                            NO. COA12-604

                   NORTH CAROLINA COURT OF APPEALS

                       Filed: 4 February 2014


TOMMY KNOX, VELMA KNOX, and KERRY
GORDON, on behalf of themselves
and all other persons similarly
situated,
     Plaintiffs

     v.                              New Hanover County
                                     No. 05 CVS 445
FIRST SOUTHERN CASH ADVANCE;
COMPUCREDIT CORPORATION; VALUED
SERVICES ACQUISITIONS COMPANY,
LLC; VALUED SERVICES, LLC; VALUED
SERVICES OF NORTH CAROLINA, LLC;
VALUED SERVICES FINANCIAL
HOLDINGS, LLC; VALUED SERVICES
HOLDINGS, LLC; FORESIGHT
MANAGEMENT COMPANY, LLC; FIRST
AMERICAN HOLDING, LLC; FIRST
AMERICAN MANAGEMENT, INC.; JAMES
E. SCOGGINS and ROBERT P. MANNING,
     Defendants


    Appeal by defendants from orders entered 23 January 2012 by

Judge D. Jack Hooks, Jr. in New Hanover County Superior Court.

Heard in the Court of Appeals 28 November 2012.


    Hartzell & Whiteman, L.L.P., by J. Jerome Hartzell, and North
    Carolina Justice & Community Development Center, by Carlene
    McNulty, for plaintiff-appellees.

    Moore & Van Allen PLLC, by Thomas D. Myrick, Mark A. Nebrig
    and Jonathan M. Watkins, and Paul Hastings LLP, by J. Allen
    Maines and S. Tameka Phillips, for defendant-appellants.


    STEELMAN, Judge.
                                -2-
     Based upon the decisions of the United States Supreme Court

in AT&T Mobility v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 179

L.Ed.2d 742 (2011), and American Express Co. v. Italian Colors

Rest., ___ U.S. ___, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013), the

trial court erred in holding that the arbitration agreement was

unconscionable and refusing to compel arbitration.

                I. Factual and Procedural History

     Between 1 May 2003 and 28 January 2005, Tommy Knox, Velma

Knox, Kerry Gordon and Willie Patrick (collectively, “plaintiffs”)

obtained loans from Community State Bank (“bank”).     These loans

were short-term, single-disbursement, single-repayment loans in

amounts up to $750.   At maturity, plaintiffs were required to pay

the principal plus a finance charge ranging from eighteen to

twenty-seven percent of the principal.

     Upon approval for a loan, plaintiffs were presented with an

agreement,   which    conspicuously   contained   provisions   that

plaintiffs agreed to binding arbitration of all claims, and that

plaintiffs agreed not to participate in a class action lawsuit.

     Of particular relevance to the instant case is the following

language from the Arbitration Agreement:

          Arbitration: You acknowledge that you have
          read, understand, and agree to the terms
          contained in the Arbitration Agreement you are
          signing in connection with this Note.       By
                     -3-
entering into the Arbitration Agreement, you
waive certain rights, including the right to
go to court (except as specifically provided
in the Arbitration Agreement), to have the
dispute heard by a jury, and to participate as
a part of a class of claimants relating to any
dispute with Lender, First American or their
affiliates.

...

ARBITRATION AGREEMENT AND WAIVER OF JURY
TRIAL.    Arbitration is a process in which
persons with a dispute: (a) waive their rights
to file a lawsuit and proceed in court and to
have a jury trial to resolve their disputes;
and (b) agree, instead, to submit their
disputes to a neutral third person (an
“arbitrator”) for a decision. Each party to
the dispute has an opportunity to present some
evidence to the arbitrator. Pre-arbitration
discovery may be limited.           Arbitration
proceedings are private and less formal than
court trials.     The arbitrator will issue a
final and binding decision resolving the
dispute, which may be enforced as a court
judgment.     A court rarely overturns an
arbitrator’s    decision.      THEREFORE,   YOU
ACKNOWLEDGE AND AGREE AS FOLLOWS:

. . .

2.   By   entering   into   this   Arbitration
Agreement:

(a) YOU ARE WAIVING YOUR RIGHT TO HAVE A
TRIAL BY JURY TO RESOLVE ANY DISPUTE ALLEGED
AGAINST US OR RELATED THIRD PARTIES;

(b) YOU ARE WAIVING YOUR RIGHT TO HAVE A
COURT, OTHER THAN A SMALL CLAIMS TRIBUNAL,
RESOLVE ANY DISPUTE ALLEGED AGAINST US OR
RELATED THIRD PARTIES; and
                     -4-
(c) YOU ARE WAIVING YOUR RIGHT TO SERVE AS A
REPRESENTATIVE, AS A PRIVATE ATTORNEY GENERAL,
OR IN ANY OTHER REPRESENTATIVE CAPACITY,
AND/OR TO PARTICIPATE AS A MEMBER OF A CLASS
OF CLAIMANTS, IN ANY LAWSUIT FILED AGAINST US
AND/OR RELATED THIRD PARTIES.

3.   Except as provided in Paragraph 6 below,
all disputes including any Representative
Claims against us and/or related third parties
shall be resolved by binding arbitration only
on an individual basis with you. THEREFORE,
THE ARBITRATOR SHALL NOT CONDUCT CLASS
ARBITRATION; THAT IS, THE ARBITRATOR SHALL NOT
ALLOW YOU TO SERVE AS A REPRESENTATIVE, AS A
PRIVATE ATTORNEY GENERAL, OR IN ANY OTHER
REPRESENTATIVE CAPACITY FOR OTHERS IN THE
ARBITRATION.

4.   Any party to a dispute, including related
third parties, may send the other party
written notice by certified mail return
receipt requested of their intent to arbitrate
and setting forth the subject of the dispute
along with the relief requested, even if a
lawsuit has been filed.     Regardless of who
demands arbitration, you shall have the right
to select any of the following organizations
to administer the arbitration: the American
Arbitration                     Association[],
J.A.M.S./Endispute[],    or    the    National
Arbitration Forum[]. However, the parties may
agree to select a local arbitrator who is an
attorney,   retired   judge,   or   arbitrator
registered   in   good    standing   with   an
arbitration    association    and    arbitrate
pursuant to such arbitrator’s rules. . .

5.   If you demand arbitration, then at your
request we will advance your portion of the
expenses associated with the arbitration,
including the filing, administrative, hearing
and arbitrator’s fees (“Arbitration Fees”).
If related third parties or we demand
                     -5-
arbitration, then at your written request we
will advance your portion of the Arbitration
Fees. Throughout the arbitration, each party
shall bear his or her own attorneys’ fees and
expenses, such as witness and expert witness
fees. The arbitrator shall apply applicable
substantive law consistent with the FAA and
applicable statutes of limitation, and shall
honor claims of privilege recognized at law.
The arbitration hearing will be conducted in
the county of your residence, or within 30
miles from such county, or in the county in
which   the  transaction    under   this  Loan
Agreement occurred, or in such other place as
shall be ordered by the arbitrator.        The
arbitrator may decide with or without any
hearing, any motion that is substantially
similar to a motion to dismiss for failure to
state a claim or a motion for summary
judgment. In conducting the arbitration, the
arbitrator shall not apply any federal or
state rules of civil procedure or evidence.
At the timely request of any party, the
arbitrator shall provide a written explanation
for the award. The arbitrator’s award may be
filed with any court having jurisdiction. If
allowed by statute or applicable law, the
arbitrator may award you statutory damages
and/or your reasonable attorneys’ fees and
expenses.      Regardless    of   whether  the
arbitrator renders a decision or an award in
your favor resolving the dispute, you will not
be responsible for reimbursing us for your
portion of the Arbitration Fees.

6.   All parties, including related third
parties, shall retain the right to seek
adjudication in a small claims tribunal for
disputes within the scope of such tribunal’s
jurisdiction.   Any dispute that cannot be
adjudicated within the jurisdiction of a small
claims tribunal shall be resolved by binding
arbitration. Any appeal of a judgment from a
small claims tribunal shall be resolved by
                                        -6-
            binding arbitration.

            7.   This Arbitration Agreement is made
            pursuant to a transaction involving interstate
            commerce and shall be governed by the FAA. If
            a final non-appealable judgment of a court
            having jurisdiction over this transaction
            finds, for any reason, that the FAA does not
            apply to this transaction, then our agreement
            to arbitrate shall be governed by the
            arbitration law of the State of South Dakota.

            8.   This Arbitration Agreement is binding
            upon and benefits you, your respective heirs,
            successors and assigns.       The Arbitration
            Agreement is binding upon and benefits us, our
            successors and assigns, and related third
            parties.

     On     8    February     2005,     plaintiffs     filed     a    class-action

complaint,       alleging     that    defendants     Compucredit          Corporation

(“Compucredit”), Valued Services Acquisitions Company, LLC (“VS-

AC”), Valued Services of North Carolina, LLC (“VS-NC”), Valued

Services    Financial       Holdings,    LLC      (“VS-FH”),     Valued     Services

Holdings,       LLC   (“VS-H”),       Foresight     Management       Company,    LLC

(“Foresight”),        First   American     Holding,     LLC    (“FA-H”),        First

American        Management,     Inc.     (“FA-M”),       James       E.     Scoggins

(“Scoggins”), and Robert P. Manning (“Manning”), under the name

First Southern Cash Advance (collectively, “defendants”) violated

the North Carolina Consumer Finance Act, the North Carolina unfair

trade practices statute, and North Carolina usury laws.
                                          -7-
     On 28 February 2006, plaintiffs moved that the case be

certified    as    a    class   action.         On   10    November    2009,   Patrick

voluntarily       dismissed     his   claims         against   defendants      without

prejudice.        On 25 January 2011, Scoggins and Manning moved to

dismiss for insufficiency of service of process.                      On 19 May 2011,

VS-AC, VS-FH, VS-H, FA-H, FA-M, Scoggins, and Manning moved to

dismiss for lack of personal jurisdiction, asserting that they had

insufficient contacts with the State of North Carolina for the

trial court to exercise personal jurisdiction under the long-arm

statute (N.C. Gen. Stat. § 1-75.4).                   On 25 May 2011, defendants

moved to compel arbitration.

     On 23 January 2012, the trial court denied defendants’ 25

January 2011 motion to dismiss for insufficiency of service of

process, denied defendants’ 19 May 2011 motion to dismiss for lack

of personal jurisdiction, denied defendants’ 25 May 2011 motion to

compel   arbitration,       and   granted       plaintiffs’     28     February   2006

motion for class certification.

     Defendants appeal.

                       II. Failure to Compel Arbitration

     Defendants        first    contend    that      the    trial   court   erred   by

refusing to compel arbitration.            We agree.
                                           -8-
                              A. Standard of Review

            The standard governing our review of this case
            is that “findings of fact made by the trial
            judge are conclusive on appeal if supported by
            competent evidence, even if ... there is
            evidence to the contrary.” Lumbee River Elec.
            Membership Corp. v. City of Fayetteville, 309
            N.C. 726, 741, 309 S.E.2d 209, 219 (1983)
            (citation omitted). “Conclusions of law drawn
            by the trial court from its findings of fact
            are reviewable de novo on appeal.” Carolina
            Power & Light Co. v. City of Asheville, 358
            N.C. 512, 517, 597 S.E.2d 717, 721 (2004).

Tillman v. Commercial Credit Loans, Inc., 362 N.C. 93, 100-01, 655

S.E.2d 362, 369 (2008).

                              B. Unconscionability

     In    the    instant        case,    the    trial   court’s   order    denying

defendants’ motion to compel arbitration was filed on 23 January

2012.     On     25    January    2012,    the   trial   court’s   order    denying

defendants’ motion to compel arbitration in the companion case of

Torrence et al. v. Nationwide Budget Finance et al. (New Hanover

County    case    05    CVS   447)   was    filed.       The   findings    of   fact,

conclusions of law, and rulings of the trial court were virtually

identical.1



1 In Torrence, there was additional analysis dealing with the
designation of the National Arbitration Forum (NAF) as the
arbitrator.   In the instant case, the arbitration agreement
provided for three arbitration groups, one of which was the NAF.
The agreement also provided that, by agreement, the parties could
select a local arbitrator. Neither party in the instant case has
                                 -9-
     We are simultaneously filing an opinion in the Torrence case

(COA 12-453).   For the reasons set forth in Torrence, we hold that

the trial court erred in determining that the arbitration agreement

was substantively unconscionable.      The orders of the trial court

denying defendants’ motion to dismiss for insufficiency of service

of process, denying defendants’ motion to dismiss for lack of

personal   jurisdiction,   denying   defendants’    motion    to    compel

arbitration,    and   granting   plaintiffs’       motion     for   class

certification are vacated, and the matter is remanded to the trial

court for entry of an order compelling arbitration in this case.

Because the trial court erred in holding that the arbitration

agreement was substantively unconscionable, we need not reach the

question of procedural unconscionability.      See Torrence, ___ N.C.

App. ___, ___, ___ S.E.2d ___, ___ (2014) (COA 12-453, § VI).

                       III. Other Arguments

     Because the trial court erred in denying defendants’ motion

to compel arbitration, defendants’ arguments with regard to class

action are moot, and further excluded due to the express language

of the arbitration agreement waiving class actions.          Because this

case was not properly before the trial court, we need not address




raised a question concerning the arbitrator             or    arbitrator
selection clause in the arbitration agreement.
                                  -10-
defendants’ further contentions regarding class certification,

personal jurisdiction and service of process.        See, e.g., Miller

v. Two State Const. Co., Inc., 118 N.C. App. 412, 418, 455 S.E.2d

678, 682 (1995) (holding that where the arbitration agreement was

valid,   we   “need   not   address   the   other   issues   raised   by

defendants”).   These issues are properly to be determined by an

arbitrator.

                             IV. Conclusion

    The trial court erred in refusing to grant defendants’ motion

to compel arbitration.      The orders of the trial court enumerated

in Section II of this opinion are all vacated, and this matter is

remanded to the trial court for entry of an order compelling the

parties to arbitrate their claims.

    VACATED AND REMANDED.

    Judges STEPHENS and McCULLOUGH concur.
