Friday, December 27, 2013

Washington Mutual Finance Group v. Bailey case brief

Washington Mutual Finance Group v. Bailey case brief summary
364 F.3d 260 (2004)

Appellees, illiterate individuals, sued appellants, a financial institution and insurance companies. The financial institution moved to compel the individuals to arbitrate their disputes under the Federal Arbitration Act, 9 U.S.C.S. § 1 et seq. The United States District Court for the Northern District of Mississippi consolidated the cases and denied the motion to compel arbitration. The financial institution and the insurance companies appealed.

On appeal, the court was required to determine the effect of the individuals' illiteracy on the enforcement of an arbitration agreement, which the individuals admitted they signed, but because of their illiteracy, denied they understood. The district court held that the individuals' illiteracy, coupled with a lack of oral disclosure, rendered the agreement procedurally unconscionable.


  • The appellate court found that under Mississippi law, the individuals' inability to read and understand the arbitration agreement did not render the agreement unconscionable or otherwise unenforceable, and the agreement was not unconscionable or unenforceable because the financial institution failed to inform the individuals that they were signing an arbitration agreement after they were made aware of the individuals' inability to read since Mississippi law charged the parties to a contract with the obligation to read the contract or have it read to them. 
  • Therefore, the arbitration agreement was valid and enforceable, and the district court's denial of the financial institution's motion to compel arbitration pursuant to 9 U.S.C.S. § 4 was reversed.
The district court's denial of the financial institution's motion to compel arbitration was reversed, and the case was remanded for entry of an order compelling arbitration for all parties to the action. The district court's grant of the individuals' motion to dismiss was reversed.

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