Title: Hurst v. Tony Moore Imports, Inc.
Citation: 699 So. 2d 1249
Docket Number: 1960306
State: Alabama
Issuer: Alabama Supreme Court
Date: July 18, 1997

699 So. 2d 1249 (1997)
John R. HURST
v.
TONY MOORE IMPORTS, INC., et al.
1960306.

Supreme Court of Alabama.
July 18, 1997.
*1250 Johnny V. Berry, Cullman, for appellant.
No brief filed for appellees.
HOUSTON, Justice.
The plaintiff, John R. Hurst, purchased a used GMC pickup truck from the defendant, Tony Moore Imports, Inc. ("the dealership"). Hurst signed a "Buyer's Order" that contained the following "Dispute Resolution Agreement":
After becoming dissatisfied with the vehicle, Hurst sued the dealership and several of its employees, seeking damages based on allegations of fraud and breach of implied warranties. Hurst demanded a jury trial.
The dealership moved to compel Hurst to arbitrate his claims, in accordance with the arbitration agreement he had signed, and to stay any further judicial proceedings pending the completion of the arbitration proceedings. In the same motion, the dealership moved, in the alternative, to dismiss Hurst's action. In support of that motion, Tony Moore, the dealership's president and sole shareholder, submitted the "Buyer's Order" and an affidavit that stated, in pertinent part, as follows:
The trial court granted the dealership's motion, stating:
Hurst filed a motion to alter, amend, or vacate the order, supported by, among other things, his affidavit, which stated, in pertinent part, as follows:
The trial court denied Hurst's motion, again relying on Allied-Bruce Terminix, supra. Hurst appealed. We affirm.
Under Alabama law, the specific enforcement of a predispute arbitration agreement violates both our statutory law and our public policy, unless federal law preempts them. Lopez v. Home Buyers Warranty Corp., 670 So. 2d 35 (Ala.1995). The Federal Arbitration Act preempts contrary state law and, thus, renders enforceable a predispute arbitration agreement contained in a contract that "involves" interstate commerce. Jim Burke Automotive, Inc. v. Beavers, 674 So. 2d 1260 (Ala.1995), citing Allied-Bruce Terminix, supra. In Allied-Bruce Terminix, the United States Supreme Court rejected the "contemplation of the parties" test that this Court had adopted in Ex parte Warren, 548 So. 2d 157 (Ala.1989), cert. denied, Jim Skinner Ford, Inc. v. Warren, 493 U.S. 998, 110 S. Ct. 554, 107 L. Ed. 2d 550 (1989).[2] The Supreme Court stated:
513 U.S.  at 272-82, 115 S. Ct.  at 839-43.
The evidence presented by affidavits in the present case indicates that the dealership is an Alabama corporation, with its sole place of business in Alabama; that Hurst is an Alabama resident and that he purchased a used motor vehicle in Alabama for his own personal use; that Hurst financed the purchase through First Alabama Bank; that Redstone Federal Credit Union held a lien on the vehicle Hurst "traded in" to the dealership; and that the indebtedness owed on that trade-in vehicle was satisfied from the proceeds of the transaction. This Court had *1253 held before Allied-Bruce Terminix that the sale in Alabama of a used motor vehicle manufactured outside Alabama to an Alabama resident who was buying it as a consumer and not for commercial purposes, was not a contract "involving commerce," as that term is used in the FAA, if the seller had its only place of business in Alabama, the vehicle was delivered to the buyer in Alabama, and all obligations arising out of the contract were to be performed in Alabama. See Ex parte Williams, 555 So. 2d 146 (Ala.1989), which relied on a similar case, Ex parte Warren, supra. In Ex parte Warren, this Court stated:
"Ex parte Costa &amp; Head (Atrium), Ltd., 486 So. 2d 1272, 1275 (Ala.1986).
"287 F.2d  at 387 (Lumbard, Chief Judge, concurring) (emphasis original). See, also, Burke County Public Schools Board of Education v. Shaver, 303 N.C. 408, 279 S.E.2d 816, 822 (1981) (applying the Metro Industrial test).
548 So. 2d  at 159-60.
Ex parte Williams and Ex parte Warren were decided before the United States Supreme Court decided Allied-Bruce Terminix and while this Court was applying the "contemplation of the parties" test. However, in Allied-Bruce Terminix, the Supreme Court made it very clear that the words "involving commerce," as used in § 2 of the FAA, are much broader than the often-found words of art "in commerce" and that they cover activities within the "flow" of interstate commerce as well as activities that merely have an effect on interstate commerce. Citing United *1254 States v. American Building Maintenance Industries, 422 U.S. 271, 276, 95 S. Ct. 2150, 2154, 45 L. Ed. 2d 177 (1975), quoting Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 195, 95 S. Ct. 392, 398, 42 L. Ed. 2d 378 (1974), the Court in Allied-Bruce Terminix defined "flow" to include "the generation of goods and services for interstate markets and their transport and distribution to the consumer."[3] 513 U.S.  at 268, 115 S. Ct.  at 839. The Court in American Building Maintenance had held:
422 U.S.  at 283-86, 95 S. Ct.  at 2158-59.
Based on Allied-Bruce Terminix and American Building Maintenance,[4] we reaffirm *1255 Ex parte Williams and Ex parte Warren to the extent they stand for the proposition that, standing alone, the sale in Alabama of a used motor vehicle to an Alabama resident, where the seller has its only place of business in Alabama, the vehicle is delivered to the buyer in Alabama, and all obligations arising out of the sales contract are to be performed in Alabama, is not a transaction within the "flow" of interstate commerce.
However, the question remains as to whether Hurst's purchase of the vehicle had some effect on interstate commerce. Because the dealership did not file a brief in this Court, we could assume from the content of Moore's affidavit that the trial court may have held (and that the dealership's argument might be) that the transaction in question affected the flow of interstate commerce, at least in part, because the two financial institutions involved (First Alabama Bank and Redstone Federal Credit Union) may have shareholders or members who reside outside Alabama. Assuming, without deciding, that Moore's testimony (that he was "informed" and "believed" that First Alabama Bank and Redstone Federal Credit Union had out-of-state shareholders or members) was admissible for purposes of the dealership's motion, that testimony in no way indicates that Hurst's purchase of the vehicle from the dealership affected the flow of interstate commerce. Stated differently, a purely intrastate transaction, such as the one here, must affect in some way "the generation of goods and services for interstate markets and their transport and distribution to the consumer" (Allied-Bruce Terminix, supra, 513 U.S.  at 273, 115 S.Ct. at 839), in order for it to "involve" interstate commerce within the meaning of § 2 of the FAA. However, the obvious weakness of the argument that the involvement of First Alabama Bank and Redstone Federal Credit Union brings this case within § 2 of the FAA causes us to believe that this was not the basis upon which the trial court ruled.
In Jim Burke Automotive, Inc. v. Beavers, supra, a post-Allied-Bruce Terminix case, a majority of this Court affirmed the trial court's denial of a motion to compel arbitration of a dispute arising out of the sale of a used motor vehicle. The majority wrote:
674 So. 2d  at 1261. Based on our review of the record in the present case, we may logically surmise that the trial court understood the issue before it to be whether an agreement for the intrastate sale of a used motor vehicle has an effect on interstate commerce. Thus, the issue the majority would not reach in Jim Burke Automotive, Inc. v. Beavers is ripe for review in the instant case.
The United States Constitution delegates to Congress the power "[t]o regulate commerce with foreign Nations, and among the several states, and with Indian Tribes." U.S. Const., Art. I, § 8, cl. 3. From the outset of constitutional jurisprudence, many questions have been raised concerning the extent to which Congress may regulate commerce. *1256 Chief Justice John Marshall first addressed this provision of the Constitution in the seminal case of Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 6 L. Ed. 23 (1824). In that case, the Chief Justice, noting that the Constitution allowed Congress to "regulate commerce... among the several states," gave the first interpretation of this constitutional delegation of power, stating:
22 U.S. (9 Wheat.) at 194-95 (emphasis added). Thus, the very first interpretation of Congress's power to regulate interstate commerce held that this power extends to the regulation of commerce "which concerns more states than one."
The contract in this case involved the sale of a used motor vehicle. Congress, exercising its power to regulate interstate commerce, has specifically authorized federal agencies to regulate the sale of used motor vehicles. See Code of Federal Regulations, Title 16, Commercial Practices, Chapter 1, Federal Trade Commission, Subchapter D, Trade Regulation Rules, Part 455, Used Motor Vehicle Regulation Rule. 16 C.F.R. § 455. Therefore, Congress has concluded that the sale of a used motor vehicle involves interstate commerce.
The definition of "interstate commerce" has been greatly extended beyond the original interpretation given by Chief Justice Marshall. Before 1937, the Supreme Court decisions interpreting the Commerce Clause dealt almost entirely with the Commerce Clause as a restriction on state legislation and interpreted the reach of the Commerce Clause in a narrower manner than more recent decisions. See, e.g., A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed. 1570 (1935); United States v. E.C. Knight Co., 156 U.S. 1, 15 S. Ct. 249, 39 L. Ed. 325 (1895); Kidd v. Pearson, 128 U.S. 1, 9 S. Ct. 6, 32 L. Ed. 346 (1888); Veazie v. Moor, 55 U.S. 568, 14 How. 568, 14 L. Ed. 545 (1853). In 1937, the Court expanded the interpretation of interstate commerce in NLRB v. Jones &amp; Laughlin Steel Corp., 301 U.S. 1, 57 S. Ct. 615, 81 L. Ed. 893 (1937), and abandoned the previous distinction that had been made between direct and indirect effects on interstate commerce, so as to expand Congress's regulatory power. See also United States v. Wrightwood Dairy Co., 315 U.S. 110, 62 S. Ct. 523, 86 L. Ed. 726 (1942); United States v. Darby, 312 U.S. 100, 61 S. Ct. 451, 85 L. Ed. 609 (1941). The expansive interpretation of interstate commerce reached its zenith in Wickard v. Filburn, 317 U.S. 111, 63 S. Ct. 82, 87 L. Ed. 122 (1942), wherein the Supreme Court, stating that growing and harvesting wheat in one's own backyard would affect interstate commerce, gave Congress the power to regulate a minute local activity. In Wickard v. Filburn the Court held that the powers of Congress under the Commerce Clause extended to the regulation of the activities of a farmer, Filburn, who had violated the Agricultural Adjustment Act of 1938 by harvesting more wheat than was allowed under the Act. Although Filburn had grown this wheat primarily for his family's own consumption and had harvested only 12 more acres than was allowed by the Act, the Court held that this activity had a sufficient effect on interstate commerce to allow the United States to prosecute him for violating the Act. The Court, in determining that Filburn's activities involved interstate commerce, stated:
Wickard, 317 U.S.  at 128, 63 S. Ct.  at 91.
Since this zenith, the seemingly infinite reach of Congress' regulatory authority under the Commerce Clause has shortened somewhat. In United States v. Lopez, 514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), the Supreme Court noted that the possession of a firearm near a high school did not involve a commercial transaction and it held that such possession did not affect interstate commerce. The Supreme Court recognized the key dilemma posed by our system of federalismto hold that the possession of a firearm near a school affected interstate commerce would divest states of the right to regulate public and private schools and would vest that power in Congress.[5] 514 U.S.  at 563-67, 115 S. Ct.  at 1632-33. Unwilling to conclude that the Commerce Clause was intended to subject all state authority to federal intervention, the Supreme Court recognized that the concept of interstate commerce does have limits, at least in noncommercial situations. 514 U.S.  at 567, 115 S. Ct.  at 1634. However, we do not view Lopez as signaling a retreat by the Supreme Court from its expansive interpretation of "interstate commerce" in cases clearly involving commercial transactions.[6] The Court's opinions discussing the reach of the Commerce Clause seem to hold that almost any commercial transaction undertaken may "affect" interstate commerce, no matter how slightly, and therefore can be regulated by Congress. See, e.g., Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528, 105 S. Ct. 1005, 83 L. Ed. 2d 1016 (1985); Hodel v. Virginia Surface Mining &amp; Reclamation Ass'n, Inc., 452 U.S. 264, 101 S. Ct. 2352, 69 L. Ed. 2d 1 (1981); Perez v. United States, 402 U.S. 146, 91 S. Ct. 1357, 28 L. Ed. 2d 686 (1971); Katzenbach v. McClung, 379 U.S. 294, 85 S. Ct. 377, 13 L. Ed. 2d 290 (1964); Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 85 S. Ct. 348, 13 L. Ed. 2d 258 (1964). These cases stand for the proposition that if any effect on interstate commerce can be found in a commercial transaction, then the transaction is considered to be one involving interstate commerce.
One of the most striking examples of the Supreme Court's expansive interpretation of Congress's regulatory power under the Commerce Clause in a commercial setting can be found in Russell v. United States, 471 U.S. 858, 105 S. Ct. 2455, 85 L. Ed. 2d 829 (1985), which was cited in Allied-Bruce Terminix, 513 U.S.  at 272, 115 S. Ct.  at 839, for the proposition that the phrase "affecting commerce" normally "signals a congressional intent to exercise its Commerce Clause powers to the full." In Russell, the defendant was convicted of unlawfully attempting to destroy by fire a two-unit apartment building in Chicago, Illinois, that the defendant owned and rented. The defendant was prosecuted under 18 U.S.C. § 844(i), which provided:
See 471 U.S.  at 859, 105 S. Ct.  at 2456.
In affirming the conviction, the Court stated:
471 U.S.  at 860-62, 105 S. Ct.  at 2456-57. (Emphasis added.)
It is apparent from an analysis of the Supreme Court's opinions discussing the favored status of arbitration agreements, see Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 115 S. Ct. 1212, 131 L. Ed. 2d 76 (1995); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987), and the reach of Congress's regulatory power under the Commerce Clause, that that power extends to the regulation of the intrastate sale of a used motor vehicle. Quite obviously, if the intrastate rental of an apartment building is "an element of a much broader commercial market in rental properties," and is, therefore, subject to congressional regulation under the Commerce Clause, then the intrastate sale of a used motor vehicle would constitute an "individual activity" within a broader "class of activities" subject to federal regulation. We hold, therefore, that federal law preempts state law in this case and that the arbitration agreement contained in the "Buyer's Order" is enforceable.
We note Hurst's alternative argument that the trial court erred in dismissing his action, as opposed to staying it pending the completion of the arbitration process. Section 3 of the FAA provides:
Based on an examination of § 3 and federal precedent, we adopt the following interpretation placed on § 3 by the Fifth Circuit Court of Appeals in Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir.1992):
Like the plaintiff's claims in Alford, all of Hurst's state law claims are arbitrable; therefore, the trial court did not abuse its discretion in dismissing them.
For the foregoing reasons, the trial court's order dismissing Hurst's action and compelling him to arbitrate his dispute with the dealership is affirmed.
AFFIRMED.
HOOPER, C.J., and SEE, J., concur.
MADDOX, J., concurs specially.
COOK, J., concurs in the result.
ALMON, SHORES, KENNEDY, and BUTTS, JJ., dissent.
MADDOX, Justice (concurring specially).
I concur wholeheartedly in Justice Houston's well-reasoned opinion. It is consistent with the views I expressed in a dissenting opinion in Ex parte Warren, 548 So. 2d 157, 160 (Ala.1989).
[1]  First Alabama Bank is now known as Regions Bank.
[2]  This Court has used two approaches in determining whether a contract involves interstate commerce. See Henderson v. Superior Ins. Co., 628 So. 2d 365 (Ala.1993), noting this Court's use of the "slightest nexus" test in Ex parte Costa &amp; Head (Atrium) Ltd., 486 So. 2d 1272 (Ala.1986), overruled, Ex parte Jones, 628 So. 2d 316 (Ala. 1993), and its adoption of the "contemplation of the parties" test in Ex parte Warren.
[3]  Section 1 of the FAA defines "commerce" as "commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation."
[4]  We note that in Katzenbach v. McClung, 379 U.S. 294, 85 S. Ct. 377, 13 L. Ed. 2d 290 (1964), the Court held that a Birmingham barbecue restaurant (Ollie's Barbecue) was involved in interstate commerce because, among other things, the establishment bought meat from a local supplier that had procured the meat from outside Alabama. In so holding, the Court stated:

"Nor are the cases holding that interstate commerce ends when goods come to rest in the State of destination apposite here. That line of cases has been applied with reference to state taxation or regulation but not in a field of federal regulation."
379 U.S.  at 302, 85 S. Ct.  at 383. Because American Building Maintenance involved a federal regulatory act and because it stands for the proposition that the "flow" of interstate commerce ceases once goods come to rest in the state of destination, we are hesitant to place great significance on the holding in Katzenbach, at least with respect to the issue whether Hurst's purchase of the vehicle was within the flow of interstate commerce.
[5]  To emphasize the constitutional significance of the balance of power between the federal government and the states, the Supreme Court quoted James Madison:

"[T]he powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite."
Lopez, 514 U.S.  at 551, 115 S. Ct.  at 1626 (quoting The Federalist No. 45, at 292-93) (Clinton Rossiter ed., 1961). The Supreme Court held that Congress's enumerated commerce power did not extend to the regulation of public and private schools. 514 U.S.  at 565, 115 S. Ct.  at 1633.
[6]  The Court in Lopez noted:

"To uphold the Government's contentions here, we would have to pile inference upon inference in a manner that would bid fair to convert congressional authority under the Commerce Clause to a general police power of the sort retained by the States. Admittedly, some of our prior cases have taken long steps down that road, giving great deference to congressional action.... The broad language in these opinions has suggested the possibility of additional expansion, but we decline here to proceed any further."
514 U.S.  at 567, 115 S. Ct.  at 1634. (Emphasis added.)