Mendez v. Palm Harbor Homes, Inc.

• Decision Date: 02 May 2002
• Docket Number: No. 20317-4-III.,20317-4-III.
• Citation: 45 P.3d 594,111 Wash.App. 446
• Court: Washington Court of Appeals
• Parties: Wenceslao MENDEZ, a single person, Respondent and Cross Appellant, v. PALM HARBOR HOMES, INC., d/b/a Palm Harbor Village, a Florida corporation; and Travelers Casualty and Surety Company of America, a foreign corporation, Appellants.

45 P.3d 594

111 Wash.App. 446

Wenceslao MENDEZ, a single person, Respondent and Cross Appellant, v. PALM HARBOR HOMES, INC., d/b/a Palm Harbor Village, a Florida corporation; and Travelers Casualty and Surety Company of America, a foreign corporation, Appellants.

No. 20317-4-III.

Court of Appeals of Washington, Division 3, Panel Three.

May 2, 2002.

As Amended June 6, 2002.

David C. Burkett, Burkett & Burdette, Seattle, for Appellants.

David B. Trujillo, Yakima, for Respondent.

BROWN, C.J.

Wenceslao Mendez filed a lawsuit against Palm Harbor Homes (Palm Harbor) and its surety, Travelers Casualty and Surety Company of America (Travelers), in connection with a failed mobile home sale. Palm Harbor and Travelers (collectively Palm Harbor) moved to compel arbitration pursuant to the contract and a separate arbitration agreement. The trial court denied the motion in essence because of the prohibitive entry costs of arbitration compared to the entry costs of trial. Palm Harbor appealed. Although technically moot because the trial court denied the motion to compel arbitration, Mr. Mendez nevertheless cross-appealed the trial court's ruling that the Consumer Protection Act and other statutory claims were ordinarily arbitrable.

We hold for the first time in Washington that Mr. Mendez's statutory claims are generally arbitrable under chapter 7.04 RCW. Next, we approve a new rule for this State allowing an equitable and legal prohibitive cost defense to contractually agreed arbitration under chapter 7.04 RCW. Lastly, we clarify that the use of out-of-state unpublished opinions is inappropriate under RAP 10.4(g) and (h). Accordingly, we affirm.

FACTS

Mr. Mendez did not complete high school. He worked two jobs to earn less than $20,000 annually and supports a family of five.

In September 2000, Mr. Mendez paid $1,000 down on a $12,000 used mobile home offered for sale by Palm Harbor at its Palm Harbor Village dealership in Union Gap. The backside of Palm Harbor's preprinted sales contract provided for attorney fees in the event of legal action to enforce the contract.

The contract contained the following arbitration clause:

Arbitration and Disputes: Disputes arising out of this Agreement are subject to compulsory and binding arbitration in accordance with the following provisions and conditions:

(a) Enforcement. Upon the election and written demand by either party showing the existence on a bona fide controversy and to the full extent permitted by law, arbitration shall be the exclusive procedure for resolving disputes and shall be binding upon the parties. Arbitration shall be commenced and enforced pursuant to RCW 7.04 and procedure shall be governed by the civil rules for superior courts for the State of Washington and the evidentiary rules thereto. The parties agree arbitration shall be by a three person panel: one selected by each party and one selected by the two arbitrators. Arbitration shall be held in Yakima County, Washington.

(b) Scope of Arbitration. Arbitration shall extend to and the arbitrator shall have the power to decide all matters and issues of fact and/or law, including, but not limited to, the existence of the validity of the Agreement as contract including the issue of fraud and inducement or in its construction, performance or breach and enforceability, operation or duration. The arbitrators shall give full force and effect to all lawful terms of the Agreement whether expressed or implied in fact. The arbitrators shall further have power to decide the appropriate remedies, including damages, restitution, awarding of interest, costs and reasonable attorneys' fees and costs of arbitration. Arbitration shall not be binding on or extend to any lender or other third party who has acquired rights arising out of any financing or consumer credit contracts and/or security agreements which may be a part or supplement the Agreement.

Clerk's Papers (CP) at 119. Mr. Mendez initialed the backside of the contract.

Mr. Mendez also signed a separate arbitration agreement partly stating:

The parties to the Retail Installment Contract or Cash Sale Contract agree that any and all controversies or claims arising out of, or in any way relating to, the Retail Installment Contract or Cash Sale Contract or the negotiation, purchase, financing, installation, ownership, occupancy, habitation, manufacture, warranties (express or implied), repair or sale/disposition of the home which is the subject of the Retail Installation Contract or Cash Sale Contract, whether those claims arise from or concern contract, warranty, statutory, property or common law, will be settled solely by means of final and binding arbitration before a three-judge panel of the American Arbitration Association (AAA) in accordance with the rules and procedures of the AAA. Judgment on the arbitration award may be entered in any court having jurisdiction.

....

The parties agree that any contests to the validity or enforceability of this Arbitration Provision, or any other part of the Retail Installment Contract or Cash Sale Contract or related documentation, will be determined by arbitration in accordance with the terms of this Arbitration Provision.

The parties understand they have the right to have any disputes between them decided in court, but they choose instead to have any disputes decided by arbitration in order to avoid the burden, expense and uncertainty of the judicial process.

THE PARTIES KNOWINGLY AND VOLUNTARILY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL.

CP at 120.

In February 2001, after a dispute arose between Mr. Mendez and Palm Harbor regarding payment and delivery, Mr. Mendez filed a complaint for specific performance and/or damages against Palm Harbor and Travelers in the Yakima County Superior Court. The complaint included alleged violations of the Dealers and Manufacturers Act, chapter 46.70 RCW and the Consumer Protection Act, chapter 19.86 RCW.

In May 2001, Palm Harbor, citing the arbitration agreement in its answer, moved to stay the proceeding and compel arbitration under chapter 7.04 RCW. Mr. Mendez, relying partly on Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 85, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), opposed the motion arguing the cost of taking his claim to arbitration would be prohibitive. In support, Mr. Mendez also filed an affidavit asserting the arbitration costs were essentially prohibitive. Mr. Mendez submitted information from the American Arbitration Association (AAA) showing a $2,000 filing fee to initiate a three person arbitration, not including various other anticipated expenses. Palm Harbor bypassed Mr. Mendez's prohibitive cost argument, and contended it had been "unable to find any authority whatsoever to suggest that Washington law carves out an exception to RCW 7.04 for people of limited financial means." CP at 57.

On June 7, 2001, the trial court filed a memorandum opinion denying the motion to compel arbitration. The trial court reasoned, "under the facts of this case, to invoke either of the arbitration clauses would deprive the Plaintiff of the opportunity for a hearing on his complaint." CP at 18. The trial court further stated, "the total absence of disclosure of the financial burdens on the plaintiff" resulted in denying Mr. Mendez of an informed choice about waiving his right to a jury trial. CP at 18. On June 22, the parties jointly presented the formal order denying Palm Harbor's motion to stay and compel arbitration.

Palm Harbor appealed. Mr. Mendez cross-appealed the trial court's determination that his statutory claims were ordinarily subject to arbitration.

ANALYSIS

A. Arbitrability

While the broad issue is whether the trial court erred in denying Palm Harbor's motion to compel arbitration, here we discuss a threshold issue raised in Mr. Mendez's cross-appeal, whether his statutory claims are subject to arbitration under chapter 7.04 RCW, or 9 U.S.C. § 10, the Federal Arbitration Act (FAA), or both. See Stein v. Geonerco, Inc., 105 Wash.App. 41, 45, 17 P.3d 1266 (2001)

.

We review questions of arbitrability de novo. Id. (citing Kamaya Co. v. Am. Prop. Consultants, Ltd., 91 Wash.App. 703, 713, 959 P.2d 1140 (1998)). Mr. Mendez bears the burden of showing "his case is unsuitable for arbitration." Id. (citing Green Tree Fin. Corp., 531 U.S. at 91-92, 121 S.Ct. 513; RCW 7.04.010). The parties agree the issue is moot because Mr. Mendez prevailed below. Nevertheless, we review this matter because the question of arbitrability of statutory claims under chapter 7.04 RCW is a continuing public policy issue worthy of clarification. See King County v. Boeing Co., 18 Wash.App. 595, 606, 570 P.2d 713 (1977) (reasoning moot issue of arbitrability of lease agreement a continuing issue worthy of review).

Mr. Mendez alleged violations of the Dealers and Manufacturer's Licensing Act, chapter 46.70 RCW, the Contractor's Registration Act, chapter 18.27 RCW, and the Consumer Protection Act (CPA), chapter 19.86 RCW. In Washington it is well settled that CPA and other statutory claims are subject to arbitration under the FAA. Garmo v. Dean, Witter, Reynolds, Inc., 101 Wash.2d 585, 590, 681 P.2d 253 (1984). But no controlling authority exists concerning arbitration of State statutory claims under chapter 7.04 RCW. Palm Harbor concedes it can identify no conflict between the Washington statute and the FAA in this case. Moreover, logic and common sense dictate if a State statutory claim can be arbitrated under the FAA, the same should be true using the procedural mechanisms of chapter 7.04 RCW.

Indeed: "There is a strong public policy in Washington State favoring arbitration of disputes." Perez v. Mid-Century Ins. Co., 85 Wash.App. 760, 765, 934 P.2d 731 (1997) (citing Munsey v. Walla Walla College, 80 Wash.App. 92, 94, 906 P.2d 988 (1995)). "The purpose of arbitration is to avoid the formalities, the expense, and the delays of the court system." Id. at 765-66, 934 P.2d 731 (citing Barnett v....