Mason v. Acceptance Loan Co., Inc.

• Decision Date: 27 September 2002
• Citation: 850 So.2d 289
• Parties: Charlie MASON et al. v. ACCEPTANCE LOAN COMPANY, INC., et al. Charlie Thigpen et al. v. Acceptance Loan Company, Inc., et al.
• Court: Alabama Supreme Court

850 So.2d 289

Charlie MASON et al. v. ACCEPTANCE LOAN COMPANY, INC., et al.

Charlie Thigpen et al. v. Acceptance Loan Company, Inc., et al.

1064.

Supreme Court of Alabama.

September 27, 2002.

Rehearing Applications Denied November 22, 2002.

Jere L. Beasley, W. Daniel Miles III, and C. Lance Gould of Beasley, Allen, Crow, Methvin, Portis & Miles, P.C., Montgomery; Terry L. Butts of Cervera, Ralph & Butts, Troy; and Thomas R. Fields III and Will R. Kelly, Hayneville, for appellants.

Lamar C. Johnson of Gilmore Law Office, Grove Hill, for appellee Acceptance Loan Company, Inc.

W. Michael Atchison, Rik S. Tozzi, and Brian A. Dodd of Starnes & Atchison, L.L.P., Birmingham, for appellee Protective Life Insurance Company.

Bibb Allen and Richard E. Smith of Christian & Small, L.L.P., Birmingham, for appellee CNL Insurance America, Inc.

HOUSTON, Justice.¹

This is an appeal from an order of the Lowndes Circuit Court granting the defendants' motions to compel arbitration; it involves, among other things, the effect of the plaintiffs' alleged mental retardation on their ability to contract. We affirm.

I. Facts

Charlie Mason, Charlie Thigpen, and others (hereinafter collectively referred to as "the plaintiffs") sued Acceptance Loan Company, Inc., Protective Life Insurance Company, and CNL Insurance America, Inc. (hereinafter collectively referred to as "the defendants"), in the Lowndes Circuit Court, asserting various claims² stemming from the solicitation and sale of insurance to the plaintiffs in conjunction with consumer loans they obtained from Acceptance. Specifically, the plaintiffs purchased credit-life and disability insurance from Protective Life and automobile insurance from CNL. The defendants each filed a motion to compel arbitration, seeking to enforce arbitration agreements signed by the plaintiffs in connection with each consumer loan and each application for insurance. The trial court granted the defendants' motions; this appeal followed.

II. Analysis

Our analysis is governed by the following now familiar standards:

"This Court reviews the [grant or] denial of a motion to compel arbitration de novo. Green Tree Fin. Corp. v. Vintson, 753 So.2d 497, 502 (Ala.1999); Patrick Home Ctr., Inc. v. Karr, 730 So.2d 1171, 1172 (Ala.1999). The party seeking to compel arbitration has the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially affecting interstate commerce.[³] TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999); Sisters of the Visitation v. Cochran, 775 So.2d 759 (Ala.2000). `[A]fter a motion to compel arbitration has been made and supported, the burden is on the nonmovant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question.' Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (opinion on application for rehearing) (Ala.1995)."

American Gen. Fin., Inc. v. Morton, 812 So.2d 282, 284-85 (Ala.2001).

It is undisputed that each plaintiff entered into at least one arbitration agreement and that most of the plaintiffs entered into multiple arbitration agreements. There is also no dispute concerning whether the plaintiffs' claims fall within the scope of those agreements. Instead, the plaintiffs contend that the trial court erred in compelling arbitration because, they say, (1) the defendants did not offer sufficient evidence indicating that the transactions substantially affected interstate commerce, (2) the various contracts that contained the arbitration agreements are void under Ala.Code 1975, § 8-1-170, because, they argue, the plaintiffs suffer from mental retardation that renders them "insane," (3) the plaintiffs were fraudulently induced into signing the arbitration agreements, and (4) the arbitration agreements are unconscionable. As discussed below, we find these arguments unpersuasive.

A. Effect of Transactions on Interstate Commerce

In granting the defendants' motions to compel arbitration, the trial court relied on two uncontroverted affidavits. One of those affidavits was from Leon Michael Schmitt, a vice president of Protective Life. It reads as follows:

"1. My name is Leon Michael Schmitt. I am over the age of twenty-one (21) years, and have personal knowledge of the following facts:

"2. I am employed by Protective Life Insurance Company (`Protective') as Vice President, Administration, Financial Institutions Insurance Division. In this capacity I am responsible for all aspects of credit life insurance sold by Protective.

"3. I have reviewed the complaint in this case, the Certificate of Insurance issued to the plaintiffs, the `Credit Insurance Disclosure Statement' signed by the plaintiffs and the plaintiffs' policy history. I am familiar with Protective's operating procedures in regard to policies of credit life insurance such as that purchased by the plaintiffs.

"4. Protective regularly sends and receives policy forms, and other information regarding the type of policy at issue in this lawsuit, across state lines, via the U.S. Mail, faxes, phones and computer/electronic transfer.

"5. Protective has policyholders throughout the United States, in all fifty states. Protective regularly mails and receives policy forms across state lines.

"6. When individuals purchase credit life insurance, the policy form and premium payments are remitted across state lines, through the U.S. Mail, to North Carolina.

"7. In the event a claim is made by any beneficiary not living in North Carolina, all claim forms are mailed by the beneficiary, across state lines, to Protective's office in North Carolina. All examination of the claim is done by an examiner located in North Carolina. The claims examination necessarily entails the transfer of information across state lines via phone lines and the U.S. Mail.

"8. When a claim is paid, the claim checks are issued in North Carolina and then mailed, across state lines, to the named beneficiary.

"9. Should any questions regarding the policy arise, policyholders are instructed to contact Protective's North Carolina office, across state lines, using a 1-800 customer service telephone number.

"10. Protective uses premiums collected on insurance policies to support its interstate activities."

The other affidavit was from Doyle Kelly, president of CNL. It states:

"My name is Doyle Kelly. I am over 19 years of age and have personal knowledge of the facts and matters contained in this affidavit.

"I currently serve as President for CNL/Insurance America and have been employed with this company for 27 years. My office is located in Macon, Georgia.

"I have reviewed the complaint filed by the plaintiffs in this case, and I am familiar with the insurance policies issued by my company relating to the allegations raised by the plaintiffs. Our company issued a master policy to defendant Acceptance Loan Co., Inc. to be used by Acceptance in soliciting Limited Physical Damage insurance in the State of Alabama. Each of the plaintiffs from Alabama would have been issued an insurance certificate from CNL in Georgia. Each of the plaintiff's insurance transactions with CNL would have been an act involving interstate commerce.

"Attached to my Affidavit as Exhibits... are true and correct copies of the arbitration agreements signed by each plaintiff in this proceeding with CNL."⁴

Based on these uncontroverted affidavits, we believe that the plaintiffs' purchase of credit-life and disability insurance and automobile insurance in connection with obtaining loans through Acceptance clearly "involved" interstate commerce so as to enforce the arbitration agreements under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"). See 9 U.S.C. § 2 (providing that the FAA applies to contracts "evidencing a transaction involving commerce"). Regarding the application of the FAA in the insurance context, we have held:

"Unquestionably, insurance transactions that stretch across state lines or intrastate insurance transactions that otherwise have the requisite (substantial) effect on interstate commerce constitute `Commerce among the several States,' so as to make them subject to regulation by Congress under the Commerce Clause of the United States Constitution."

Southern United Fire Ins. Co. v. Knight, 736 So.2d 582, 586 (Ala.1999) (citing United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 546-47, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944) (holding that an insurer that conducts business across state lines is engaged in interstate commerce)). See Humana Inc. v. Forsyth, 525 U.S. 299, 307, 119 S.Ct. 710, 142 L.Ed.2d 753 (1999) (stating that "an insurance company doing business across state lines engages in interstate commerce" (citing South-Eastern Underwriters)).

In this case, Schmitt's affidavit indicates, among other things, that the plaintiffs' Protective Life insurance policies were issued from and are maintained at Protective Life's office in North Carolina. Similarly, Kelly's affidavit indicates that the plaintiffs' CNL insurance policies were issued from and are maintained at CNL's home office in Macon, Georgia.

Furthermore, it is undisputed that the plaintiffs' transactions with Protective Life and CNL were the result of, and, in fact, were an integral part of, the plaintiffs' loan transactions with Acceptance. The insurance was obtained through Acceptance as a part of a transaction in which the plaintiffs' borrowed money from Acceptance.⁵ Therefore, because, as stated above, the plaintiffs' transactions with Protective Life and CNL sufficiently "involve" interstate commerce, the transactions with Acceptance must likewise "involve" interstate commerce. See Green Tree Fin. Corp. v. Lewis, 813 So.2d 820, 824 (Ala.2001) (examining all relevant related transactions to determine whether a particular transaction "involved" interstate commerce).

We affirm the trial court's finding that the defendants...