Stout v. Byrider, 99-3854

• Decision Date: 23 June 2000
• Docket Number: No. 99-3854,99-3854
• Citation: 228 F.3d 709
• Parties: (6th Cir. 2000) James D. Stout; Shirley A. Brown, Plaintiffs-Appellants, v. J.D. Byrider, a/k/a Docherty Motors, Inc.; T & J Acceptance Corporation, d/b/a Carnow Acceptance Company,Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 709

228 F.3d 709 (6th Cir. 2000)

James D. Stout; Shirley A. Brown, Plaintiffs-Appellants, v. J.D. Byrider, a/k/a Docherty Motors, Inc.; T & J Acceptance Corporation, d/b/a Carnow Acceptance Company,Defendants-Appellees.

No. 99-3854

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: June 23, 2000

Decided and Filed: September 8, 2000

Appeal from the United States District Court for the Northern District of Ohio at Akron. No. 98-02830--James S. Gwin, District Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] Sylvia M. Antalis, John T. Murray, MURRAY & MURRAY, Sandusky, Ohio, for Appellants.

Gary W. Johnson, John A. Albers, WESTON, HURD, FALLON, PAISLEY & HOWLEY, Cleveland, Ohio, William F. Kolis, Jr., WICKENS, HERZER & PANZA, Lorain, Ohio, for Appellees.

Before: SILER and CLAY, Circuit Judges; STAFFORD, District Judge^*.

OPINION

CLAY, Circuit Judge.

Plaintiffs James D. Stout and Shirley A. Brown appeal the denial of their motion for class certification and dismissal of this action for fraud and violations of the Ohio Consumer Sales Practices Act and the federal Truth in Lending Act arising from Plaintiffs' purchases of used motor vehicles from Defendants J.D. Byrider, a.k.a. Docherty Motors, Inc., and T & J Acceptance Corporation. For the following reasons, we AFFIRM.

I.

Docherty Motors is a closely held Ohio corporation which has sold used motor vehicles since 1995, and which advertises itself as providing financing to consumers with imperfect credit records. The corporation owns three J.D. Byrider franchises in northern Ohio. Each franchise has a manager who reports to Docherty Motors' executive vice-president.

Each franchise has a service department which performs repairs only on vehicles purchased at J.D. Byrider; the service department does both warranty and nonwarranty work. Prior to sale, each vehicle is inspected by Docherty Motors employees who perform a "safety check;" Docherty Motors also permits customers to take vehicles for a pre-purchase inspection at a mechanic of their choice.

Docherty Motors offers financing through T & J Acceptance Corporation to those individuals who may not qualify for traditional financing such as banks or credit unions. T & J owns three CarNow Acceptance Corporation ("CNAC") franchises, located at each J.D. Byrider dealership. CNAC provides standardized guidelines for the procedure for closing a sale and loan. Byrider personnel are trained to handle sales and financing transactions in a uniform manner. A CNAC representative handles the closing on each customer's purchase, which includes individual presentation of a power of attorney for vehicle registration and license, federal odometer statement, Ohio temporary registration application, Best Extended Service Agreement (if applicable), Buyer's Order, Retail Installment Contract and Security Agreement, insurance responsibility form, Buyer's guide, check list, and customer survey questionnaire. Closings at the Sandusky dealership are videotaped by a wall mounted camera for training and quality assurance purposes. The CNAC representative provides a brief explanation of each document, answers questions about the documents, and gives buyers an opportunity to review the paperwork prior to signing. After late 1997, customers were also presented with arbitration agreements which are separate, written agreements in normal and bold-faced type.

Vehicles purchased at Docherty Motors come with a limited warranty for three months or 3,000 miles. Customers may purchase an extended service agreement which covers the same items as the limited warranty, or they may decline it. There is no financial incentive for Defendants' employees if a customer purchases an extended service agreement. The extended service agreement is presented at the same time as the other documents as part of closing.

The videotapes of Plaintiffs' transactions show that the documents were individually presented to Plaintiffs for their review and signature. The CNAC representative provided a hypothetical example to Stout of how the arbitration agreement might work. Brown also reviewed the arbitration agreement prior to signing. Under Brown's agreement, the only dispute not subject to arbitration is a claim by Defendants that she failed to make payments on a timely basis in compliance with the contracts; her arbitration is to be conducted through the Better Business Bureau. Under Stout's agreement, the only claims not subject to arbitration are claims under $10,000, and claims relating to repossession and replevin of the vehicle; his arbitration is to be conducted through the American Arbitration Association. Both Plaintiffs purchased extended service agreements lasting eighteen months or 18,000 miles for $895. Brown utilized the extended service agreement for replacing the engine in a car she had purchased.

On December 7, 1998, Plaintiffs James D. Stout and Shirley A. Brown, individually and on behalf of all similarly situated individuals, filed a class action complaint in the United States District Court for the Northern District of Ohio against J.D. Byrider, a.k.a. Docherty Motors, Inc., and T & J Acceptance Corporations, d.b.a. CarNow Acceptance Company. The complaint alleged violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, the Ohio Consumer Sales Practices Act ("OCSPA"), Ohio Rev. Code § 1345.01, and common law fraud.

Defendants moved to strike the class action allegations, to stay the proceedings and to compel arbitration under the parties' arbitration agreement. Plaintiffs moved to certify the proposed class. The district court denied Plaintiffs' motion for class certification, holding that Plaintiffs' claims were not typical of the putative class, that insufficient commonality existed amongst the putative class members, and that Plaintiffs were inadequate representatives for the class.

Defendants moved for summary judgment on all of Plaintiffs' claims; Plaintiffs moved for partial summary judgment on their TILA claim. The district court denied Defendants' motion to stay the proceedings but granted Defendants' motion to compel arbitration, holding after review of the record including the videotape of Plaintiffs' transactions, that the arbitration agreements were enforceable under Ohio and federal law and dismissing Plaintiffs' amended complaint "without prejudice to reinstatement should further proceedings be needed after arbitration." The district court did not rule on either party's motion for summary judgment.

Plaintiffs appealed to this Court.

II.

This Court reviews the ruling of the district court compelling arbitration de novo. See Ferro Corp. v. Garrison Indus., 142 F.3d 926, 931 (6th Cir. 1998).

Under the Federal Arbitration Act, 9 U.S.C. § 2, ("FAA"), a written agreement to arbitrate disputes which arises out of a contract involving transactions in interstate commerce "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The FAA was designed to override judicial reluctance to enforce arbitration agreements, to relieve court congestion, and to provide parties with a speedier and less costly alternative to litigation. See Allied-Bruce Terminx Cos. v. Dobson, 513 U.S. 265, 270, 280 (1995); Mastrobuono v. Shearsan Lehman Hutton, Inc., 514 U.S. 52, 52-54 (1995). When asked by a party to compel arbitration under a contract, a federal court must determine whether the parties agreed to arbitrate the dispute at issue. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). Claims relating to fraud in the making of the arbitration agreed are determined by the court. See C.B.S. Employees Fed. Credit Union v. Donaldson, Lufkin and Jenrette Sec. Corp., 912 F.2d 1563, 1566 (6th Cir. 1990). Courts are to examine the language of the contract in light of the strong federal policy in favor of arbitration. See Soler Chrysler-Plymouth, 473 U.S. at 626; Arnold v. Arnold, 920 F.2d 1269, 1281 (6th Cir.1990). Likewise, any ambiguities in the contract or doubts as to the parties' intentions should be resolved in favor of arbitration. See Soler Chrysler-Plymouth, 473 U.S. at 626.

When considering a motion to stay proceedings and compel arbitration under the Act, a court has four tasks: first, it must determine whether the parties agreed to arbitrate; second, it must determine the scope of that agreement; third, if federal statutory claims are asserted, it must consider whether Congress intended those claims to be nonarbitrable; and fourth, if the court concludes that some, but not all, of the claims in the action are subject to arbitration, it must determine whether to stay the remainder of the proceedings pending arbitration. See Compuserve, Inc. v. Vigny Int'l Finance, Ltd., 760 F.Supp. 1273, 1278 (S.D.Ohio 1990).

Plaintiffs argue that the district court incorrectly found that the parties had agreed to arbitrate the dispute and that under the FAA, Congress intended Plaintiffs to arbitrate their claims. Plaintiffs first contend that there was no agreement to arbitrate. However, the record indicates that the parties did agree to arbitrate: the videotape shows Plaintiffs reviewing the documents, engaging in discussions concerning them, and reading them prior to signing. "One who signs a contract is presumed to know its contents, and ... if he has had an opportunity to read the contract which he signs he is bound by its provisions." Sears, Roebuck & Co. v. Lea, 198 F.2d 1012, 1015 (6th Cir.1952). This Court applies "the cardinal rule that, in the absence of fraud or wilful deceit, one who signs a contract which he has had an opportunity to read and understand, is bound by its provisions." Allied Steel and Conveyers, Inc. v. Fort Motor Co., 277 F.2d 907, 913 (6th Cir. 1960). Plaintiffs seem to argue that there is fraud in the transaction, but point to no actual evidence that either they were...