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In re Willis

United States Court of Appeals, Fifth Circuit

December 12, 2019

In the Matter of: CHUCK WILLIS Debtor.
CHUCK WILLIS, Appellee. TOWER LOAN OF MISSISSIPPI, L.L.C., Doing Business as Tower Loan of Crystal Springs, Appellant,

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

          Before OWEN, Chief Judge, SMITH and DENNIS, Circuit Judges.


         In adversary bankruptcy proceedings, Chuck Willis sued Tower Loan of Mississippi, L.L.C. ("Tower Loan"), for allegedly violating the Truth in Lending Act ("TILA"). Tower Loan moved to dismiss or compel arbitration. The bankruptcy court denied the motion, and the district court affirmed. Tower Loan appeals. Because the parties reached a valid agreement to arbitrate and delegated threshold arbitrability issues to the arbitrator, we reverse and remand with instructions to refer this case to arbitration.


         This appeal centers on the relationship between two arbitration agreements that Willis signed in November 2016 when he borrowed money from Tower Loan via an Installment Loan Agreement and Disclosure Statement ("loan agreement"). The loan agreement showed that Willis had also purchased insurance policies; those policies were issued by Tower Loan subsidiaries. In signing the loan agreement, Willis agreed to an arbitration agreement found on its back side ("first arbitration agreement"). And in purchasing the insurance policies, Willis agreed to a separate arbitration agreement ("second arbitration agreement"). Though Tower Loan didn't sign the second agreement, a Tower Loan representative had handed it to Willis for his signature.[1]

         The two arbitration agreements are similar but not identical. Start with the similarities. Both broadly require arbitration for all disputes between and among Willis, Tower Loan, and the insurance companies, including any that arise from the loan or the policies. Each agreement binds Willis to arbitrate any dispute with Tower Loan's affiliates. Both delegate to the arbitrator the power to decide gateway arbitrability issues, including whether a given claim is covered. But the agreements conflict over several procedural aspects of the arbitration, relating mainly to the selection and number of arbitrators, time to respond, location, and fee-shifting.

         In January 2017, Willis filed for Chapter 7 bankruptcy. About four months later, he sued Tower Loan in an adversary proceeding, alleging that the company had violated the TILA, 15 U.S.C. § 1601 et seq., by providing inaccurate disclosures in the loan agreement. After answering, Tower Loan moved to dismiss or compel arbitration.

         The bankruptcy court denied the motion. It held that the first and second arbitration agreements formed a single contract and that the conflicting provisions meant that Willis and Tower Loan hadn't formed a sufficiently definite contract to arbitrate under Mississippi law. The district court affirmed in a terse opinion that added nothing on the merits.[2] Tower Loan appeals, contending that the arbitration agreements should be construed separately and that even if we construe them together, the parties still formed a valid contract.


         "We review de novo a ruling on a motion to compel arbitration" and follow "two analytical steps" in doing so. Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016). We first apply state law to determine whether the parties formed "any arbitration agreement at all." Id. Second, we interpret the contract "to determine whether this claim is covered by the arbitration agreement." Id. The second step is also ordinarily for the court. Id. But "the analysis changes" where the agreement delegates to "the arbitrator the primary power to rule on the arbitrability of a specific claim." Id. In such a case, we ask only whether there is a valid delegation clause.[3] If there is, then the arbitrator decides whether the claim is arbitrable. Id.


         The first question per Kubala is whether, as a matter of Mississippi law, [4] the parties created a valid contract to arbitrate. Id. That requires us to resolve two related issues. First, should the arbitration agreements be construed as one contract? Second, assuming we construe them together, did the parties have a meeting of the minds as to arbitration?

         A. Contract Construction

         The bankruptcy court construed the arbitration agreements together, noting that both cover all disputes between Willis and Tower Loan. Tower Loan contends that the agreements should be construed separately because Tower Loan assented only to the first arbitration agreement and not the second. The company suggests that because it did not sign or otherwise agree to the second, it cannot be considered a party to it. Hence, on Tower Loan's theory, only the first agreement applies.

         We disagree. Under Mississippi law, "when separate documents are executed at the same time, by the same parties, as part of the same transaction, they may be construed as one instrument."[5] All of those requirements are met, so the bankruptcy court properly construed the agreements as one.

         First, Tower Loan is a party to the second arbitration agreement just as it is to the first. Tower Loan conceded at oral argument that its representative handed Willis both arbitration agreements to sign. And the agreements are closely related. Each requires Willis to arbitrate any dispute involving Tower Loan. Both apply to all disputes that arise from the loan Willis received and the insurance he purchased. Moreover, the loan agreement-to which Tower Loan is indisputably bound-shows that Willis purchased the insurance policies that the company insists are part of an entirely separate transaction.[6]Next, Tower Loan and Willis executed the two agreements at the same time and as part of the same transaction. As stated above, a Tower Loan representative handed Willis both agreements, and the loan agreement evidences both the loan and the insurance purchases. Accordingly, the arbitration agreements were "executed at the same time, by the same parties, as part of the same transaction." Sullivan, 882 So.2d at 135. We construe them together.

         B. Meeting of the Minds

         Next, construing the agreements as one, we decide whether Willis and Tower Loan entered into a valid contract to arbitrate despite inconsistencies in the contractual terms.

         1. To form a contract, Mississippi law requires, among other things, [7]"mutual assent"[8] or a "meeting of the minds"[9] as to essential terms, as well as a contract that is "sufficiently definite" to "enable the court under proper rules of construction to ascertain its terms." Leach v. Tingle, 586 So.2d 799, 802 (Miss. 1991). A "[d]etermination that an agreement is sufficiently definite is favored in the courts, so as to carry out the reasonable intention of the parties if it can be ascertained." Jones v. McGahey, 187 So.2d 579, 584 (Miss. 1966). Thus, "[a] court will, if possible, interpret doubtful agreements by attaching a sufficiently definite meaning to a bargain if the parties evidently intended to enter into a binding contract." 1 Williston on Contracts ("Williston") § 4:21 (4th ed. 2019). Mississippi courts have not addressed whether conflicting terms in an arbitration agreement prevent a contract from forming.

         2. The bankruptcy court identified several terms in conflict between the two arbitration agreements. They relate to (1) the number of arbitrators, [10] (2) selection of arbitrators, [11] (3) time allowed to respond, [12] (4) location of the arbitration, [13] (5) who pays the arbitration costs, [14] (6) who is entitled to attorneys' fees and on what showing, [15] and (7) when arbitration doesn't apply.[16] The court ...

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