Cavalier Mfg., Inc. v. Jackson

• Decision Date: 13 April 2001
• Citation: 823 So.2d 1237
• Parties: CAVALIER MANUFACTURING, INC., d/b/a Buccaneer Homes of Alabama, Inc. v. Angela JACKSON and Shawyn Jackson.
• Court: Alabama Supreme Court

823 So.2d 1237

CAVALIER MANUFACTURING, INC., d/b/a Buccaneer Homes of Alabama, Inc. v. Angela JACKSON and Shawyn Jackson.

1000391.

Supreme Court of Alabama.

April 13, 2001.

Specially Concurring Opinion on Denial of Rehearing June 1, 2001.

Opinion on Return to Remand October 5, 2001.

John R. Bradwell of Hill, Hill, Carter, Franco, Cole & Black, P.C., Montgomery, for appellant.

James G. Bodin of McPhillips, Shinbaum & Gill, L.L.P., Montgomery, for appellees.

HOUSTON, Justice.

Shawyn Jackson and Angela Jackson sued Cavalier Manufacturing, Inc., d/b/a Buccaneer Homes of Alabama, Inc. (hereinafter "Cavalier"), alleging negligence, breach of contract, breach of express and implied warranties, and fraud, all in connection with the plaintiffs' purchase of a mobile home. The plaintiffs complained that the mobile home they purchased from Cavalier contained manufacturing defects. Cavalier filed a motion to dismiss, or in the alternative, a motion to compel arbitration of the plaintiffs' claims, pursuant to an arbitration clause contained in the "acknowledgment and agreement" signed by the plaintiffs and by a representative of Cavalier. The trial court, without making any findings of fact, denied Cavalier's motion. Cavalier appeals.¹ We remand with instructions.

The arbitration clause in the acknowledgment and agreement reads:

"10. ARBITRATION. All parties hereto acknowledge and agree that this Agreement and the performance of the transactions contemplated hereby evidence transactions which involve a substantial nexus with interstate commerce. Accordingly, any dispute, controversy or claim of any kind or nature which has arisen or may arise between the parties... (including any dispute, controversy or claim relating to the validity of this arbitration clause), whether arising out of past, present or future dealings between the parties ... shall be governed by the Federal Arbitration Act and shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

". . . .

"The parties understood and agree that the arbitrator shall have all powers provided by law, and may award any legal or equitable relief, including, without limitation, money damages, declaratory relief, and injunctive relief; provided, however, that the arbitrator shall have no power to award punitive damages or other damages not measured by the prevailing party's actual damage. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY CONTROVERSY BETWEEN THE PARTIES...."

(Emphasis in original.)

A direct appeal is the appropriate procedure by which to seek review of a trial court's order denying a motion to compel arbitration. Homes of Legend, Inc. v. McCollough, 776 So.2d 741, 745 (Ala.2000). This Court conducts a de novo review of the trial court's denial of the motion to compel arbitration. Patrick Home Ctr., Inc. v. Karr, 730 So.2d 1171, 1171 (Ala.1999).

Section 8-1-41(3), Ala.Code 1975, prohibits specific enforcement of "[a]n agreement to submit a controversy to arbitration." However, § 2 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 2, provides:

"[A] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

This Court has recognized that under this section the FAA preempts conflicting state law where an arbitration agreement is contained in a contract that involves interstate commerce. Ex parte Jones, 628 So.2d 316 (Ala.1993); Ex parte Phelps, 672 So.2d 790 (Ala.1995); see Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)

. Thus, an arbitration provision in a contract that, in fact, involves interstate commerce is put "`on the same footing' as other terms of a contract." Phelps, 672 So.2d at 793 (quoting Allied Bruce Terminix, 513 U.S. at 275,

115 S.Ct. 834).

We first address the question whether the FAA applies to the arbitration clause contained in the "acknowledgment and agreement" the plaintiffs signed when they purchased the mobile home. We note that nothing in the record suggests, and that the plaintiffs do not allege, that the acknowledgment and agreement itself, entered into between the plaintiffs and Cavalier, is invalid or unenforceable. Therefore, the FAA will apply to the arbitration clause if the "acknowledgment and agreement" is a contract "involving interstate commerce in fact, so as to be within Congress's power to regulate under the Commerce Clause." Coastal Ford, Inc. v. Kidder, 694 So.2d 1285, 1287 (Ala.1997).

This Court, in Southern Energy Homes, Inc. v. McCray, 788 So.2d 882 (Ala.2000), stated that "[a]n Alabama resident's purchase of a new mobile home—even one manufactured in Alabama—can be a transaction that substantially affects interstate commerce." Whether it is such a transaction depends on the facts of the purchase, including, among others, such facts as the source of the mobile home or its components. In McCray, an Alabama resident purchased a mobile home that had been manufactured by Southern Energy Homes, a Delaware corporation with manufacturing facilities in Alabama. 788 So.2d at 883 n. 1. The homes manufactured in Alabama were constructed with parts shipped to the Alabama plants from out-of-state suppliers. Id. at n. 1. This Court held that this evidence indicated that the purchase of the mobile home substantially affected interstate commerce. Id.

Similarly, the Jacksons' purchase of their mobile home from Cavalier substantially affected interstate commerce. Cavalier is a Delaware corporation doing business in Marion County, Alabama, as Buccaneer Homes. According to the record, Buccaneer Homes, the company that constructed the plaintiffs' home, manufactures mobile homes with components furnished by out-of-state suppliers. Therefore, we conclude that this transaction substantially affected interstate commerce, and that the FAA does apply to make the arbitration provision in this case enforceable. We now address the arguments Cavalier makes on appeal.

Cavalier argues that the trial court erred in denying the motion to compel arbitration, because, it says, the trial court misapplied the current caselaw on arbitration. Specifically, Cavalier argues: (1) that the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., does not prohibit enforcement of an arbitration clause in an agreement, other than an arbitration clause in a warranty; (2) that the financial hardship the plaintiffs claimed does not void the arbitration agreement; (3) that the plaintiffs' tort claim is subject to binding arbitration; and (4) that the arbitration agreement is valid even though it precludes the recovery of punitive damages.

With respect to the first argument, Cavalier contends that the Magnuson-Moss Act does not prohibit the enforcement of arbitration clauses in agreements other than warranties.² The plaintiffs, in their response brief on appeal, argue that the Magnuson-Moss Act provides that the supplier of a consumer product may establish a mandatory dispute-settlement procedure only if the terms of the settlement are included in a warranty. However, a review of the language of the Act indicates that the Act governs only warranties and no other documents. Thus, its provisions concerning arbitration clauses, 15 U.S.C. § 2310, are inapplicable to this case, which involves an agreement that is not a warranty.

Regarding the second argument, Cavalier argues that the financial hardship the plaintiffs claim does not void the arbitration agreement. The plaintiffs, in their response brief on appeal, argue that the arbitration clause is unenforceable because, they say, they cannot afford the cost of arbitrating this dispute. In Green Tree Financial Corp. v. Wampler, 749 So.2d 409 (Ala.1999), this Court wrote:

"Because the general principles of Alabama contract law do not excuse performance on grounds of financial hardship, we cannot allow a party's poverty, standing alone and independent of other considerations justifying a finding of unconscionability, to constitute a defense to enforcement of an arbitration agreement."

749 So.2d at 416.

Although the record shows that Angela Jackson was disabled and unemployed when the trial court denied Cavalier's motion to compel arbitration, the record contains no evidence of the finances of Shawyn Jackson, the other plaintiff in this case. Furthermore, the record contains no information about how much arbitration would cost the plaintiffs. The plaintiffs, in their response brief on appeal, state approximate dollar amounts; however, their calculations appear to be nothing more than mere speculation. "The `risk' that [the plaintiffs] will be saddled with ... costs is too speculative to justify the invalidation of an arbitration agreement." Palm Harbor Homes, Inc. v. Turner, 796 So.2d 295, 297 (Ala.2001) (quoting Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 90, 121 S.Ct. 513, 522, 148 L.Ed.2d 373 (2000)). Therefore, the plaintiffs have failed to show that financial hardship should prohibit enforcement of the arbitration provision against them.

Finally, as to the third and fourth arguments, Cavalier avers that all the plaintiffs' claims, including their tort claims, are subject to the arbitration clause. The plaintiffs, in their response brief on appeal, argue that their fraud claim is not arbitrable because, they say, the arbitration clause denies them an adequate remedy by prohibiting the arbitrator from awarding punitive damages.

A court reviewing a motion to compel arbitration must determine "`whether the language or "scope" of the arbitration clause is broad enough to encompass the claims...