Court Opinion

ID: 4055417
Source: CourtListenerOpinion
Date Created: 2016-09-29 07:01:25.82797+00
Date Added: 2024-06-11T14:31:33.773076
License: Public Domain

ACCEPTED
                                                                                     01-15-00194-cv
                                                                         FIRST COURT OF APPEALS
                                                                                 HOUSTON, TEXAS
                                                                               5/18/2015 2:12:29 PM
                                                                              CHRISTOPHER PRINE
                                                                                             CLERK

                           No. 01-15-00194-CV
                    IN THE COURT OF APPEALS
                                                                   FILED IN
                 FOR THE FIRST JUDICIAL DISTRICT            1st COURT OF APPEALS
                        HOUSTON, TEXAS                          HOUSTON, TEXAS
                                                            5/18/2015 2:12:29 PM
                                                            CHRISTOPHER A. PRINE
                                                                    Clerk
         AN Luxury Imports Ltd., AN Luxury Imports GP, LLC, and
                     United States Warranty Corp.,
                                Appellants,

                                     v.

                             D. Scott Southall,
                                 Appellee.

                Appeal from the 295th Judicial District Court
                          Harris County, Texas

                        APPELLEE’S BRIEF
__________________________________________________________________

                                      Victor S. Elgohary
                                      State Bar No. 24067587
                                      6406 Arcadia Bend Ct
                                      Houston, Texas 77041-6222
                                      Phone (281) 858-0014
                                      victor@vselgohary.com

                                      Attorney for Appellee
              IDENTIFICATION OF PARTIES AND COUNSEL

      The following is a complete list of the names of all parties to the trial court’s
order and the names and addresses of all trial and appellate counsel as required
under Texas Rule of Appellate Procedure 38.1(a).

Plaintiff in the trial court (Appellee in this Court): D. Scott Southall

Defendants in the trial court (Appellants in this Court): AN Luxury Imports
Ltd d/b/a/ BMW of Dallas, AN Luxury Imports GP, LLC, and United States
Warranty Corp.

Trial and Appellate Counsel for D. Scott Southall:

Victor S. Elgohary
State Bar No. 24067587
6406 Arcadia Bend Ct
Houston, Texas 77041
(281) 858-0014

Trial and Appellate Counsel for AN Luxury Imports Ltd d/b/a BMW of
Dallas, AN Luxury Imports GP, LLC, and United States Warranty Corp.:

George A. Kurisky, Jr.
Johnson DeLuca Kurisky & Gould P.C.
1221 Lamar Street
Suite 1000
Houston, Texas 77010
(713) 652-2525
(713) 652-5130 (Telecopy)

                                           i
IDENTIFICATION OF PARTIES AND COUNSEL ..................................................... i 

ABBREVIATIONS........................................................................................................... iii 

INDEX OF AUTHORITIES ........................................................................................... iv 

STATEMENT OF THE CASE ....................................................................................... vi 

ISSUES PRESENTED FOR REVIEW .......................................................................... vi 

STATEMENT OF FACTS ............................................................................................... 1 

SUMMARY OF ARGUMENT ........................................................................................ 2 

STANDARD OF REVIEW............................................................................................... 3 

ARGUMENTS & AUTHORITIES ................................................................................. 4 

CONCLUSION .................................................................................................................. 9 

                                                               ii
                            Abbreviations

C.R.   clerk’s record filed March 12, 2014

                                   iii
                                        Index of Authorities

                                                  Cases

Brown v. Pac. Life Ins. Co.,
     462 F.3d 384 (5th Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

City of Pinehurst v. Spooner Addition Water Co.,
       432 S.W.2d 515 (Tex. 1968) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Cleveland Const., Inc. v. Levco Const., Inc.,
      359 S.W.3d 843 (Tex.App. – Houston [1st Dist.] 2012, pet. dism’d) . . . . . 3

Crown Cent. Petroleum Corp. v. Jennings,
     727 S.W.2d 739 (Tex. App. – Houston [1st Dist.] 1987, no writ) . . . . . . . . 5

Dorsett v. Cross,
     106 S.W.3d 213 (Tex. App. – Houston [1st Dist.] 2003, pet. denied) . . . . . 5

Hamden v. Ford Motor Co.,
    408 F. Supp. 2d 300 (E.D. Mich. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

In re Kellogg Brown & Root, Inc.,
       166 S.W.3d 732 (Tex. 2005) (orig. proceeding) . . . . . . . . . . . . . . . . . . . . . . 6

J.M. Davidson, Inc. v. Webster,
      128 S.W.3d 223 (Tex. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Kelley-Coppedge, Inc. v. Highlands Ins. Co.,
      980 S.W.2d 462 (Tex. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Myers v. Gulf Coast Minerals Management Corp.,
     361 S.W.2d 193 (Tex. 1962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Ogden v. Dickinson State Bank,
     662 S.W.2d 330 (Tex. 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc.,
     596 S.W.2d 517 (Tex. 1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

                                                     iv
Universal C.I.T. Credit Corp. v. Daniel,
     243 S.W.2d 154 (Tex. 1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

                                        Statutes and Regulations

15 U.S.C. §2302(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

16 C.F.R. § 710.3(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

                                                          v
                         STATEMENT OF THE CASE

             This is a consumer case. D. Scott Southall sued AN Luxury Imports,

Ltd., its general partner AN Luxury Imports GP, LLC and United States Warranty

Corp. alleging that it failed to honor the repair warranty when Southall’s Porsche

Cayman engine catastrophically failed shortly after his purchase. Southall’s claims

include breach of contract, breach of warranty, negligence, unfair settlement

practices under the Texas Insurance Code, fraud by nondisclosure, negligent

misrepresentation as well as violations of the Texas Deceptive Trade Practices Act

and Magnuson-Moss Warranty Act. Defendants moved that all claims be abated

and referred to arbitration. Based on the motions and evidence presented, the trial

court denied all Defendants’ requests to compel the case to arbitration.

                      ISSUE PRESENTED FOR REVIEW

      Whether the trial court properly denied Defendants’ motion to compel

arbitration of Southall’s claims.

                                          vi
                            STATEMENT OF FACTS

             This is a consumer case growing out of D. Scott Southall’s

(“Southall”) purchase of a Porsche Cayman from AN Luxury Imports, Ltd.

(“BMW Dallas”). (C.R. 132). As part of that purchase, Southall also acquired a

Used Vehicle Limited Mechanical Warranty (“Warranty”). (Id., C.R. 64-67). Less

than two months after Southall’s purchase, the engine failed. (C.R. 132). Southall

made a claim under the Warranty, which BMW Dallas and United States Warranty

Corp. (“US Warranty”) denied. (C.R. 133). Southall filed suit in the trial court

claiming breach of contract, breach of warranty, negligence, unfair settlement

practices under the Texas Insurance Code, fraud by nondisclosure, negligent

misrepresentation, as well as violations of the Texas Deceptive Trade Practices Act

and Magnuson-Moss Warranty Act. (C.R. 133-39).

                               PROCEDURAL HISTORY

             BMW Dallas answered the suit subject to its right to compel

arbitration. (C.R. 13-18). Later, BMW Dallas moved to compel arbitration and to

stay or dismiss the lawsuit. (C.R. 19-36). After Southall filed for a default

judgment against defendant U.S. Warranty, it e-mailed an answer to Southall,

however there is no answer on file with the district clerk. U.S. Warranty then

joined BMW Dallas in moving to compel arbitration and to stay or dismiss the

lawsuit. (C.R. 98-100). On October 27, 2014, the trial court conducted a hearing

                                          1
on the motions to compel arbitration. The trial court denied Defendants’ Motion to

Compel Arbitration. (C.R. 130). Southall then amended his petition to include

claims under the Magnuson-Moss Warranty Act. (C.R. 131). Defendants then

moved for reconsideration. (C.R. 141-55). Ten days later, Defendants filed an

appeal with this court. (C.R. 171). The trial court held a second hearing on the

Motion to Compel Arbitration on April 20, 2015. The trial court denied the motion

a second time on May 7, 2015.

                          SUMMARY OF ARGUMENT

      The trial court properly denied the motion to compel arbitration. A party

seeking to compel arbitration must establish that there is a valid arbitration

agreement. Here, the agreements give the courts sole and exclusive jurisdiction

over a dispute arising under the contract. Similarly, the Used Vehicle Limited

Mechanical Warranty contract stands alone and has no arbitration provision.

Moreover, since the Magnuson-Moss Warranty Act requires that an arbitration

provision be disclosed within a written warranty, Southall cannot be compelled to

arbitrate his warranty claims.

                                         2
                           STANDARD OF REVIEW

            An order denying a motion to compel arbitration under the FAA is

reviewed under an abuse of discretion standard. Cleveland Const., Inc. v. Levco

Const., Inc., 359 S.W.3d 843, 851 (Tex.App. – Houston [1st Dist.] 2012, pet.

dism’d). In reviewing an order denying a motion to compel arbitration under the

FAA, the reviewing court gives deference to the trial court’s factual determinations

that are supported by evidence and its legal conclusions are reviewed de novo. Id.

                                         3
                        ARGUMENTS & AUTHORITIES

       I.    The Purchase Agreement signed by the parties provides for

exclusive venue and jurisdiction by the trial court, hence Southall should not be

compelled to arbitrate his claims.

       Paragraph 17 of the Retail Purchase Agreement provides in part:

       The sole and exclusive venue for any dispute or litigation arising
       under or concerning this Agreement shall be in the courts located in
       and for the county in which Dealer is located, and the parties
       irrevocably consent to the jurisdiction of said courts. [emphasis
       added]

       (C.R. 31)

       The final paragraph of the separate Arbitration Agreement provides

in part:

       This Agreement is entered into contemporaneously with your Retail
       Installment Sale Contract . . . . In the event of a conflict between the
       terms of this Agreement and those of your Contract, then the terms
       shall be construed together to the extent possible and only those
       terms of this Agreement that are in direct conflict with those of the
       Contract shall be disregarded. If there is an irreconcilable difference
       between this Agreement and the Contract such that the two cannot be
       read together and which renders enforcement of this Agreement
       impossible or impractical, then the terms of the Contract shall
       govern.

       (C.R. 32)

       In construing a written contract, the primary concern of the court is to

ascertain the true intentions of the parties as expressed in the instrument. R & P

Enterprises v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980);

                                           4
City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.

1968). To achieve this objective, courts should examine and consider the entire

writing in an effort to harmonize and give effect to all the provisions of the

contract so that none will be rendered meaningless. Kelley-Coppedge, Inc. v.

Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998); Universal C.I.T. Credit

Corp. v. Daniel, 243 S.W.2d 154, 158 (Tex. 1951); Crown Cent. Petroleum Corp.

v. Jennings, 727 S.W.2d 739, 741 (Tex. App. – Houston [1st Dist.] 1987, no writ).

No single provision taken alone will be given controlling effect; rather, all the

provisions must be considered with reference to the whole instrument. Myers v.

Gulf Coast Minerals Management Corp., 361 S.W.2d 193, 196 (Tex. 1962);

Crown Cent. Petroleum Corp. v. Jennings, 727 S.W.2d at 741. In harmonizing

provisions, terms stated earlier in an agreement must be favored over subsequent

terms. Ogden v. Dickinson State Bank, 662 S.W.2d 330 (Tex. 1983); Dorsett v.

Cross, 106 S.W.3d 213, 220 (Tex. App. – Houston [1st Dist.] 2003, pet. denied).

      Here, it is clear from the language in paragraph 17 that the parties to the

Retail Purchase Agreement intended to give the courts sole and exclusive

jurisdiction over a dispute. Any other interpretation places that provision in direct

conflict with the Arbitration Agreement. When there is a conflict between the two

contracts, the Arbitration Agreement specifically provides that the Retail Purchase

Agreement language prevails. Hence, the jurisdiction of the courts given in the

                                           5
Retail Purchase Agreement prevails over the provision to arbitrate in the

Arbitration Agreement.

      For these reasons, Southall should not be compelled to arbitrate his claims

under the Retail Purchase Agreement.

      II.   The Warranty agreement between Southall and Defendants contains

no arbitration provision; hence Southall should not be compelled to arbitrate his

warranty claim.

      A party seeking to compel arbitration must establish that there is a valid

arbitration agreement between the parties. In re Kellogg Brown & Root, Inc., 166
S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); J.M. Davidson, Inc. v. Webster,

128 S.W.3d 223, 227 (Tex. 2003). Ordinary principles of contract law determine

whether there is a valid agreement to arbitrate. In re Kellogg Brown & Root, Inc.,
166 S.W.3d at 738. Generally, only signatories to an arbitration agreement are

bound by its terms. Brown v. Pac. Life Ins. Co., 462 F.3d 384, 398 (5th Cir. 2006).

      Here the terms of the Warranty agreement are outlined in a two page

document. (C.R. 64-65). One of the acknowledgements provides:

            Purchaser acknowledges and agrees that these terms and conditions
            are a complete statement of coverage and rights under this Limited
            Mechanical Warranty and that Purchaser is not relying on any
            writings other than this Limited Mechanical Warranty or any
            representations or promises other than those made in this Limited
            Mechanical Warranty.

                                          6
             (C.R. 64)

Nowhere in the Warranty agreement is there an arbitration provision, hence,

Southall should not be compelled to arbitrate his warranty claims against either

BMW Dallas or US Warranty Corp.

      Even if the Warranty agreement can somehow be read together with the

Arbitration Agreement, Defendants should not be permitted to compel arbitration

of Southall’s warranty claims because the Warranty agreement itself does not

comply with the Magnuson-Moss Warranty Act.

      The Magnuson-Moss Warranty Act states in part:

             In order to improve the adequacy of information available
             to consumers, prevent deception, and improve competition
             in the marketing of consumer products, any warrantor
             warranting a consumer product to a consumer by means of
             a written warranty shall, to the extent required by rules of
             the Commission, fully and conspicuously disclose in simple
             and readily understood language the terms and conditions
             of such warranty.

             15 U.S.C. §2302(a)

      The Federal Trade Commission rules require that certain terms be clearly

and conspicuously disclosed “in a single document in simple and readily

understood language.” 16 C.F.R. § 710.3(a). The Eleventh Circuit in Cunningham

found that the FTC's “comprehensive disclosure requirements . . . are an integral, if

not the central, feature of the Act.” Cunningham v. Fleetwood Homes of Ga., Inc.,

                                          7
253 F.3d 611, 621 (11th Cir. 2001); see also Hamden v. Ford Motor Co., 408 F.

Supp. 2d 300 (E.D. Mich. 2004). The Cunningham court held that a warrantor

may not force a consumer into arbitration when the arbitration requirement is not

disclosed in the warranty itself. Cunningham v. Fleetwood Homes of Ga., Inc., 253
F.3d at 623. This single document requirement is significant, because it means an

arbitration clause cannot be included in another document. Instead, it must be

disclosed in the actual written warranty. That is because compelling arbitration

when such a provision is not referenced in the warranty itself presents an inherent

conflict with the Act’s purpose of providing clear and concise warranties to

consumers. Id. at 621.

      Here, the Used Vehicle Limited Mechanical Warranty agreement contains

no arbitration provision as required under the Magnuson-Moss Warranty Act. (CR

64-65). Therefore, since the Defendants have not complied with the Magnuson-

Moss Warranty Act with respect to the arbitration disclosure requirement in the

Warranty agreement, this Court should affirm the trial court’s denial of

Defendants’ motion to compel arbitration.

                                          8
                                 CONCLUSION

             This Court should affirm the trial court’s orders denying Defendants’

arbitration demands and tax costs of appeal against Defendants, jointly and

severally.

                                      Respectfully submitted,

                                      ______________________________

                                      VICTOR S. ELGOHARY
                                      State Bar No. 24067587
                                      6406 Arcadia Bend Ct
                                      Houston, Texas 77041-6222
                                      Phone (281) 858-0014
                                      victor@vselgohary.com
                                      Attorneys for Appellee, D. Scott Southall

                                         9
                          CERTIFICATE OF SERVICE

       I certify that a copy of Appellee’s Brief was served on AN Luxury Imports

Ltd., AN Luxury Imports GP, LLC, and United States Warranty Corp,

Appellants, through its counsel of record, George A. Kurisky, Jr., Johnson

DeLuca Kurisky & Gould P.C., 1221 Lamar Street, Suite 1000, Houston, Texas

77010 on 18 May 2015.

                                                __________________________
                                                VICTOR ELGOHARY

                       CERTIFICATE OF COMPLIANCE

       Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), the undersigned

counsel, in reliance upon the word count of the computer program used to

prepare this document, certifies that this brief contains 1,407 words, excluding

the words that need not be counted under Texas Rule of Appellate Procedure

9.4(i)(1).

                                                __________________________
                                                VICTOR ELGOHARY

                                        10