Opinion ID: 1780764
Heading Depth: 2
Heading Rank: 1

Heading: The Lewises v. Conseco

Text: The Lewises make three arguments against arbitration with respect to Conseco. First, they argue that Conseco failed to demonstrate that the transaction substantially affected interstate commerce. Second, they argue that because there was allegedly no substantial performance of the installment agreement on the part of WLS, Inc., the trial court erred in specifically enforcing the arbitration provision. Third, the Lewises assert that the breach-of-express-warranty and Magnuson-Moss claims asserted against Conseco through the FTC rule provision are not subject to arbitration under Ex parte Thicklin, supra .
In support of its motion to compel arbitration, Conseco submitted the affidavit of Robert D. Eller, regional manager of Conseco Finance Corporation-Alabama, which is described in the affidavit as an affiliate of Conseco Finance Corporation. Eller's affidavit states, in pertinent part: 2. The Complaint identifies Conseco Finance Corp.-Alabama, whose correct name is Conseco Finance Corp. (`Conseco'), as one of the Defendants in this action. Conseco was at the time of the transaction made the basis of this suit, a corporation organized and existing under the laws of the State of Delaware and maintaining its principal place of business in St. Paul, Minnesota. Conseco, through its affiliates, is engaged, among other things, in consumer finance operations in the fifty United States, including the State of Alabama. 3. The customer file in this matter reflects that the Plaintiffs entered into an agreement with WLS, Inc. to purchase a mobile home. In connection with the financing of this purchase, the Plaintiffs executed a Retail Installment Contract, a copy of which is attached hereto as Exhibit A. The Retail Installment Contract contains an arbitration provision. 4. The financing transaction with respect to the purchase of the mobile home by the plaintiffs was handled by the Montgomery office of Conseco. The installment contract signed by the Plaintiffs indicates that the assignee was Green Tree Financial Corp. with its address at 324 Interstate Park Drive, Montgomery, Alabama. Checks drawn by Conseco in connection with the financial transaction, such as the payment of the mobile home dealer, were drawn on a bank account in East Grand Forks, Minnesota. The mobile home which is the subject of this action was financed and the payments made by the Plaintiffs on the purchase were to be, and have been, mailed to an address in Louisville, Kentucky. The Lewises contend that this affidavit is insufficient to demonstrate that the transaction had a substantial effect on interstate commerce as required under Sisters of the Visitation; we disagree. The undisputed facts in this case are almost identical to those in Green Tree Financial Corp. v. Channell, 825 So.2d 90 (Ala.2002). In that case, we reversed a trial court's denial of the motion to compel arbitration filed by Green Tree (now known as Conseco): The record before us indicates that Green Tree is a Delaware corporation whose principal place of business is in Minnesota and that the installment agreement was assigned to Green Tree in exchange for funds it provided; those funds were drawn on an out-of-state financial institution. Additionally, the Channells mailed their installment payments to Green Tree at an address in Louisville, Kentucky. These facts are similar to those presented in Green Tree Financial Corp. v. Lewis, 813 So.2d 820 (Ala.2001), and American General Finance, Inc. v. Branch, 793 So.2d 738 (Ala.2000). In both Lewis and Branch we concluded that the subject transactions had had a substantial effect on interstate commerce based upon evidence that the lender in each case was a foreign corporation with headquarters outside of Alabama, that the loan proceeds had moved from outside Alabama to Alabama, and that payments made by the customers to the lender were sent out of the state of Alabama. Lewis, 813 So.2d at 824; Branch, 793 So.2d at 747. Based on the facts presented here and relying on our holdings in Lewis and Branch, we conclude that Green Tree has met its burden of proving that the transaction made the subject of this litigation substantially affected interstate commerce and has thus triggered application of the Federal Arbitration Act (`FAA'). 825 So.2d at 94-95. Although the Lewises make several arguments in an attempt to attack Eller's affidavit as vague, we are not persuaded. The Lewises do not point to any evidence that contradicts Eller's statements regarding Conseco's corporate status and structure or its statement that payment to WLS, Inc., was made from a bank in Minnesota, and the Lewises do not dispute that they submitted several payments to an address in Kentucky. Accordingly, we see no legitimate basis to reach a result in this case different from the one reached in Channell with regard to the interstate-commerce question. [2]
The Lewises argue that the trial court erred in specifically enforcing the arbitration agreement because, it says, WLS, Inc., breached the installment agreement. The Lewises rely on Ala.Code 1975, § 8-1-40, which provides: Specific performance cannot be enforced against a party to a contract in any of the following cases: (1) If he has not received an adequate consideration for the contract; (2) If it is not, as to him, just and reasonable; (3) If his assent was obtained by the misrepresentation, concealment, circumvention or unfair practices of any party to whom performance would become due under the contract or by any promise of such party which has not been substantially fulfilled; or (4) If his assent was given under the influence of mistake, misapprehension, or surprise; except, that where the contract provides for compensation in case of mistake, a mistake within the scope of such provision may be compensated for and the contract specifically enforced in other respects if proper to be so enforced. Specifically, the Lewises contend that § 8-1-40 applies and precludes the enforcement of the arbitration provision because WLS, Conseco's assignor, did not substantially perform its obligations [under the installment agreement] to Lewis, and Lewis' consent was obtained by `misrepresentation, concealment, circumvention or unfair practices.' Lewises' brief at 23. However, if the Lewises' challenge is in reality a challenge to the enforceability of the installment agreement as a whole, then that challenge is properly resolved by an arbitratornot by the court. Green Tree Fin. Corp. v. Wampler, 749 So.2d 409, 413 (Ala.1999) (holding that an attack on the enforceability of a security agreement must be arbitrated). Wampler provides the general rule for determining the proper forum for the resolution of claims when an arbitration provision is involved: When deciding the threshold issue whether the court or the arbitrator decides a challenge to the enforcement of an arbitration clause entered into by the parties, the court first must satisfy itself that the terms of the arbitration clause are broad enough to permit the arbitrator to decide issues of arbitrability. However, a determination that, by the terms of the arbitration clause, the arbitrator is to decide issues of arbitrability does not end the inquiry. Where the attack is addressed to the arbitration clause itself, as opposed to the contract as a whole, the court, and not the arbitrator, resolves the issue. But, when the challenge goes to the whole contract, a contract that happens to contain an arbitration clause, the issue of enforceability of the contract, including the arbitration clause, is for the arbitrator to decide. 749 So.2d at 413. [3] When engaging this analysis, we `look beyond the ad hoc arguments of counsel in order to determine whether [the plaintiff's] claim actually bears upon the entire agreement' or just the arbitration clause. NationsBanc Invs., Inc. v. Paramore, 736 So.2d 589, 591 (Ala.1999) (quoting Anniston Lincoln Mercury Dodge v. Conner, 720 So.2d 898, 901-02 (Ala.1998)). In this case, it is apparent that the Lewises challenge the enforceability of the installment agreement as a whole, not merely the arbitration provision. If § 8-1-40 were truly applicable, it would preclude Conseco from seeking the specific enforcement of any provision of the agreement, not merely the arbitration provision. The Lewises creatively, but erroneously, attempt to construe their challenge to the enforceability of the contract as a challenge to the arbitration provision alone, arguing that Conseco currently seeks only the specific enforcement of the arbitration provision and that the remaining contractual provisions would be unaffected because they have not been asserted. In this respect, the Lewises simply mischaracterize the relevant analysis, which is properly directed at the extent and possible effect of the Lewises' challenge on the whole contract rather than on the particular provisionhere the arbitration provision sought to be enforced. Based upon the above, we hold that the Lewises' arguments concerning specific performance raise issues that are properly resolved by an arbitrator.
The Lewises argue that their claim under the Magnuson-Moss Warranty Act and their breach-of-express-warranty claim against Conseco are not subject to arbitration under our decision in Ex parte Thicklin. However, assuming that those claims could properly be brought against Conseco, those claims are derivative; that is, they are asserted through the language from the installment agreement quoted above, which, pursuant to an FTC rule (16 C.F.R. § 433.2), must appear in such an agreement. Therefore, the claims purportedly [4] would be viable against Conseco only to the extent that they are viable against the WLS defendants. Because, as discussed below, we hold that the Lewises have failed to demonstrate that the WLS defendants gave them a written warranty, we hold that Ex parte Thicklin in which we held that, where a written warranty had been given, Magnuson-Moss and express-warranty claims could not be arbitrated unless the arbitration provision at issue was included in that written warrantyis inapplicable. See Part B.2. below. Therefore, because Ex parte Thicklin is inapplicable to the claims against the WLS defendants, it is inapplicable to the Lewises' claims against Conseco.