Nat'l Motors, Inc. v. Universal Warranty Corp.
| Decision Date | 03 January 2020 |
| Docket Number | Civil No. ELH-19-00052 |
| Parties | NATIONAL MOTORS, INC., Plaintiff, v. UNIVERSAL WARRANTY CORPORATION, Defendant. |
| Court | U.S. District Court — District of Maryland |
This Memorandum Opinion resolves a motion to compel arbitration with respect to a suit initiated by plaintiff National Motors, Inc. ("National"), against Universal Warranty Corporation ("Universal"). ECF 1-1 ("Complaint").1 National is a Maryland corporation engaged in the business of buying and selling used cars. Universal is a Michigan corporation engaged in the finance and warranty of motor vehicles. ECF 1-1 at 14-18.
This suit is rooted in a contract between the parties dated April 2, 2012 (ECF 1-1 at 19-20), called "Universal Advantage Agreement" (the "Agreement"). It concerns a sales incentive program offered by Universal, by which National was to sell Universal's vehicle service contracts in exchange for payment of commissions. ECF 1-1. According to National, Universal did not pay the commissions due under the Agreement.
The Complaint contains three counts. Count I is titled "Action for Accounting and Injunctive Relief." Id. ¶¶ 8-12. Count II alleges breach of contract. Id. ¶¶ 13-17. In Count III, plaintiff lodges a claim for "Unjust Enrichment." Id. ¶¶ 18-21.
Universal has moved to compel arbitration and to dismiss the suit (ECF 15), supported by a memorandum of law. ECF 15-1 (collectively, the "Motion"). According to Universal, "every claim made in this action is subject to the terms and conditions of an arbitration provision" in the Agreement. ECF 15-1 at 1 (citing ECF 1-1 at 19-20); see also ECF 19-1 (same). Plaintiff opposes the Motion. ECF 19. According to National, the arbitration clause is unenforceable because it is unconscionable, id. at 5, and because the arbitration clause is "impermissibly vague." Id. at 8. Universal has replied (ECF 20), disputing plaintiff's contentions.
No hearing is necessary to resolve the Motion. Local Rule 105.6. For the reasons that follow, I shall grant the Motion.
National buys and sells used cars throughout the State of Maryland. ECF 1-1, ¶ 1; see ECF 19-2 (Affidavit of Gabriela Furdyna), ¶ 4. It maintains its principal place of business in Ellicott City, Maryland. ECF 1-1, ¶ 1. Universal provides automotive financial services, including vehicle financing and warranties. Id. ¶ 2. Its principal place of business is located in Detroit. Id.
On April 2, 2012, Tom Hanlon, a salesperson from Universal, and Mark Brownhill, a representative from Ally Financial ("Ally"), which owns and operates Universal, met with Ms. Furdyna, a manager of National, at National's headquarters. ECF 19-2, ¶ 5. Mr. Hanlon and Mr. Brownhill proposed that National enroll in the Universal Advantage Program (the "Program"). Id. In general terms, under the Program, National would sell Universal's products, namely vehicleservice contracts ("Qualifying VSCs"), in exchange for a commission and/or payment on those sales. ECF 1-1, ¶ 5.
According to Ms. Furdyna, Mr. Hanlon and Mr. Brownhill represented that there were no drawbacks to joining the Program, and they averred that National would receive payments within a year of joining. ECF 19-2, ¶ 7. Further, they allegedly advised that participating in the Program would improve National's relationship with Ally, which is a major creditor in the automotive sales industry. Id. ¶¶ 6, 7.
Based on these representations, National and Universal executed the Agreement on April 2, 2012. ECF 1-1, ¶ 5; ECF 19-2, ¶ 11; see also ECF 1-1 at 19-20. The Agreement contains seven sections. Relevant here, Section IV provides, ECF 1-1 at 20:
IV. ARBITRATION
Further, Section V contains a choice of law provision. Id. at 20. It states: "The parties expressly agree that this Agreement is to be interpreted and the right of the parties governed and enforced by the substantive law of the State of Nebraska." Id.
National alleges that, following execution of the Agreement, it sold Qualifying VSCs to customers. ECF 1-1, ¶ 6. However, according to National, it has not received payment for these sales, as provided by the Agreement. Id. ¶ 7. Further, Universal allegedly failed to furnish information or reports as to National's performance under the Program, despite such requests. See id. ¶¶ 8-11.
This lawsuit followed. Additional facts are included in the Discussion.
Universal moves to compel arbitration and to dismiss this action pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq. The FAA, which was enacted in 1925, "requires courts to enforce covered arbitration agreements according to their terms." Lamps Plus, Inc. v. Varela, ___ U.S. ___, 139 S. Ct. 1407, 1412 (2019); see also McCormick v. Am. Online, Inc., 909 F.3d 677, 679 (4th Cir. 2018) (). Under § 2 of the FAA, an arbitration contract is "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Thus, the FAA "establishes 'a liberal federal policy favoring arbitration agreements.'" Epic Sys. Corp. v. Lewis, ___ U.S. ___, 138 S. Ct. 1612, 1621 (2018) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)); see also McCormick, 909 F.3d at 680 ().
In Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002), the Fourth Circuit explained, id. at 500-01 (quoting Whiteside v. Teltech Corp., 940 F.2d 99, 102 (4th Cir. 1991)):
In the Fourth Circuit, a litigant can compel arbitration under the FAA if he can demonstrate "(1) the existence of a dispute between the parties, (2) a written agreement that includes an arbitration provision which purports to cover the dispute, (3) the relationship of the transaction, which is evidenced by the agreement, to interstate or foreign commerce, and (4) the failure, neglect or refusal of the defendant to arbitrate the dispute."
The Adkins Court also said, 303 F.3d at 500: "A district court . . . has no choice but to grant a motion to compel arbitration where a valid arbitration agreement exists and the issues in a case fall within its purview." Accordingly, a court must "engage in a limited review to ensure that the dispute is arbitrable—i.e., that a valid agreement exists between the parties and that the specific dispute falls within the substantive scope of that agreement." Murray v. United Food and Commercial Workers Int'l Union, 289 F.3d 297, 302 (4th Cir. 2002).
Nevertheless, there must be an "independent jurisdictional basis" for suit in federal court. Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 581-82 (2008). Of significance here, "diversity jurisdiction would authorize a federal court to resolve disputes concerning the arbitration process. . . ." McCormick, 909 F.3d at 681.
Section 3 of the FAA is also relevant. It provides, 9 U.S.C. § 3:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
Thus, the Fourth Circuit has said: Adkins, 303 F.3d at 500 (quoting 9 U.S.C. § 3)). Nevertheless, in lieu of a stay, some courts have determined that "dismissal is a proper remedy when all of the issues presented in a lawsuit are arbitrable." Choice Hotels Int'l, Inc. v. BSR Tropicana Resort, Inc., 252 F.3d 707, 709-10 (4th Cir. 2001); see Willcock v. My Goodness! Games, Inc., PWG-16-4020, 2018 WL 3970474, at *4 (D. Md. Aug. 20, 2018); Kabba v. Ctr., PWG-17-211, 2017 WL 1508829, at *2 (D. Md. Apr. 27, 2017) (same), aff'd, 730 F. App'x 141 (4th Cir. 2018).
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