Bondy's Ford, Inc. v. Sterling Truck Corp.
| Decision Date | 28 June 2001 |
| Docket Number | No. CIV. A. 00-T-358-S.,CIV. A. 00-T-358-S. |
| Citation | 147 F.Supp.2d 1283 |
| Parties | BONDY'S FORD, INC., Plaintiff, v. STERLING TRUCK CORPORATION, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
v.
STERLING TRUCK CORPORATION, Defendant.
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William Lovard Lee, III, Lee & McInish, Dothan, AL, Robert A. Huffaker, Rachel Sanders-Cochran, Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, for Plaintiff.
Dow T. Huskey, Jr., Dothan, Jon P. Christiansen, Brian W. McGrath, Jonathan
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J. Van Handel, Foley & Lardner, Milwaukee, WI, for Defendant.
MYRON H. THOMPSON, District Judge.
Plaintiff Bondy's Ford, Inc., filed this lawsuit in the Circuit Court for Houston County, Alabama, against defendant Sterling Truck Corporation alleging claims for breach of contract and violation of the Alabama Motor Vehicle Franchise Act, 1975 Ala.Code §§ 8-20-1 through 8-20-13. Bondy's Ford bases its claims on a contractual "Dealer Sales and Service Agreement" it entered into with Sterling Truck. Sterling Truck removed the suit to this court based on diversity-of-citizenship jurisdiction, 28 U.S.C.A. §§ 1332 (diversity of citizenship), 1441 (removal).
This cause is now before the court on Sterling Truck's motions to dismiss or stay this action pending arbitration. Sterling Truck relies on 9 U.S.C.A. §§ 1-16, commonly known as the Federal Arbitration Act or FAA. For the reasons stated below, this case will be stayed pending arbitration.
Bondy's Ford is a motor vehicle dealer in Dothan, Alabama. In 1998, Bondy's Ford contracted with Sterling Truck to become an authorized Sterling Truck dealer. The contract was drafted exclusively by Sterling Truck, and, by its terms, provides for arbitration of all disputes: It states that "any claim, controversy, protest, or dispute ... relating to or arising from this Agreement, or any claim of breach of the Agreement, or of the relationship [between the parties] ... shall be settled by arbitration."1 The contract specifies that Ohio law governs its construction,2 that the obligations and rights conferred by it are to be exercised in compliance with valid local law,3 and that any provisions of the agreement that contravene local law are to be severed.4
In June 1999, Sterling Truck notified Bondy's Ford that, in Sterling Truck's opinion, Bondy's Ford was not adequately performing its obligations under the contract. Sterling Truck gave Bondy's Ford until December 15, 1999, to cure the alleged deficient performance. After the deadline passed, Sterling Truck was still not satisfied with Bondy's Ford's performance and, as provided by ¶ XV(K) of the dealership agreement between the two, commenced arbitration seeking a declaration that Sterling Truck has the right to terminate its relationship with Bondy's Ford under the agreement. Bondy's Ford responded by filing the instant lawsuit.
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Bondy's Ford has made four arguments why this suit may not be dismissed or stayed pending arbitration of the parties' dispute: (1) the anti-arbitration provision in the Alabama Motor Vehicle Franchise Act, 1975 Ala.Code § 8-20-4, has not been preempted by federal law in favor of arbitration; (2) the arbitration clause is severed from the rest of the agreement and may not be enforced; (3) the parties explicitly contracted for Alabama law—which prohibits arbitration of these claims—to govern their dispute; and (4) the arbitration provision as written is unconscionable. The court takes up each of these arguments in turn.
To be sure, the Alabama Motor Vehicle Franchise Act prohibits binding arbitration. 1975 Ala.Code § 8-20-4(1)(m) provides, in part, that it is an "unfair and deceptive trade practice" for "any manufacturer ... to coerce or attempt to coerce any motor vehicle dealer ... [t]o prospectively assent ... to require any controversy between a new motor vehicle dealer and a manufacturer to be referred to any person other than the duly constituted courts of this state or the United States, if the referral would be binding on the new motor vehicle dealer." Bondy's Ford, however concedes that the FAA preempts state law that conflicts with the FAA and that it evidences a national policy in favor of arbitration. Bondy's Ford argues, however, that where Congress has acted to preclude a waiver of a judicial forum for resolving a dispute, then state law to the same effect does not contravene the FAA and is not preempted. Bondy's Ford is correct that state law, when in agreement with a Congressional mandate that creates an exception to the FAA, is not preempted by that statute. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226-27, 107 S.Ct. 2332, 2337-38, 96 L.Ed.2d 185 (1987); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627-28, 105 S.Ct. 3346, 3355, 87 L.Ed.2d 444 (1985). In this case, Bondy's Ford asserts that Congress precluded the arbitration of claims arising out of franchise agreements between automobile dealers and manufacturers when it enacted the Dealer's Day in Court Act (DDCA), 15 U.S.C.A. §§ 1221-1225. This issue, whether the DDCA carves out an exception to the FAA, appears to be one of first impression.5
In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., the Supreme Court endorsed a two-part approach to determining whether a statutory right is not subject to the FAA. First, the trial court should answer the question whether "the arbitration clause at issue may not be read to encompass the statutory []claims." 473 U.S. at 624, 105 S.Ct. at 3352; and the answer here is undoubtedly yes. The FAA "plac[es] arbitration agreements upon the same footing as other contracts." McMahon, 482 U.S. at 225-26, 107 S.Ct. at 2337 (citations omitted). The FAA provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C.A. § 2. Statutorily created causes of action are no exception to the rule that arbitration agreements should be enforced according to their terms. Mitsubishi, 473 U.S. at 626-27, 105 S.Ct. at 3354. Moreover, as a matter of contractual interpretation, there is no question that the broadly worded arbitration clause between Bondy's
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Ford and Sterling Truck reaches such statutory claims and rights as those based on the DDCA.
Having answered yes to the first question, the court turns to the second question posed in Mitsubishi: Whether, although "the parties' agreement to arbitrate reach[es] the statutory issues, ... [there are] legal constraints external to the parties' agreement [that] foreclose[] the arbitration of those claims." Id. at 628, 105 S.Ct. at 3355. In other words, "whether [the party]'s ... claims are nonarbitrable even though it has agreed to arbitrate them." Id. Here, Bondy's Ford contends that the DDCA is a legal constraint external to its agreement with Sterling Truck that forecloses the arbitration of its claims against Sterling Truck.
"Agreements to arbitrate are essentially forum-selection clauses," Cunningham v. Fleetwood Homes of Georgia, Inc., 253 F.3d 611, 617 (2001); see also Scherk v. Alberto-Culver Co., 417 U.S. 506, 519, 94 S.Ct. 2449, 2457, 41 L.Ed.2d 270 (1974), and by "agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Mitsubishi, 473 U.S. at 628, 105 S.Ct. at 3354. However, Congress may limit or prohibit waiver of a judicial forum for specific statutory claims. See McMahon, 482 U.S. at 227, 107 S.Ct. at 2337-38. To deduce such an intent, reviewing courts must scrutinize a statute's text and legislative history, and ascertain whether an inherent conflict exists between enforcement of the arbitration agreement and the statute's underlying purposes. Id.
As in any case of statutory interpretation, the court looks first to the text of the statute. The DDCA enables automobile dealers to bring suit against manufacturers for "failure ... to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer." 15 U.S.C.A. § 1222. The statute creates a federal right and federal cause of action. See, e.g., Carroll Kenworth Truck Sales, Inc. v. Kenworth Truck Co., 781 F.2d 1520, 1525 (11th Cir.1986). Section 1222 delineates the elements of a violation of the act and a statutory defense to dealers' claims. See 15 U.S.C.A. § 1222. Section 1222 clearly and unambiguously permits a dealer to bring suit to enforce rights under the act "in any district court of the United States in the district in which [the] manufacturer resides, or is found, or has an agent." Id.
The language of § 1222, however, does not support the conclusion that Congress intended the DDCA to preclude arbitration of DDCA claims, or to close off other avenues of dispute resolution. Under the terms of the statute, a plaintiff "may bring suit," 15 U.S.C.A. § 1222, in federal district court. This language is permissive, not mandatory, as to the forum in which a DDCA claim may be brought. It is unmistakable evidence that Congress intended to open federal courts to DDCA claims. But such permissive language falls far short of itself supporting the conclusion that this provision, while opening federal courts, closes other fora. Thus, the plain terms of the DDCA do not support the proposal that Congress sought to exempt DDCA claims from arbitration under the FAA.
Next, the court turns to the statute's legislative history. Bondy's Ford bases its arguments about the DDCA's legislative history on a report by the Judiciary Committee of the House of Representatives on the DDCA. See H.R.Rep. No. 2850, 84th Cong., 2nd Sess.1956, 1956 U.S.C.C.A.N. 4596, 1956 WL 5114 (Leg. Hist). The portions of the Judiciary Committee's report to which Bondy's
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...a franchise agreement unless the party invokes the judicial process to 86. 515 A.2d 633 (Pa. Commw. Ct. 1986). 87. Id . at 636-37. 88. 147 F. Supp. 2d 1283 (M.D. Ala. 2001). 89. Id. at 1290. litigate the “specific claim” that it “subsequently seeks to arbitrate.” 90 Thus, where affiliates o......
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