Wolff Motor Co. v. White

• Court: Supreme Court of Alabama
• Writing for the Court: SEE, Justice.
• Citation: 869 So.2d 1129
• Decision Date: 27 June 2003
• Parties: WOLFF MOTOR COMPANY et al. v. Stephen M. WHITE and Linda K. White.

869 So.2d 1129

WOLFF MOTOR COMPANY et al.
v.
Stephen M. WHITE and Linda K. White

1011845.

Supreme Court of Alabama.

June 27, 2003.

869 So.2d 1130

Dorothy A. Powell of Parsons, Lee & Juliano, P.C., Birmingham, for appellants

Robert S. Presto of Caffey, Presto & Associates, P.C., Brewton, for appellee.

SEE, Justice.

Wolff Motor Company, Pete Wolff III, and Joe Powell (hereinafter referred to collectively as "Wolff") appeal from the trial court's denial of their motion to compel arbitration of the claims filed against them by Stephen M. White and Linda K. White. The trial court denied Wolff's motion to compel arbitration on the ground that the Whites' purchase from Wolff of a vehicle used to transport automobiles did not substantially affect interstate commerce. We reverse and remand.

Wolff Motor Company buys vehicles in Florida, Alabama, Louisiana, Georgia, and Mississippi and resells them to buyers in Alabama and other surrounding states. Wolff has its principal place of business in Evergreen, Alabama. Wolff purchased a 1994 GMC 3500 Rollback tow truck ("the car-hauler") from Musick Enterprises d/b/a Suncoast Wholesale in Pensacola, Florida. Wolff used the car-hauler to haul cars in Florida, Mississippi, Georgia, and Alabama.

On October 27, 2000, Stephen White negotiated the purchase of the car-hauler from Wolff. Stephen White told Wolff that he operated a wrecker business in Flomaton, Alabama, and in Century, Florida, and that he intended to use the car-hauler to haul cars for his business.

Stephen White directed Wolff to complete the paperwork for the purchase of the car-hauler showing Stephen White

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and/or Linda White as the buyer. Wolff obtained the Whites' credit information from Equifax Credit Information Services in Atlanta, Georgia. Wolff attempted to obtain financing for the Whites through Firstar Bank, N.A., in Oshkosh, Wisconsin. Firstar declined to provide financing, but Wolff ultimately was able to secure a loan through the Escambia County Bank in Alabama by which the Whites could purchase the car-hauler. Wolff Motor Company and Stephen White executed an arbitration agreement in connection with the sale and purchase of the car-hauler

On February 26, 2002, the Whites sued Wolff, alleging negligent, reckless, wanton, and/or intentional misrepresentation or suppression of material facts concerning the condition of the car-hauler at the time of the sale. The gravamen of the Whites' complaint is that the 1994 GMC 3500 Rollback tow truck they purchased from Wolff was manufactured and marketed as a commercial car-hauler but has proven unsuitable for that use; the Whites allege that they have been damaged because they have had to have the truck repaired, causing their business to lose money while the car-hauler was out of service during those repairs.¹ Wolff moved to compel arbitration of the Whites' claims against it. The trial court denied Wolff's motion, finding that its sale of the car-hauler to the Whites did not substantially affect interstate commerce. Wolff appeals.

"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.2000). "A `party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that that contract involves a transaction affecting interstate commerce.'" Tefco Fin. Co. v. Green, 793 So.2d 755, 758 (Ala.2001)(quoting Ex parte Caver, 742 So.2d 168, 172 n. 4 (Ala.1999)). The party moving for arbitration must "`produce some evidence which tends to establish its claim.'" Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 (Ala.1995)(opinion on application for rehearing)(quoting In re American Freight Sys., Inc., 164 B.R. 341, 345 (D.Kan.1994)).

The parties agree that Stephen White signed an arbitration agreement when he purchased the car-hauler from Wolff Motor Company. Wolff argues that this transaction is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (the "FAA"), because, it argues, the car-hauler, by definition, is an instrumentality of interstate commerce and the sale of the car-hauler therefore affects interstate commerce. The Whites argue, however, that Wolff has not demonstrated that the sale of the car-hauler to the Whites affected interstate commerce.² The Whites also

869 So.2d 1132

argue that even if the transaction affects interstate commerce, Mrs. White cannot be compelled to arbitrate her dispute with Wolff because she did not sign the arbitration agreement and she was not a party to the actual sale. Finally, the Whites argue that Joe Powell, an employee of Wolff Motor Company, may not compel the Whites to arbitrate their dispute with him concerning the car-hauler because he is not a party to the arbitration agreement

Section 2 of FAA provides, in pertinent part:

"A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

Section 2 "has the effect of preempting conflicting Alabama law, in particular Ala. Code 1975, § 8-1-41(3), and thereby making enforceable a predispute arbitration agreement in a contract evidencing a transaction that involves interstate commerce." Homes of Legend, 776 So.2d at 745 (footnote omitted). See also Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 279, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995)(holding that the FAA controls in all cases in which the "`transaction' in fact involve[s] interstate commerce"). The FAA "provides for `the enforcement of arbitration agreements within the full reach of the Commerce Clause.'" Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 2040 (2003)(quoting Perry v. Thomas, 482 U.S. 483, 490, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987)). It is well established that Congress can regulate three broad categories of activity pursuant to its commerce power: (1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce or persons or things in interstate commerce; and (3) those general activities having a substantial effect on interstate commerce. Selma Med. Ctr., Inc. v. Fontenot, 824 So.2d 668, 674 (Ala.2001)(plurality opinion).³

869 So.2d 1133

Wolff argues that the trial court erred when it relied on this Court's decision in Sisters of the Visitation v. Cochran Plastering Co., 775 So.2d 759 (Ala.2000), to determine that the sale of the car-hauler to the Whites by Wolff Motor Company did not involve interstate commerce. Wolf argues that "the very nature of the vehicle which was purchased in this case invokes the application of the FAA to this transaction." We agree.

In Citizens Bank, the Supreme Court of the United States held that Sisters of the Visitation expressed an "improperly cramped view of Congress' Commerce Clause Power," that "appears to rest on a misreading of our decision in United States v. Lopez, 514 U.S. 549 (1995). Lopez did not restrict the reach of the FAA or implicitly overrule Allied-Bruce Terminix Cos.[ v. Dobson, 513 U.S. 265 (1995) ]." 539 U.S. at 58, 123 S.Ct. at 2041. In Citizens Bank, the Supreme Court of the United States rejected the test this Court adopted in Sisters of the Visitation—that the individual transaction at issue must itself have a "substantial effect" on interstate commerce in order to trigger the application of the FAA. The Supreme Court reaffirmed the rule that "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.' " 539 U.S. at 56-57, 123 S.Ct. at 2040 (quoting Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U.S. 219, 236, 68 S.Ct. 996, 92 L.Ed. 1328 (1948)).

In Citizens Bank, Alafabco, a construction company, sued Citizens Bank alleging, among other causes of action, fraud and breach of fiduciary duty. Alafabco argued in its complaint that it "detrimentally `"incur[red] massive debt"' because [Citizens Bank] had unlawfully reneged on its agreement to provide capital sufficient to complete" one of Alafabco's construction projects. 539 U.S. at 54, 123 S.Ct. at 2039. Alafabco's loan agreement with Citizens Bank contained an arbitration clause. Citizens Bank moved to compel arbitration, but Alafabco argued that its transaction with Citizens Bank lacked a sufficient nexus with interstate commerce to establish the applicability of the FAA to the dispute. The...