                    United States Court of Appeals
                         FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 99-1582
                                  ___________

Todd B. Dobbins, Sr.; Stacy L.           *
Dobbins,                                 *
                                         *
       Plaintiffs/Appellees,             *
                                         *
       v.                                *
                                         *
Hawk's Enterprises, doing business       * Appeal from the United States
as Hawk's Mobile Homes, Inc.; John       * District Court for the Eastern
Evans; Eddie Hawks,                      * District of Arkansas.
                                         *
       Defendants/Appellants,            *
                                         *
BankAmerica Housing Services, a          *
division of Bank of America, FSB;        *
Leigh Hanson; Debra Sweat; Rodney        *
Smith;                                   *
                                         *
       Defendants,                       *
                                         *
Carriage Homes, a division of Brilliant *
Homes Corporation,                       *
                                         *
       Defendant/Appellant.              *
                                    ___________

                            Submitted: November 15, 1999

                                 Filed: December 23, 1999
                                  ___________
Before RICHARD S. ARNOLD, JOHN R. GIBSON, and BEAM, Circuit Judges.
                           ___________

BEAM, Circuit Judge.

       Todd and Stacy Dobbins contracted with Hawk's Enterprises to purchase a
mobile home manufactured by Carriage Homes. They allege the mobile home was
delivered with substantial damage. The Dobbinses also allege they tried several means
to resolve the dispute, but they eventually filed suit claiming damages under multiple
legal theories, including the Truth in Lending Act.1 In response, Carriage Homes,
Hawk's Enterprises, Eddie Hawks, and John Evans filed a motion to stay the federal
court proceeding and compel arbitration. In June 1998, the district court granted the
stay and ordered the parties to arbitrate.

       In September 1998, the Dobbinses made a motion to lift the stay on the basis that
the fees imposed by the American Arbitration Association (AAA) and their inability to
pay the fees prevented them from effectively asserting their claims.2 In response to the
motion, the district court held an evidentiary hearing to provide the Dobbinses the
opportunity to present evidence on their financial condition and inability to pay the
arbitration fees. Following the evidentiary hearing, the district court lifted the stay,
reopened the case, and found that the arbitration fees precluded the Dobbinses from
availing themselves of the arbitral forum.

       Carriage Homes, Hawk's Enterprises, Hawks, and Evans appeal, contending that
the arbitration agreement entered with the Dobbinses is enforceable. We reverse and
remand with instructions.

      1
          15 U.S.C. §§ 1601 et seq.
      2
      The Dobbinses claim $50 million dollars in compensatory and punitive
damages. We find the damage claim is disproportionate with the value of the mobile
home, and the claim that the mobile home arrived with substantial damage.

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       As a threshold matter, the Dobbinses contend we lack jurisdiction to review the
district court's order lifting the stay because it is an embedded arbitrability matter. An
embedded arbitrability matter is one which arises as part of a broader action dealing
with many issues. The Federal Arbitration Act (FAA), however, explicitly allows an
appeal of an order refusing a stay and an order refusing to compel arbitration. See 9
U.S.C. § 16(a)(1)(A) & (C). Therefore, we have jurisdiction over this appeal.

       Congress passed the FAA which mandated the enforcement of arbitration
provisions, and declared a strong national policy in favor of arbitration. See Southland
Corp. v. Keating, 465 U.S. 1, 10 (1983). From this strong policy flows a "broad
principle of enforceability" of arbitration provisions. Id. at 11. To enforce an
arbitration clause under the FAA, the arbitration provision must be a part of a written
"maritime contract" or a contract evidencing a commercial transaction, and an
arbitration agreement must be enforceable under the principles of contract law. See 9
U.S.C. § 2; see also Barker v. Golf U.S.A., Inc., 154 F.3d 788, 790 (8th Cir. 1998).

       The Dobbinses contend that the arbitration clause is unconscionable because of
the fees they must pay under the AAA rules. Therefore, they say, the contract is
unenforceable. We review the district court's decision on arbitrability de novo and the
court's factual findings for clear error. See Keymer v. Management Recruiters Int'l,
Inc., 169 F.3d 501, 504 (8th Cir. 1999). We must consider the arbitrability of the
issues with a healthy regard for the federal policy in favor of arbitration and any doubts
about the ability to arbitrate the issue should be resolved in favor of arbitration. See
id.

      As the district court noted in its order, courts across the country have begun to
recognize the potential that arbitration fees will make an arbitration agreement
unconscionable. See Rollins, Inc. v. Foster, 991 F. Supp. 1426, 1439 (M.D. Ala.
1998); In re Knepp, 229 B.R. 821, 838 (Bankr. N.D. Ala. 1999); Patterson v. ITT
Consumer Fin. Corp., 18 Cal. Rptr. 2d 563, 567 (Cal. Ct. App. 1993); Brower v.

                                           -3-
Gateway 2000, Inc., 676 N.Y.S.2d 569, 574 (N.Y. App. Div. 1998). We agree with
those courts that the potential is present. However, whether or not arbitration fees
make the agreement to arbitrate unconscionable is something that must be determined
on a case-by-case basis in light of the state law governing unconscionability.

       In this case, the Dobbinses claim that the final fee determination they received
from the AAA was $23,000.3 The district court found this fee to be oppressive and
therefore granted the stay. The AAA, however, has a fee waiver procedure. It decides
whether or not to waive, in whole or in part, a fee on the basis of a claimant's financial
situation. It is clear, however, from our reading of the evidentiary hearing transcript,
that the Dobbinses never fully explored the AAA's fee waiver procedures because Mr.
Dobbins refused to provide his family's financial information to the AAA. This is an
important step that must be taken before an unconscionability determination can be
made.

       Therefore, in an effort to foster the policy in favor of arbitration, we reverse and
remand this case with directions to order the Dobbinses to present a reduced demand
for damages and to seek a diminution or a waiver of fees from the AAA. The district
court also should retain jurisdiction over the case to determine if the fee, if not waived
all together, is lowered to a reasonable amount. If the district court finds that the fee
is unreasonable given the current financial situation of the Dobbinses, the district court
should accept the appellant's offer4 to pay the arbitration fees.




      3
         The fee is based on the amount of damages claimed by the Dobbinses which,
as we have earlier indicated, is $50 million dollars. It is clear from the record that this
is the highest fee that the Dobbinses would possibly have to pay and it is also clear that
the fee will be much less if a more realistic demand for damages is advanced.
      4
         This offer was made at oral argument. We also note the appellants paid the
initial $500 filing fee with the AAA to get the arbitration process started.

                                           -4-
A true copy.

      Attest:

         CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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