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

Background

Plaintiff D. Scott Southall bought a used Porsche Cayman from AN Luxury Imports Ltd. (BMW Dallas) and purchased a separate Used Vehicle Limited Mechanical Warranty.
Within two months the car’s engine failed; Southall’s warranty claim was denied by BMW Dallas and United States Warranty Corp. (US Warranty).
Southall sued for breach of contract and warranty, negligence, deceptive trade practices, negligent misrepresentation, fraud by nondisclosure, Texas Insurance Code unfair settlement practices, and Magnuson-Moss Warranty Act violations.
Defendants moved to compel arbitration based on an Arbitration Agreement executed contemporaneously with the Retail Purchase Agreement; the trial court denied the motion to compel arbitration at two hearings and the defendants appealed.
Appellee’s brief argues arbitration is improper because (1) the Retail Purchase Agreement contains an exclusive-court-jurisdiction clause that controls over the Arbitration Agreement, (2) the separate Limited Mechanical Warranty contains no arbitration clause, and (3) the Magnuson-Moss Act/FTC rules require arbitration provisions to be disclosed in the written warranty itself.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the parties must arbitrate disputes arising from the Retail Purchase Agreement	Southall: Retail Purchase Agreement’s paragraph 17 grants sole and exclusive venue/jurisdiction to dealer’s county courts, which controls and displaces arbitration language	Defendants: Arbitration Agreement signed contemporaneously with purchase requires arbitration of disputes	Trial court denied motion to compel arbitration; appellee argues the Purchase Agreement’s court-jurisdiction clause prevails over the Arbitration Agreement
Whether the Limited Mechanical Warranty requires arbitration of warranty claims	Southall: The two-page warranty contains no arbitration provision and is a standalone contract; therefore warranty claims are not subject to arbitration	Defendants: Warranty should be read with Arbitration Agreement to require arbitration	Trial court denied motion to compel arbitration; appellee argues no arbitration clause exists in the warranty document itself
Whether an arbitration clause outside the written warranty can bind a consumer under Magnuson‑Moss/FTC rules	Southall: Magnuson‑Moss and FTC rules require warranty terms (including arbitration) be disclosed in the single written warranty document; arbitration in a separate document is unenforceable	Defendants: Arbitration agreement executed contemporaneously covers disputes including warranty claims	Trial court denied; appellee contends federal statute/regulations bar forcing arbitration where arbitration is not disclosed in the written warranty
Whether trial court’s denial of motion to compel arbitration should be upheld on appeal	Southall: Trial court’s factual findings and legal harmonization of contracts justified denial; abuse of discretion review favors affirmance	Defendants: (implicit) trial court erred and should have compelled arbitration under FAA/agreements	Appellee urges affirmance; trial court’s denial reviewed for abuse of discretion (factual findings given deference, legal conclusions de novo)

Key Cases Cited

Brown v. Pac. Life Ins. Co., 462 F.3d 384 (5th Cir.) (discussing who is bound by arbitration agreements)
Cleveland Const., Inc. v. Levco Const., Inc., 359 S.W.3d 843 (Tex. App. — Houston [1st Dist.]) (standard of review for arbitration orders)
R & P Enterprises v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex.) (contract interpretation principles)
City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515 (Tex.) (contract construction; harmonizing provisions)
In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex.) (party seeking arbitration must show valid arbitration agreement)
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex.) (ordinary contract principles govern enforceability of arbitration clauses)
Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154 (Tex.) (contract interpretation authority)