Jim Burke Automotive, Inc. v. Beavers

• Decision Date: 29 September 1995
• Citation: 674 So.2d 1260
• Parties: JIM BURKE AUTOMOTIVE, INC. v. Detrecia BEAVERS. 1940564.
• Court: Alabama Supreme Court

Page 1260

674 So.2d 1260

JIM BURKE AUTOMOTIVE, INC. v. Detrecia BEAVERS.

1940564.

Supreme Court of Alabama.

Sept. 29, 1995.

Opinion on Overruling of Rehearing

Feb. 23, 1996.

William A. Davis III and Steven T. McMeekin of Starnes & Atchison, Birmingham, for appellant.

Clay Hornsby of Morris, Haynes, Ingram & Hornsby, Alexander City, for appellee.

KENNEDY, Justice.

The defendant, Jim Burke Automotive, Inc. ("Jim Burke"), sold a used automobile to the plaintiff, Detrecia Beavers, and, as agent of an insurer, also sold her a credit disability policy. Jim Burke appeals from the denial of a motion to compel Beavers to arbitrate the claims presented in her action against Jim Burke.

Beavers's action involves her purchase of the credit disability insurance in conjunction with her purchase and financing of the car. Beavers became disabled, and the insurer did not pay on the policy as she says Jim Burke represented that it would at the time she bought the policy. She sued Jim Burke, alleging fraud in the inducement. Based on a predispute arbitration agreement in the sales contract for the automobile, Jim Burke moved to compel arbitration. As indicated, the trial court denied that motion.

Even if the arbitration provision in the sales contract is broad enough to apply to matters involving the credit life disability policy, as Jim Burke argues on appeal, it still remains to be seen that the sales contract involved interstate commerce. A predispute agreement to arbitrate is not legally enforceable in our state courts unless it is contained in a contract that involves interstate commerce. See Allied-Bruce Terminix Companies, Inc. v. Dobson, --- U.S. ----, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); Ala.Code 1975, § 8-1-41(3).

Jim Burke offered no evidence in the trial court indicating that the contract had any involvement in interstate commerce. However, it argues that an agreement for the sale of an automobile, per se, involves interstate commerce.

It affirmatively appears from the record that Jim Burke has raised this argument for the first time on this appeal. There is no indication in the record that in seeking to compel arbitration Jim Burke asserted that it did not have to demonstrate that the contract involved interstate commerce, on the basis that its involvement with interstate commerce should be assumed, or on any other basis. In light of this, and the fact that Jim Burke did not demonstrate in the trial court that the contract involved interstate commerce, we affirm.

AFFIRMED.

ALMON, SHORES, COOK, and BUTTS, JJ., concur.

MADDOX and HOUSTON, JJ., dissent.

INGRAM, J., recused.

MADDOX, Justice (dissenting).

The majority affirms an order of the trial court refusing to compel arbitration of a dispute among the purchaser of a used automobile, the seller of the automobile, and a credit disability insurance carrier on the ground that the seller "did not demonstrate in the trial court that the contract involved interstate commerce." 674 So.2d at 1261. Because the majority affirms on this basis, I state some of the basic facts to show that this contract did, in fact, involve interstate commerce and is covered by the provisions of the Federal Arbitration Act.

On June 11, 1993, the plaintiff, Detrecia Beavers, purchased a used 1990 Chevrolet Lumina from the defendant, Jim Burke Automotive, Inc. Simultaneously with Beavers's purchase of the automobile, she also purchased credit disability insurance, to make payments on the vehicle in the event she became disabled.

Subsequently, Beavers, claiming to have become disabled because of a back injury and depression, filed a claim for disability benefits under the credit disability insurance policy. The insurance carrier, American Bankers Insurance Group, an out-of-state corporation, subsequently denied her claim for benefits.

When Beavers purchased the automobile and the credit disability insurance, she executed a "retail buyer's order," which read, in part:

"DISPUTE RESOLUTION AGREEMENT

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

(Emphasis added.) The reverse side of the buyer's order contained the following description of the dispute resolution process:

"DISPUTE RESOLUTION PROCESS

"All disputes and controversies of every kind and nature between the parties hereto arising out of or in connection with this contract, its subject matter or its negotiation, as to the existence, construction, validity, interpretation or meaning, performance or non-performance, enforcement, operation, breach of contract, breach of warranty, continuance or termination thereof of any claim alleging fraud in fact, fraud in the inducement, deceit, or suppression of any material fact shall be submitted to binding arbitration pursuant to the provisions of the Federal Arbitration Act and according to the commercial rules of the American Arbitration Association then in effect in Birmingham, Alabama. Such arbitration proceedings may be initiated by either party by notice in writing to the other and to the American Arbitration Association. Each party shall bear its own arbitration costs and expenses, except to the extent provided on the [front] side hereof.

"....

"The parties stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding instituted in any federal, state, or local court, or before any administrative tribunal with respect to any controversy or dispute arising hereunder." (Emphasis added).

After American Bankers' had denied Beavers's claim under the credit disability insurance policy, she sued American Bankers and Jim Burke Automotive, Inc. In Count I, Beavers alleged that both Jim Burke and American Bankers committed fraud when she purchased the automobile and credit disability insurance. Her fraud count includes an allegation of misrepresentation of material facts, suppression, deceit, and fraudulent deceit.

Based upon the arbitration agreement between Beavers and Jim Burke contained in the retail buyer's order, Jim Burke moved on October 10, 1994, to compel arbitration. In the motion, Jim Burke sought require the plaintiff to arbitrate her claims against Jim Burke pursuant to the parties' arbitration agreement, basing its motion to compel arbitration upon § 2 of the Federal Arbitration Act. The trial court held a hearing on the motion on December 13, 1994, and denied it.

Did the trial court err in holding that the predispute arbitration agreement in this case was unenforceable? Clearly, it did. If there was any remaining doubt about the enforceability of such predispute arbitration agreements, and about whether the Federal Arbitration Act preempted conflicting state law, the Supreme Court of the United States removed that doubt in Allied-Bruce Terminix Companies, Inc. v. Dobson, --- U.S. ----, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995), a case appealed from this Court. In that case, this Court held, as it had held on several other occasions and as it holds in the present case, that the predispute arbitration agreement was unenforceable. The Supreme Court of the United States plainly and specifically said that this Court had incorrectly interpreted the provisions of the Federal Arbitration Act:

"The Supreme Court of Alabama upheld the denial of the stay on the basis of a state statute, [Ala.Code 1975, § 8-1-41(3) ], making written, predispute arbitration agreements invalid and 'unenforceable.' 628 So.2d 354, 355 (Ala.1993). To reach this conclusion, the court had to find that the Federal Arbitration Act, which pre-empts conflicting state law, did not apply to the termite contract. It made just that finding. The court considered the federal Act inapplicable because the connection between the termite contract and interstate commerce was too slight. In the court's view, the Act applies to a contract only if ' "at the time [the parties entered into the contract] and accepted the arbitration clause, they contemplated substantial interstate activity." ' Ibid. (emphasis in original) (quoting Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 387 (CA2) (Lumbard, C.J., concurring), cert. denied, 368 U.S. 817, 82 S.Ct. 31, 7 L.Ed.2d 24 (1961)). Despite some interstate activities (e.g., Allied-Bruce, like Terminix, is a multi-state firm and shipped treatment and repair material from out of state), the court found that the parties 'contemplated' a transaction that was primarily local and not 'substantially' interstate.

"Several state courts and federal district courts, like the Supreme Court of Alabama, have interpreted the Act's language as requiring the parties to a contract to have 'contemplated' an interstate commerce connection. See, e.g., Burke County Public Schools Bd. of Ed. v. Shaver Partnership, 303 N.C. 408, 417-420, 279 S.E.2d 816, 822-823 (1981); R.J. Palmer Constr. Co. v. Wichita Band Instrument Co., 7 Kan.App.2d 363, 367, 642 P.2d 127, 130 (1982); Lacheney v. Profitkey Int'l, Inc., 818 F.Supp. 922, 924 (ED Va.1993). Several Federal appellate courts, however, have interpreted the same language differently, as reaching to the limits of Congress' Commerce Clause power. See, e.g., Foster v. Turley, 808 F.2d 38, 40 (CA10 1986); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406-407 (CA2 1959), cert. dism'd, 364 U.S. 801, 81 S.Ct. 27, 5 L.Ed.2d 37 (1960); cf. Snyder v. Smith, 736 F.2d 409, 417-418 (CA7), cert. denied, 469 U.S. 1037, 105 S.Ct. 513, 83 L.Ed.2d 403 (1984). We granted certiorari to resolve this conflict, 510 U.S. ----, 114 S.Ct. 1292, 127 L.Ed.2d 646 (1994); and, as we said, we conclude that the broader reading of the statute is the right one."

513 U.S. at ----, 115 S.Ct. at 837.

In interpreting the...