Lacy Barras v. Branch Banking and Trust Company
685 F.3d 1269
11th Cir.2012Background
- Barrass v. Branch Banking & Trust Co. is part of MDL 2036; BB&T sought to compel arbitration under the Bank Services Agreement (BSA).
- District court denied arbitration due to unconscionability under South Carolina law and later remanded after Concepcion (2011).
- On remand BB&T renewed, and the district court held BB&T waived its right to arbitrate the threshold issue of unconscionability and found a cost-and-fee-shifting provision unconscionable.
- The BSA requires Barras to bear any loss, costs, or expenses incurred by BB&T in any dispute, allegedly including arbitration costs.
- South Carolina unconscionability doctrine was argued to be preempted by the FAA under Concepcion, but the court applied the doctrine as a generally applicable contract defense.
- The court ultimately held the cost-and-fee-shifting provision unconscionable, severable from the arbitration provision, and reversed to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of arbitrability threshold issue? | BB&T did not waive; issue should go to arbitrator. | Rent-A-Center requires submission of threshold issue to arbitrator. | BB&T waived its right to arbitrate the threshold issue. |
| Does cost-and-fee-shifting clause apply to arbitration? | Clause applies to any dispute, including arbitration. | AAA rules govern costs, not the contract's broader clause. | Cost-and-fee-shifting provision applies to arbitration. |
| Is South Carolina unconscionability preempted by the FAA under Concepcion? | SC unconscionability is a state defense not preempted. | Concepcion preempts such state defenses to arbitration. | SC unconscionability doctrine is a generally applicable defense and not preempted. |
| Is the cost-and-fee-shifting provision unconscionable under SC law? | Provision is one-sided and oppressive, violating SBLA factors. | Provision is not unconscionable; it reflects contract terms. | Yes, the provision is unconscionable as written. |
| Severability of the unconscionable term from the arbitration clause? | Severability should be limited but may apply. | severability clause should allow enforcement of arbitration apart from the cost clause. | The cost-and-fee-shifting provision is severable; arbitration remains enforceable. |
Key Cases Cited
- Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (Sup. Ct. 2010) (waiver of arbitrability threshold issue not clearly required to go to arbitrator)
- Concepcion, 131 S. Ct. 1740 (Sup. Ct. 2011) (FAA preemption of class-arbitration waivers; generally applicable defenses remain valid)
- Simpson v. MSA of Myrtle Beach, Inc., 644 S.E.2d 663 (S.C. 2007) (two-element unconscionability test: meaningful choice and oppressive terms)
- Hough v. Regions Financial Corp., 672 F.3d 1224 (11th Cir. 2012) (waiver and severability considerations in arbitration context)
- Carolina Care Plan, Inc. v. United HealthCare Servs., 606 S.E.2d 752 (S.C. 2004) (SC unconscionability doctrine and its application to contracts, including arbitration)
- Munoz v. Green Tree Fin. Corp., 542 S.E.2d 360 (S.C. 2001) (adhesion contracts and unconscionability considerations under SC law)