Aguillard v. Auction Management Corp.

• Decision Date: 29 June 2005
• Docket Number: No. 2004-C-2857., No. 2004-C-2804
• Citation: 908 So.2d 1
• Court: Louisiana Supreme Court
• Parties: Dave F. AGUILLARD v. AUCTION MANAGEMENT CORP., Gilmore Auction & Realty Company, Bank of New York, and its Servicer, New South Federal Saving Bank.

908 So.2d 1

Dave F. AGUILLARD v. AUCTION MANAGEMENT CORP., Gilmore Auction & Realty Company, Bank of New York, and its Servicer, New South Federal Saving Bank.

Nos. 2004-C-2804, 2004-C-2857.

Supreme Court of Louisiana.

June 29, 2005.

Frilot, Partridge, Kohnke & Clements, LC, Michael Hodgson Pinkerton, William Howard Berglund, New Orleans, Counsel for Applicant in No. 2004-C-2804.

Hesni & Parrales, PLC, George Saleem Hesni, II, Gretna, Denisse Yvonne Parrales, Joseph Anthony Delafield, Lake Charles, Counsel for Respondent in No. 2004-C-2804.

Amar D. Sarwal, David M. Gossett, Evan M. Tager, Robin S. Conrad, Gary Judge Russo, Lafayette, Counsel for Amicus Curiae Chamber of Commerce of the United States.

David Joseph Boneno, Counsel for Amicus Curiae Louisiana Bankers Association.

Hesni & Parrales, PLC, George Saleem Hesni, II, Gretna, Yvonne Parrales, Counsel for Applicant in 2004-C-2857.

Frilot, Partridge, Kohnke & Clements, LC, Michael Hodgson Pinkerton, William Howard Berglund, New Orleans, Joseph Anthony Delafield, Lake Charles, Counsel for Respondent in No. 2004-C-2857.

KNOLL, Justice.

This civil case addresses the legal question of whether the court of appeal erred in declaring a contract, including its arbitration agreement, adhesionary. The district court denied the defendants' motion to stay proceedings pending arbitration. The court of appeal affirmed the district court's ruling. We granted this writ particularly to address the validity of the arbitration agreement and to resolve a split among the circuits regarding the enforceability of arbitration agreements contained within consumer standard form contracts under a "contract of adhesion" analysis, a res nova issue before this court. Dave F. Aguillard v. Auction Management Corp., 04-2804 c/w 04-2857 (La.3/11/05), 896 So.2d 47. For the following reasons we reverse, finding the lower courts erred in failing to stay the proceedings pending arbitration and adopt a liberal policy favoring arbitrability.

FACTS AND PROCEDURAL HISTORY

On March 25, 2003, defendant, Gilmore Auction & Realty Company ("Gilmore Realty"), a duly licensed Louisiana auctioneer, conducted a public auction of certain real estate property located in Sulphur, Louisiana. Gilmore Realty, along with Auction Management Corporation ("Auction Management"), the closing coordinator, acted as agents for the owner of the property defendant Bank of New York. The auction property is described in the record as follows:

The East one-half (½) of Lot 6 of the Lawrence R. Kounter subdivision, a subdivision as per plat recorded in the public records of Calcasieu Parish, Louisiana, together with all improvements situated thereon, whose municipal address is 2123 Division Street, Sulphur, Louisiana.

See Official Record of Dave. F. Aguillard v. Auction Management Corp., 04-2804 c/w 04-2857 (La.), 896 So.2d 47 ("Record"), p. 3.

Prior to the auction, Auction Management and Gilmore Realty disseminated a sales brochure to prospective bidders, which pictured and described each of the auctioned properties and the rules that governed the auction. Plaintiff, Dave F. Aguillard, obtained a brochure prior to the event.

On the day of the auction, plaintiff, along with approximately seventeen other individuals, attended the onsite auction for the above described property. Registration for the auction occurred approximately one-half hour prior to the auction. During registration, plaintiff received the "Auction Terms and Conditions," his bidder number, and the Real Estate Agency Disclosure. Prior to bidding and receiving his bidder number, plaintiff was required to sign and deliver before the commencement of the auction the document entitled "Auction Terms & Conditions,"¹ which contained the arbitration clause in dispute. By signing the document, plaintiff "acknowledge[d] that he or she ha[d] read and underst[ood] these AUCTION TERMS & CONDITIONS and agree[d] to be bound thereby." See Auction Terms & Conditions, Record, p. 79.

The entire document was printed in nine-point font, including the arbitration clause found under the section entitled "ANNOUNCEMENTS," providing:

Any controversy or claim arising from or relating to this agreement or any breach of such agreement shall be settled by arbitration administered by the American Arbitration Association under is [sic] rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

In addition to the arbitration clause, the "Auction Terms & Conditions" document contained the following provisions:

All announcements from the Auction Block will take precedence over all previously printed materials and other oral statements made. The Auction Agreement for the Purchase and Sale of Real Estate represents the final contracted terms.

* * *

The sellers reserve the right to withdraw any property from the Auction at any time.

* * *

If the purchaser fails to comply with any of these Auction Terms & Conditions, the sale shall be canceled, and the seller may, at its option retain the earnest money deposit as liquidated damages. If any sale is so canceled prior to the completion of the Auction, the property may, at the Auctioneer's discretion, be re-offered and resold.

* * *

All bidders will be bound by announcements made at the auction, even though a bidder may not have actually heard the announcement.

All potential bidders were required to sign the document prior to receiving a bid number. This document signed by plaintiff is the document which the defendants, who did not sign the document, seek to enforce against plaintiff.

At the auction, plaintiff submitted the highest bid on the residential dwelling and was thereupon required to sign a document entitled "Auction Real Estate Sales Agreement"² and to submit his check to Auction Management and Gilmore Realty in the amount of $4,290, which represented ten percent of the sales price on the property, in accordance with the Auction Terms & Conditions.

The seller, Bank of New York, subsequently rejected plaintiff's bid of $42,900, and refused to close the sale of the property, refusing as well to execute the Auction Real Estate Sales Agreement. Bank of New York argued the auction was not an "absolute auction" and any offer to purchase was subject to the seller's confirmation. On or around April 17, 2003, the seller submitted a counter-offer of $53,000. Plaintiff rejected this offer.

Subsequently, plaintiff filed suit to enforce the Auction Real Estate Sales Agreement against Bank of New York and its servicer New South Federal Savings Bank ("New South"), Auction Management, and Gilmore Auction ("defendants"). In response, the defendants filed a joint motion to stay proceedings pending arbitration³ in accordance with La.Rev.Stat. § 9:4201, contending the arbitration clause contained in the Auction Terms & Conditions document governs this dispute. The district court denied the motion.⁴ In response, the defendants filed an application for supervisory writs with the Third Circuit, which denied the writ and in turn ordered that the writ be converted into an appeal.⁵ The court of appeal affirmed the district court's ruling, finding the entire contract between the parties, including the arbitration clause, was adhesionary and lacked mutuality. Dave F. Aguillard v. Auction Management Corp., 04-393, p. 8 (La.App. 3 Cir. 10/13/04), 884 So.2d 1257, 1261. Relying on its previous decisions in Sutton's Steel & Supply, Inc. v. Bellsouth Mobility, Inc., 00-511 (La. App. 3 Cir. 12/13/00), 776 So.2d 589, writ denied, 01-0152 (La.3/16/01), 787 So.2d 316, and Simpson v. Grimes, 02-0869 (La. App. 3 Cir. 5/21/03), 849 So.2d 740,writ denied,03-2497 (La.12/19/03), 861 So.2d 567, the Third Circuit concluded plaintiff was not in a position to bargain regarding the terms of the agreement with the defendants and was required to sign the document prior to receiving a bid number and participating in the auction. The defendants were clearly in a superior bargaining position. The court noted (1) the document was printed in extremely small type and "the arbitration clause was not distinguished in any way"; (2) the defendants reserved to themselves methods of dispute resolution other than arbitration, which were not available to the auction customer, e.g., the seller had the option to retain the earnest money deposit as liquidated damages and re-offer and resell the property in situations of buyer default; and (3) provisions in the documents provided the defendants the unilateral power to change any or all parts of the contract, including the arbitration clause, simply by verbal announcement at the auction block.

In his dissent, Judge Amy opined the arbitration clause was not part of a contract of adhesion that would render it unenforceable. Rather, he found that neither the print nor the font size of the arbitration clause differed from the remainder of the two-page contract and that the arbitration clause was not hidden in the document in any way. Furthermore, the nature of the underlying real estate transaction was not such a necessary transaction to indicate that the plaintiff was compelled to enter the terms of the contract; rather, plaintiff could have just walked away.

We granted this writ to address whether the court of appeal erred in declaring the arbitration clause adhesionary and to resolve a split among the circuits regarding the enforceability of arbitration agreements in consumer standard form contracts under a "contract of adhesion" analysis, a res nova issue before this Court.

LAW AND ANALYSIS

Arbitration Law

At the outset, we note the positive law of Louisiana favors arbitration. See La.Rev. Stat. § 9:4201. La.Rev.Stat. § 9:4201 specifically provides:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract, or out of the refusal to perform the whole or any part thereof, or an agreement in writing between two or more

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