Pre-Paid Legal Services ( PPD) will soon test its legal savvy in a "judicial hellhole" known for its runaway jury awards.

The company -- which heartily promotes "equal justice for all" -- had hoped to block hundreds of unhappy customers from the courtroom and force them into arbitration instead. But the Mississippi Supreme Court ruled on Thursday that a brief arbitration clause, printed in nine-point font near the end of the company's six-page contract, fails to eliminate a customer's right to a jury trial.

"There was no notice, no discussion and no negotiation of the arbitration agreement," the state Supreme Court ruled. "Further, based upon the language in this clause, we do not find that an average citizen would realize that he or she is giving up his or her right to a trial by jury under the broad, general language contained in the Pre-Paid Legal expense agreement."

Pre-Paid must now defend itself in court against hundreds of Mississippi customers who believe they were defrauded by the company and should receive hundreds of millions of dollars in damages as a result. The company faces its first test less than six weeks from now in a Holmes County trial court that was recently labeled one of 10 "judicial hellholes" by the American Tort Reform Association. It will later defend itself against a similar lawsuit filed in another court that appears on that same list.

"We're about 39 days away from the first trial," Doug Minor, a plaintiffs' attorney at Pigott Reeves Johnson & Minor, told TheStreet.com on Thursday. "We'll be seeking other trial dates as soon as possible and hope to schedule at least one more trial before the end of the year."

As a matter of policy, Pre-Paid does not comment for stories by TheStreet.com, because the company believes the coverage is negatively biased.

The Mississippi plaintiffs have accused Pre-Paid of misleading them about the coverage provided by its policies. The company relies on multilevel marketing -- the sales approach made famous by Amway -- to sell a legal plan that provides limited coverage for $25 a month. The plan specifically excludes coverage for such common legal issues as adoption, divorce and drunken driving. Because it offers a discount for such services, however, it has taught its massive sales force to promise customers that "everything is covered." Policyholders can then find themselves facing the very retainer fees they had purchased legal coverage to avoid.

All told, Pre-Paid is staring at nine Mississippi trials carrying potential damages of $90 million each. The company itself is worth just over half of the total amount that Mississippi plaintiffs are seeking. It faces a slew of other lawsuits -- including one accusing it of being an outright pyramid scheme -- as well. But it has reserved just $3.3 million to cover any legal judgments that may arise.

To be fair, Pre-Paid has noted that the Mississippi plaintiffs spent less than $500,000 on their legal policies before filing their multimillion-dollar lawsuits. But the company must now make its case in Mississippi courts that have often ignored the actual damages suffered. For example, a jury in Holmes County -- where Pre-Paid is headed first -- three years ago awarded six plaintiffs $150 million for being exposed to asbestos. The huge award has yet to be thrown out.

"Only 3M ( MMM) appealed the decision, as settlements or bankruptcies ended the cases against the other defendants," the Asbestos Litigation Reporter noted last month.

In Hinds County, another so-called hellhole where Pre-Paid faces trial, a jury issued a $30 million judgment against an insurer accused of selling a couple a policy they didn't really need. Some critics believe that Pre-Paid has behaved in a similar fashion.

"Pre-Paid sells a product that's supposed to help you when you're faced with legal issues," said one fund manager who has a large short position in Pre-Paid's stock. "Now, the company has to defend itself in front of a Mississippi jury that's seen its peers suffer after purchasing this often-worthless product."

Two years ago, Mississippi did establish a cap on punitive damage awards after being labeled a haven for "jackpot justice." Plaintiffs responded by rushing into popular courts -- including those in Holmes and Hinds counties -- to file a slew of extra suits before the law took effect in 2003. Pre-Paid's cases, filed well before the cutoff, are exempt from the new limit.

One short-seller, who has been following the company for years, is glad to see Pre-Paid customers getting their day in court.

"Pre-Paid Legal fought hard to keep these Mississippi cases out of the light of day," he said. "We'll find out why when these cases get aired in the courts in Mississippi. With their history of crooked high-profile associates peddling these products, no one should expect this to be anything but ugly for Pre-Paid."

Pre-Paid's stock, which climbed 40% last year during an aggressive buyback program, tacked on 30 cents to hit $24.78 on Thursday. More than 75% of the float is currently sold short by investors betting against the company.

More from Stocks

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

Dow Gets Swept Into Nasty Reversal Even as Nasdaq Posts New Record

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

REPLAY: Jim Cramer on Fed Rate Hikes, Oil Prices and Starbucks Worries

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

What Will GM Do With Cruise -- and Is Its Stock Worth $55?

3 Must Reads on the Market From TheStreet's Top Columnists

3 Must Reads on the Market From TheStreet's Top Columnists

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes