Fid. Auto Grp. v. Hargroder

689 S.W.3d 1

FIDELITY AUTO GROUP, LLC, d/b/a Baytown Nissan, Appellant

v.Gretchen HARGRODER, Appellee

NO. 09-23-00098-CV

Court of Appeals of Texas, Beaumont.

Submitted on February 29, 2024

Opinion Delivered March 14, 2024

On Appeal from the 58th District Court, Jefferson County, Texas, Trial Cause No. A-203,460

Yizhen Ding, Jonathan Tripp Jones, Mark C. Sparks, for Appellee.

Charles Patrick Waites, for Appellant Fidelity Auto Group, LLC, d/b/a Baytown Nissan.

William S. Helfand, Felix Digilov, Houston, for Appellant Nissan North America, Inc.

Before Golemon, C.J., Johnson and Wright, JJ.

OPINION

W. SCOTT GOLEMON, Chief Justice

Gretchen Hargroder ("Hargroder") sued Fidelity Auto Group, LLC, d/b/a Baytown Nissan ("Baytown Nissan") and Nissan North America, Inc. after they sold her a "new" truck that she later learned was used and the previous owner had returned as defective. Baytown Nissan appeals the trial court’s order denying its Motion to Compel Arbitration.¹ See Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (allowing interlocutory appeal from an order denying motion to compel arbitration). In one issue, Baytown Nissan complains the district court erred in denying its Motion to Compel Arbitration, because: 1) the parties have a valid and enforceable arbitration agreement; 2) Hargroder's claims fall within the agreement’s broad scope; 3) the question of arbitrability or "waiver" is contractually assigned to the arbitrator not the courts; 4) Baytown Nissan’s litigation conduct did not waive its right to arbitrate; and 5) Texas public policy favors arbitration. For the reasons discussed below, we affirm the trial court’s Order denying arbitration.

I. Background and Procedural Posture

In February 2018, Hargroder purchased a "new" 2017 Nissan Titan XD crew cab truck from Baytown Nissan. Baytown Nissan represented the truck was new and sold Hargroder the truck as such. The contract documents for the purchase of the vehicle contained an arbitration provision. The arbitration provision provided as follows:

ARBITRATION PROVISION PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS

1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN US DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL.

2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY HAVE AGAINST US IN-

CLUDING ANY RIGHT TO CLASS ARBITRATION OR ANY CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.

3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT, AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.

Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision, and the arbitrability of the claim or dispute), between you and us or our employees, agents, successors or assigns, which arises out of or relates to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action. If federal law provides that a claim or dispute is not subject to binding arbitration, this Arbitration Provision shall not apply to such claim or dispute. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action. You expressly waive any right you may have to arbitrate a class action. You may choose the American Arbitration Association, 1633 Broadway, 10th Floor, New York, New York 10019 (www.adr.org), or any other organization to conduct the arbitration subject to our approval. You may get a copy of the rules of an arbitration organization by contacting the organization or visiting its website. Arbitrators shall be attorneys or retired judges and shall be selected pursuant to the applicable rules. The arbitrator shall apply governing substantive law and the applicable statute of limitations. The arbitration hearing shall be conducted in the federal district in which you reside unless the Seller-Creditor is a party to the claim or dispute, in which case the hearing will be held in the federal district where this contract was executed. We will pay your filing, administration, service or case management fee and your arbitrator or hearing fee all up to a maximum of $5000, unless the law or the rules of the chosen arbitration organization require us to pay more. The amount we pay may be reimbursed in whole or in part by decision of the arbitrator if the arbitrator finds that any of your claims is frivolous under applicable law. Each party shall be responsible for its own attorney, expert and other fees, unless awarded by the arbitrator under applicable law. If the chosen arbitration organization’s rules conflict with this Arbitration Provision, then the provisions of this Arbitration Provision shall control. Any arbitration under this Arbitration Provision shall be governed by the Federal Arbitration Act (9 U.S. C. § 1 et. seq.) and not by any state law concerning arbitration. Any award by the arbitrator shall be in writing and will be final and binding on all parties, subject to any limited right to appeal under the Federal Arbitration Act.

You and we retain the right to seek remedies in small claims court for disputes or claims within that court’s jurisdiction, unless such action is transferred, removed or appealed to a different court. Neither you nor we waive the right to arbitrate by using self-help remedies, such as repossession, or by filing an action to recover the vehicle, to recover a deficiency balance, or for individual injunctive relief. Any court having jurisdiction may enter judgment on the arbitrator’s award. This Arbitration Provision shall survive any termination, payoff or transfer of this contract. If any part of this Arbitration provision, other than waivers of class action rights, is deemed or found to be unenforceable for any reason, the remainder shall remain enforceable. If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of the Arbitration Provision shall be enforceable.

Shortly after buying the vehicle, Hargroder learned that the truck had been previously purchased and returned as defective when it dropped a large amount of engine fluid. When Hargroder learned this, she demanded that Baytown Nissan take the truck back and return her down payment with the vehicle she traded in. Baytown Nissan refused.

In March 2019, Hargroder sued Baytown Nissan, Nissan North America, and two individuals who worked for Baytown Nissan. Hargroder pleaded causes of action for negligence, gross negligence, intentional violations of the Texas Deceptive Trade Practices Act (DTPA), fraud, fraudulent misrepresentation, negligent misrepresentation, breach of fiduciary duty, breach of warranties, manufacturing defects, and breach of contract.

Baytown Nissan first answered with a general denial, subject to its motion to transfer venue. Its amended answer raised multiple affirmative defenses, sought costs and fees, and demanded a jury. The parties also conducted merits-based written discovery, which included Baytown Nissan responding to Hargroder's multiple requests and propounding written discovery requests on Hargroder. Baytown Nissan also deposed Hargroder and the former employee who sold the truck to Hargroder. In September 2022, the parties filed a Joint Motion for Continuance and Entry of Docket Control Order, which requested that the matter be moved from its October 2022 trial setting and set for trial in June 2023. The trial court signed the parties’ Agreed Amended Docket Control Order and set the case on its "try or dismiss" docket in June 2023.

Baytown Nissan moved to compel arbitration in March 2023, almost four years after Hargroder filed suit, shortly after the trial court granted Hargroder’s Motion to Compel the production of certain documents, and three months before the scheduled trial setting. In their Motion to Compel Arbitration, Baytown Nissan argued a valid arbitration agreement existed and noted the delegation clause that provides the parties to arbitrate "[a]ny claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this Arbitration Provision and the arbitrability of the dispute)." Baytown Nissan also argued that the AAA commercial rules say that the arbitrator rather than the court determines issues of arbitrability. Finally, it argued that Hargroder’s claims are within the broad scope of the agreement and attached multiple exhibits to its Motion, including the contract documents containing the arbitration provision and the AAA Rules for Commercial Arbitration.

Hargroder filed a Response to Baytown Nissan’s Motion to Compel Arbitration and supported her Response with evidence. Hargroder argued that Baytown Nissan waived and relinquished its right to arbitrate via its litigation activities, and that given a recent decision by the Supreme Court of the United States, there is no longer a prejudice requirement. Even so, she argued she expended time and over $3,500 that she would not have had if Baytown Nissan timely demanded arbitra- tion, and she noted the discovery dispute required her to file a Motion to Compel.

Baytown Nissan filed a Reply to Hargroder's Response and disputed that they did not waive the right to enforce the arbitration agreement by their litigation conduct. Baytown Nissan also argued that the Federal Arbitration Act governed the dispute and whether the dispute was arbitrable. It contended that Hargroder had the burden to raise an affirmative defense to the provision’s enforcement and that the "question of waiver is one of arbitrability the parties have...