Galloway v. Priority Imports Richmond, LLC

• Decision Date: 12 December 2019
• Docket Number: Civil Action No. 3:19-cv-209
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Renee GALLOWAY, Plaintiff, v. PRIORITY IMPORTS RICHMOND, LLC, d/b/a Priority Toyota Richmond, Defendant.

426 F.Supp.3d 236

Renee GALLOWAY, Plaintiff,

v.PRIORITY IMPORTS RICHMOND, LLC, d/b/a Priority Toyota Richmond, Defendant.

Civil Action No. 3:19-cv-209

United States District Court, E.D. Virginia, Richmond Division.

Signed December 12, 2019

Craig Carley Marchiando, Leonard Anthony Bennett, Thomas Dean Domonoske, Consumer Litigation Associates, Newport News, VA, Elizabeth W. Hanes, Kevin Anthony Dillon, Consumer Litigation Associates, Richmond, VA, for Plaintiff.

Brad Darin Weiss, Travis Francis Salisbury, Charapp & Weiss LLP, McLean, VA, for Defendant.

OPINION

John A. Gibney, Jr., United States District Judge

In May, 2018, Renee Galloway bought a new car from Priority Toyota Richmond, LLC ("Priority"). A few weeks later, Priority forced her to come back to the dealership and choose between agreeing to higher interest rates or returning her car. Galloway has sued Priority for violating federal and state consumer protection laws. Priority has moved to dismiss for lack of subject matter jurisdiction, or alternatively, to compel arbitration. The Court heard argument on the motion on August 7, 2019. Following the hearing, the Court granted the motion in part and required the parties to attend mediation before the Better Business Bureau ("BBB"). The parties did not resolve the case at mediation.

On December 3, 2019, the Court held a hearing on the motion to dismiss insofar as it asks the Court to compel arbitration. Galloway argues that the arbitration provision violates public policy and is unenforceable because it prohibits an arbitrator from awarding punitive damages. Galloway also asks the Court to hold an evidentiary hearing regarding Priority's intent for including the provision in its contracts. Because the Court concludes that the parties entered into a valid arbitration agreement that does not violate public policy, the Court will grant the motion to dismiss and declines to hold an evidentiary hearing.

I. FACTS ALLEGED IN THE COMPLAINT

Galloway purchased a new Toyota Camry from Priority in May, 2018. To complete the transaction, Galloway signed a retail installment sales contract ("Credit Contract") and a Buyer's Order form ("Buyer's Order"). The Credit Contract contained the financing details, and the Buyer's Order contained the arbitration agreement. The arbitration agreement provides:

You, as Buyer(s), and Dealer agree that if any Dispute ... arises, except as provided in this agreement, the Dispute will be resolved by binding arbitration by a single arbitrator under the applicable rules of the [Greater Hampton Roads BBB].¹ You agree that you will submit a Dispute for resolution in your individual capacity only and not as a named plaintiff or as a class member in any purported class or representative capacity. No claim arising from a Dispute (known or unknown) may be adjudicated in or be the basis for compensation as a result of any class action proceeding. The parties understand that they are waiving their rights to a jury trial and class consideration of all claims and disputes between them not specifically exempted from arbitration in this Agreement. The enforceability of this arbitration agreement shall be governed by the Federal Arbitration Act. The arbitrator's decision shall be binding on all parties and may be entered in the highest local, state, or federal court, and before any administrative body. If You are signing a retail installment sale contract or lease in connection with this transaction that contains an arbitration agreement, that arbitration agreement supersedes this agreement in any case where the retail installment sale contract or lease is implicated.

(Dk. No. 11-2, at 1). The Buyer's Order also provides:

All costs and expenses of the alternative dispute agency and the fees of the arbitrator shall be borne by the Dealer, except if you commence arbitration then you are financially responsible for the filing fee to the extent equal to the amount for filing a civil action for the claimed amount the Circuit Court of the county or city where the Dealer is located plus the incremental amount of the filing fee with the alternative dispute agency for any amount claimed in excess of the purchase price of the vehicle involved in the Dispute. Each party shall be responsible for its own attorney, expert and other fees and costs, unless awarded otherwise under applicable law. The arbitrator must make a written decision with separate findings of fact and conclusions of law. The arbitrator may not award punitive damages. The arbitrator shall apply the substantive law of the state of Virginia, and the arbitration shall take place in the county or city in which the Dealer is located.

(Id. at 2.) The Buyer's Order sold and assigned the Credit Contract to the Toyota Motor Credit Corporation ("Toyota"), which allowed Toyota to change Galloway's financing terms.

Priority asked Galloway to return to the dealership a few weeks later to sign more paperwork. Galloway did not return to the dealership. In June, 2018, Priority again asked Galloway to return to the dealership to sign more paperwork. At the dealership, Priority told her that the original Credit Contract was invalid and that "she could not drive her Camry off the lot unless she agreed to a much higher interest rate and higher payments." (Dk. No. 11, at ¶¶ 58-59.) Galloway refused the terms of the new contract and returned the car.

On March 26, 2019, Galloway filed this lawsuit. She alleges (1) a violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1638(a) ; (2) a violation of the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. § 1691(d) ; (3) fraud; (4) a violation of the Virginia Consumer Protection Act ("VCPA"), Va. Code. § 59.1-200 ; (5) a claim under 42 U.S.C. § 1983 ; (6) conversion; and (7) a violation of the Uniform Commercial Code ("UCC"), Va. Code § 8.9A-625.

Priority filed a motion to dismiss all counts for lack of subject matter jurisdiction, invoking the mediation and arbitration provisions of the Buyer's Order. The Court held a hearing on the motion on August 7, 2019. The Court ordered the parties to mediation and stayed the case for forty-five days. The parties did not resolve the case. On December 3, 2019, the Court held a hearing on the motion insofar as it asks the Court to compel arbitration of Galloway's claims.

II. DISCUSSION

The Federal Arbitration Act ("FAA") recognizes "that arbitration is a matter of contract[,] ... [a]nd ... courts must ‘rigorously enforce’ arbitration agreements according to their terms." Am. Exp. Co. v. Italian Colors Rest. , 570 U.S. 228, 233, 133 S.Ct. 2304, 186 L.Ed.2d 417 (2013) (quoting Dean Witter Reynolds Inc. v. Byrd , 470 U.S. 213, 221, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) ). Virginia law considers arbitration agreements "valid, enforceable[,] and irrevocable, except upon such grounds as exist at law or in equity for the revocation of any contract." Va. Code Ann. § 8.01-581.01. "The validity of an arbitration agreement is a ‘question of arbitrability’ and, in the normal course, it ‘is undeniably an issue for judicial determination.’ " Hayes v. Delbert Servs. Corp. , 811 F.3d 666, 671 (4th Cir. 2016) (quoting Peabody Holding Co. v. United Mine Workers of Am., Int'l Union , 665 F.3d 96, 102 (4th Cir. 2012) ).

Courts apply common law principles of contract interpretation when interpreting an arbitration agreement, but must give due regard to the FAA's "liberal federal policy favoring arbitration agreements." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp. , 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) ; see United States v. Bankers Ins. Co. , 245 F.3d 315, 319 (4th Cir. 2001) ; 9 U.S.C. §§ 1 - 16. Parties may agree to arbitrate statutory claims. "Having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. , 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). Accordingly, "ambiguities as to the scope of the arbitration clause itself should be resolved in favor of arbitration." Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Jr. Univ. , 489 U.S. 468, 475-76, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).

Courts assess the validity of the arbitration agreement, not the contract as a whole. See Hayes , 811 F.3d at 671. To compel arbitration under the FAA, a litigant must show

(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal ... to arbitrate the dispute.

Adkins v. Labor Ready, Inc. , 303 F.3d 496, 500-01 (4th Cir. 2002). "The party seeking to compel arbitration bears the burden of establishing the existence of an arbitration provision that purports to cover the dispute." Lovelady v. Five Star Quality Care-VA, LLC , No. 4:18-cv-18, 2018 WL 3580768, at *7 (E.D. Va. July 25, 2018).

Here, neither party challenges whether a dispute exists that the agreement purports to cover.² The transaction involves the sale of a car, which relates to interstate commerce. See Citizens Bank v. Alafabco, Inc. , 539 U.S. 52, 56, 123 S.Ct. 2037, 156 L.Ed.2d 46 (2003) ("We have interpreted the term ‘involving commerce’ in the FAA as the functional equivalent of the more familiar term ‘affecting commerce’—words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power."). Galloway has refused to arbitrate the dispute. Thus, this case satisfies the four Adkins factors.

Instead, Galloway argues that the arbitration agreement violates public policy and is unenforceable because it limits her statutory right to recover punitive damages under federal and state consumer protection laws.³ Galloway also requests an evidentiary hearing...