MS Dealer Service Corp. v. Franklin

• Decision Date: 28 May 1999
• Docket Number: No. 98-6699,98-6699
• Citation: 177 F.3d 942
• Parties: MS DEALER SERVICE CORP., Plaintiff-Appellant, v. Sharon D. FRANKLIN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 942

177 F.3d 942

MS DEALER SERVICE CORP., Plaintiff-Appellant, v. Sharon D. FRANKLIN, Defendant-Appellee.

No. 98-6699.

United States Court of Appeals Eleventh Circuit.

May 28, 1999.

Stephanie Keller Womack, M. Christian King, Madeline H. Haikala, Lightfoot, Franklin & White, LLC, Birmingham, AL, for Plaintiff-Appellant.

Earl P. Underwood, Jr., Underwood & Associates, Anniston, AL, for Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before BARKETT, Circuit Judge, and KRAVITCH and MAGILL ^*, Senior Circuit Judges.

MAGILL, Senior Circuit Judge:

MS Dealer Service Corporation ("MS Dealer") appeals from the dismissal of its petition to compel Sharon Franklin to participate in arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16. We reverse.

I.

In May 1996 Sharon Franklin and Jim Burke Motors, Inc. ("Jim Burke") executed a "Buyers Order," whereby Franklin contractually agreed to purchase a vehicle from Jim Burke. The Buyers Order incorporates by reference a "Retail Installment Contract," in which Franklin is charged $990.00 for a service contract through MS Dealer. The Buyers Order contains an arbitration clause, providing that "BUYER HEREBY ACKNOWLEDGES AND AGREES THAT ALL DISPUTES AND CONTROVERSIES OF EVERY KIND AND NATURE BETWEEN BUYER AND JIM BURKE MOTORS, INC. ARISING OUT OF OR IN CONNECTION WITH THE PURCHASE OF THIS VEHICLE WILL BE RESOLVED BY ARBITRATION...." Buyers Order at 1. The Buyers Order also provides that "[a]ll disputes and controversies of every kind and nature between the parties hereto arising out of or in connection with this contract ... shall be submitted to binding arbitration pursuant to the provisions of the Federal Arbitration Act...." Id. at 2. This includes "any claim alleging fraud in fact [or] fraud in the inducement." Id. MS Dealer was not a signatory to either the Buyers Order or the Retail Installment Contract.

After taking possession of the vehicle, Franklin discovered several defects in the car. She then filed suit in Alabama state court against Jim Burke, MS Dealer and Chrysler Credit Corporation (the assignee of the Retail Installment Contract), asserting claims for breach of contract, breach of warranty, fraud and conspiracy. All of her claims against MS Dealer arise out of the $990.00 charge identified in the Retail Installment Contract for the service contract. According to her complaint, MS Dealer improperly cooperated, conspired and otherwise colluded with Jim Burke and Chrysler Credit Corporation in a scheme to defraud her in connection with the purchase of the service contract. She alleges that the $990.00 charge was excessive and that the defendants conspired to charge this excessive amount so that they could each profit from the sale of the service contract by divvying up the excess amount. She also alleges that this excessive charge required her to borrow an inflated amount of money in order to purchase the car and, thus, incur excessive interest expenses on her car loan.

Relying on the Federal Arbitration Act ("FAA") and the arbitration clause in the Buyers Order, MS Dealer filed the instant petition in federal district court to compel Franklin to arbitrate her claims against it. ¹ The district court originally granted the petition. On reconsideration, however, the district court dismissed the petition on the ground that MS Dealer was not a signatory to the Buyers Order and, thus, did not have standing to compel arbitration. MS Dealer appeals.

II.

As an initial matter, Franklin contends that the district court lacked subject matter jurisdiction to consider MS Dealer's petition to compel arbitration. We disagree.

The parties agree that "there must be diversity of citizenship or some other independent basis for federal jurisdiction before [an order compelling arbitration] can issue." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n. 32, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Here, MS Dealer premised federal jurisdiction on diversity of citizenship between itself and Franklin. See 28 U.S.C. § 1332. In its petition to compel arbitration, MS Dealer alleges, and Franklin does not dispute, that (1) the petitioner, MS Dealer, is a corporation organized under the laws of Mississippi and having its principal place of business in Mississippi, (2) the respondent, Franklin, is a citizen of Alabama, and (3) the amount in controversy exceeds $75,000.00. "That plainly satisfies 28 U.S.C. § 1332's demands." First Franklin Fin. Corp. v. McCollum, 144 F.3d 1362, 1363 (11th Cir.1998).

Notwithstanding this complete diversity between the parties named in the petition, Franklin contends that diversity jurisdiction is lacking because Jim Burke is named as a co-defendant in the state court action and the state court action is not removable due to Jim Burke's Alabama citizenship. "We disagree. As a matter of both § 1332's language and common sense, whether another action is removable or not does not affect jurisdiction in this, an independent action" to compel arbitration. Id. While acknowledging that the McCollum court has already specifically considered and rejected the argument Franklin raises here, ² she asks us to modify or reverse that case. We decline that request. See Chambers v. Thompson, 150 F.3d 1324, 1326 (11th Cir.1998) ("We are bound to follow a prior panel or en banc holding, except where that holding has been overruled or undermined to the point of abrogation by a subsequent en banc or Supreme Court decision.").

Alternatively, Franklin contends that diversity jurisdiction is lacking because Jim Burke is an "indispensable party," as that term is defined in Rule 19 of the Federal Rules of Civil Procedure, to the petition to compel arbitration. See Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 445 (2d Cir.1995) ("As with any federal action, diversity of citizenship is determined by reference to the parties named in the proceeding before the district court, as well as any indispensable parties who must be joined pursuant to Rule 19 of the Federal Rules of Civil Procedure. Where joinder of a party would destroy subject matter jurisdiction, the court must dismiss the action if that party is 'indispensable' to the litigation."). She bases this argument on the fact that her state court complaint identifies Jim Burke and MS Dealer as coconspirators and joint tortfeasors. However, that mere fact does not render Jim Burke an indispensable party. See Temple v. Synthes Corp., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990) (per curiam) ("It has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit.... The Advisory Committee Notes to Rule 19(a) explicitly state that 'a tortfeasor with the usual "joint-and-several" liability is merely a permissive party to an action against another with like liability.' " (citations omitted)); Herpich v. Wallace, 430 F.2d 792, 817 (5th Cir.1970) ³ ("Rule 19, as amended in 1966, was not meant to unsettle the well-established authority to the effect that joint tortfeasors or coconspirators are not persons whose absence from a case will result in dismissal for non-joinder."); see also Pasco Int'l (London) Ltd. v. Stenograph Corp., 637 F.2d 496, 501 n. 10 (7th Cir.1980) (recognizing the "established principle" that coconspirators are not indispensable parties).

Moreover, we note that (1) an arbitrator has already ruled in favor of Jim Burke on all of Franklin's claims against it and (2) the state court has dismissed Franklin's claims against Jim Burke with prejudice. A party is "indispensable" only if he meets either of the threshold tests of Rule 19(a) of the Federal Rules of Civil Procedure. See Fed.R.Civ.P. 19(b). That provision requires joinder

if (1) in the person's absence complete relief cannot be accorded among those already parties or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest.

Fed.R.Civ.P. 19(a). In light of the binding ruling in favor of Jim Burke and its dismissal from the state court action with prejudice, Jim Burke is not an indispensable party with respect to Franklin's claims against MS Dealer.

Because complete diversity exists between MS Dealer and Franklin and because Jim Burke is not an indispensable party, we find that the district court properly exercised subject matter jurisdiction over MS Dealer's petition. We thus proceed to address the merits of the district court's decision denying the petition.

III.

The district court denied MS Dealer's petition to compel arbitration on the ground that MS Dealer was not a signatory to the Buyers Order. We review this decision de novo. See Kidd v. Equitable Life Assurance Soc'y of the United States, 32 F.3d 516, 518 (11th Cir.1994).

In enacting the FAA, Congress demonstrated a "liberal federal policy favoring arbitration agreements." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (internal quotation marks omitted). Therefore, "questions of arbitrability must be addressed with a healthy regard for the federal policy favoring arbitrations." Moses H. Cone, 460 U.S. at 24, 103 S.Ct. 927. Notwithstanding this strong federal policy, however, "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." AT & T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (internal quotation marks omitted). As a general rule, therefore, "the parties' intentions control, but those...