2014 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

11-25-2014

Sara Edmondson v. Lilliston Ford Inc

Precedential or Non-Precedential: Non-Precedential

Docket No. 14-1415

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Recommended Citation

"Sara Edmondson v. Lilliston Ford Inc" (2014). 2014 Decisions. Paper 1195.

http://digitalcommons.law.villanova.edu/thirdcircuit_2014/1195
NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

C.A. No. 14-1415

___________

SARA ANN EDMONDSON,

Appellant

v.

LILLISTON FORD, INC.; JANE AND JOHN DOES 1-10, INDIVIDUALLY AND AS 

OWNERS, OFFICERS, DIRECTORS, FOUNDERS, MANAGERS, AGENTS, 

SERVANTS, EMPLOYEES, REPRESENTATIVES, AND/OR INDEPENDENT 

CONTRACTORS OF LILLISTON FORD, INC.; XYZ CORPORATIONS 1-10

____________________________________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil Action No. 1-13-cv-07704)

District Judge: Honorable Renée M. Bumb

____________________________________

Submitted Pursuant to Third Circuit LAR 34.1(a)

November 4, 2014

Before: CHAGARES, JORDAN and GARTH, Circuit Judges

(Opinion filed: November 25, 2014)

___________

OPINION

___________

PER CURIAM

Appellant Sara Edmondson brought this lawsuit against appellee, Lilliston Ford, 

Inc. (“Lilliston”), alleging that it engaged in fraudulent business practices that violated 
2

several federal and state laws. She appeals the District Court’s denial of her motion to 

compel arbitration under the Federal Arbitration Act. For the reasons stated below, we 

will vacate and remand with instructions that the District Court decide the motion to 

compel before it reaches the motion to dismiss presented by the appellee. We emphasize, 

however, that the District Court should first ensure that it has subject matter jurisdiction 

over Edmondson’s suit.

I.

Edmondson purchased a used Ford Focus from Lilliston on February 15, 2012. 

She alleged that she chose to purchase from Lilliston after receiving its advertisement for 

a tax refund event in which a $1,000 down payment voucher was offered. According to 

Edmondson, Lilliston did not apply the $1,000 down payment credit, in spite of her 

presentation of the voucher to the sales representative, who told her he was applying the 

credit to the purchase price. Nor did Lilliston’s agents apply a special friends and family 

“X Plan” discount that she had acquired from a friend. Edmondson also alleged that the 

Ford Focus she received was unsafe to drive, despite its designation as a “Certified PreOwned” vehicle and the express statements by Lilliston’s agent that the car was in 

“excellent condition.”

Shortly after the purchase, Edmondson experienced mechanical difficulties with 

the car. After multiple attempts to repair the vehicle, she tried to return it, but Lilliston 

would not accept it. When Edmondson subsequently refused to provide Lilliston with the 

title to a vehicle that she had traded in as part of the deal for the Ford Focus, the 
3

dealership initiated a lawsuit in state court, to which Edmondson responded with a 

counterclaim. The record shows that, in January 2013, the state court dismissed the 

complaint and counterclaim without prejudice. According to Lilliston, the parties 

reached a settlement whereby the dealership withdrew its claims without prejudice on the 

condition that Edmondson execute a form stating that the title to the trade-in vehicle was 

lost. After Edmondson refused to provide that form, the dealership moved for sanctions 

to enforce the alleged settlement. Edmondson contests the existence of that alleged 

settlement agreement. Rather, according to Edmondson, the parties mutually agreed to 

withdraw their claims in order to engage in arbitration, pursuant to an arbitration clause 

in the sales agreement that governed the purchase. No written documentation of a 

settlement agreement was presented by Lilliston, and the record reflects that the state 

court denied Lilliston’s motion to enforce the alleged settlement agreement. 

Edmondson filed a demand for arbitration with the American Arbitration 

Association (“AAA”) in October 2013. According to a November 19, 2013 letter from 

the AAA administrator, however, Lilliston did not pay the required arbitration fees. As a 

result, the AAA declined to arbitrate the case and requested that Lilliston remove all 

reference to the AAA from the arbitration agreement clause that appeared on Lilliston’s 

lease and sales forms. 

Edmondson then filed a complaint in the District Court. She brought several statelaw claims of fraud and misrepresentation, as well as claims under the federal Odometer 
4

Act1and the Magnuson-Moss Act. Lilliston filed an answer and a counterclaim. Shortly 

thereafter, Lilliston filed a motion to dismiss under Rule 12(b)(6), on the sole ground that 

the action was barred by the principles of res judicata.2 Prior to a hearing on Lilliston’s 

motion to dismiss, Edmondson filed a motion to compel arbitration under the Federal 

Arbitration Act (“FAA”). The District Court dismissed Edmondson’s motion to compel 

without prejudice, pending a determination on Lilliston’s motion to dismiss. Edmondson 

appealed. 

II.

Our appellate jurisdiction over the District Court’s dismissal of Edmondson’s 

motion to compel arbitration is conferred by section 16 of the Federal Arbitration Act

(the “FAA”). Section 16 mandates that an appeal may be taken from an order refusing a 

stay of any action under § 3 of the FAA or denying a petition to compel arbitration under 

§ 4 of the FAA. 9 U.S.C. 16 (a)(1)(A) – 16(a)(1)(B).3 In addition to the plain language 

 

1

 According to Edmondson, the car was never actually inspected to determine whether it 

qualified for the pre-owned warranty certification program. She alleged that such an 

inspection would require road tests and, according to recorded odometer readings, no 

mileage was added to the car between the time it was transferred from the prior owner to

Lilliston and the time Lilliston transferred it to Edmondson. 

2

 Because Lilliston filed its motion to dismiss after its responsive pleading, the motion is 

more properly construed as a request for judgment on the pleadings under Federal Rule of 

Civil Procedure 12(c). See Turbe v. Gov’t of Virgin Islands, 938 F.2d 427, 428 (3d Cir. 

1991).

3

 Edmondson, who had previously received the assistance of an attorney but filed her 

“Motion to Compel Arbitration” pro se, cited to § 3 of the FAA in her motion. Section 3 

permits federal courts to stay proceedings pending arbitration. It is evident, however, that 

the primary relief that Edmondson sought was an order compelling arbitration, which 
5

of §16, other parts of the FAA “evince clear Congressional intent that challenges to 

refusals to compel arbitration be promptly reviewed by appellate courts.” Sandvik AB v. 

Advent Int’l Corp., 220 F.3d 99, 102-103 (3d Cir. 2000). Our jurisdictional authority is 

unaffected by the fact that the motion was denied without prejudice. See Quilloin v.

Tenet HealthSystem Phila., Inc., 673 F.3d 221, 227-28 (3d Cir. 2012) (“[T]here can be no 

doubt that we have the authority to review an appeal from the District Court’s order 

denying a motion to compel arbitration, irrespective of the fact that the order was denied 

without prejudice.”) (internal quotations and citation omitted).4 Our review of the 

District Court’s denial of Edmondson’s motion to compel arbitration is plenary. 

Hoxworth v. Blinder, Robinson & Co., Inc., 980 F.2d 912, 925 (3d Cir. 1992). 

III.

The limited question before us is whether the District Court erred in dismissing 

Edmondson’s motion to compel arbitration and stay proceedings as premature pending a 

determination of Lilliston’s motion to dismiss. “By its terms, the [Federal Arbitration] 

 

would arise under § 4 of the FAA. We thus construe her motion as a motion to compel 

arbitration under § 4 and, after a determination of such arbitrability, to stay the current 

federal action under § 3.

4

 The District Court’s express denial of the motion to compel arbitration distinguishes 

this case from the situation considered by the Seventh Circuit in Cont’l Cas. Co. v. 

Staffing Concepts, Inc., 538 F.3d 577, 580 (7th Cir. 2008). There, the District Court 

struck a motion to compel arbitration without expressly denying it, thereby creating 

ambiguity with regard the nature of the order. Here, the District Court expressly denied 

the motion to compel, leaving no such room for ambiguity. See, e.g., Sharif v. Wellness 

Int’l Network, Ltd., 376 F.3d 720, 726 (7th Cir. 2004) (asserting jurisdiction under § 16 

where the District Court dismissed the motion to compel arbitration without prejudice 

pending resolution of a 12(b)(6) motion challenging venue). 
6

Act leaves no place for the exercise of discretion by a district court, but instead mandates 

that district courts shall direct the parties to proceed to arbitration on issues as to which 

an arbitration agreement has been signed.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 

213, 218 (1985). Thus, if the parties have a valid, enforceable arbitration agreement and 

any of the asserted claims are within its scope, the motion to compel arbitration cannot be 

denied. See 9 U.S.C. § 4. This is so even if the denial is without prejudice for the 

purpose of permitting the District Court to make a determination on a pending motion to 

dismiss. See, e.g., Sharif v. Wellness Int’l Network, Ltd., 376 F.3d 720, 726 (7th Cir. 

2004) (holding that the District Court erred in dismissing a motion to compel without 

prejudice as superfluous to a pending 12(b)(6) motion alleging improper venue). 

Similarly, a motion to stay under § 3 may not be denied if any issue is arbitrable under a 

valid, enforceable arbitration agreement. See 9 U.S.C. § 3; see also Lloyd v. HOVENSA, 

LLC., 369 F.3d 263, 269 (3d Cir. 2004) (“[T]he plain language of § 3 affords a district 

court no discretion to dismiss a case where one of the parties applies for a stay pending 

arbitration.”). 

There is at least a reasonable possibility that some of the issues presented are 

arbitrable. Exhibit A to Edmondson’s notice of appeal is a document that contains what 

appears to be a signed arbitration agreement that states, among other things, that “[t]he 

parties to this agreement agree to arbitrate any claim, dispute, or controversy, including 

all statutory claims and any state or federal claims, that may arise out of or relating to the 

sale or lease identified in this agreement.” The sale identified in that document is that of 
7

the 2012 Ford Focus that is the subject of Edmondson’s complaint. The District Court 

has yet to determine, however, whether the alleged agreement is valid and enforceable. 

See 9 U.S.C. § 2 (providing that agreements in writing to submit controversies to 

arbitration shall be “valid, irrevocable, and enforceable, save upon such grounds as exist 

at law or in equity for the revocation of any contract.”).

The FAA instructs that when a party petitions a district court for an order directing 

arbitration, “[t]he court shall hear the parties, and upon being satisfied that the making of 

the agreement for arbitration or the failure to comply therewith is not in issue, the court 

shall make an order directing the parties to proceed to arbitration in accordance with the 

terms of the agreement.” 9 U.S.C. § 4 (emphasis added). Edmondson petitioned the 

District Court for an order directing arbitration. That petition was denied without 

prejudice so that the District Court could consider Lilliston’s motion to dismiss. A 

premature determination on the motion to dismiss in favor of Lilliston, however, would 

effectively preclude the District Court from hearing the parties to consider the alleged 

arbitration agreement, offending the clear mandate of the FAA. See id.; see also Sharif, 

376 F.3d at 726. The District Court must first determine the scope of arbitrable issues, if 

any, and then determine in the first instance what portion of the claims and defenses are 

properly before the arbitrator. Id.; see also Medtronic AVE, Inc. v. Adv. Cardiovascular

Sys., Inc., 247 F.3d 44, 54-55 (3d Cir. 2001).

Although we are mindful of the District Court’s authority to manage its own 

docket, that authority is, in this instance, secondary to the clear Congressional intent 
8

behind the FAA “to move the parties to an arbitrable dispute out of court and into 

arbitration as quickly and easily as possible.” Moses H. Cone Mem. Hosp. v. Mercury 

Constr. Corp., 460 U.S. 1, 22 (1982). The District Court thus erred in refusing to 

consider the merits of the motion to compel on the basis that it was premature pending 

the resolution of Lilliston’s motion to dismiss and stay. See Sharif , 376 F.3d at 726; see 

also HOVENSA, LLC., 369 F.3d at 269. 

IV.

After this matter was taken on appeal, Edmondson filed a motion for recusal. 

Although the disposition of that motion is not currently on appeal, we note that the 

District Court’s corresponding order to that motion raises, among other things, the 

question of subject matter jurisdiction. The District Court is not precluded from making

a threshold determination of subject matter jurisdiction prior to proceeding with an 

analysis of the motion to compel. To the contrary, a determination as to subject matter 

jurisdiction is a necessary component of that analysis. This is because the FAA does not 

independently confer federal subject matter jurisdiction. See 9 U.S.C. § 4 (instructing 

that a petition to compel arbitration under the FAA may only be brought in a District 

Court “which, save for such agreement, would have jurisdiction under Title 28, in a civil 

action or in admiralty of the subject matter of a suit arising out of the controversy 

between the parties . . .”); see also Moses H. Cone Mem’l Hosp., 460 U.S. at 26 n.32.5 

 

5

 Diversity jurisdiction appears to be precluded here because the parties are both citizens 

of New Jersey. The District Court should thus look through to the complaint to 

determine if the complaint sufficiently alleges facts upon which subject matter 
9

We leave it to the District Court to consider in the first instance its subject matter 

jurisdiction. If the District Court determines it has subject matter jurisdiction, it should 

then proceed with a determination on the motion to compel arbitration.

V.

In light of the foregoing, we will vacate the District Court’s order dismissing 

Edmondson’s motion to compel arbitration and remand this case to the District Court for 

further proceedings consistent with this opinion.

 

jurisdiction may be based. See Vaden v. Discover Bank et al., 556 U.S. 49, 50-51 (2009). 

That analysis is, of course, different from that conducted when considering the merits of 

the claim. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998) 

(“Dismissal for lack of subject-matter jurisdiction because of the inadequacy of the 

federal claim is proper only when the claim is ‘so insubstantial, implausible, foreclosed 

by prior decisions of this Court, or otherwise completely devoid of merit as not to involve 

a federal controversy.’”) (quoting Oneida Indian Nation of N .Y. v. County of Oneida, 

414 U.S. 661, 666 (1974)). Although Edmondson’s complaint contains two federal 

claims under the Odometer Act and the Magnuson-Moss Act, the District Court has 

raised concern as to the sufficiency of those pleadings for the purpose of establishing 

federal subject matter jurisdiction.