Title Loan Express No.-2, Inc. v. Hooks, No. 1031389 (AL 5/27/2005), 1031389.

• Decision Date: 27 May 2005
• Docket Number: No. 1031389.,1031389.
• Parties: Title Loan Express No.-2, Inc. v. Lakesia Hooks.
• Court: Alabama Supreme Court

Page 1

Title Loan Express No.-2, Inc. v. Lakesia Hooks.

No. 1031389.

Supreme Court of Alabama.

Decided May 27, 2005.

Appeal from Jefferson Circuit Court (CV-04-1536)

LYONS, Justice.

Title Loan Express No.-2, Inc., appeals from the Jefferson Circuit Court's denial of its motion to compel arbitration. We reverse and remand.

I. Factual Background

In October 2002, Lakesia Hooks purchased a vehicle from an automobile dealership in Jefferson County. She paid the entire purchase price in cash. However, because Lakesia was under the age of 19 when she purchased the vehicle, the dealership required that Lakesia's mother, Robin Hooks Feagin, be listed on the certificate of title as an owner of the vehicle. According to Lakesia's complaint, the certificate of title lists the owners of the vehicle as "LaKesia K. Hooks or Robin Hooks Feagin."¹

At some point, Robin purportedly removed the certificate of title from the glove-box of the vehicle and took the title to Title Loan, where she entered into a pawn transaction in which she received $3,000 and pledged the vehicle as collateral. The pawn agreement between Robin and Title Loan included an arbitration clause providing that "[t]he parties agree that all disputes resulting from or arising out of this pawn transaction or renewals thereof ... shall be subject to binding arbitration ...." According to Lakesia, she had no knowledge of the transaction between Robin and Title Loan or of the resulting agreement.

On August 10, 2003, RC Recovery Towing repossessed the vehicle. During the repossession, the driver for RC Recovery collided with two parked vehicles in what it contends was an attempt to avoid running over Lakesia. Lakesia contends that the driver of the wrecker was trying to run her over when he collided with the other vehicles. Lakesia alleges that, after the vehicle was repossessed, she offered to pay Robin's debt if Title Loan would return the vehicle and that Title Loan refused that offer.

II. Proceedings Below

Lakesia sued Title Loan and Randy Cantrell, the individual doing business as RC Recovery Towing, claiming wrongful repossession, assault and battery, breach of the peace, negligent supervision, malicious conversion, bad faith, deceptive trade practice, and a violation of the Alabama Pawnshop Act, § 5-19A-1 et seq., Ala. Code 1975. Title Loan answered and filed a motion to compel arbitration. Lakesia voluntarily dismissed her bad-faith and deceptive-trade-practice claims. Cantrell also filed a motion to compel arbitration. The trial court entered an order stating:

"[Lakesia] has dismissed her claim[s] for `Bad Faith' ... and [deceptive trade practice]. [Lakesia] was not a party to the agreement to submit the claim to binding arbitration. With the amendment to the complaint [effected by the dismissal of those claims], her claim does not arise from the contract. Therefore, the defendant's motion to compel arbitration is denied."

The trial court's order denying the motion to compel arbitration does not specify whether it was considering Title Loan's motion to compel arbitration or Cantrell's motion. However, only Title Loan has filed a notice of appeal to this Court. We therefore treat the order for purposes of this appeal as applicable to the motion filed by Title Loan.

III. Standard of Review

"This Court reviews de novo a trial court's denial of a motion to compel arbitration." Homes of Legend, Inc. v. McCollough, 776 So. 2d 741, 745 (Ala. 2002). Further, in Jim Walter Homes, Inc. v. Saxton, 880 So. 2d 428, 430 (Ala. 2003), this Court stated:

"A party seeking to compel arbitration has the burden of proving: (1) the existence of a contract containing an arbitration agreement and (2) that the underlying contract evidences a transaction affecting interstate commerce. Kenworth of Birmingham, Inc. v. Langley, 828 So. 2d 288, 290 (Ala. 2002). Once those two items have been shown, the burden shifts to the opposing party to present evidence either that the arbitration agreement is not valid or that it does not apply to the dispute in question. Id."

IV. Analysis

A. Interstate Commerce

"[F]ederal law mandates the arbitration of claims encompassed by an arbitration clause that is contained in a binding contract that involves interstate commerce." Ex parte Conference America, Inc., 713 So. 2d 953, 955 (Ala. 1998). "In determining whether a transaction 'involves' interstate commerce, this Court looks to whether Congress's Commerce Clause power can reach the activity that is the basis of the transaction ...." Allied Williams Cos. v. Davis, [Ms. 1030207, Nov. 12, 2004] So. 2d , (Ala. 2004). "Congress' Commerce Clause power 'may be exercised in individual cases without showing any specific effect upon interstate commerce' if in the aggregate the economic activity in question would represent 'a general practice ... subject to federal control.'" Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (quoting Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236 (1948)). Title Loan notes in its brief to this Court that the vehicle made the basis of the pawn transaction between it and Robin was produced out of state and that the pawn transaction was regulated by federal law. See Citizens Bank, 539 U.S. at 57 ("[T]he Commerce Clause gives Congress the power to regulate local business establishments purchasing substantial quantities of goods that have moved in interstate commerce."); Wolff Motor Co. v. White, 869 So. 2d 1129, 1134 (Ala. 2003) ("The [Federal Arbitration Act] certainly reaches transactions involving vehicles that have moved in interstate commerce ...."); Burnett v. Ala Moana Pawn Shop, 3 F.3d 1261 (9th Cir. 1993) (applying the Federal Truth in Lending Act to a pawn transaction). Lakesia does not dispute Title Loan's contention that the pawn transaction between Title Loan and Robin involves interstate commerce, and we hold that Title Loan has presented sufficient evidence of such involvement.

B. Applicability of Arbitration Clause to Lakesia as a Non-Signatory

The pawn agreement contains the following arbitration clause:

"The parties agree, in connection with any dispute arising out of or related to this transaction or renewals thereof: That the vehicle was manufactured outside of Alabama that has and will continue to operate on interstate highways [sic]; That this transaction is regulated by federal law; and, that this contract substantially affects interstate commerce. The parties agree that all disputes resulting from or arising out of this pawn transaction or renewals thereof, (including but not limited to disputes as to: the meaning and application of any term of this agreement, its breadth and scope, the representations, promises, undertakings, warranties or covenants made by the pawn broker in connection with this transaction, all actions to enforce this agreement and whether the dispute is subject to this arbitration clause); shall be submitted to BINDING ARBITRATION, pursuant to the provisions of 9 U.S.C. Section 1, et. seq. and the Commercial Rules of the American Arbitration Association then existing in the County where this transaction takes place. ... THIS ARBITRATION SHALL BE IN LIEU OF ANY CIVIL LITIGATION IN ANY COURT, AND IN LIEU OF ANY TRIAL BY JURY."

(Capitalization in original.) Of course, the pawn agreement containing the arbitration clause was entered into by Title Loan and Robin; it was not signed by Lakesia. Lakesia argues that, as a nonsignatory, she is not bound by the pawn agreement and therefore is not required to arbitrate her claims against Title Loan.

"[A]rbitration agreements must be enforced according to general standards of contract law. ... It is the general rule that a nonsignatory to an arbitration agreement cannot be forced to arbitrate her claims." Cook's Pest Control, Inc. v. Boykin, 807 So. 2d 524, 526 (Ala. 2001). However, this Court has recognized that under certain theories of contract law a signatory to an arbitration agreement can force a nonsignatory to arbitrate his or her claims.

In Infiniti of Mobile, Inc. v. Office, 727 So. 2d 42 (Ala. 1999), this Court held that a plaintiff could not avoid an arbitration provision contained in a contract entered into by her husband and the defendant, even though she did not herself sign the contract. We held that the plaintiff, by basing her claims of fraud and breach of warranty on the contract entered into by her husband and the defendant, had relied on her status as a third-party beneficiary of that contract. She therefore could not claim the benefits of the contract without being subject to its burdens, including the arbitration clause.

Similarly, in Credit Sales, Inc. v. Crimm, 815 So. 2d 540 (Ala. 2001), the plaintiff sought to enforce a provision in a contract to which she was not a signatory that required the defendant car dealership to return, after the final payment had ben made, the down payment on a car she had co-purchased with a signatory to the contract. We held that the plaintiff was a "third-party beneficiary attempting to pick and choose among the provisions" of the contract that required the return of the down payment. 815 So. 2d at 547. This she could not do.

Title Loan cites Infiniti and Crimm in support of its contention that Lakesia "cannot pick and choose the provisions of the contract to which she is bound." Title Loan argues that Lakesia's claim alleging wrongful repossession is in essence a claim alleging breach of the contract between Title Loan and Robin. Therefore, Title Loan contends, because Lakesia asserts a claim based on the contract containing the arbitration provision, she is bound by the provisions of that contract, including the arbitration clause.

In support of its argument, Title Loan points out that Lakesia's claim of wrongful repossession is in part based on a contention that, in repossessing the vehicle, Title Loan breached the peace. Section 7-9A-609, Ala. Code 1975, gives a secured part...