Hurst v. Tony Moore Imports, Inc.

• Decision Date: 18 July 1997
• Citation: 699 So.2d 1249
• Parties: John R. HURST v. TONY MOORE IMPORTS, INC., et al. 1960306.
• Court: Alabama Supreme Court

Page 1249

699 So.2d 1249

John R. HURST v. TONY MOORE IMPORTS, INC., et al.

1960306.

Supreme Court of Alabama.

July 18, 1997.

Johnny V. Berry, Cullman, for appellant.

No brief filed for appellees.

HOUSTON, Justice.

The plaintiff, John R. Hurst, purchased a used GMC pickup truck from the defendant, Tony Moore Imports, Inc. ("the dealership"). Hurst signed a "Buyer's Order" that contained the following "Dispute Resolution Agreement":

"Buyer acknowledges and agrees that all disputes and controversies of every kind and nature between buyer and Tony Moore ..., arising out of or in connection with the purchase of this vehicle will be resolved by arbitration in accordance with the procedure set forth on the reverse side of this buyer's order."

After becoming dissatisfied with the vehicle, Hurst sued the dealership and several of its employees, seeking damages based on allegations of fraud and breach of implied warranties. Hurst demanded a jury trial.

The dealership moved to compel Hurst to arbitrate his claims, in accordance with the arbitration agreement he had signed, and to stay any further judicial proceedings pending the completion of the arbitration proceedings. In the same motion, the dealership moved, in the alternative, to dismiss Hurst's action. In support of that motion, Tony Moore, the dealership's president and sole shareholder, submitted the "Buyer's Order" and an affidavit that stated, in pertinent part, as follows:

"Pursuant to the transaction whereby the said Johnny R. Hurst purchased the motor vehicle as aforesaid, he signed an installment contract to accomplish financing. This installment contract was assigned by Tony Moore Imports, Inc., to First Alabama Bank ¹ and the said Johnny R. Hurst became thereby obligated to pay interest and/or finance charges to First Alabama Bank, thereby enhancing the earnings of the said First Alabama Bank. I am informed and believe and upon such information and belief, I assert that First Alabama Bank is a corporation with shareholders who reside in the State of Alabama and in other states. Also, pursuant to the aforesaid transaction, an existing indebtedness owed by the aforesaid Johnny R. Hurst to the Redstone Federal Credit Union was discharged by a payment disbursed by Tony Moore Imports, Inc., from the purchase proceeds. Again, I am informed that Redstone Federal Credit Union has members residing in the State of Alabama and other states and, based upon such information and belief, I hereby aver that members of Redstone Federal Credit Union reside in the State of Alabama and other states."

The trial court granted the dealership's motion, stating:

"Defendants' 'Motion to Compel Arbitration, Motion to Stay, or In the Alternative, Motion to Dismiss' is before the Court. The Court has considered same and finds that the motion is due to be granted pursuant to Allied-Bruce Terminix Companies, Inc. v. Dobson, [513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) ]. The Court hereby ORDERS the motion be GRANTED and the case DISMISSED."

Hurst filed a motion to alter, amend, or vacate the order, supported by, among other things, his affidavit, which stated, in pertinent part, as follows:

"My name is John Robert Hurst. I am 36 years of age and a resident citizen of Cullman County, Alabama.

"On December 11, 1995, I purchased a used 1992 GMC truck from Tony Moore Imports, Inc., located and doing business in Morgan County, Alabama. I set forth the following facts in regard to the purchase of said vehicle:

"1. I am an Alabama resident and have lived here for 36 years.

"2. I am employed at Webb Wheel in Cullman, Alabama, and have been for 3 1/2 years.

"3. I work inside the plant and have never been out of the state for any work related business.

"4. The vehicle in question was purchased to carry me to and from work and for personal use inside the State of Alabama.

"5. My vehicle is not used in interstate commerce."

The trial court denied Hurst's motion, again relying on Allied-Bruce Terminix, supra. Hurst appealed. We affirm.

Under Alabama law, the specific enforcement of a predispute arbitration agreement violates both our statutory law and our public policy, unless federal law preempts them. Lopez v. Home Buyers Warranty Corp., 670 So.2d 35 (Ala.1995). The Federal Arbitration Act preempts contrary state law and, thus, renders enforceable a predispute arbitration agreement contained in a contract that "involves" interstate commerce. Jim Burke Automotive, Inc. v. Beavers, 674 So.2d 1260 (Ala.1995), citing Allied-Bruce Terminix, supra. In Allied-Bruce Terminix, the United States Supreme Court rejected the "contemplation of the parties" test that this Court had adopted in Ex parte Warren, 548 So.2d 157 (Ala.1989), cert. denied, Jim Skinner Ford, Inc. v. Warren, 493 U.S. 998, 110 S.Ct. 554, 107 L.Ed.2d 550 (1989). ² The Supreme Court stated:

"The Federal Arbitration Act, [9 U.S.C] § 2 ['the FAA'], provides that a

" 'written provision in any maritime transaction or 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.' 9 U.S.C. § 2 (emphasis added [by the Supreme Court] ).

"The initial interpretive question focuses upon the words 'involving commerce.' These words are broader than the often- found words of art 'in commerce.' They therefore cover more than ' "only persons or activities within the flow of interstate commerce." ' [Emphasis added by the Supreme Court.] United States v. American Building Maintenance Industries, 422 U.S. 271, 276, 95 S.Ct. 2150, 2154, 45 L.Ed.2d 177 (1975), quoting Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 95 S.Ct. 392, 398, 42 L.Ed.2d 378 (1974) (defining 'in commerce' as related to the 'flow' and defining the 'flow' to include 'the generation of goods and services for interstate markets and their transport and distribution to the consumer'); see also FTC v. Bunte Brothers, Inc., 312 U.S. 349, 351, 61 S.Ct. 580, 582, 85 L.Ed. 881 (1941). But, how far beyond the flow of commerce does the word 'involving' reach? Is 'involving' the functional equivalent of the word 'affecting'? That phrase--'affecting commerce'--normally signals a congressional intent to exercise its Commerce Clause powers to the full. See Russell v. United States, 471 U.S. 858, 859, 105 S.Ct. 2455, 2456, 85 L.Ed.2d 829 (1985). ...

"After examining the statute's language, background, and structure, we conclude that the word 'involving' is broad and is indeed the functional equivalent of 'affecting.' ...

"....

"... And, we conclude that the word 'involving,' like 'affecting,' signals an intent to exercise Congress' commerce power to the full.

"Section 2 applies where there is 'a contract evidencing a transaction involving commerce.' 9 U.S.C. § 2 (emphasis added [by the Supreme Court] ). The second interpretive question focuses on the [emphasized] words. Does 'evidencing a transaction' mean only that the transaction (that the contract 'evidences') must turn out, in fact, to have involved interstate commerce? [Emphasis in original.] Or, does it mean more?

"Many years ago, Second Circuit Chief Judge Lumbard said that the phrase meant considerably more. He wrote:

" 'The significant question ... is not whether, in carrying out the terms of the contract, the parties did cross state lines, but whether, at the time they entered into it and accepted the arbitration clause, they contemplated substantial interstate activity. Cogent evidence regarding their state of mind at the time would be the terms of the contract, and if it, on its face, evidences interstate traffic ..., the contract should come within § 2. In addition, evidence as to how the parties expected the contract to be performed and how it was performed is relevant to whether substantial interstate activity was contemplated.' Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 387 (C.A.2 1961) (Lumbard, C.J., concurring) (second emphasis added [by the Supreme Court; first and third emphases original]).

"The Supreme Court of Alabama, and several other courts, have followed this view, known as the 'contemplation of the parties' test. See supra, [513 U.S. at 269-70, 115 S.Ct. at 837].

"We find the interpretive choice difficult, but for several reasons we conclude that the first interpretation ('commerce in fact') is more faithful to the statute than the second ('contemplation of the parties'). ...

"....

"... [W]e accept the 'commerce in fact' interpretation, reading the [FAA's] language as insisting that the 'transaction' in fact 'involve' interstate commerce, even if the parties did not contemplate an interstate commerce connection."

513 U.S. at 272-82, 115 S.Ct. at 839-43.

The evidence presented by affidavits in the present case indicates that the dealership is an Alabama corporation, with its sole place of business in Alabama; that Hurst is an Alabama resident and that he purchased a used motor vehicle in Alabama for his own personal use; that Hurst financed the purchase through First Alabama Bank; that Redstone Federal Credit Union held a lien on the vehicle Hurst "traded in" to the dealership; and that the indebtedness owed on that trade-in vehicle was satisfied from the proceeds of the transaction. This Court had held before Allied-Bruce Terminix that the sale in Alabama of a used motor vehicle manufactured outside Alabama to an Alabama resident who was buying it as a consumer and not for commercial purposes, was not a contract "involving commerce," as that term is used in the FAA, if the seller had its only place of business in Alabama, the vehicle was delivered to the buyer in Alabama, and all obligations arising out of the contract were to be performed in Alabama. See Ex parte Williams, 555 So.2d 146 (Ala.1989), which relied on a...