HAROLD ALLEN'S MOBILE HOME OUTLET, INC. v. Butler

• Citation: 825 So.2d 779
• Parties: HAROLD ALLEN'S MOBILE HOME FACTORY OUTLET, INC. v. Patrick C. BUTLER.
• Decision Date: 18 January 2002
• Court: Supreme Court of Alabama

825 So.2d 779

HAROLD ALLEN'S MOBILE HOME FACTORY OUTLET, INC. v. Patrick C. BUTLER.

1002000.

Supreme Court of Alabama.

January 18, 2002.

Sterling G. Culpepper and Beth J. Moscarelli of Balch & Bingham, L.L.P., Montgomery, for appellant.

J. Jefferson Utsey, Butler, for appellee.

LYONS, Justice.

The sole issue presented in this case is whether the trial judge, in granting a motion to arbitrate a dispute between the buyer and the seller of a mobile home, erred by holding that a provision in the arbitration agreement authorizing the seller of the mobile home to select the arbitrator, with one limitation stated in the provision, was unconscionable, and that "[u]nder the Federal Rules, the court must appoint an arbitrator," which the court then did.

The seller, Harold Allen's Mobile Home Factory Outlet, Inc. (hereinafter "Harold Allen"), filed a notice of appeal, but asked this Court, in the alternative, to treat the appeal as a petition for a writ of mandamus, which we do.¹ See Southern Energy Homes Retail Corp. v. McCool, 814 So.2d 845 (Ala.2001). Reviewing the record and considering the briefs, we are of the opinion that the arbitration agreement allowing Harold Allen to select the arbitrator is unconscionable; consequently, the writ of mandamus is due to be denied.

Facts

Patrick C. Butler filed a complaint against Harold Allen on June 12, 2000, alleging several causes of action arising out of his purchase of a mobile home from Harold Allen.

Harold Allen timely filed a motion to stay and to compel arbitration, supported by a brief and exhibits, in which it sought to enforce an arbitration agreement it had entered into with Butler. The arbitration agreement provides, in pertinent part:

"As a part of the consideration for the sale of the subject chattel, BUYER and SELLER, for themselves and for their respective heirs, successors, assigns and legal representatives, hereby enter into this Agreement wherein the BUYER does knowingly, intelligently and voluntarily waive any and all rights that he, she or they may otherwise have to a trial by jury, or otherwise, in the event of any disagreement, claim, demand or other dispute which may arise between the BUYER and the SELLER and/or any of the SELLER's agents or representatives, directly or indirectly, with regard to the sale, purchase, finance (if applicable), delivery, setup, service and/or maintenance of the chattel made the subject hereof, whether such claim arises prior to, on or subsequent to the date of the execution of this Agreement, each intending to be fully and mutually bound by the terms hereof and preferring to resolve their disagreements, claims, demands or other disputes through binding arbitration, except as otherwise provided hereinbelow, and whether such disagreement, claim, demand or other dispute may involve contractual disputes, claims of fraud by way of suppression, misrepresentation, inducement or otherwise, breach of expressed or implied warranties, negligence, recklessness, wantonness, intentional misconduct and/or any other similar or dissimilar legal or equitable claim of any type, including, without limitation, disputes as to the arbitrability of all of the foregoing matters and/or the validity of this Agreement.

"The SELLER shall have the right to select an arbitrator who shall arbitrate any disagreement, claim, demand or other dispute between the SELLER and the BUYER, having all powers as may be provided for by law, by regulation, by legislative act or otherwise; provided, however, that no arbitrator may be selected by the SELLER who shall have provided legal representational services to or for the SELLER at any time.

". . . .

"The parties to this Agreement recognize and acknowledge that the sale of the chattel made the subject hereof is a transaction having its basis in interstate commerce; that this Agreement is to be governed by the Federal Arbitration Act and by any applicable laws of the State of Alabama; and that the American Arbitration Association Commercial Arbitration Rules are incorporated into and made a part of this Agreement as if the same were fully and completely set forth herein."

(Emphasis added.)

On June 7, 2001, the trial court entered an order granting in part and denying in part Harold Allen's motion to stay and to compel arbitration. The trial court held "that the clause in the arbitration contract as to the selection of the arbitrator is unconscionable," but it made no findings of fact to support its conclusion. The court then went on to say: "Under the Federal Rules, the court must appoint an arbitrator. The court picks Spence Walker to arbitrate the matter."

I.

As previously stated, the sole issue presented in this appeal is whether the trial court erred in holding that the provision in the arbitration agreement allowing Harold Allen to select the arbitrator was unconscionable. The law states, and Harold Allen agrees, that arbitration agreements are subject to traditional contract defenses, including unconscionability. Ex parte Colquitt, 808 So.2d 1018 (Ala.2001), in which this Court, citing Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996), held that, as a general rule, applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate an arbitration agreement without contravening § 2 of the Federal Arbitration Act.

Harold Allen candidly admits that the issue whether the arbitration agreement was unconscionable was a question for the trial court to decide, and we agree. See Green Tree Fin. Corp. of Alabama v. Wampler, 749 So.2d 409 (Ala.1999). ("The issue of unconscionability of an arbitration clause is a question for the court and not the arbitrator. 9 U.S.C. § 2; Ex parte Dan Tucker Auto Sales, Inc., 718 So.2d 33, 41 (Ala.1998) (Lyons, J., concurring specially), followed in Ex parte Napier, 723 So.2d 49, 52 (Ala.1998)." 749 So.2d at 415.) Harold Allen argues before this Court, however, that even if "the trial court had the ability to `reform' the Agreement by removing only the arbitration selection provision (the `selection provision'), the trial court erroneously found this provision unconscionable assumedly because the provision does not, on its face, require Butler's consent." (Harold Allen's brief at pp. 9-10) (footnote omitted).

Butler states that he filed two briefs in the trial court in opposition to Harold Allen's motion to stay and to compel arbitration. In both briefs, he says, he argued that the arbitration agreement was void or, in the alternative, that he was entitled to a trial on the issue of the validity of the arbitration agreement. Butler filed a supplemental brief in opposition to Harold Allen's motion to compel arbitration, in which he asked the trial court "to find that the provision of [Harold Allen's] arbitration clause governing the selection of an arbitrator be deemed unconscionable." Butler also argued in that supplemental brief, without citing any authority, that "[t]he court should apply the federal rules of arbitration and pick the arbitrator for this matter."

Responding to the argument Butler made in his supplemental brief, Harold Allen argued that Butler had "provide[d] no legal authority whatsoever for his proposition," and that "Butler's conclusory assertion that the agreed upon method for selecting an arbitrator [was] `clearly unfair'... [was] based on nothing more than speculation," and "Butler assumes that Allen's choice of an arbitrator will work to `the detriment of Butler.'"

Harold Allen argued before the trial court and argues before this Court that Butler has presented no factual or legal support for his contention that the provision for choosing the arbitrator is unconscionable. Harold Allen also argued before the trial court that it "[was] unaware of any federal rules of arbitration which specify that the court should choose an arbitrator."

II.

Did the trial court err in finding that the provision in the arbitration agreement in this case allowing Harold Allen to select the arbitrator was unconscionable? We think not.

In Layne v. Garner, 612 So.2d 404, 408 (Ala.1992), this Court stated:

"While it is true that a court may rescind a contract, or a portion of a contract, for unconscionability, `[r]escission of a contract for unconscionability is an extraordinary remedy usually reserved for the protection of the unsophisticated and uneducated.' Marshall v. Mercury Finance Co., 550 So.2d 1026, 1028 (Ala.Civ.App.1989), quoting E & W Building Material Co. v. American Savings & Loan Ass'n, 648 F.Supp. 289, 291 (M.D.Ala.1986)

; and see Wilson v. World Omni Leasing, Inc., 540 So.2d 713 (Ala.1989).

"An unconscionable contract or contractual provision is defined as a contract or provision `such as no man in his sense and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.' Lloyd v. Service Corp. of Alabama, 453 So.2d 735, 739 (Ala.1984),

quoting Hume v. United States, 132 U.S. 406, 410, 10 S.Ct. 134, 136, 33 L.Ed. 393 (1889)."

(Emphasis added.)

We pretermit consideration of the sufficiency of Butler's evidence because we conclude that the arbitration-selection provision allowing Harold Allen to select the arbitrator with no input from Butler is unconscionable as a matter of law.

Harold Allen cites a decision of a federal district court in Mississippi, which it says states that it is obvious that a provision giving a party to an arbitration agreement the ability to unilaterally select an arbitrator does not, by itself, raise the specter of unconscionability. See Raesly v. Grand Housing, Inc., 105 F.Supp.2d 562, 569 (S.D.Miss.2000), in which the court stated:

"Plaintiffs' argument regarding substantive unconscionability consists of the following one sentence in their brief: `The Arbitration Contract goes so far as to give Defendant Corporation or its assignees the sole right to choose the arbitrator.' Even if this fact

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