Court Opinion

ID: 46822
Source: CourtListenerOpinion
Date Created: 2010-04-25 23:06:32+00
Date Added: 2024-06-11T17:17:47.950735
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
                IN THE UNITED STATES COURT OF APPEALS
                                                             November 29, 2006
                         FOR THE FIFTH CIRCUIT
                                                          Charles R. Fulbruge III
                                                                  Clerk

                             No. 05-60391

FORD MOTOR COMPANY

                 Plaintiff - Appellant

     v.

WALLACE ABLES, ET AL

                 Defendants - Appellees

            Appeal from the United States District Court
          for the Southern District of Mississippi, Jackson
                          No. 3:04-CV-00152

Before JOLLY, PRADO, and OWEN, Circuit Judges.

PER CURIAM:*

     The issue before us is whether Defendants-Appellees’

(“Defendants”) claims against Plaintiff-Appellant Ford Motor

Company (“Ford”) in Mississippi state court are subject to

binding arbitration under the Federal Arbitration Act (“FAA”), 9

U.S.C. §§ 1-16 (2000).    The district court denied Ford’s motion

to compel arbitration, concluding that Defendants’ fraud claims

     *
        Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.

                                  -1-
against Ford fall outside the scope of the arbitration clauses in

the retail installment contracts and that Ford, as a non-

signatory to these contracts, may not enforce arbitration.      For

the following reasons, we REVERSE and REMAND.

                 I.   FACTUAL AND PROCEDURAL BACKGROUND

     This dispute arises from automobile purchases by Defendants

at Greater Canton Ford Mercury, Inc. (“GCFM”), a dealership

formerly located in Canton, Mississippi.     In purchasing a vehicle

from GCFM, each Defendant entered into a contract entitled

“Mississippi Simple Interest Vehicle Retail Instalment Contract.”

The contract described the automobile purchaser as the “Buyer.”

The first line of text in the contract stated:

     You, the Buyer . . . may buy the vehicle described below
     for cash or on credit. The cash price is shown below as
     “Cash Price.” The credit price is shown below as “Total
     Sale Price.” By signing this contract, you choose to buy
     the vehicle on credit under the agreements on the front
     and back of this contract.

The contract identified the vehicle at issue, and then set out

the specifics of the financing agreement, including, inter alia,

the interest rate, the number of payments, the amount of each

payment, when payments are due, and the terms of prepayments and

late payments.    The contract also included “Additional

Agreements” on payments, the creditor’s security interest in the

vehicle, warranties, insurance, late charges, default, and

consumer reports.

     The contract required the buyer to initial under a clause

                                   -2-
stating, “YOU ACKNOWLEDGE THAT YOU HAVE READ AND AGREE TO BE

BOUND BY THE ARBITRATION PROVISIONS ON THE REVERSE SIDE OF THIS

CONTRACT.”   The arbitration provisions on the reverse side of the

contract stated:

     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, 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.

Each Defendant initialed the arbitration provision and signed the

retail installment contract as a “Buyer.”     An agent of GCFM

signed the contract as the “Seller.”

     In August 2003, Defendants (along with other buyers who are

not parties to the instant appeal) filed suit against Ford, GCFM,

and others in Mississippi state court.1    Defendants alleged that

Ford and the other state court defendants conspired to defraud

them by inducing them to purchase “certified, pre-owned” vehicles

that were not properly certified.     The state court complaint

     1
        In total, forty-four buyers commenced suit against Ford,
GCFM, and others in state court. Twenty-one of the buyers signed
arbitration agreements as part of their retail installment
contracts and are Defendants in the instant appeal.

                                -3-
included claims for fraudulent inducement, fraud, civil

conspiracy, breach of implied covenant of good faith and fair

dealing, negligent training and supervision, negligent infliction

of emotional distress, negligence and gross negligence, and bad

faith.

     In February 2004, Ford initiated the present action in

federal district court to compel arbitration of Defendants’

claims under the FAA.   Ford argued that Defendants’ claims fell

within the scope of the arbitration provision because the clause

required arbitration of any claim “related to” the contract

effecting the purchase.   Even though it was not a signatory to

the retail installment contract, Ford maintained that it could

compel arbitration because Defendants had raised allegations of

substantially interdependent and concerted misconduct by Ford and

GCFM, a signatory to the contract.

     On March 31, 2005, the district court entered an order

denying Ford’s motion to compel arbitration.   The district court

concluded that “[t]he individual defendants’ fraud claims against

Ford seemingly fall outside of the arbitration agreement.”    It

further stated that it was “not persuaded” that Ford had met the

standard to enforce arbitration as a non-signatory of the retail

installment contract.   On April 22, 2005, Ford filed this appeal.

                          II.   DISCUSSION

     On appeal, Ford challenges both of the district court’s

                                 -4-
reasons for denying its motion to compel arbitration.     First,

Ford argues that the district court erred in concluding that

Defendants’ claims “seemingly” fall outside the scope of the

arbitration clause because the clause is broad enough to

encompass any claim relating to the purchase of the vehicle.       In

the alternative, Ford maintains that questions about whether

claims are arbitrable should be decided by the arbitrator in the

first instance and not the court.      Second, Ford contends that the

district court incorrectly concluded that Ford could not maintain

this action because it was a non-signatory to the retail

installment contracts signed by Defendants.     Ford claims that it

meets the standard set forth in Grigson v. Creative Artists

Agency, LLC, 210 F.3d 524 (5th Cir. 2000), for compelling

arbitration as a non-signatory to an arbitration agreement.

     We will address each argument in turn.     This court reviews a

district court’s order denying a motion to compel arbitration de

novo.    Webb v. Investacorp, Inc., 89 F.3d 252, 257 (5th Cir.

1996).

A.   Scope of the Arbitration Provision

     “Arbitration is a matter of contract between the parties,

and a court cannot compel a party to arbitrate unless the court

determines the parties agreed to arbitrate the dispute in

question.”    Pennzoil Exploration & Prod. Co. v. Ramco Energy

Ltd., 139 F.3d 1061, 1064 (5th Cir. 1998).     In adjudicating a

motion to compel arbitration under the FAA, this court conducts a

                                 -5-
two-step inquiry.   Webb, 89 F.3d at 257-58.   The first question

is whether the parties agreed to arbitrate the dispute in

question.   Id. at 258.   This step involves two considerations:

“‘(1) whether there is a valid agreement to arbitrate between the

parties; and (2) whether the dispute in question falls within the

scope of that arbitration agreement.’”    Pers. Sec. & Safety Sys.

v. Motorola Inc., 297 F.3d 388, 392 (5th Cir. 2002) (quoting OPE

Int’l LP v. Chet Morrison Contractors, Inc., 258 F.3d 443, 445

(5th Cir. 2001)).   The second question is “‘whether legal

constraints external to the parties’ agreement foreclose[] the

arbitration of those claims.’”    Webb, 89 F.3d at 258 (quoting

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473

U.S. 614, 628 (1985)).

     Ford and Defendants do not dispute that the retail

installment contracts contain valid arbitration provisions and

that there are no external constraints that preclude arbitration

of Defendants’ claims.    Thus, the central question is whether the

arbitration provision covers the claims alleged in Defendants’

state court complaint.    In addressing questions of scope, we are

mindful that “‘due regard must be given to the federal policy

favoring arbitration, and ambiguities as to the scope of the

arbitration clause itself must be resolved in favor of

arbitration.’”   See id. (quoting Volt Info. Scis., Inc. v. Bd. of

Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 475-76 (1989)).

“Arbitration should not be denied ‘unless it can be said with

                                 -6-
positive assurance that an arbitration clause is not susceptible

of an interpretation which would cover the dispute at issue.’”

Pennzoil Exploration & Prod. Co., 139 F.3d at 1067 (quoting Neal

v. Hardee’s Food Sys., Inc., 918 F.2d 34, 37 (5th Cir. 1990))

(alteration omitted).

     We start with the language of the arbitration provision

itself.   The clause mandates arbitration of “any Claim related

to” the retail installment contract.   The provision then provides

an inexhaustive list of examples:

     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, 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.

     The Supreme Court and this court have characterized

arbitration provisions with similar language as “broad

arbitration clauses capable of expansive reach.”   Pennzoil

Exploration & Prod. Co., 139 F.3d at 1067 (stating that “[a]ny

dispute, controversy or claim arising out of or in relation to or

in connection with this Agreement” is a broad arbitration clause

that “embrace[s] all disputes between the parties having a

significant relationship to the contract regardless of the label

attached to the dispute”); see also Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395, 397-98 (1967) (labeling as

“broad” a clause requiring arbitration of “[a]ny controversy or

                                -7-
claim arising out of or relating to this Agreement”).    An

arbitration provision, such as the one here, that purports to

cover all disputes “related to” the contract or any resulting

transaction or relationship is “not limited to claims that

literally ‘arise under the contract.’”    Pennzoil Exploration &

Prod. Co., 139 F.3d at 1067.    Rather, “[w]ith such a broad

arbitration clause, it is only necessary that the dispute ‘touch’

matters covered by the [contract] to be arbitrable.”     Id. at

1068.

     Defendants’ claims touch matters covered by the retail

installment contract.   In their state court complaint, Defendants

alleged that Ford’s fraudulent scheme “induce[d] potential

customers to purchase certified pre-owned vehicles that had not

undergone the certification process” and “charge[d] customers for

products and/or services that had not been performed” by GCFM.

COMPL. ¶¶ 62-63.   Defendants further claimed that they were

induced “to purchase vehicles from Greater Canton Ford based on

false and fraudulent representations.”    Id. ¶ 66.   These claims

“relate to” the vehicle purchases that were the subject of the

retail installment contracts.   The arbitration provision–-

covering any claim “arising out of or relating to” the retail

installment contract or any resulting transaction or

relationship–-is broad enough to encompass claims relating to the

sale of the vehicles.

     We are not persuaded by Defendants’ argument that the retail

                                 -8-
installment contract covers only an extension of credit to

purchase the vehicle.   As an initial matter, the retail

installment contract is the only document in the record

evidencing the purchase of the vehicles.     It states that “[by]

signing this contract, [the buyer] choose[s] to buy the vehicle

on credit under the agreement on the front and back of this

contract.”   It uses the terms “total sale price,” “purchase,” and

“buy,” describes the parties as buyer and seller, and states the

terms of the purchase between the buyer and seller, including

financing terms.   The express terms of the contract support an

interpretation that the retail installment agreement is a sales

contract and not simply a credit arrangement.

     Defendants’ argument is not only contradicted by the

contract itself but also at odds with the statutory definition of

retail installment contract under Mississippi law, which defines

such transactions as purchases.     See MISS. CODE. ANN. § 63-19-3(f)

(2004 & Supp. 2006) (defining a “retail installment transaction”

as “any transaction evidenced by a retail installment contract

entered into between a retail buyer and a retail seller wherein

the retail buyer buys a motor vehicle . . . from the retail

seller at a time price payable in one or more deferred

installments”).    In light of the strong federal policy in favor

of arbitration, we conclude that the arbitration provision is

                                  -9-
broad enough to encompass Defendants’ claims.2   See Pers. Sec. &

Safety Sys., 297 F.3d at 392 (noting the “strong federal policy

in favor of enforcing arbitration agreements”) (internal

quotation marks and citation omitted).

B.   Non-Signatory to Arbitration Provision

     Having concluded that Defendants’ claims fall within the

scope of the arbitration clause, we must determine whether Ford

can compel arbitration even though it is a non-signatory to the

agreements.    Without citing this court’s decision in Grigson, 210

F.3d 524, the district court stated it was “not persuaded” by

Ford’s argument that it could maintain the action to compel

arbitration.

     Under Grigson, a non-signatory may compel arbitration under

an equitable estoppel theory if it demonstrates that the case

fits one of two different circumstances: (1) “‘when the signatory

     2
        Because we hold that the district court erred in
concluding that Defendants’ claims “seemingly” fall outside the
scope of the arbitration provision, we need not address Ford’s
alternative argument that questions of arbitrability are for the
arbitrator to decide. Even if we were to reach Ford’s
alternative argument, there is a question whether Ford
sufficiently raised this argument before the district court, as
it was included only in a footnote in Ford’s reply brief before
the district court and the district court did not address the
issue in its order. See Kelly v. Foti, 77 F.3d 819, 823 (5th
Cir. 1996) (“A party must press, not merely intimate, an
argument, in order to preserve it for appeal. The raising party
must present the issue so that it places the opposing party and
the court on notice that a new issue is being raised.”) (internal
quotation marks and citations omitted); see also In re Liljeberg
Enters., Inc., 304 F.3d 410, 427 n.29 (5th Cir. 2002) (stating
that to avoid waiver the argument must be presented in a
sufficient manner to permit the district court to rule on it).

                                -10-
to a written agreement containing an arbitration clause must rely

on the terms of the written agreement in asserting its claims

against the nonsignatory’”; or (2) “‘when the signatory to the

contract containing an arbitration clause raises allegations of

substantially interdependent and concerted misconduct by both the

nonsignatory and one or more of the signatories to the

contract.’”   210 F.3d at 527 (quoting MS Dealer Serv. Corp. v.

Franklin, 177 F.3d 942, 947 (11th Cir. 1999)) (emphasis omitted).

     As Ford points out, Defendants’ state court complaint

includes allegations of substantially interdependent and

concerted misconduct by Ford (a non-signatory) and GCFM (a

signatory), thus meeting one of the tests in Grigson for

equitable estoppel.   See COMPL. ¶¶ 61, 77-78 (alleging, for

example, that state court defendants, including Ford and GCFM,

“intentionally, willfully, maliciously and tortiously conspired

between themselves and with others to unlawfully injure

Plaintiffs” and that their “scheme was calculated to and in fact

did cause Plaintiffs to purchase vehicles from [GCFM] based on

false and fraudulent representations”).   In any event, Defendants

have abandoned their argument against arbitration by a non-

signatory to the contract, stating in their brief that they “do

not dispute that the doctrine of equitable estoppel as it has

been developed in cases since Grigson may permit Ford to compel

arbitration of claims alleging ‘interdependent and concerted

misconduct’ between Ford and a signatory to an agreement

                               -11-
containing a valid arbitration agreement.”     Accordingly, Ford may

compel arbitration as a non-signatory to the agreement.

                        III.   CONCLUSION

     For the foregoing reasons, we REVERSE the district court’s

order denying Ford’s motion to compel arbitration of Defendants’

claims and REMAND for entry of an order staying the state court

litigation against Ford and requiring the parties to submit their

dispute against Ford to binding arbitration.

     REVERSED and REMANDED.

                               -12-