Daimler Chrysler Corp. v. Franklin
| Decision Date | 30 August 2004 |
| Docket Number | No. 53A01-0309-CV-346.,53A01-0309-CV-346. |
| Citation | 814 N.E.2d 281 |
| Parties | DAIMLER CHRYSLER CORPORATION, Appellant-Defendant, v. Derek FRANKLIN, Appellee-Plaintiff. |
| Court | Indiana Appellate Court |
Jeffrey P. Smith, W. Randall Kammeyer, Hawk, Haynie, Kammeyer & Chickedantz, Fort Wayne, IN, Attorneys for Appellant.
John D. Barker, Scott M. Cohen, Krohn & Moss, Ltd, Chicago, IL, Attorneys for Appellee.
Daimler Chrysler Corporation ("Daimler") brings two appeals following a jury trial that resulted in a verdict in favor of Derek Franklin on his claims regarding a 2001 Dodge Neon automobile that he purchased. In its first appeal, Daimler raises several issues, one of which we find dispositive: whether Franklin agreed to arbitrate claims against Daimler when he entered into a contract with Community Chrysler ("Community") that contained a provision requiring the parties to submit any claims against one another to arbitration. Franklin argues on cross-appeal that he should be awarded appellate attorney's fees.
In its second appeal, Daimler argues that the amount of trial attorney's fees the trial court awarded to Franklin was excessive.
We affirm in part, reverse in part, and remand.
On May 24, 2001, Franklin purchased a 2001 Dodge Neon vehicle manufactured by Daimler from Community for a purchase price in excess of $18,000.00. The parties executed a retail installment contract that contained the following provision:
Appellant's Appendix at 26-27.
After taking possession of the Neon, Franklin discovered multiple defects that impaired its value. Franklin returned the vehicle to Community and other dealerships for repair of the problems, but the dealerships were unable to make the repairs within a reasonable number of attempts.
Thereafter, Franklin revoked his acceptance of the Neon in writing. Daimler refused the revocation. Franklin submitted to Daimler's informal dispute resolution program, but was not satisfied with the outcome. Subsequently, he filed a four count complaint, alleging a breach of written warranties,1 breach of the warranty of merchantability, revocation of acceptance, and a violation of the Indiana Motor Vehicle Protection Act ("IMVPA"). Daimler filed a motion to dismiss and for an order compelling arbitration based on the arbitration clause in the sales contract between Franklin and Community. The trial court denied Daimler's motion to dismiss, and Daimler filed its answer.
On August 12, 2003, the trial court conducted a jury trial on Franklin's claims. The jury decided in Franklin's favor and awarded him $12,123.99 and ordered Daimler to accept return of the vehicle pursuant to the IMVPA. Daimler filed a motion for directed verdict, which the trial court denied.
Franklin filed a motion for attorney's fees, which the trial court granted in the amount of $19,405 after submission of Franklin's petition documenting his attorneys' time. Daimler now appeals from the denial of its motion to dismiss and compel arbitration and the award of attorney's fees. Franklin cross-appeals.2
Daimler argues that the trial court erred in denying its motion to compel arbitration and to dismiss Franklin's complaint. We review a trial court's denial of a motion to compel arbitration de novo. Showboat Marina Casino P'ship v. Tonn & Blank Constr., 790 N.E.2d 595, 597 (Ind.Ct.App.2003). Under Indiana contract law, the party seeking to compel arbitration has the burden of demonstrating the existence of an enforceable arbitration agreement. Id. at 597-98.
A party seeking to compel arbitration must satisfy a two-pronged burden of proof. Mislenkov v. Accurate Metal Detinning, Inc., 743 N.E.2d 286, 289 (Ind.Ct.App.2001). First, the party must demonstrate the existence of an enforceable agreement to arbitrate the dispute. Id. Second, the party must prove that the disputed matter is the type of claim that the parties agreed to arbitrate. Id. Once the court is satisfied that the parties contracted to submit their dispute to arbitration, the court is required by statute to compel arbitration. Id. When determining whether the parties have agreed to arbitrate a dispute, we apply ordinary contract principles governed by state law. Showboat Marina, 790 N.E.2d at 598; Mislenkov, 743 N.E.2d at 289. In addition, when construing arbitration agreements, every doubt is to be resolved in favor of arbitration, and the parties are bound to arbitrate all matters, not explicitly excluded, that reasonably fit within the language used. Showboat Marina, 790 N.E.2d at 598. However, parties are only bound to arbitrate those issues that by clear language they have agreed to arbitrate; arbitration agreements will not be extended by construction or implication. Id. The court should attempt to determine the intent of the parties at the time the contract was made by examining the language used to express their rights and duties. Id. at 597. Words used in a contract are to be given their usual and common meaning unless, from the contract and the subject matter thereof, it is clear that some other meaning was intended. Id.
Here, Daimler seeks to invoke the arbitration clause in its dispute with Franklin. However, the retail sales contract was entered into by Franklin and Community, not Daimler. Community assigned its interest in the contract to Chrysler Financial Company, LLC ("Chrysler Financial"). Franklin's claims were against Daimler, not Community or Chrysler Financial. Thus, they do not fall within the scope of the mandatory arbitration clause. Daimler points out that the clause was "broadly written to cover all claims arising out of the contract, including resulting transactions or relationships with third parties who did not sign the contract." Appellant's Brief at 4. Thus, Daimler claims the benefit of the arbitration clause as a stranger to the contract. Generally, only those who are parties to a contract or those in privity with a party have the right to enforce the contract. Mislenkov, 743 N.E.2d at 289. Privity has been defined as "`mutual or successive relationships to the same right of property, or an identification of interest of one person with another as to represent the same legal right.'" Id. ().
We faced the issue of privity in similar circumstances in Hyundai Motor America, Inc. v. Goodin, 804 N.E.2d 775 (Ind.Ct.App.2004), trans. granted. We note that our supreme court has since granted transfer in this case. Nonetheless, we still find the reasoning of our opinion persuasive. In that case, the plaintiff purchased a Hyundai automobile. Like Franklin, the plaintiff began experiencing problems with the automobile and authorized repair centers were unable to successfully repair the problems. The plaintiff then sued Hyundai alleging breach of express warranty, breach of implied warranty, and revocation of acceptance. The case was tried to a jury that returned a verdict in favor of the plaintiff on her breach of implied warranty claim.
On appeal, we reversed the judgment in favor of the plaintiff. We noted that in Indiana, privity between the buyer and seller is generally required to maintain a cause of action on an implied warranty of merchantability claim. We explained that there are only two exceptions to the privity requirement: where the immediate seller of a product is an agent of the manufacturer or where the manufacturer participated significantly in the sale of the product. We determined that neither of those exceptions applied in Hyundai, where the facts showed a routine car dealer/car manufacturer relationship. We held that "the mere existence of a manufacturer-dealer relationship is insufficient to make the dealer an agent of the manufacturer for purposes of the privity requirement." Id. at 787. Because the plaintiff failed to demonstrate the existence of privity between her and Hyundai and that neither exception applied, we reversed the judgment in her favor. Id.
Here, Daimler, like Hyundai, is not in privity with the consumer, Franklin, and therefore cannot enjoy the benefit of the terms of Franklin's contract with Community.
Finally, we note that Daimler is not an intended third-party beneficiary of the contract between Franklin and Community. To enforce a contract under this theory, the claimant must show 1) a clear intent by the parties to the contract to benefit the third party, 2) a duty imposed on one of the contracting parties in favor of the third party, and 3) performance of the contract. Angell Enters., Inc. v. Abram & Hawkins Excavating Co., Inc., 643 N.E.2d 362, 365 (Ind.Ct.App.1994). Here, the body of the contract and the arbitration agreement between Community and Franklin does not reference Daimler and does not show a clear intent to benefit it. Accordingly, Daimler could not have been an intended third-party...
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