1 challenge
must be decided by an arbitrator, not the courts.                 For those reasons, we
AFFIRM the district court’s order.
                                              I.
       Bowles had worked for OneMain Financial Group and its predecessors
since 1998.       Over that period she had agreed several times through
employment contracts and acknowledgments of employee handbooks to refer
all employment disputes to arbitration. In 2016, Bowles was again required to
review     and    acknowledge        OneMain’s       Employee       Dispute      Resolution
Program/Agreement (“Arbitration Agreement”). This Arbitration Agreement
provides that any employment-related dispute will be referred to arbitration
in accordance with the rules and procedures of the American Arbitration
Association. In addition, the Arbitration Agreement contained a delegation
clause, which delegated to the arbitrator as follows: “any legal dispute . . .
arising out of, relating to, or concerning the validity, enforceability or breach
of this Agreement, shall be resolved by final and binding arbitration.” On




       1 We recently set out the difference between procedural and substantive
unconscionability under Mississippi law:
       Under substantive unconscionability, we 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. 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 of the
       parties and/or a lack of opportunity to study the contract and inquire about the
       contract terms.
       Begole v. N. Miss. Med. Ctr., Inc., 761 F. App’x 248, 251 (5th Cir. 2019) (unpublished)
(per curiam) (internal citations and quotation marks omitted). Neither party disputes that
Bowles’s objection is to procedural rather than substantive unconscionability. Furthermore,
by using the term “procedural unconscionability” and grounding her objection in disparate
bargaining power and her lack of a meaningful opportunity to bargain, it is clear that
Bowles’s objection is indeed to procedural unconscionability.
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November 15, 2016, Bowles viewed the Arbitration Agreement 2 and
electronically signed a certificate that reads: “I hereby certify that I have
carefully read the Employment Dispute Resolution Program/Agreement within
and that I understand and agree to its terms.”
     In      October     2017,    OneMain         terminated       Bowles    for    allegedly
inappropriate interactions with employees under her supervision. Bowles filed
an unsuccessful administrative complaint with the EEOC. She next filed suit
in federal court alleging that her termination violated the Age Discrimination
in Employment Act and Title VII of the Civil Rights Act of 1964. In response,
OneMain moved the district court, under the Federal Arbitration Act, 3 to
compel Bowles to arbitrate her claims pursuant to the 2016 Arbitration
Agreement.
     Bowles objected to OneMain’s motion to compel by challenging the
formation of the Arbitration Agreement itself on two grounds.                      First, she
argued that there was no “meeting of the minds” because she did not
understand that she was agreeing to a binding arbitration agreement and
therefore there was not the mutual assent necessary for contract formation
under Mississippi law.           Second, she argued that the Agreement was




     2   Before signing, the software required Bowles to open the Arbitration Agreement.
     3   The Federal Arbitration Act provides that:
              A written provision in any maritime transaction or a contract
              evidencing a transaction involving commerce to settle by arbitration a
              controversy thereafter arising out of such contract or transaction, or the
              refusal to perform the whole or any part thereof, or an agreement in
              writing to submit to arbitration an existing controversy arising out of
              such a contract, transaction, or refusal, 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.

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procedurally unconscionable because of disparate bargaining power and her
lack of a meaningful opportunity to bargain.
      The district court granted OneMain’s motion to compel and dismissed
the case with prejudice. It first found that there was the meeting of the minds
necessary for contract formation in Mississippi. Next, instead of considering
Bowles’s procedural unconscionability claim on the merits, the district court
found that “[c]laims of unconscionability do not affect whether an arbitration
agreement has been entered but, instead, such claims permit a court to
invalidate an otherwise existing agreement.”      Thus, finding that Bowles’s
procedural unconscionability objection went to the enforceability of the
Arbitration Agreement and not its formation, the court held that this argument
must be decided by the arbitrator under the Arbitration Agreement’s
delegation clause, which we have earlier quoted. Accordingly, the district court
granted OneMain’s motion to compel arbitration and dismissed the case with
prejudice.
      Bowles appealed, arguing that the district court incorrectly upheld the
validity of the Arbitration Agreement on the erroneous ground that there was
a meeting of the minds, and further erred by referring her procedural
unconscionability claim to the arbitrator when, under Mississippi law, such
objections are for the court to decide.
      This court issued an opinion on June 19, 2019. 927 F.3d 878. Upon
petition for rehearing, that opinion was withdrawn on January 24, 2020. 947
F.3d 874. Subsequently, the case was placed on the calendar of this panel for
March 31, 2020 consideration. We thus turn to that consideration.
                                          II.
      “This court reviews the grant or denial of a motion to compel arbitration
de novo.” Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 2012)
(citing Morrison v. Amway Corp., 517 F.3d 248 (5th Cir. 2008)). If the existence

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of an arbitration contract between parties is challenged, the challenge is
always for the courts to decide. Will-Drill Resources, Inc., v. Samson Resources
Co., 352 F.3d 211, 219 (5th Cir. 2003). Once the arbitration contract itself has
been established, however, then whether that contract may be enforced for or
against the parties in the particular case is for an arbitrator to decide. Id. at
218. 4 In determining whether a challenge is to formation itself or to
subsequent enforcement, courts should “apply[] state-law principles of
contract.” Id. This case concerns a Mississippi contract. In Mississippi, “[t]he
elements of a contract are (1) two or more contracting parties, (2) consideration,
(3) an agreement that is sufficiently definite, (4) parties with legal capacity to
make a contract, (5) mutual assent, and (6) no legal prohibition precluding
contract formation.” GGNSC Batesville, LLC v. Johnson, 109 So. 3d 562, 565
(Miss. 2013) (quoting Adams Cmty. Care Ctr., LLC v. Reed, 37 So. 3d 1155,
1158 (Miss. 2010)).


                                              III.
      We address each of Bowles’s two challenges in turn. First, Bowles says
that there was no meeting of the minds because she did not intend to agree to
arbitrate employment-related disputes. The district court found that this
challenge goes to the formation of the Arbitration Agreement and is therefore
to be decided by the courts. We agree. See GGNSC Batesville, 109 So. 3d at
565 (holding that mutual assent is a necessary element of contract formation).
      On the merits, the district court dismissed this argument based on
Mississippi law. Bowles challenges this application of Mississippi law to the
merits of her meeting of the minds objection, arguing, as she did below, that




      4   Two exceptions to this general rule are not applicable in this case. See infra note 7.
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she never had the intent to sign an arbitration agreement and was unaware of
the nature of the document she signed.
       We can find no error in the district court’s ruling on the merits of
Bowles’s meeting of the minds objection. The court correctly found that the
electronic communications transmitting the Arbitration Agreement clearly
identified     an     arbitration     agreement       as     the     subject     of    the
communications. Furthermore, Bowles was given the opportunity to read the
Agreement and certified that she had “carefully read the Employment Dispute
Resolution Program/Agreement within and that I understand and agree to its
terms.”    Bowles cannot deny that she thus agreed to the Arbitration
Agreement.       Instead, she argues that she thought she was “simply
acknowledging receipt of another policy or directive” and did not understand
she was agreeing to arbitrate her employment disputes. The district court
correctly held that such a unilateral lack of diligence does not preclude contract
formation under Mississippi law. See Hicks v. Bridges, 580 So. 2d 743, 746
(Miss. 1991) (quoting Busching v. Griffin, 542 So. 2d 860, 865 (Miss. 1989)) (“A
person cannot avoid a signed, written contract on the grounds that he did not
read it . . . . ‘To permit a party when sued on a written contract, to admit that
he signed it but to deny that it expresses the agreement he made or to allow
him to admit that he signed it but did not read it or know its stipulations would
absolutely destroy the value of all contracts.’”). The district court thus made
no error in concluding that there was the meeting of the minds between Bowles
and OneMain necessary for contract formation, and this portion of the district
court’s ruling is affirmed. 5




      5Furthermore, we hold that the district court had sufficient evidence to dismiss this
argument without an evidentiary hearing.
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                                       IV.
      Second, Bowles argues that there was no arbitration contract because
the circumstances surrounding its formation rendered it procedurally
unconscionable. She argues that in the procedure that led to the arbitration
contract, i.e. the negotiations, there was disparate bargaining power and lack
of a meaningful opportunity for her to bargain.
      The district court was correct to find that Bowles’s procedural
unconscionability challenge went to whether the Arbitration Agreement
should be enforced rather than to whether an agreement had been formed
between the parties. Thus, the district court did not err to refer this challenge
to the arbitrator for decision. This referral was consistent with Mississippi
Supreme Court precedent.
      In Caplin Enters. Inc. v. Arrington, 145 So. 3d 608 (Miss. 2014), plaintiffs
challenged an arbitration agreement contained within a larger contract as both
procedurally and substantively unconscionable.        The Mississippi Supreme
Court explicitly categorized both of these unconscionability claims as relating
to the enforcement of the arbitration agreement, not to whether the agreement
to arbitrate was itself validly formed. See id. at 613 (“The plaintiffs focus on
the alleged procedural and substantive unconscionability of the arbitration
clauses; they do not argue that the contract itself was invalid.”) (emphasis
added). The Court first found that a valid contract had been formed. See id.
(“[C]onsideration [was given]; the agreement was sufficiently definite; and
there was no legal prohibition precluding the contract. The parties have not
presented any evidence that they lacked the legal capacity to contract or that
mutual assent was lacking. Therefore, we find that each element of a contract
is present.”). After determining that “the parties agreed to arbitrate the
dispute,” id., the court then considered “whether ‘defenses available under
state contract law such as fraud, duress, and unconscionability’ may invalidate

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the arbitration agreement.” Id. at 614. (quoting E. Ford, Inc. v. Taylor, 826 So.
2d 709, 713 (Miss. 2002)). The court then focused on both procedural and
substantive unconscionability as defenses, to the enforcement of the contract.
See id. (“The only defense at issue is unconscionability . . . . Two strains of
unconscionability are recognized—procedural and substantive.”).
      Several other Mississippi Supreme Court cases have classified
unconscionability challenges as challenges to enforcement rather than
formation, without distinguishing between procedural and substantive
unconscionability. Each such case involved a procedural unconscionability
challenge. See, e.g., East Ford, 826 So. 2d at 713 (emphasis added) (citing
Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 686 (1996)) (“In the present
case, the outcome of the first prong [whether a valid contract was formed] is
not disputed. . . .   Under the second prong, applicable contract defenses
available under state contract law such as fraud, duress, and unconscionability
may be asserted to invalidate the arbitration agreement[.]”); Smith v. Express
Check Advance of Miss., LLC, 153 So. 3d 601, 606–07 (Miss. 2014) (citation
omitted) (“[N]either party disputes that the arbitration clause purports to
submit [Plaintiff’s] claim to arbitration. . . . Instead, [Plaintiff] attacks the
enforcement of that provision based on the doctrine of unconscionability, one
of the ‘legal constraints external to the parties’ agreement’ which may foreclose
enforcement.”); Trinity Mission Health & Rehab of Holly Springs, LLC v.
Lawrence, 19 So. 3d 647, 650 (Miss. 2009) (“[Plaintiff] argues that, should this
Court find that there is a valid arbitration agreement, it should not be enforced
because it is procedurally unconscionable[.]”); Norwest Fin. Miss., Inc. v.
McDonald, 905 So. 2d 1187, 1192 (Miss. 2005) (emphasis added) (citation
omitted) (“[W]hether an agreement to arbitrate may be held unenforceable
because it is unconscionable is determined in reference to state law contract
principles.”).

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       Applying Mississippi law to an arbitration challenge, this court has
likewise categorized both procedural and substantive unconscionability as
challenges to contract enforcement, not contract formation. See Banc One
Acceptance Corp. v. Hill, 367 F.3d 426, 430 (5th Cir. 2004) (“[Plaintiff] does not
challenge the ‘very existence’ of the contract. . . . Instead, [Plaintiff] asserts
that the arbitration clause is ‘procedurally unconscionable[.]’”); see also Bell v.
Koch Foods of Miss., LLC, 358 F. App’x 498, 501 (5th Cir. 2009) (unpublished)
(per curiam) (“[Plaintiffs] argue that they did not enter into valid agreements
to arbitrate their claims, the arbitration agreements are unenforceable
because of procedural and substantive unconscionability, and the arbitration
agreements violate [federal law].”); Carson v. Higbee Co., 149 F. App’x 289,
291 (5th Cir. 2005) (unpublished) (per curiam) (“[Plaintiff] claims that if an
agreement to arbitrate does exist, that agreement is unconscionable.”).
       Bowles’s procedural unconscionability challenge is a challenge to
contract enforcement rather than contract formation.                    6   Her challenge
therefore must be referred to an arbitrator. Will-Drill, 352 F.3d at 218. 7



       6  Bowles’s argument that procedural unconscionability is a challenge to contract
formation under Mississippi law relies on a single sentence in the Mississippi Supreme Court
case West v. West, 891 So. 2d 203 (Miss. 2004). In that case, the court stated without
discussion or analysis that “[p]rocedural unconscionability goes to the formation of the
contract.” Id. at 213.
        We are unpersuaded by an argument based on this single sentence. (We recognize
that in this court’s earlier opinion, now withdrawn, the court found this argument persuasive.
Further examination of Mississippi law has given us a more complete view and convinced us
that the earlier opinion was in error.) First, West was in existence when the Mississippi
Supreme Court decided those other cases to which we have alluded, which belie this bald
statement. None of those cases apparently viewed West as a bar to hold explicitly that such
challenges are enforcement challenges. And second, in context, we think it is clear that the
West court only meant to distinguish procedural unconscionability from substantive
unconscionability at a more general level. When we have previously cited this sentence from
West, it has likewise been for the purpose of distinguishing the two types of unconscionability
at a general level. See Cooper Tire & Rubber Co. v. Farese, 423 F.3d 446, 458 (5th Cir. 2005).
        7 Two exceptions to this rule are not applicable in this case.        If an arbitration
agreement does not include a delegation clause referring enforcement challenges to an
arbitrator, then enforcement challenges may remain with the courts. First Options of Chi.,
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                                            V.
       In this opinion, we have decided two issues. First, the district court
correctly found that there was a meeting of the minds between Bowles and
OneMain necessary for the formation of the Arbitration Agreement. Second,
contrary to this court’s earlier withdrawn opinion, we have decided that
Bowles’s     challenge     to   the    Arbitration     Agreement       as    procedurally
unconscionable was a challenge to the Agreement’s enforceability, not to its
existence. For that reason, under the delegation clause in the Agreement that
sends all enforcement challenges to an arbitrator, the district court correctly
referred this challenge to the arbitrator. Accordingly, the district court’s order
compelling arbitration and dismissing the complaint is
                                                                            AFFIRMED.




Inc. v. Kaplan, 514 U.S. 938, 943 (1995). But the agreement here does contain a delegation
clause. See infra Part 1. And if an enforcement challenge is targeted solely at a delegation
clause, then the challenge remains with the courts. Rent-A-Center, W., Inc. v. Jackson, 561
U.S. 63, 71–72 (2010). But Bowles’s enforcement challenge is by her own admission to the
Arbitration Agreement as a whole, not just to the delegation clause.
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