On September 16, 2025, the U.S. District Court for the Southern District of Mississippi declined to dismiss a claim for breach of guaranty agreements, rejecting the defendants’ argument that the contracts are “so unconscionable that they fail to state a claim.”
The action arose out of a series of loans provided by First Service Bank from 2016 to 2023 to Thomas Swarek, Sunnyside Well Service Inc., and World AG Investment Inc. (“World AG”), guaranteed by Swarek and/or World AG. When the loans went into default, First Service then sued to enforce the loan agreement and related guaranties.
The defendants argued that the guaranty agreements were unconscionable under Arkansas law because their waiver provisions are “so broad” and “so one-sided” that the guarantor can “assert literally no defense whatsoever,” even the defense of payment. One set of guaranty agreements provides that, “to the extent permitted by law,” the guarantor waives several specified rights, in particular “any defense that could be asserted by Borrower, including defenses arising out of failure of consideration, breach of warranty, fraud, payment, statute of frauds, bankruptcy, lack of capacity, statute of limitations, lender liability, unenforceability of any loan document, accord and satisfaction, or usury.” The other set of guaranty agreements contained a provision providing that the guarantor waived, among other things, “each and every defense , , , except the defense of actual payment.”
The court rejected the defendants’ unconscionability arguments, which the court stated were “conclusory” and “fail[ed]to address the limiting language found within the guaranty agreements.” Specifically, the court noted the language in one set of guaranties that the guarantor’s waiver of rights was only “to the extent permitted by law” and that the other set of guaranties contained a specific carve-out for the defense of actual payment. “Without more” than an argument that the contract language is unfair, the court concluded the defendants failed to carry their burden to establish that the guaranty agreements are unconscionable.
The case is First Service Bank v. World AG Investment Inc., et al., No. 1:24-cv-262 (S.D. Miss. Sept. 16, 2025). Plaintiff is represented by Butler Snow LLP. Defendants World AG Investment Inc., Thomas Swarek, and Sunnyside Well Services Inc. are represented by Holcomb Law Group. Defendant Bill Buffington is represented by Daly Kirl, PLLC. The decision is available here.
