AN Luxury Imports, Ltd. D/B/A BMW of Dallas, Inc., AN Luxury Imports GP, LLC, and United States Warranty Corp. v. D. Scott Southall
01-15-00194-CV
| Tex. App. | Apr 6, 2015Background
- Plaintiff D. Scott Southall bought a 2007 Porsche Cayman from AN Luxury Imports d/b/a BMW of Dallas on Dec. 19, 2013 and signed multiple contemporaneous documents: Retail Purchase Agreement (Sale Agreement), an Arbitration Agreement, and a Used Vehicle Limited Mechanical Warranty.
- ~50 days after purchase the engine catastrophically failed; Southall submitted a claim to United States Warranty Corp. (U.S. Warranty), which denied coverage alleging prior abuse/racing.
- Southall sued in Harris County asserting breach of contract, unfair settlement practices, bad faith, DTPA violations, negligence, fraud by nondisclosure, and negligent misrepresentation; claims were directed at BMW of Dallas, AN Luxury Imports GP, LLC (ANLI), and U.S. Warranty.
- BMW of Dallas, ANLI, and U.S. Warranty moved to compel arbitration based on the Arbitration Agreement, which (as signed) covers claims arising from Customer/Dealership dealings including contract, tort, statutory, and warranty claims and expressly extends to claims involving third parties arising from those dealings.
- The trial court denied the motion to compel arbitration on Feb. 9, 2015. Appellants (BMW of Dallas, ANLI, U.S. Warranty) appealed, arguing (1) the arbitration agreement is a valid part of the purchase transaction and (2) all of Southall’s claims fall within its broad scope; they also assert equitable estoppel and that arbitrable claims must be sent to arbitration even if nonsignatory claims remain in court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of arbitration agreement | Southall contends forum-selection language and separate warranty mean no enforceable arbitration covering these claims | Defendants say arbitration agreement was executed as part of the single purchase transaction and the Sale Agreement incorporates the arbitration clause | Trial court denied motion to compel; appellants seek reversal (arbitration agreement was contemporaneous and incorporated) |
| Scope: warranty and repair claims | Southall argues Warranty Agreement lacks arbitration clause so warranty/repair claims are non-arbitrable | Defendants argue arbitration clause expressly covers claims relating to warranties, representations, services, and "any resulting transaction" | Appellants maintain claims are within broad arbitration scope; trial court nonetheless denied arbitration |
| Scope: fraud and nondisclosure claims | Southall contends tort/statutory fraud claims lie outside arbitration because they are separate from the sale/warranty | Defendants argue tort/statutory claims arose from the purchase dealings and are factually intertwined with arbitrable claims, so arbitration governs | Defendants assert these claims are arbitrable under the clause; trial court denied arbitration |
| Non‑signatory (U.S. Warranty) | Southall argues U.S. Warranty did not sign arbitration agreement so its claims are not subject to arbitration | Defendants argue (a) documents are part of one transaction; (b) arbitration provision extends to third‑party claims arising from dealership dealings; (c) equitable estoppel and factual intertwining bind nonsignatory | Trial court denied arbitration as to whole case; appellants argue arbitrable claims must be compelled even if nonsignatory remains in court (seek reversal) |
Key Cases Cited
- Dean Witter Reynolds v. Byrd, 470 U.S. 213 (1985) (FAA requires courts to compel arbitrable claims even if this may produce piecemeal litigation)
- Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943 (Tex. 1996) (presumption in favor of arbitration and party opposing arbitration bears burden)
- J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (contract interpretation principles apply to arbitration agreements; harmonize provisions)
- In re Labatt Food Service, L.P., 279 S.W.3d 640 (Tex. 2009) (gateway questions about nonsignatory arbitrability for courts to decide absent clear delegation)
- Speedemissions, Inc. v. Bear Gate, L.P., 404 S.W.3d 34 (Tex. App.—Houston [1st Dist.] 2013) (distinguishes when separate agreements between different parties should not be read together for arbitration)