Amer Hlth Life Ins v. Lawrence ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-60594
AMERICAN HEALTH AND LIFE INSURANCE
COMPANY; TRITON INSURANCE COMPANY,
Plaintiffs - Appellees,
versus
IVA JOHNSON
Defendant - Appellant.
No. 01-60595
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
CO
Plaintiffs - Appellees
v.
ELLIS B LANG
Defendant - Appellant
No. 01-60596
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
CHARLES LAWRENCE
Defendant - Appellant
No. 01-60597
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
REGINALD V LOWERY
Defendant - Appellant
No. 01-60598
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
ETTA MELTON
Defendant - Appellant
No. 01-60599
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
HELEN MORANT
Defendant - Appellant
No. 01-60600
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
2
Plaintiffs - Appellees
v.
DANIEL DAVIS
Defendant - Appellant
No. 01-60601
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
MARILYN FARMER
Defendant - Appellant
No. 01-60602
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
ETHYL MAE GILL
Defendant - Appellant
No. 01-60603
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
3
ZETTIE GRAHAM
Defendant - Appellant
No. 01-60604
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
LAURA HAIRSTON
Defendant - Appellant
No. 01-60605
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintifffs - Appellees
v.
ROBERT HALBERT
Defendant - Appellant
No. 01-60606
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
LOUISE HARRELL
Defendant - Appellant
4
No. 01-60607
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
TINA HART
Defendant - Appellant
No. 01-60608
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
DAVID HILL; GLENDA ANN HILL
Defendants - Appellants
No. 01-60609
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
WILLIE ARTHUR HODGES, SR; LULA D HODGES
Defendants - Appellants
No. 01-60610
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
5
Plaintiffs - Appellees
v.
VIOLET R JOHNSON
Defendant - Appellant
No. 01-60611
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
ELLSWORTH NASH
Defendant - Appellant
No. 01-60612
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
HOWARD PRATT
Defendant - Appellant
No. 01-60613
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
6
v.
DELORES SANDERS
Defendant - Appellant
No. 01-60614
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
JERRY SMITH
Defendant - Appellant
No. 01-60616
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
EARNEST STALLINGS; LUTISHIA STALLINGS
Defendants - Appellants
No. 01-60617
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
JOE STALLINGS
7
Defendant - Appellant
Case No. 01-60619
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
ANGEL SYKES
Defendant - Appellant
No. 01-60620
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
TWANDA BRAZZLE
Defendant - Appellant
No. 01-60621
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
CHARLIE BREWER; IZELLA BREWER
Defendants - Appellants
No. 01-60622
8
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
MICHAEL W BROWN
Defendant - Appellant
No. 01-60623
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
ARGAIL CARTER
Defendant - Appellant
No. 01-60624
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
VELMA CLARK
Defendant - Appellant
No. 01-60625
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
9
Plaintiffs - Appellees
v.
GLORIA COTTON
Defendant - Appellant
No. 01-60626
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
LINDA TAYLOR
Defendant - Appellant
No. 01-60627
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
TRAVIS WILKINS; LOUISE WILKINS
Defendants - Appellants
No. 01-60628
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
10
Plaintiffs - Appellees
v.
REGINALD WHITE; TYREE WHITE
Defendants - Appellants
No. 01-60629
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
HENRY YOUNG; ANNIE YOUNG
Defendants - Appellants
No. 01-60630
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
Plaintiffs - Appellees
v.
RICHARD SMITH
Defendant - Appellant
No. 01-60631
AMERICAN HEALTH AND LIFE INSURANCE COMPANY; TRITON INSURANCE
COMPANY
11
Plaintiffs - Appellees
v.
B J HARVEY; LOUISE HARVEY
Defendants - Appellants
Appeals from the United States District Court
for the Northern District of Mississippi
(1:01-CV-110)
June 7, 2002
Before DAVIS, EMILIO M. GARZA, and STEWART, Circuit Judges.
PER CURIAM:*
Iva Johnson (“Johnson”) appeals the district court’s order referring the above case to
arbitration pursuant to the Federal Arbitration Act (“FAA”). For the reasons stated herein, we affirm.
FACTUAL AND PROCEDURAL HISTORY
This case involves the sale of credit-related insurance to Iva Johnson and several other
similarly situated individuals (collectively the “Defendants”). The Defendants obtained one or more
consumer loans from CitiFinancial, Inc. (“CFI”) at CFI’s Mississippi offices in Columbus,
Greenwood, Starkville, or Tupelo. As a prerequisite for receiving the loans, the Defendants were
* Pursuant to 5th CIR. R. 47.5, the court has determined that this opinion should not be published and is not
precedent except under the limited circumstances set forth in 5th CIR. R. 47.5.4.
12
required to purchase credit-related insurance. The purpose of credit-related insurance is to provide
security for the repayment of a loan, in the event that the borrower is disabled or injured, or collateral
is impaired. CFI gave the Defendants the option of purchasing their insurance from either American
Health and Life Insurance Company (“American”) or Triton Insurance Company (“Triton”).
American and Triton are wholly owned subsidiaries of CFI. In connection with the loan, the
Defendants signed a document entitled “Disclosure Statement, Note and Security Agreement”
(“Agreement”), which essentially constituted the loan contract. The Agreement contained a
mandatory arbit ration provision, requiring that all claims or disputes in connection with the loan
transaction be submitted to binding arbitration. Despite this provision, the Defendants independently
filed suit in state court against American, Triton, and employees of CFI (the “Plaintiffs”) alleging
fraud, negligent misrepresentation, breach of fiduciary duty, and negligence in relationship to the
consumer loan transactions.
Shortly thereafter, the Plaintiffs filed an action in federal district court seeking to compel
arbitration. They alleged that, in connection with the loan, the Defendants signed a contract
containing a mandatory arbitration clause, and thus, arbitration was required pursuant to the FAA.
The Defendants filed motions to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure, asserting that Mississippi law forbids arbitration clauses in insurance policies. In support
of their contention, the Defendants submitted an affidavit from the Mississippi Insurance
Commissioner, and an opinion from the State Attorney General. By written order, the district court
denied the Defendants’ motions to dismiss, finding that the Defendants submitted evidentiary
materials that were outside of the pleading, and therefore could not have been considered in deciding
a 12(b)(6) motion to dismiss. Considering only the pleadings, the court found that the Defendants
13
failed to allege any set of facts that would entitle them to the relief they sought. Subsequently, the
Plaintiffs filed a motion for summary judgment. After evaluating all of the summary judgment
evidence, the district court granted their motion and ordered arbitration. The Defendants each timely
appealed to this Court. All of the Defendants’ independent actions were consolidated for purposes
of appeal.
STANDARD OF REVIEW
We review de novo a district court’s ruling on a motion to dismiss pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure. Shipp v. McMahon, 234 F.3d 907, 911 (5th Cir. 2000).
This motion examines the legal sufficiency of the claims stated in the complaint and must be evaluated
solely on the pleadings. Jackson v. Procunier, 789 F.2d 307, 309 (5th Cir. 1986). A district court’s
grant of summary judgment is also reviewed de novo. Exxon Corp. v. Baton Rouge Oil, 77 F.3d 850,
853 (5th Cir. 1996). Once a properly supported motion for summary judgment is presented, t he
burden shifts to the non-moving party to set forth facts showing that there is a genuine issue for trial.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Bros. v. Klevenhagen, 28 F.3d 452, 455
(5th Cir. 1994). We review “the facts drawing all inferences most favorable to the party opposing
the motion.” Matagorda County v. Russell Law, 19 F.3d 215, 217 (5th Cir. 1994). Therefore, the
entry of summary judgment is appropriate if “there is no genuine issue as to any material fact” and
“the moving party is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c); Rojas v. TK
Comms., Inc., 87 F.3d 745, 747 (5th Cir. 1996).
DISCUSSION
In enacting the FAA, Congress expressed a strong national policy favoring arbitration and
removed the states’ power to require judicial proceedings for the resolution of claims which the
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parties contracted to resolve by arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10 (1984).
Under the Act, a written provision, in a contract that evidences a transaction involving commerce,
to settle by arbitration a controversy arising out of such contract is valid, irrevocable, and enforceable.
9 U.S.C. § 2 (1999). Whenever the scope of an arbitration clause is in question, the court should
construe the clause in favor of arbitration. Rojas , 87 F.3d at 747. If the issues in the case are within
the contemplation of the arbitration agreement, the FAA's stay-of-litigation provision is mandatory,
and there is no discretion vested in the district court to deny the stay. In re Complaint of Hornbeck
Offshore Corp., 981 F.2d 752, 754 (5th Cir. 1993).
This Circuit has directed that district courts are to conduct a two-step inquiry when
determining whether parties’ claims should be submitted to arbitration. R.M. Perez & Assocs., Inc.
v. Welch, 960 F.2d 534, 538 (5th Cir. 1992). First, the district court must determine whether the
parties had a written agreement to arbitrate the dispute. Id. After the court concludes that the parties
agreed to arbitrate, “it must consider whether any federal statute or policy renders the claims
nonarbitrable.” Id. In the present case, the parties do not dispute that the Agreement contains the
following mandatory arbitration provision:
Any claim, except those specified below in this provision, shall be resolved by binding
arbitration in accordance with (i) the Federal Arbitration Act; (ii) the Expedited
Procedures of the Commercial Arbitration Act; and (iii) this Provision.
The Agreement defines a “claim” as
[A]ny case, controversy, dispute, tort, disagreement, lawsuit, or claim now or
hereafter existing between You and Us. A Claim includes, without limitation,
anything that concerns . . . any past, present, or future Credit Transactions. . .
Examples of claims that are governed by this Agreement include those involving:
State insurance, usury, and lending laws, fraud or misrepresentation, including claims
for failing to disclose material facts.
15
The Agreement also states that the term “US” as used in the arbitration provision includes not only
the lender, but also the lender’s present and former parent corporations, subsidiary and affiliate
corporations, as well as any employees of these entities. Id. at 4 (emphasis added). The Plaintiffs
clearly fall within one or more of these categories. Thus, they are specifically covered by the
arbitration clause.
Applying the two-prong test set out in R.M. Perez, the district court determined that the
written arbitration clause was “unambiguous, sufficiently broad to cover the Defendant[s]’ claims,
and susceptible to only one interpretation - that the parties intended to settle, through arbitration, the
claims the Defendant[s] [had] raised.” As for the second prong, the court found that there were no
federal statutes or policies rendering the claims raised in the complaint “nonarbitrable.” Id. Thus,
the court ordered arbitration.
As an initial matter, we find that the district court properly found that the two-prong test for
determining whether the parties agreed to binding arbitration was met, and the Defendants do not
challenge this conclusion on appeal. Instead, they maintain that the entire loan agreement is invalid
because the Plaintiffs failed to submit their policy forms to the Mississippi Commissioner of Insurance
for approval as required by Mississippi law.2 This contention must fail because it ignores the fact that
the arbitration clause was in the loan agreement and not the insurance policy itself. Therefore,
Mississippi law applicable to the business of insurance is not at issue here, and there is no law in
Mississippi requiring that loan contracts must be presented to the Commissioner of Insurance for
2
Mississippi law requires that “All policies, certificates of insurance, notices of proposed
insurance, applications for insurance, endorsements and riders delivered or issued for delivery in this
state, and the schedules of premium rates pertaining thereto, shall be filed with the commissioner for
his approval prior to use.” MISS. CODE ANN. § 83-53-15 (1999).
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approval. See e.g. Federal Trade Comm’n v. Dixie Fin. Co., 695 F.2d 926, 931(5th Cir. 1983)
(holding that the wrongful sale of credit insurance during a loan transaction does not involve the
business of insurance). Because we find that the loan contract was valid, and that the two-prong test
set out in R.M. Perez was met, we conclude that the district court properly ordered mandatory
3
arbitration pursuant to the FAA. Since we are affirming the district court’s decision, the
Defendants’ motion to supplement the record is denied.
CONCLUSION
For the reasons stated above, we AFFIRM.
AFFIRMED.
3
The Defendants also allege that in their motion to dismiss, they argued that the application
of the FAA to this case is prohibited by the McCarran-Ferguson Act, which generally prohibits federal
interference in the state regulation of insurance. The record reveals, however, that the Defendants
did not raise this issue in their motion to dismiss as they contend. Because this preemption argument
is raised for the first time on appeal, we would generally review it only for plain error. Forbush v.
J.C. Penney Co., 98 F.3d 817, 822 (5th Cir. 1996). However, because we find that the disposition
of this case does not depend on the application of state insurance law, we do not address this
argument.
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