Kennamer v. Ford Motor Credit Co.

153 So.3d 752

Paul KENNAMER and Dorothy Kennamer

v.FORD MOTOR CREDIT COMPANY LLC and Ray Pearman Lincoln, Inc.

1120689.

Supreme Court of Alabama.

Feb. 28, 2014.

Rehearing Denied May 23, 2014.

Ralph K. Strawn, Jr., of Henslee, Robertson, Strawn & Sullivan, L.L.C., Gadsden, for appellants.

S. Dagnal Rowe and S. Dagnal Rowe, Jr., of Wilmer & Lee, P.A., Huntsville, for appellee Ford Motor Credit Company LLC.

John Martin Galese and Cassandra Harris Kalupa of Galese & Ingram, P.C., Birmingham, for appellee Ray Pearman Lincoln, Inc.

Opinion

BOLIN, Justice.

Paul Kennamer and Dorothy Kennamer appeal an order entered by the Marshall Circuit Court compelling them to arbitrate their claims against Ford Motor Credit Company LLC (hereinafter “Ford Credit”) and Ray Pearman Lincoln, Inc. (hereinafter “the dealership”).

Facts and Procedural History

On November 7, 2009, the Kennamers purchased a used automobile from the dealership. As part of their purchase, the Kennamers entered into a retail-installment contract with the dealership, which the dealership subsequently assigned to Ford Credit. The installment contract contained an arbitration provision, which provided as follows:

“Arbitration is a method of resolving any claim, dispute, or controversy (collectively, a ‘Claim’) without filing a lawsuit in court. Either you or Creditor (‘us' or ‘we’) (each, a ‘Party’) may choose at any time, including after a lawsuit is filed, to have any Claim related to this contract decided by arbitration. Such Claims include but are not limited to the following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims regarding the interpretation, scope or validity of this clause, or arbitrability of any issue; 3) Claims between you and us, your/our employees, agents, successors, assigns, subsidiaries, or affiliates; 4) Claims arising out of or relating to your application for credit, this contract, or any resulting transaction or relationship, including that with the dealer, or any such relationship with third parties who do not sign this contract.

“RIGHTS YOU AND WE AGREE TO GIVE UP

“If either you or we choose to arbitrate a claim, then you and we agree to waive the following rights:

“RIGHT TO A TRIAL, WHETHER BY JUDGE OR JURY

“RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR A CLASS MEMBER IN ANY CLASS CLAIM YOU MAY HAVE AGAINST U.S. WHETHER IN COURT OR IN ARBITRATION

“BROAD RIGHTS TO DISCOVERY AS ARE AVAILABLE IN A LAWSUIT

“RIGHT TO APPEAL THE DECISION OF AN ARBITRATOR

“OTHER RIGHTS THAT ARE AVAILABLE IN A LAWSUIT

“Either Party must contact one of the associations listed below and the other Party to start arbitration. The applicable rules (the ‘Rules') may be obtained from the association.

“American Arbitration Association (‘AAA’), at 1–800–778–7879, or www.adr.org;

“National Arbitration Forum, at 1–800–474–2371, or www.arb-forum.com

“If there is a conflict between the Rules and this contract, this contract shall govern. This contract is subject to the Federal Arbitration Act (9 U.S.C. § 1 et seq. ) and the Federal Rules of Evidence. The arbitration decision shall be in writing with a supporting opinion. We will pay your total reasonable arbitration fees and expenses (not including attorney fees, except where applicable law otherwise provides) in excess of $ 125. We will pay the whole filing fee if we demand arbitration first. Any portion of this arbitration clause that is unenforceable shall be severed, and the remaining provisions shall be enforced.”

(Capitalization in original.)

The Kennamers also entered into a separate arbitration agreement with the dealership, which provided, in pertinent part, as follows:

“Buyer/lessee acknowledges and agrees that the vehicle buyer/lessee is purchasing or leasing from dealer has traveled in interstate commerce. Buyer/lessee thus acknowledges that the vehicle and other aspects of sale, lease, or financing transaction are involved in, affect, or have a direct impact upon, interstate commerce.

“Buyer/lessee agree that all claims, demands, disputes, or controversies of every kind or nature between them arising from, concerning or relating to any of the negotiations involved in the sale, lease, or financing, of the vehicle, the terms and provisions of the sale, lease, or financing agreements, the arrangements for financing, purchase of insurance, extended warranties, service contracts or other products purchased as an incident to the sale, lease, or financing of the vehicle, the performance or condition of the vehicle, or any other aspects of the vehicle and its sale, lease, or financing, shall be settled by binding arbitration conducted pursuant to the provision of the Federal Arbitration Act 9 U.S.C. Section 1 et seq. and according to the Commercial Arbitration Rules of the Better Business Bureau of North Alabama. All parties retain the right to seek relief in a small claims court for disputes of claims within the scope of its jurisdiction.”

In the summer of 2010, the Kennamers began experiencing problems with the car. The Kennamers contend that they stopped making the monthly payments required under the installment contract because of the mechanical problems. Although the Kennamers were aware that the car had been involved in an accident when they purchased it, they discovered that the damage to the car had been more extensive than they say they were told. According to the Kennamers, the dealership and its salesman misrepresented the extent of the damage to the car, and they relied upon those misrepresentations in purchasing the car. They confronted the dealership (who contacted Ford Credit) with the allegations, but the dealership and Ford Credit refused to cancel the contract or to refund the Kennamers' money.

On February 1, 2011, Ford Credit repossessed the car and sold it at an auction for $13,400. The sale at the auction resulted in the Kennamers having a balance owed on the purchase price of the car of $4,364, which, pursuant to the terms of the installment contract, the Kennamers were responsible for.

On November 2, 2011, Ford Credit sued the Kennamers in the district court in order to the collect the deficiency, along with attorney fees, interest, and court costs. The Kennamers filed an answer and subsequently responded to 18 interrogatory questions and 16 requests for admissions posed by Ford Credit. On April 10, 2012, Ford Credit filed a motion for a summary judgment, attaching the Kennamers' responses in support of the motion. The Kennamers opposed summary judgment and stated that they intended to file a counterclaim against Ford Credit and intended to join the dealership as a party and to file a claim against it. The Kennamers stated that the amount of the counterclaim and the claim combined would exceed the jurisdiction of the district court. On July 9, 2012, the district court entered a summary judgment for Ford Credit and awarded Ford Credit $4,364 and an attorney fee of $654, along with court costs. On July 23, 2012, the Kennamers filed a postjudgment motion seeking to alter, amend, or vacate the judgment or, in the alternative, a new trial. The postjudgment motion was denied by operation of law. On August 15, 2012, the Kennamers timely filed an appeal to the circuit court.

On August 31, 2012, Ford Credit filed a summary-judgment motion, attaching documents from the district-court action. On September 14, 2012, the Kennamers filed a counterclaim against Ford Credit, alleging fraud, breach of contract, negligence, wantonness, and intentional infliction of emotional distress. That same day, the Kennamers moved to serve a complaint on the dealership, alleging fraud and breach of contract. In their complaint against the dealership, the Kennamers also alleged that “if [the Kennamers] are liable to [Ford Credit] on the claims presented in [Ford Credit's] complaint, they are liable because of the acts and omissions of [the dealership].”

On October 3, 2012, Ford Credit filed a motion to dismiss the Kennamers' counterclaim on the ground that the counterclaim failed to state a claim upon which relief may be granted. On October 12, 2012, the circuit court denied Ford Credit's motion to dismiss and granted the Kennamers' motion to serve the dealership.

On October 26, 2012, Ford Credit filed a motion to compel arbitration and attached to the motion a copy of the installment contract. On November 6, 2012, the dealership filed a motion to dismiss or, in the alternative, to compel arbitration based on the arbitration agreement between the dealership and the Kennamers. The dealership attached an affidavit from its general manager, which provided:

“The automobile in question was manufactured out of state and delivered into Alabama prior to the sale to Mr. and Mrs. Kennamer. As part of the purchase process, the majority of the purchase price was paid by receipt of a loan from Ford Motor Credit Co., Inc., a corporation foreign to Alabama, with such money coming into Alabama from out of state.

“Furthermore, various aspects of the sale were regulated by federal laws, including, the Federal Truth–in–Lending Act, the Federal Trade Commission's Holder in Due Course regulations, the Federal Odometer Act (the Motor Vehicle Information and Cost Savings Act), and the Magnuson Moss Warranty Act.

The transaction as a whole substantially involved and affected interstate commerce.”

On December 12, 2012, the Kennamers responded and attached an affidavit in support of their opposition to both motions to compel. The Kennamers argued that Ford Credit and the dealership (as the assignor of the installment contract) waived their rights to arbitrate because Ford Credit had sought discovery in the district court, had filed a summary-judgment motion, and had obtained a judgment against the Kennamers in the district court. The Kennamers argued that, in order to avoid the res judicata effect of the district-court judgment, they had had to appeal that judgment to the circuit court and had incurred litigation expenses, such as court costs and attorney...