Washington Mutual Finance Group, Llc. v. Bailey

364 F.3d 260 (5th Cir.2004).

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Nature of the Case

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Facts

D provides among other things, consumer credit services. Ps obtained loans from D or its predecessors. As part of the same transaction, the illiterate Ps also purchased credit, life, disability, and property insurance from American Bankers Life Assurance Company of Florida, American Security Insurance Company, Union Security Life Insurance Company and American Bankers Insurance Company of Florida (the Insurers). Each of the illiterate Ps signed an agreement to arbitrate any disputes they might have with D. Eventually Ps began to figure out that they were sold insurance that they did not need or want. They sued in state court. In response, D brought separate federal actions under the Federal Arbitration Act (FAA) against Ps, seeking an order staying the state actions and compelling Ps to arbitrate their disputes. The Insurers who were also defendants in the state court suit intervened. The district court consolidated the cases. The court found that they were illiterate and that D never specifically informed them that they were signing arbitration agreements. These facts and circumstances rendered the arbitration agreements procedurally unconscionable and therefore unenforceable. Ds appealed.