Arabian Motors Group W.L.L. v. Ford Motor Co.
228 F. Supp. 3d 797
E.D. Mich.2017Background
- Arabian Motors (Kuwaiti dealer) and Ford entered a 2005 Resale Agreement appointing Arabian Motors as Ford dealer in Kuwait; the contract incorporated the 1976 UNCITRAL Arbitration Rules.
- Ford terminated the Resale Agreement in 2016 and filed an arbitration demand with the AAA seeking a declaration that termination was proper.
- Arabian Motors objected to arbitration (arguing non-arbitrability and lack of AAA jurisdiction) and filed suit in federal court seeking a preliminary injunction to enjoin the arbitration and declaratory relief that it is not obligated to arbitrate; it also asserted breach and fraud claims.
- The parties’ agreement incorporated UNCITRAL rules granting the arbitral tribunal authority to decide jurisdiction/arbitrability (the Delegation Provision).
- Arabian Motors argued the Motor Vehicle Franchise Contract Arbitration Fairness Act (15 U.S.C. §1226) (the Fairness Act) bars enforcing the Delegation Provision because the Act requires post-dispute written consent to arbitration; Ford argued the Act does not apply to foreign dealers and the Delegation Provision is enforceable.
- The Court held the Fairness Act does not apply to contracts between manufacturers and foreign dealers, found the Delegation Provision enforceable, and denied Arabian Motors’ motion to enjoin arbitration (leaving arbitrability to the arbitrator).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides arbitrability (court or arbitrator)? | Delegation provision invalid under Fairness Act, so court must decide. | Delegation provision valid; parties agreed under UNCITRAL to give arbitrator arbitrability. | Delegation provision enforceable; arbitrator decides arbitrability. |
| Does the Fairness Act apply to the Resale Agreement? | Fairness Act covers "motor vehicle franchise contracts" broadly (includes foreign dealers); therefore it bars enforcing pre-dispute delegation without post-dispute written consent. | The Fairness Act targets domestic dealers; it does not reach contracts with foreign dealers, so it does not apply here. | Fairness Act does not apply to contracts between manufacturers and foreign dealers. |
| Can statutory text/context/legislative history rebut domestic-application presumption? | Text ("any other person") and placement near ADDCA indicate Congress intended coverage beyond domestic dealers. | Statutory context, legislative history, and purpose show domestic focus; no convincing indication Congress intended extraterritorial reach. | No convincing indication Congress intended extraterritorial application; apply presumption favoring domestic scope. |
| Is Ford judicially estopped from arguing Fairness Act inapplicable (due to prior case)? | Ford previously argued Fairness Act applied to foreign dealers in Ghreiwati, so it should be estopped now. | Prior position not a sworn factual representation accepted by the court; judicial estoppel inapplicable. | Judicial estoppel not warranted; prior case did not satisfy doctrine’s elements. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (clarifies who decides arbitrability and requires clear and unmistakable evidence to delegate gateway issues)
- Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63 (parties may delegate arbitrability; courts may decide enforceability only when delegation clause is specifically challenged)
- Granite Rock Co. v. International Broth. of Teamsters, 561 U.S. 287 (a valid delegation clause shifts arbitrability to arbitrator)
- Small v. United States, 544 U.S. 385 (use of presumption favoring domestic application when interpreting ambiguous statutory phrases)
- RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (presumption against extraterritoriality and its application beyond conduct-regulating statutes)
- Kiobel v. Royal Dutch Petroleum Co., 569 U.S. 108 (discussion of presumption against extraterritoriality)
- Solvay Pharmaceuticals, Inc. v. Duramed Pharmaceuticals, Inc., 442 F.3d 471 (6th Cir.) (default that courts decide arbitrability)
- Oracle Am., Inc. v. Myriad Group A.G., 724 F.3d 1069 (9th Cir.) (incorporation of UNCITRAL rules is clear evidence of delegation of arbitrability)
- Ford Motor Co. v. Ghreiwati Auto, 945 F. Supp. 2d 851 (E.D. Mich.) (prior case where Ford advanced a contrary position; court here declines to apply judicial estoppel)