Adkins v. Palm Harbor Homes, Inc., CIV. A. No. 00-A-1712-E.

• Decision Date: 22 August 2001
• Docket Number: CIV. A. No. 00-A-1712-E.
• Citation: 157 F.Supp.2d 1256
• Parties: Lawrence ADKINS, Plaintiff, v. PALM HARBOR HOMES, INC., Defendant.
• Court: U.S. District Court — Middle District of Alabama

157 F.Supp.2d 1256

Lawrence ADKINS, Plaintiff, v. PALM HARBOR HOMES, INC., Defendant.

CIV. A. No. 00-A-1712-E.

United States District Court, M.D. Alabama, Eastern Division.

August 22, 2001.

James E. Hall, Phenix City, AL, for Plaintiffs.

Lee M. Hollis, Anne Sikes Hornsby, Birmingham, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

ALBRITTON, Chief Judge.

I. INTRODUCTION

This cause is before the court on a Renewed Motion to Compel Arbitration filed by the Defendant, Palm Harbor Homes, Inc. on June 28, 2001.

The Plaintiff, Lawrence E. Adkins ("Adkins"), originally filed his Complaint in this case on September 25, 2000. Adkins brings claims against Palm Harbor Homes, Inc. for breach of the implied warranty of merchantability (Count I), breach of express warranty (Count II), negligent or wanton manufacture of a mobile home (Count III), and violation of the Magnuson-Moss Warranty Act (Count IV).

For the reasons which follow, the motion to compel arbitration is due to be GRANTED in part and DENIED in part.

II. STANDARD FOR A MOTION TO COMPEL ARBITRATION

Pursuant to the Federal Arbitration Act, a written arbitration "provision in any ... contract evidencing a transaction involving commerce ... [is] 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. § 2. Section 4 of the FAA allows a "party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement" to petition the court "for an order directing that such arbitration proceed." 9 U.S.C. § 4. When a court is "satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue," the court is required to "make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." Id.

III. FACTS

The submissions of the parties establish the following facts:

Adkins purchased a mobile home from Palm Harbor Village in Columbus, Georgia. Palm Harbor Village is owned by Palm Harbor Homes, Inc. ("Palm Harbor"), the manufacturer of the mobile home purchased in this case. When Adkins purchased the mobile home, he signed a sales contract and an arbitration agreement. The arbitration agreement within the sales contract states that it inures to the benefit of the manufacturer. Plaintiff's Exhibit A. The separate arbitration agreement states that it inures to the benefit of Palm Harbor Homes, Inc. Defendant's Exhibit A. Both arbitration agreements refer to claims made under express warranties. Palm Harbor asks this court to compel arbitration of Adkins' claims, including his claims based on the written warranty provided by Palm Harbor. The written warranty provided by Palm Harbor, however, does not reference the arbitration agreement.

IV. DISCUSSION

In this case, Adkins does not dispute that the transaction at issue involves interstate commerce. Adkins further does not raise any argument that his claims for breach of the implied warranty of merchantability or for negligent or wanton manufacture are not due to be arbitrated under the arbitration agreement at issue in this case, nor does Adkins dispute that, to the extent that his claim in Count II includes oral warranties, those claims are due to be arbitrated. See Richardson v. Palm Harbor Homes, Inc., 254 F.3d 1321, 1327 (11th Cir.2001)(oral express warranties can be arbitrated). Adkins does dispute, however, that his claims for breach of express written warranties are subject to arbitration.

The Eleventh Circuit has recently addressed arbitration of written express warranty claims in a similar situation. In Cunningham v. Fleetwood Homes of Georgia, Inc., 253 F.3d 611 (11th Cir.2001), plaintiffs purchased a mobile home from Ronnie Smith's Home Center, Inc., and as part of the sales contract executed an arbitration agreement with Ronnie Smith's Home Center, Inc. The arbitration agreement stated that it inured "to the benefit of the manufacturer ... insofar as any claims may exist or thereafter arise against the manufacturer, including but not limited to, enforcement of the warranties, whether express or implied." Id. at 613, n. 1. Fleetwood was the manufacturer of the mobile home and provided a manufacturer's written warranty. As a third-party beneficiary of the arbitration agreement, Fleetwood sought to compel arbitration of all claims brought against it by Cunningham, including a claim under the Magnuson-Moss Warranty Act for breach of an express written warranty. Although the district court determined that Fleetwood was a third-party beneficiary of the arbitration agreement, the district court declined to require arbitration of the Magnuson-Moss Warranty Act claim.

In ruling on the issue of whether the plaintiffs' written warranty claims under the Magnuson-Moss Warranty Act could be compelled to be submitted to binding arbitration, the Eleventh Circuit first examined the text and legislative history of the Act and determined that arbitration of express warranty claims is not necessarily precluded in every case. See id. at 620. The court also concluded, however, that certain provisions of the act, including the requirements that terms of the warranty be included in the language of the warranty itself, and that the warranty must consist of a single, understandable document, meant that the claims asserted in that case could not be compelled to be arbitrated. Id. Under the facts of Cunningham, the Eleventh Circuit concluded that Fleetwood's use of its third-party beneficiary status to compel arbitration where it had failed to disclose in the warranty a term or condition requiring arbitration contravened the act. Id. at 622. The Eleventh Circuit stated, "[c]ompelling arbitration on the basis of an arbitration agreement that is not referenced in the warranty presents an inherent conflict with the Act's purpose of providing clear and concise warranties to consumers." Id. The court stated that

Because we conclude that Fleetwood's failure to disclose in the warranty a term or clause requiring the Cunninghams to utilize an informal dispute resolution mechanism runs afoul of the disclosure requirements of the Magnuson-Moss Warranty Act, we affirm the district court's order declining to compel arbitration of the written or express warranty claims.

Id. at 624.

In this case, Adkins argues that Cunningham is dispositive and dictates that arbitration not be compelled as to his express written warranty claims. Palm Harbor, on the other hand, argues that Cunningham can be distinguished, because in Cunningham the manufacturer conditioned the warranty on the arbitration agreement. In the instant case, according to Palm Harbor, the warranty was not conditioned on the arbitration agreement because consumers received the warranty regardless of whether they agreed to the arbitration provision, and so the arbitration provision was not a term of the warranty. Accordingly, Palm Harbor argues that Adkins' express warranty claims may be arbitrated. This court finds Cunningham to be dispositive and to defeat Palm Harbor's attempt to compel binding arbitration of the Magnuson-Moss Warranty Act claim in this case.

The distinction that Palm Harbor attempts to draw between this case and Cunningham can only be drawn if one places inappropriate emphasis on particular language in the Cunningham opinion. The Cunningham court did, as Palm Harbor points out, state that "[a]llowing Fleetwood to condition the warranty by invoking an arbitration agreement executed by the buyer and the seller confounds this purpose in that consumers confronted with warranties that do not contain arbitration clauses that are nonetheless subject to arbitration will have no basis for judging the suitability of the warranty." Id. at 623. The word "condition" does not, however, within the context of the Cunningham opinion, bear the significance attributed to it by Palm Harbor. Fleetwood's use of the arbitration agreement to require arbitration of the warranty claims effectively caused arbitration to be a condition of enforcement of the warranty. The word "condition" is, therefore, synonymous with "term." This meaning of the word "condition" is made clear when the Eleventh Circuit states that Fleetwood improperly failed to disclose in the warranty a "term or clause requiring the Cunninghams to utilize an informal dispute resolution mechanism ..." Id. at 624.

In this case, although warranties were apparently issued regardless of whether customers agreed to arbitration, Palm Harbor has also sought to use the arbitration agreement entered into by Adkins to require arbitration of the warranty claims,...