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UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-60852
PRIMERICA LIFE INSURANCE CO.; ET AL,
Plaintiffs,
PRIMERICA LIFE INSURANCE CO.;
PRIMERICA FINANCIAL SERVICES, INC.;
CITIGROUP, INC.; SANFORD L. WEILL; and
CITIFINANCIAL, INC.,
Plaintiffs-Appellants,
v.
CATHERINE E. BROWN,
individually and in her
representative capacity
for John E. Brown;
JOHN E. BROWN,
Defendants-Appellees.
Appeals from the United States District Court
for the Northern District of Mississippi
August 28, 2002
Before JONES, WIENER and DENNIS, Circuit Judges.
Edith H. Jones, Circuit Judge:
John Brown sued CitiFinancial, Inc., and its affiliates
("Appellants"), in state court alleging breach of contract and
related claims. Brown's contract with CitiFinancial contains an
arbitration clause requiring arbitration of his claims.

CitiFinancial filed a petition to compel arbitration of Brown's
claims in federal district court, pursuant to § 4 of the Federal
Arbitration Act ("FAA"), 9 U.S.C. § 4. The district court
determined that Brown lacked the mental capacity to execute a
contract under Mississippi law, and that Brown's entire contract
with CitiFinancial was void. On this basis, the district court
refused to compel arbitration of Brown's claims.
CitiFinancial now appeals and contends that the district
court erred by reaching the merits of Brown's capacity defense.
Appellants contend that Prima Paint Corp. v. Flood & Conklin Mfg.
Co., 388 U.S. 395, 87 S.Ct. 1801 (1967), requires arbitration of
Brown's capacity defense. We agree, and reverse the judgment of
the district court.
DISCUSSION
This court reviews de novo the grant or denial of a
petition to compel arbitration pursuant to § 4 of the FAA. Webb v.
Investacorp, 89 F.3d 252, 257 (5th Cir. 1996). The FAA expresses
a strong national policy favoring arbitration of disputes, and all
doubts concerning the arbitrability of claims should be resolved in
favor of arbitration. Southland Corp. v. Keating, 465 U.S. 1, 10,
104 S.Ct. 852 (1984).
"Courts perform a two-step inquiry to determine whether
parties should be compelled to arbitrate a dispute. First, the
court must determine whether the parties agreed to arbitrate the
2

dispute. Once the court finds that the parties agreed to
arbitrate, it must consider whether any federal statute or policy
renders the claims nonarbitrable." R.M. Perez & Assoc., Inc. v.
Welch, 960 F.2d 534, 538 (5th Cir. 1992) (citing Mitsubishi Motors
Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 105 S.Ct. 3346
(1983)). When conducting this two-pronged analysis, courts must
not consider the merits of the underlying action. Snap-On Tools
Corp. v. Mason, 18 F.3d 1261, 1267 (5th Cir. 1994). "Under § 4 of
the FAA, the federal district court ascertains only whether the
arbitration clause covers the allegations at issue. `If the
dispute is within the scope of the arbitration clause, the court
may not delve further into the merits of the dispute.'" Id.
(quoting Municipal Energy Agency of Miss. v. Big Rivers Elec.
Corp., 804 F.2d 338, 342 (5th Cir. 1986)).
Brown's contract with CitiFinancial contains an express
arbitration agreement. Brown's state court claims fall within the
scope of the arbitration agreement. There are no external
impediments to the arbitrability of Brown's claims.1 Therefore, a
straightforward application of the required two-pronged inquiry
supports CitiFinancial's petition to compel arbitration.
1
Brown also argues that arbitration costs render the arbitration
clause "substantively unconscionable." The Supreme Court, in Green Tree
Financial Corp. v. Randolf, 531 U.S. 79, 91-92, 121 S.Ct. 513 (2000), explained
that "a party seeking to avoid arbitration on the ground that arbitration would
be prohibitively expensive" bears the burden of showing the likelihood of
incurring prohibitive costs. Brown has failed to carry this burden. Brown also
suggests that the arbitration agreement is "procedurally unconscionable" on other
grounds. This argument is without merit.
3

The district court nevertheless refused to compel
arbitration by delving into the merits of the underlying dispute.
Specifically, the district court determined that Brown lacked the
capacity to contract under Mississippi law. As explained above,
the district court's inquiry when reviewing a petition to compel
arbitration is limited. "[T]he merits of the underlying dispute
are for the arbitrator to consider, not for this Court or the
district court." Snap-On Tools Corp., 18 F.3d at 1267. Brown's
capacity defense is part of the underlying dispute between the
parties, and the defense must be submitted to the arbitrator.
In Prima Paint, the Court held that, under § 4 of the
FAA, the "making" of an agreement to arbitrate was not called into
question by an allegation that the entire contract was void as
fraudulently induced. 388 U.S. at 403-04, 87 S.Ct. 1801. "[The
FAA] does not permit the federal court to consider claims of fraud
in the inducement of the contract generally . . . A federal court
may consider only issues relating to the making and performance of
the agreement to arbitrate." Id. Accordingly, unless a defense
relates specifically to the arbitration agreement, it must be
submitted to the arbitrator as part of the underlying dispute.
This court has applied the Prima Paint rule on numerous
occasions. See Snap-On Tools Corp., 18 F.3d at 1267-68 (submitting
fraudulent inducement defense to arbitration because allegations of
fraud did not specifically relate to the arbitration clause); R.M.
4

Perez & Assoc., Inc., 960 F.2d at 538-39 (submitting allegations of
fraud in obtaining signatures to contract to arbitration because
defense was not specific to the arbitration agreement); Lawrence v.
Comprehensive Business Serv. Co., 833 F.2d 1159, 1162 (5th Cir.
1987) (submitting illegality defense to arbitration because it did
not specifically relate to arbitration clause); Mesa Operating Ltd.
Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 244
(5th Cir. 1986) (submitting claim that contract was void ab initio
to arbitration because parties failed to demonstrate that the
arbitration agreement was "invalid separately from the entire
contract").
As in each of these cases, Brown's capacity defense is a
defense to his entire agreement with CitiFinancial and not a
specific challenge to the arbitration clause. Therefore, Brown's
capacity defense is part of the underlying dispute between the
parties which, in light of Prima Paint and its progeny, must be
submitted to the arbitrator.2 We need not reach the other issues
raised by the parties.
2
The district court determined that the Prima Paint rule applied to
defenses which render a contract voidable, but did not apply to defenses which
render a contract void. This distinction is inconsistent with Mesa Operating,
which applied the Prima Paint rule to a defense which, if proven, would have
rendered the contract containing the arbitration clause "void as never having
been entered into." 797 F.2d at 244; see also Lawrence, 833 F.2d at 1162
(following Mesa Operating and submitting illegality defense to arbitrator).
5

CONCLUSION
For the reasons stated above, we REVERSE the judgment of
the district court and REMAND for proceedings consistent with this
opinion.
6

DENNIS, Circuit Judge, concurring.
I concur in the judgment of the majority opinion. I write
separately to note the district court's finding, which the parties
apparently do not dispute, that Mr. Brown "has been profoundly
retarded since birth." The district court also found that the loan
agency "required him to sign the loan agreement containing the
arbitration clause by printing his name on a piece of paper and
having him copy it on the appropriate line." Under Mississippi law,
contracts entered into by incompetent persons are voidable. See
Williams v. Wilson, 335 So.2d 110, 112 (Miss. 1976) (stating that a
contract made by an incompetent "may be avoided on the ground of
insanity"). Similarly, when a party contracting with an incompetent
has knowledge of the incompetent's condition, the contract "will be
rescinded." Id. at 112-13 (emphasis added).
Against this backdrop, I note the grounds on which this Court
will vacate a decision of an arbitrator: (1) the award is contrary to
public policy, (2) the award is arbitrary and capricious, (3) the
award fails to draw its essence from the underlying contract, and (4)
the award is in manifest disregard of the law. See Williams v. Cigna
Fin. Advisors Inc., 197 F.3d 752, 758, 761-62 (5th Cir. 1999).
Hence, if the facts are as they appear to be on the record before us,
I can conceive of no way in which the contract underlying this action
7

could be enforced against the profoundly retarded and incompetent Mr.
Brown.
Finally, with regard to the broad statement that "unless a
defense relates specifically to the arbitration agreement, it must be
submitted to the arbitrator as part of the underlying dispute" and
the related footnote two, I note that this circuit has not considered
the authority of other circuits applying the Prima Paint rule to the
distinction between voidable contracts and those contracts deemed not
to have existed. We have decided that the question of whether a
contract as a whole was illegal must be submitted to arbitration.
See Lawrence v. Comprehensive Bus. Servs. Co., 833 F.2d 1159 (5th
Cir. 1987); Mesa Operating Ltd. P'ship v. Louisiana Intrastate Gas
Corp., 797 F.2d 238 (5th Cir. 1986). But we have not yet thoroughly
analyzed or squarely decided whether challenges going to the very
existence of a contract must be submitted to arbitration. Other
circuits have split on this question. See, e.g., Three Valleys Mun.
Water Dist. v. E.F. Hutton & Co., 925 F.2d 1136 (9th Cir. 1991) (no);
I.S. Joseph Co. v. Michigan Sugar Co., 803 F.2d 396 (8th Cir. 1986)
(no); Cancanon v. Smith Barney, Harris, Upham & Co., 805 F.2d 998
(11th Cir. 1986) (no); Unionmutual Stock Life Ins. Co. v. Beneficial
Life Ins. Co., 774 F.2d 524 (1st Cir. 1985) (yes); Par-Knit Mills,
Inc. v. Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980) (no).
Because it is not necessary for us to reach that question here, the
8

majority opinion's statements thereon are dicta, in which I do not
join.
9