Business Law

Tower Loan of Mississippi, LLC v. Willis (In re Willis) (5th Cir.)

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The following is a case update written by Corey R. Weber, a partner at Brutzkus Gubner Rozansky Seror Weber LLP, a member of the ad hoc group and the Chair of the CLA Business Law Section, analyzing a recent decision of interest:

The Fifth Circuit Court of Appeals reversed a district court order affirming denial of a motion to compel arbitration of an adversary proceeding for violations of the Truth in Lending Act.  A strong dissent argued that the district court and bankruptcy court properly denied the motion.  Tower Loan of Mississippi, LLC v. Willis (Matter of Willis), 2019 WL 6767095 (5th Cir. 2019).  

To view the full opinion, click here.


Chuck Willis, a mechanic and truck driver, entered into two written agreements when he borrowed money from Tower Loan of Mississippi, LLC (Tower).  Both agreements contained arbitration provisions, but the provisions differed “relating mainly to the selection and number of arbitrators, time to respond, location, and fee-shifting.”  About three months after entering into the agreements with Tower, Willis filed a chapter 7 bankruptcy case.

Willis filed an adversary proceeding against Tower in the bankruptcy case for violation of the Truth in Lending Act (TILA).  After the adversary complaint was filed and Tower filed an answer, Tower filed a motion to dismiss the case or compel arbitration.  The bankruptcy court denied Tower’s motion to compel arbitration due to conflicting arbitration provisions in the two agreements and the district court affirmed.  The Fifth Circuit reversed and remanded.


The Fifth Circuit determined that Willis and Tower “reached a valid agreement to arbitrate and delegated threshold arbitrability issues to the arbitrator”.  Citing to Kubala v. Supreme Prod. Servs., Inc., 830 F.3d 199, 201 (5th Cir. 2016), the Fifth Circuit reiterated that within the circuit, the two step process in analyzing a motion to compel arbitration is: (1) apply state law to determine whether the parties formed any arbitration agreement; and (2) interpret the contract to determine whether the claim is covered by the arbitration agreement.

The court found that “the bankruptcy court properly construed the agreements as one” under Mississippi law because Tower and Willis were parties to both agreements, the agreements were closely related, and the agreements were executed “at the same time and as part of the same transaction.”  The majority found construing them as one agreement reinforced its conclusion that there was a meeting of the minds.

In fact, most of the decision focused on whether there was a meeting of the minds under Mississippi law.  The Fifth Circuit analyzed whether the conflicting arbitration provisions in the two agreements impacted whether there was a meeting of the minds.  The court adopted the dissent’s reasoning in Ragab v. Howard, 841 F.3d 1134 (10th Cir. 2016), the majority opinion of which was relied upon by the bankruptcy court.  The dissent in Ragab was written by Justice Gorsuch (Judge Gorsuch at the time).  The Fifth Circuit stated that “Willis asks us to follow Ragab and hold that the conflicting provisions thwarted a meeting of the minds.  We decline his request.  The parties’ intentions were unmistakable: They wished to arbitrate any dispute that may arise between them.”  The Fifth Circuit further stated that “[t]he conflicting provisions do not change that result.  Though the agreements differ over procedural details, they speak with one voice about whether to arbitrate.  We thus find good company in Justice Gorsuch: We will not shut our eyes to an agreement that demonstrates a baseline intent to arbitrate just because it contains inconsistent terms about procedural minutiae.” 

The Fifth Circuit therefore reversed and remanded, holding that “under Mississippi law, the parties validly contracted to arbitrate” and that the agreements contained delegation clauses that provided for the arbitrator to determine arbitrability of the claims.

Author’s Comment

The opinion is notable because it enforces arbitration provisions despite conflicts over meaningful terms, and despite the fact that Willis was a consumer.  The conflicting terms in the agreements gave rise to a strong dissent by Judge Dennis, who stated that “there was not a meeting of the minds or mutual assent on a contract to arbitrate.”  The dissent took issue with Justice Gorsuch’s dissent in Ragab, stating that “[t]he merit of that dissent’s reasoning is debatable and does not appear to have been applied by any court to decide a meeting of the minds issue with respect to arbitration.”  The dissent also noted that “the two arbitration agreements contain seven conflicting terms, which the majority inappropriately downplays as differences over mere “procedural minutiae” “ and that the conflicting terms include the amount of time to respond to a notice of demand for arbitration, the location of the arbitration, how the arbitrator is selected and who pays for the arbitration.

The dissent stated that whereas Ragab dealt with knowledgeable merchants, Willis was “a mechanic and truck driver”, that the agreements were provided “on a take it or leave it basis” and that “the majority falls into serious error in adopting the Ragab dissent as a model for deciding the issue of mutual assent in consumer transactions in our circuit.”

Judge Dennis’ dissent is well-reasoned and more compelling than the majority reasoning.  The majority opinion passes over a number of substantive conflicts in the arbitration provisions in the two agreements simply because Willis and Tower agreed to arbitrate.  The conflicting terms about who pays for what in the arbitration seems particularly important in deciding if there is a meeting of the minds in a consumer case.

Other circuits have refused to enforce arbitration provisions in certain circumstances.  For instance, the Ninth Circuit has determined that arbitration should not be enforced in “core” proceedings where enforcing an arbitration provision would conflict with the underlying purposes of the Bankruptcy Code.  In re Thorpe Insulation Co., 671 F.3d 1011, 1021 (9th Cir. 2012).  Arbitration provisions also have not been enforced when a bankruptcy trustee is pursuing claims that are the prepetition claims of creditors rather than the debtor, such as fraudulent transfer claims.  In re EPD Inv. Co., LLC, 821 F.3d 1146, 1152 (9th Cir. 2016).  However, those circumstances are not present in this case.  The TILA claims in Willis’ adversary complaint are not “core” bankruptcy claims and arbitration of TILA claims does not appear to conflict with the underlying purposes of the Bankruptcy Code.  The claims also are the prepetition claims of the debtor rather than creditors.  The opinion has no discussion regarding how the debtor had standing to pursue a claim of the bankruptcy estate held by the trustee.  Notwithstanding, forcing a consumer to arbitrate claims when there are conflicting substantive terms in two separate agreements leads to an inequitable result when any meeting of the minds between Tower and Willis is questionable. 

For discussions of other cases dealing with related issues, see:

  • 2007 Comm. Fin. News. 94
  • 2019-37 Comm. Fin. News. NL 74

These materials were written by Corey R. Weber, a partner at Brutzkus Gubner Rozansky Seror Weber LLP, a member of the ad hoc group and the Chair of the CLA Business Law Section, with editorial contributions by the Hon. Meredith Jury (United States Bankruptcy Judge, C.D. Cal, Ret.), also a member of the ad hoc group.  Thomas Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomas Reuters.

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