Greater Canton Ford Mercury, Inc. v. Ables

• Decision Date: 01 February 2007
• Docket Number: No. 2005-CA-01316-SCT.,2005-CA-01316-SCT.
• Citation: Greater Canton Ford Mercury, Inc. v. Ables, 948 So.2d 417 (Miss. 2007)
• Parties: GREATER CANTON FORD MERCURY, INC., Keith Clark, Ford Motor Company, Ray L. Fayne and Katrina Fayne v. Wallace ABLES, Mary Bennett and John Williams.
• Court: Mississippi Supreme Court

948 So.2d 417

GREATER CANTON FORD MERCURY, INC., Keith Clark, Ford Motor Company, Ray L. Fayne and Katrina Fayne v. Wallace ABLES, Mary Bennett and John Williams.

No. 2005-CA-01316-SCT.

Supreme Court of Mississippi.

February 1, 2007.

Michael David Tapscott, Tupelo, Thomas Wicker, Dara Steele—Belkin, John H. Fleming, Daniel H. Schlueter, Phil B. Abernethy, Jackson, Arnold Datron Lee, Gary E. Friedman, Latoya Cheree Merritt, Jackson, attorneys for appellants.

J. Douglas Minor, Jr., Jackson, attorney for appellees.

EN BANC.

SMITH, Chief Justice, for the Court.

FACTS AND PROCEEDINGS BELOW

¶ 1. Plaintiffs Wallace Ables, Mary Bennett and John H. Williams (Plaintiffs) purchased pre-owned vehicles from Greater Canton Ford Mercury, Inc. (GCFM). Plaintiffs allege that Defendants, GCFM and its employees, Keith Clark, Ray L. Fayne, and Katrina Fayne, along with Ford Motor Company (Ford), committed fraud by selling them "certified, pre-owned vehicles" when, in fact, the vehicles were either not eligible for this program or had not undergone an inspection and maintenance program required of "certified, pre-owned vehicles." Defendants filed a Motion to Stay Litigation and Compel Arbitration. The circuit court denied the motion, and consequently, Defendants appeal. Separately, Ford appeals the applicability of the circuit court judgment to it, particularly, whether as a non-signatory it may compel arbitration.

¶ 2. In 2002, the three plaintiffs¹ each purchased a vehicle from GCFM, a Ford dealership located in Canton, Mississippi. In August 2003, the plaintiffs filed suit against GCFM, three of its employees, and Ford in the Holmes County Circuit Court alleging that due to Defendants' misrepresentations, they purchased vehicles under the belief that the vehicles were certified pre-owned when the vehicles had, in fact, not undergone the certification process required by Ford in order to qualify as "certified pre-owned." Each plaintiff claims to have purchased one of the fraudulently identified vehicles, in reliance on Defendants' alleged misrepresentations, at an increased price based on a false value. After the circuit court granted an extension of time for Defendants' responses, four answers were filed. Ford answered in October 2003. Ray and Katrina Fayne responded jointly in the same month. GCFM answered in November 2003, and Keith Clark filed his answer in December 2003. Each party listed the right to arbitrate the dispute as a defense.

¶ 3. On February 27, 2004, Ford alone filed a Motion to Compel Arbitration and Stay Litigation in the United States District Court for the Southern District of Mississippi in Jackson, Mississippi. The district court denied the motion on March 31, 2005, citing Ford's non-signatory status and finding that the claims brought against Ford "seemingly fall outside the arbitration agreement." Ford Motor Co. v. Ables, No. 3:04-CV-00152 (S.D.Miss. March 31, 2005). Ford appealed, and the United States Court of Appeals for the Fifth Circuit reversed the district court, holding that Ford could compel arbitration as a non-signatory.²

¶ 4. In June 2004, Plaintiffs filed a Motion for Partial Summary Judgment and Declaratory Judgment requesting the circuit court to decide the arbitrability of their claims. Plaintiffs contended that the arbitration clauses in the retail installment contracts executed by Plaintiffs did not cover claims asserted by Plaintiffs in their complaint. GCFM and Ford responded in the same month by filing in circuit court a Joint Motion to Stay Resolution of Plaintiffs' Motion for Partial Summary Judgment. On October 26, 2004, the circuit court partially granted Defendants' motion, staying resolution until November 26, 2004.

¶ 5. On November 29, 2004, still awaiting a decision from the circuit court on Plaintiffs' motion regarding arbitrability of the claims, GCFM and Keith Clark filed a Motion to Stay Litigation and Compel Arbitration in the circuit court, which all of the other Defendants subsequently joined. The circuit court entered an Order on March 10, 2005, staying its ruling on Plaintiffs' Motion for Partial Summary Judgment until the federal district court ruled on Ford's Motion to Compel. Following the federal district court's denial of Ford's Motion to Compel on March 31, 2005, the circuit court entered an Order on June 13, 2005, granting Plaintiffs' Motion for Partial Summary Judgment and Declaratory Judgment. Explicitly relying on the federal district court opinion, the circuit court reached the same conclusion and found that Plaintiffs had no duty to submit to arbitration of their claims. The circuit court subsequently, on July 12, 2005, denied Defendants' Motion to Stay Litigation and Compel Arbitration.

¶ 6. GCFM and Keith Clark appealed jointly on July 5, 2005, with Ford filing its appeal separately on the same day. Ray and Katrina Fayne filed a Notice of Appeal on July 8, 2005. Defendants each claim the decision by the Holmes County Circuit Court was in error regarding arbitrability of Plaintiffs' claims. They raise one issue, whether the trial court properly refused to stay litigation and compel arbitration of those claims presented by Plaintiffs who executed arbitration agreements. Ford claims the court erred in finding it incapable of compelling arbitration as a non-signatory. Ford adopts the arguments presented by the other Defendants and further presents two legal issues, specifically in relation to Ford. Ford raises two issues: (1) whether Ford has a right compel arbitration as a non-signatory to the retail installment contract and (2) whether the circuit court should have granted Defendants' motion to stay litigation as to Ford until resolution of the arbitrability of Plaintiffs' claims.

DISCUSSION

I. WHETHER THE TRIAL COURT ERRED IN DENYING DEFENDANTS' MOTION TO COMPEL ARBITRATION AND STAY LITIGATION

¶ 7. A lower court's grant or denial of a motion to compel arbitration is reviewed de novo. East Ford, Inc. v. Taylor, 826 So.2d 709, 713 (Miss.2002).

¶ 8. The fraudulent actions alleged by Plaintiffs resulted in the purchase of vehicles, a transaction involving commerce. Written agreements to arbitrate contained in contracts evidencing a transaction involving commerce are subject to the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., and in determining whether to grant a motion to compel arbitration of a dispute subject to the FAA, there are two prongs of inquiry. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626-28, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); East Ford, 826 So.2d at 713. The first prong the Court must examine is whether the parties agreed to arbitrate the dispute. Id. Second, the Court must determine whether legal constraints external to the parties' agreement bar arbitration of the claims. Id.

Prong 1: Whether the parties agreed to arbitrate the dispute

¶ 9. The first prong is two-fold in that the court considers whether there is a valid arbitration agreement and then whether the parties' dispute is within the scope of the arbitration agreement. East Ford, 826 So.2d at 713.

A. Whether there is a valid arbitration agreement

¶ 10. Plaintiffs do not dispute the validity of the arbitration agreement. Instead, the parties disagree about the scope of the agreement, specifically, whether the Plaintiffs' claim of fraudulent behavior is encompassed within the arbitration provision.

B. Whether the parties' dispute is within the scope of the arbitration agreement

¶ 11. This appeal centers around the parties' disagreement as to the interpretation of the agreement. Defendants dispute who, a court or an arbitrator, should interpret the agreement and determine its scope as well as whether the arbitration agreement in the retail installment contract encompasses Plaintiffs' claims. Consequently, two questions must be answered: (1) whether the proper forum for determining the scope of the arbitration agreement is in court or in arbitration, AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (citing United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574 582-83, 80 S.Ct. 1347 4 L.Ed.2d 1409 (1960)), and (2) whether the arbitration agreement encompasses the dispute, Mitsubishi Motors, 473 U.S. at 626-28, 105 S.Ct. 3346. Efficiency dictates that we decide first whether it is proper for the court to interpret the arbitration agreement before attempting to interpret it.

¶ 12. First, we must determine the proper interpreter of the arbitration agreement. We have not previously answered this particular inquiry. However, since the FAA governs the enforcement of the disputed agreement, we are bound by the decisions of the United States Supreme Court, which has spoken on the issue. While this Court consistently recognizes the established federal policy favoring arbitration agreements, Terminix Int'l, Inc., Ltd. P'ship v. Rice, 904 So.2d 1051, 1055 (Miss.2004), [t]he presumption in favor of arbitration does not apply to the question of who should decide arbitrability, because the purpose of the FAA was to make arbitration agreements as enforceable as other contracts, not more so, First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). Whether a party is bound by an arbitration agreement is generally considered an issue for the courts, not the arbitrator, "[u]nless the parties clearly and unmistakably provide otherwise." AT & T Technologies, 475 U.S. at 649, 106 S.Ct. 1415 (emphasis added). In other words, when the parties have explicitly agreed that the question of arbitrability is to be decided by an arbitrator rather than the court, that agreement must be interpreted by an arbitrator.

¶ 13. The United States Supreme Court has mandated that general contract principles will apply. Consequently, the general practice of allowing courts to determine the issue of arbitrability is...