Opinion
CIVIL ACTION NO. 02-0158 SECTION "T"(1)
May 31, 2002
ORDER AND REASONS
Before the Court is a Motion to Compel Arbitration and Stay Court Proceedings Pending Arbitration filed on behalf of the defendant, General Motors Corporation ("GM"). The Court, having considered the arguments of counsel, the applicable law, and jurisprudence, is fully advised in the premises and ready to rule.
I. BACKGROUND
Trapp Chevrolet-Oldsmobile-Cadillac, Inc. owns and operates an automobile dealership in Houma, Louisiana, that sells the Chevrolet, Oldsmobile, and Cadillac lines of General Motors manufactured products. Trapp initially began as a stand-alone Chevrolet dealership in 1971. Cournoyer Automotive, Inc. ("Cournoyer") was an authorized GM dealer in Houma and sold Oldsmobile and Cadillac products. In 1999, Cournoyer approached Trapp about the possibility of purchasing some or all of its automobile franchises. GM's approval was required for any proposed change in the ownership of a dealership. Additionally, GM had in place certain agreements with Cournoyer with respect to the manner in which the Cadillac and Oldsmobile facilities would be utilized, how new GM vehicles would be displayed, and how the dealership would be operated.
In June, 1999, Trapp and Cournoyer entered into an Asset Purchase Agreement whereby Trapp purchased the Oldsmobile and Cadillac franchises. On July 26, 1999, GM ultimately approved Trapp's proposed acquisition of Cournoyer. Trapp also signed the Amendment, Assignment, and Assumption of the Exclusive Use Agreement ("Assumption Agreement") in order to assume the agreements between GM and Cournoyer. The Assumption Agreement contained a broad arbitration provision mandating that all disputes between the parties be submitted to binding arbitration.
On August 19, 1999, Trapp and GM entered into a Dealer Sales and Service Agreement which covered the Oldsmobile and Cadillac lines ("Dealer Agreement"). The Dealer Agreement states that GM and Trapp "agree to resolve disputes in accordance with the Dispute Resolution Process." The Dispute Resolution Process states that arbitration is voluntary and both parties must agree to use this process.
In 2000, Trapp was required to renew its Dealer Agreement with GM. After attending a dealer's meeting and being assured that Oldsmobile would continue to be viable in the future, Trapp renewed its agreement. However, on December 12, 2000, GM announced that it had decided to halt development of new Oldsmobile products and "phase out" the Oldsmobile line. As a result of the announcement, Trapp sought to recover damages allegedly incurred in acquiring, providing facilities for, and then operating its Oldsmobile-Cadillac operations.
Because the Dealer Agreement requires Trapp and GM to mediate any dispute arising under its Agreement or applicable law using General Motors Dispute Resolution Process, Trapp submitted to the Joint Mediation/Arbitration Committee. GM objected to Trapp's use of the Dispute Resolution Process. They argued that Trapp's claim was a challenge to GM's Policies and Procedures and thus exempted from mediation, pursuant to Section A of the Dispute Resolution Process. GM further claimed that its decision to "phase-out" Oldsmobile was not a termination of the Dealer Agreement. The Joint Mediation/Arbitration Committee upheld GM's objection and this suit followed.
II. ARGUMENTS OF THE RESPECTIVE PARTIES
A. Arguments of the Defendant in Support of the Motion
Defendant requests that this Court compel the parties to resolve this dispute according to the agreed upon procedure, including arbitration. It is submitted that the Assumption Agreement entered into by the parties contained a broad dispute resolution provision including an expansive clause requiring that any and all claims, disputes, and controversies between them arising under or relating to this Agreement and its negotiation, execution, administration, modification, extension or enforcement, be decided by way of a specified dispute resolution process leading to final, binding arbitration. (Exhibit 1 at p. 4). Defendant argues that Plaintiff has raised claims that are clearly within the scope of the Agreement's mandatory arbitration provision. As such, this Court should compel arbitration.
B. Arguments of the Plaintiff in Opposition to the Motion
Plaintiff argues that it should not be compelled to arbitrate its disputes. It is asserted that misrepresentations were made concerning the viability of the Oldsmobile line, which resulted in a breach of only the Dealer Agreement. Plaintiff argues that the Dealer Agreement supersedes the Assumption Agreement and contains only a Voluntary Arbitration Clause; as a result, this matter should be resolved before the Court.
III. LAW AND ANALYSIS
1. The Broad Arbitration Clause in the Assumption Agreement Also Applies to the Dealer Agreement
Arbitration is a matter of contract between the parties, and a court cannot compel a party to arbitrate a dispute unless the court determines the parties agreed to arbitrate the dispute in question. ATT Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 1418, 89 L.Ed.2d 648 (1986); Neal v. Hardee's Food Systems, Inc., 918 F.2d 34, 37 (5th Cir. 1990). Determining whether the parties agreed to arbitrate the dispute in question involves two considerations: (1) whether a valid agreement to arbitrate between the parties exists; and, (2) whether the dispute in question falls within the scope of that arbitration agreement. Pennzoil Exploration and Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1065 (5th Cir. 1998).
The Federal Arbitration Act ("FAA") applies to written arbitration provisions contained in contracts evidencing a transaction involving commerce, and its reach is coextensive with the Congressional power to regulate under the Commerce Clause. Section 2 of the FAA provides that a "written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has stated that this section serves as a "congressional declaration of a liberal federal policy favoring arbitration agreements." Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765 (1983). As such, arbitration should be required "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation" that would include the claims at issue. Pennzoil, 139 F.3d at 1067 (quoting Neal, 918 F.2d at 37). All doubts concerning the scope of coverage of an arbitration clause should be resolved in favor of arbitration. Pennzoil, 139 F.3d at 1061 (5th Cir. 1998) (citing Neal, 918 F.2d at 37 (5th Cir. 1990)); Commerce Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 338 (5th Cir. 1984) (citing Moses H. Cone, 103 S.Ct. at 941)).
In this case, there is no dispute that the agreements between Trapp and GM were "contracts evidencing a transaction involving interstate commerce." 9 U.S.C. § 2. Moreover, it is also undisputed that the Assumption Agreement contains a written arbitration provision:
GM . . . and [Trapp] agree to submit to final and binding arbitration, upon any party's written notice, any and all claims, disputes, and controversies between them arising under or relating to this Agreement and its negotiation, execution, administration, modification, extension or enforcement (collectively, "Claims"). Such arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA").
* * *
GM and [Trapp] agree that the dispute resolution process outlined in this section shall be the exclusive mechanism for resolving any Claims. All arbitration awards are binding and non-appealable except as otherwise provided in the United States Arbitration Act ( 9 U.S.C. § 1, et seq.)
(Exhibit 1 at p. 4). Likewise, the Dealer Agreement contains a written voluntary arbitration provision: "Arbitration is voluntary and both parties must agree to use this process." (Exhibit C at p. 4).
The Fifth Circuit has differentiated arbitration clauses which are "broad" and those that are "narrow". Where an arbitration clause is "broad", the action should be stayed and the arbitrator permitted to decide if the dispute falls within the clause. Whereas in cases where the clause is "narrow", the case is not referred to arbitration or stayed, unless the Court determines that the dispute falls within the clause. In re Complaint of Hornbeck Offshore Corp., 981 F.2d 752 (5th Cir. 1993). "Narrow" arbitration clauses are those which only require arbitration of disputes "arising out of" the contract, whereas "broad" arbitration clauses govern disputes which "relate to" or "are connected with" the contract. See, Pennzoil, supra. Additionally, clauses which contain the "any dispute" language are considered to be "broad". Id.; Rojas v. TK Communications, Inc., 87 F.3d 745 (5th Cir. 1996) ("any other dispute" was sufficiently broad).
In this case, the arbitration clause in the Assumption Agreement refers to "any and all claims, disputes, and controversies between them arising under or relating to this Agreement and its negotiation, execution, administration, modification, extension or enforcement." (Exhibit 1 at p. 4). This Court finds that this is a sufficiently "broad" arbitration clause. It applies to any and all claims arising under or relating to the Agreement.
Plaintiff has asserted claims for breach of the Dealer Agreement and tort claims regarding misleading statements made by GM. As discussed below, it is the opinion of this Court that these claims fall under the Dealer Agreement, but also, within the scope of the "broad" arbitration provision contained in the Assumption Agreement over "any and all claims, disputes, and controversies between them arising under or relating to this Agreement and its negotiation, execution, administration, modification, extension or enforcement." (Exhibit 1 at p. 4).
Plaintiff argues that it should not be compelled to arbitrate because this suit directly relates to only the Dealer Agreement, which contains a Voluntary Arbitration provision. Under the caption "Voluntary Binding Arbitration," the Dealer Agreement states that "arbitration is voluntary and both parties must agree to use this process." (Exhibit C at p. 4) This Court, however, is not in agreement with plaintiff's position. InPennzoil Exploration and Prod. Co., 139 F.3d at 1066, the parties' relationship was governed by a number of different agreements. Plaintiff filed suit against defendant and based its claims upon only one of their agreements. Id. The agreement did not contain a provision mandating arbitration. Id. Nevertheless, defendant moved to compel arbitration of the dispute based upon a broad arbitration clause contained in one of the other agreements executed by the parties. Id. The Fifth Circuit explained that when parties consent to an arbitration clause that governs all disputes "arising under" or "relating to" their agreement, they are expressing their intent that the arbitration clause reach all aspects of their relationship. Id. at 1067. The Court also reasoned that the fact that the plaintiff based its claims upon an agreement that did not contain an arbitration clause was not determinative of the issue of whether the dispute was arbitrable under the related agreement containing an arbitration clause. Id. Ultimately, the Fifth Circuit held that while the agreement referred to in plaintiff's petition did not contain an arbitration clause, the arbitration provision contained in the parties' other agreement was broad enough to encompass all claims at issue between the parties. Id. at 1068. The disputed claims were "related to" the agreement containing the arbitration clause, such that they were "arbitrable under its extremely broad arbitration provision." Id.
Moreover, this Court is guided by the Fifth Circuit Court of Appeals' holding in Neal v. Hardee's Food Systems, Inc., 918 F.2d 34 (5th Cir. 1990). In that case, the Court found that when a restaurant franchiser and franchisee included a broad arbitration clause in license agreements covering "any and all disputes," they intended the clause to reach all aspects of the parties' relationship, including a purchase that was covered by a separate agreement that did not include an arbitration clause. Id. "Although the parties used multiple agreements to delineate their relationship, each agreement was dependent upon the entire franchise transaction. The individual agreements were integral and interrelated parts of the one deal." Id. at 36. The Court recognized the parties' intent:
The keystone of the deal between the parties was the transfer of franchise rights pursuant to the License Agreement. Without the franchise rights, the parties concede that they would not have executed the Purchase Agreement. The parties chose to include a broad arbitration clause in the License Agreements. Recognizing that the License Agreements were the heart of their deal, it is logical that the parties would have expressed their intent to arbitrate all of their disputes in a provision in those agreements. We hold that when the parties included a broad arbitration clause in the essential license agreements covering "any and all disputes," they intended the clause to reach all aspects of the parties' relationship including the purchase of the physical properties.Id. at 37.
Although the plaintiff argued that his claim pertained only to the Purchase Agreement, the Court recognized that the franchises were created by the License Agreements, not just by the purchasing of property through the Purchase Agreement. Id. Plaintiff's claim clearly related to the License Agreement and "any and all disputes arising under those agreements are subject to arbitration." Id. at 38.
In the case at hand, plaintiff contends that the suit arises out of the Dealer Agreement which does not contain a mandatory arbitration clause; rather, arbitration under that agreement is expressly voluntary. Having considered plaintiff's argument, it is this Court's opinion that this suit relates to both the Dealer Agreement and the Assumption Agreement. The Assumption Agreement contained a broad arbitration clause covering "any and all claims, disputes, and controversies." (Exhibit 1 at p. 4). Although the parties also made a separate Dealer Agreement, the record indicates that GM would not have agreed to do business with Trapp had Trapp not executed the Assumption Agreement. The Assumption Agreement was essential for Trapp to become an Oldsmobile-Cadillac dealer. In other words, the Dealer Agreement was dependent upon the Assumption Agreement and each agreement was an "integral and interrelated part of one deal." Without the Assumption Agreement, it is logical to conclude that the Dealer Agreement would not have been possible.
Despite the fact that the agreements in Pennzoil, 139 F.3d 1061, and Neal, 918 F.2d 34, did not contain arbitration clauses and are therefore slightly distinguishable from the case at hand, it is this Court's opinion that the same legal principals apply such that the broad mandatory arbitration clause controls. "Arbitration should be required unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation" that would include the claims at issue. Pennzoil, 139 F.3d at 1067.
The damages claimed in this suit also arise under the Assumption Agreement. These damages stem from the cost of building a new facility from which to sell and service the Oldsmobile-Cadillac lines, which was required under the Assumption Agreement. (Exhibit 1 at p. 2). Trapp was also obligated to maintain separate deal operations and to make substantial improvements to such facility.
Despite plaintiff's assertions to the contrary, this Court finds ample evidence that this suit arises under both the Dealer Agreement and Assumption Agreement. As such, it is the opinion of this Court that this Agreement falls within the scope of the FAA and pursuant to Section 2, said arbitration provision is "valid, irrevocable, and enforceable." 9 U.S.C. § 2. Moreover, it is clear to this Court that (I) a valid agreement to arbitrate existed between the parties, and (2) that the dispute in question falls within the scope of that arbitration. See,Pennzoil, supra.
2. Dealer Agreement Does Not Supersede or Trump Assumption Agreement
Plaintiff also argues that the Dealer Agreement supersedes or "trumps" the Assumption Agreement; therefore, the voluntary arbitration provision applies in this case. This argument is based upon Article 17.11 of the Dealer Agreement that reads, "this agreement cancels and supercedes all previous agreements between the parties that relate to any matters covered herein." (Exhibit A at p. 28). This Court is not persuaded by this argument as Article 17.11 goes on to provide an exception wherein it does not apply to "any other unexpired written agreements executed by both parties." Id. Prior to the Dealer Agreement, both parties signed the Assumption Agreement. The Assumption Agreement certainly qualifies as an unexpired written agreement and is thus exempt from Article 17.11 of the Dealer Agreement.
Plaintiff makes an alternative argument relying upon the Assumption Agreement: "Nothing set forth in this Agreement shall be construed as amending, modifying or superseding any of the Oldsmobile and Cadillac Dealer Sales and Service Agreements." (Exhibit 1 at p. 3). This provision does not affect the Assumption Agreement in any way. It only admits that the Assumption Agreement and the Dealer Agreement are completely separate and independent contracts that may contain conflicting provisions.
Because this dispute arises out of both the Assumption Agreement and Dealer Agreement, this Court must resort to the finding that the parties intended mandatory arbitration. All doubts concerning the scope of coverage of an arbitration clause should be resolved in favor of arbitration. Pennzoil, 139 F.3d at 1061 (5th Cir. 1998) (citing Neal, 918 F.2d at 37 (5th Cir. 1990)); Commerce Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 338 (5th Cir. 1984) (citing Moses H. Cone, 103 S.Ct. at 941)). Having found a valid, enforceable, and mandatory agreement to arbitrate the issues presented in this suit, this Court shall stay these proceedings pending said arbitration.
Accordingly,
IT IS ORDERED that the Motion to Compel Arbitration and Stay Court Proceedings Pending Arbitration filed on behalf of the defendants, General Motors Corporation, be and the same is hereby GRANTED.
IT IS FURTHER ORDERED that the Clerk of Court mark this action closed for statistical purposes, and,
IT IS FURTHER ORDERED that the Court shall retain jurisdiction and that the case shall be restored to the trial docket and shall be reset by order of this Court upon motion of a party if circumstances change, so that the case may proceed to final disposition. This order shall not prejudice the rights of the parties to this litigation.