Thompson v. Lithia ND Acquisition Corp. 1
2017 ND 136
| N.D. | 2017Background
- Thompson bought a vehicle from Lithia and later sued to rescind the purchase and for damages, alleging unlawful sales practices. Lithia moved to dismiss and compel arbitration under a contract clause providing arbitration "in accordance with the rules of the American Arbitration Association" before a single retired state-court judge arbitrator.
- The district court compelled arbitration, finding Thompson failed to show the arbitration clause was unenforceable or unconscionable and denying her request for a jury trial on arbitrability.
- Parties struggled to agree on an arbitrator; the court ordered selection procedures and ultimately appointed retired judge Wickham Corwin when the parties did not agree.
- The arbitrator ruled for Lithia, awarding $6,000; Thompson moved to vacate the award arguing the arbitrator was improperly selected in violation of AAA rules, was biased, and the award lacked merit. The district court denied vacatur and entered judgment for Lithia.
- Thompson later sought relief under Rules 59/60 and argued FAA §9’s one-year period barred confirmation; the district court denied relief. Thompson appealed to the North Dakota Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAA exclusively governed and preempted state law | DIRECTV requires application of FAA and preemption of state arbitration law | State law not in conflict; FAA does not displace all state arbitration law | Court: FAA did not require sole application; district court did not err in applying state law where not preempted |
| Whether arbitration clause was unconscionable | Clause is adhesive and imposes Hobson’s choice on fees and limited discovery, so unenforceable | Clause is standard, not one-sided; some procedural adhesion exists but no substantive unconscionability | Court: No substantive unconscionability; arbitration compelled |
| Whether arbitrator was invalidly appointed under AAA rules (jurisdiction/partiality) | Corwin’s appointment violated AAA Consumer Rules; selection defect vitiates award | Thompson failed to timely object under AAA rules and waived the challenge | Court: Failure to object during arbitration waived the procedural challenge; no vacatur |
| Whether FAA §9 bars confirmation because defendant did not move within one year | Section 9 imposes a one-year limitations on confirmation and Lithia missed it | Section 9 provides an expedited federal route but is not the exclusive means; state statute permits confirmation after vacatur denial | Court: Even if §9 is time-limited, state statutory procedure authorized confirmation; judgment affirmed |
Key Cases Cited
- DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (2015) (FAA allows parties to choose governing law but state law cannot undermine FAA’s objectives)
- Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265 (1995) (FAA purpose is to enforce arbitration agreements)
- Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468 (1989) (state law not preempted where it does not conflict with FAA)
- Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA provides expedited federal remedies but not the exclusive means to enforce awards)
- Strand v. U.S. Bank Nat’l Ass’n ND, 693 N.W.2d 918 (N.D. 2005) (North Dakota two-prong procedural/substantive unconscionability analysis)
- Brook v. Peak International, Ltd., 294 F.3d 668 (5th Cir. 2002) (party waives challenge to arbitration-selection procedures if not timely raised)
- Marino v. Writers Guild of America, East, Inc., 992 F.2d 1480 (9th Cir. 1993) (parties cannot remain silent during arbitration and later collaterally attack procedure)