238 So. 3d 35
Ala.2017Background
- Pine City Auto sold used cars financed by purchasers who signed a Retail Installment Sale Contract and a Dealer's Assignment and Buyer's Consent assigning the contract to Family Security Credit Union (FSCU).
- Action Auto, which had financed Pine City’s inventory and held vehicle titles, sued Pine City and eight purchasers after Pine City went out of business and some inventory financing remained unpaid; purchasers filed third-party claims against FSCU for failing to perfect security interests.
- Each assignment agreement contained a broad arbitration clause: "Any controversy or claim arising out of or relating to this Agreement shall be settled by binding arbitration," plus provisions allowing FSCU to seek certain court remedies and to prohibit class proceedings and jury trials.
- FSCU moved to compel arbitration in eight consolidated cases, attaching the signed contracts; purchasers opposed but submitted no evidentiary proof—only argument.
- The trial court denied FSCU’s motions, finding the arbitration clause illusory (lack of mutuality of remedy) and unconscionable (substantively one-sided); FSCU appealed.
- The Alabama Supreme Court reversed, holding purchasers bore the burden to prove invalidity, found no procedural unconscionability proof, rejected the mutuality argument, and concluded the arbitration clause covers the purchasers’ claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity (unconscionability) of arbitration clause | Clause is grossly one-sided and unconscionable because FSCU can still pursue court remedies while buyers must arbitrate | Clause valid; purchasers failed to prove both procedural and substantive unconscionability and offered no evidence | Reversed trial court: purchasers presented no evidence of procedural unconscionability; unconscionability not established |
| Consideration for arbitration provision | Arbitration clause fails for lack of consideration or mutuality of remedy | Contract as a whole supplied consideration (buyers bought cars; FSCU bought contracts); mutuality of remedy doctrine inapplicable to arbitration | Rejected trial court: valid consideration exists; mutuality-of-remedy argument is inapplicable to arbitration agreements |
| Scope—do tort claims against FSCU fall within arbitration clause? | Purchasers: tort claims (negligence, wantonness, conspiracy) fall outside clause | FSCU: clause covers "any controversy or claim arising out of or relating to this Agreement," which is broad and encompasses these claims | Held for FSCU: broad language covers claims about title/perfection tied to the assigned contracts |
| Jury-waiver argument | Purchasers: jury-waiver language (in assignment) invalidates arbitration requirement | FSCU: jury-waiver doctrines are distinct from FAA/arbitration principles; not properly before court | Court declined to accept jury-waiver argument as a basis to affirm; arbitration governed by FAA principles |
Key Cases Cited
- Parkway Dodge, Inc. v. Yarbrough, 779 So.2d 1205 (Ala. 2000) (standard of review for denial of motion to compel arbitration)
- TranSouth Fin. Corp. v. Bell, 739 So.2d 1110 (Ala. 1999) (motion to compel arbitration analogous to summary judgment)
- Jim Burke Automotive, Inc. v. Beavers, 674 So.2d 1260 (Ala. 1995) (burden shifts to nonmovant to present evidence that arbitration agreement is invalid)
- Ex parte McNaughton, 728 So.2d 592 (Ala. 1998) (mutuality-of-remedy has no application to arbitration agreements)
- Green Tree Fin. Corp. of Alabama v. Vintson, 753 So.2d 497 (Ala. 1999) (distinguishes ultimate redress from procedural means; broad interpretation of arbitration clauses)
- Blue Cross Blue Shield of Alabama v. Rigas, 923 So.2d 1077 (Ala. 2005) (explains need to show both procedural and substantive unconscionability)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (strong federal presumption favoring arbitration and resolving doubts in favor of arbitrability)