Opinion
No. 37124-3-II.
May 5, 2009.
Appeal from a judgment of the Superior Court for Kitsap County, No. 07-2-02095-2, Leila Mills, J., entered November 30, 2007.
Affirmed by unpublished opinion per Penoyar, A.C.J., concurred in by Houghton and Quinn-Brintnall, JJ.
UNPUBLISHED OPINION
This is an appeal from an order compelling arbitration in a dispute between an automobile dealership, Dave Barcelon's Truck Town, Ltd., (Barcelon's) and a buyer (Kenneth W. Wegeleben). The buyer contends that the arbitration clause in the vehicle order is unenforceable because (1) the vehicle order was never a completed contract; (2) the dealership violated its statutory obligations; (3) his statutory and consumer protection claims are not arbitrable; and (4) he never waived his right to a public trial. We affirm.
FACTS
On June 22, 2007, Wegeleben purchased a 1981 Jeep CJ5 from Barcelon's in Bremerton, Washington. The negotiated price was $9,865.00 and Wegeleben paid $7,500 in cash, financing the remaining balance of $3,357.24. The document detailing this agreement is entitled, "Vehicle Order." Clerk's Papers (CP) at 45. The order form contains a provision entitled, "Dispute Resolution." CP at 46. This provision provides:
DISPUTE RESOLUTION All disputes (any and all legal and equitable claims) between the Parties and/or their employees, agents, and assignees (herein after referred to as the Parties) shall be determined by binding arbitration in accordance with the laws of the State of Washington at a time and place determined by the arbitrator. If the Parties are not able to agree upon a single arbitrator within ten (10) days following demand therefore, then the arbitrator shall be appointed by a Court in the State of Washington that would have, but for Arbitration as provided for herein, jurisdiction over the matter. Each Party shall pay one-half of the arbitrator's fees and costs, unless one Party is ruled the prevailing Party by the arbitrator, in which case the arbitrator, subsequent to the arbitration itself, may award the prevailing Party the arbitrator's fees and costs and the prevailing Party's attorneys fees and costs. The Parties recognize, acknowledge and agree that the designated arbitrator will be an independent individual, not affiliated or related to either, who is a licensed lawyer or retired Judge applying the substantive law of the applicable jurisdiction, and that any dispute between the Parties will not be heard and decided by a Judge or jury, except as provided for herein. The Parties waive any right to a Class Action, provided however, that if this waiver is determined to be unenforceable, then this Dispute Resolution provision is inapplicable and the Class Action shall be heard before the appropriate Federal or State Court. Notwithstanding the above, in the interest of promoting prompt resolution, the following actions, and no other, may be commenced in the appropriate State, County, or Federal Court: (i) replevin actions through the granting and action on (or denial of) an order of replevin and then transferred to arbitration, (ii) action for money due on an NSF check or promissory note (in the even[t] of a counterclaim the entire matter shall be transferred to arbitration), and (iii) actions over which a bankruptcy court has exclusive jurisdiction, provided however, that if any or all of these exceptions are determined by a Court or Arbitrator, before which the matter is raised, as rendering unenforceable this Dispute Resolution provision, then these exclusions shall not apply and all such matters shall be arbitrated. These Dispute Resolution provisions shall survive termination of this Agreement between Purchaser(s) and Dealer.
CP at 46 (emphasis added). Wegeleben's signature immediately follows this provision. Below this dispute resolution provision is a provision entitled, "Financing Condition." CP at 46. It provides:
IF A RETAIL INSTALLMENT CONTRACT OR NOTE AND SECURITY AGREEMENT IS SIGNED IN CONJUNCTION WITH THIS BUYER'S ORDER (COLLECTIVELY, THE "AGREEMENT"), THE AGREEMENT IS BINDING UPON EXECUTION, PROVIDED HOWEVER, THAT THE DEALER WILL HEREAFTER ASSESS THE BUYER'S CREDITWORTHINESS AND IF THE DEALER DOES NOT HEREAFTER APPROVE FINANCING ON ACCOUNT OF THE BUYER'S CREDITWORTHINESS AND SUBSEQUENTLY NOTIFIES BUYER OF SUCH DISAPPROVAL, THIS AGREEMENT IS VOID, AND ALL FUNDS AND ANY TRADE-IN SHALL BE RETURNED TO PURCHASER, SUBJECT, HOWEVER, TO ADJUSTMENT AS FOLLOWS: IF PURCHASER HAS TAKEN POSSESSION OF THE VEHICLE, PURCHASER SHALL IMMEDIATELY RETURN SAID VEHICLE TO DEALER AND PURCHASER SHALL BE LIABLE TO DEALER FOR ALL DAMAGE AND/OR DESTRUCTION TO, ABUSE OF, EXCESSIVE WEAR AND/OR EXCESSIVE MILEAGE ON SAID VEHICLE WHILE IN THE POSSESSION OF PURCHASER. AT THE OPTION OF [THE] DEALER, ANY SUMS DEPOSITED BY PURCHASER WITH DEALER MAY BE APPLIED TO THE EXTENT NECESSARY TO COMPENSATE DEALER AND/OR TO PAY THE COST OF REPAIRS FOR ANY DAMAGE, DESTRUCTION, ABUSE, EXCESSIVE WEAR AND/OR EXCESSIVE MILEAGE ON SAID VEHICLE, AND ANY ATTORNEY FEES INCURRED BY DEALER AND OTHER RESOURCES AS MAY BE AUTHORIZED BY LAW.
CP 46 (emphasis added). Wegeleben signed a retail installment contract.
On June 30, 2007, Wegeleben returned to the dealership, seeking to return his vehicle because the dealer had not provided an 8000 pound vertical Warn winch as previously negotiated and demanding his down payment in return. The dealership refused. On July 2, 2007, Wegeleben received a letter from Kitsap Bank informing him that the bank was treating his return of the vehicle to the dealer as repossession. This letter is not part of the record on appeal.
On August 24, 2007, Wegeleben sued Barcelon's, Contractor's Bonding and Insurance Company, and Kitsap Bank. Wegeleben claimed that Barcelon's violated the Auto Dealer Page 4 Practices Act (RCW 46.70.180(4)) and the Consumer Protection Act (CPA) (RCW 19.86.020). As relief, Wegeleben sought a declaration that the vehicle order and financing agreement were void, the return of his $7,500 deposit plus interest, treble damages for the CPA violations, attorney fees, and a permanent injunction.
According to the complaint, this is Barcelon's surety.
According to the complaint, Kitsap Bank is the assignee under the Retail Installment and Security Contract between Wegeleben and Barcelon's.
This Act provides:
(4) To commit, allow, or ratify any act of " bushing" which is defined as follows: Entering into a written contract, written purchase order or agreement, retail installment sales agreement, note and security agreement, or written lease agreement, hereinafter collectively referred to as contract or lease, signed by the prospective buyer or lessee of a vehicle, which:
(a) Is subject to any conditions or the dealer's or his or her authorized representative's future acceptance, and the dealer fails or refuses within four calendar days, exclusive of Saturday, Sunday, or legal holiday, and prior to any further negotiations with said buyer or lessee to inform the buyer or lessee either: (i) That the dealer unconditionally accepts the contract or lease, having satisfied, removed, or waived all conditions to acceptance or performance, including, but not limited to, financing, assignment, or lease approval; or (ii) that the dealer rejects the contract or lease, thereby automatically voiding the contract or lease, as long as such voiding does not negate commercially reasonable contract or lease provisions pertaining to the return of the subject vehicle and any physical damage, excessive mileage after the demand for return of the vehicle, and attorneys' fees authorized by law, and tenders the refund of any initial payment or security made or given by the buyer or lessee, including, but not limited to, any down payment, and tenders return of the trade-in vehicle, key, other trade-in, or certificate of title to a trade-in. Tender may be conditioned on return of the subject vehicle if previously delivered to the buyer or lessee.
The provisions of this subsection (4)(a) do not impair, prejudice, or abrogate the rights of a dealer to assert a claim against the buyer or lessee for misrepresentation or breach of contract and to exercise all remedies available at law or in equity, including those under chapter 62A.9A RCW, if the dealer, bank, or other lender or leasing company discovers that approval of the contract or financing or approval of the lease was based upon material misrepresentations made by the buyer or lessee, including, but not limited to, misrepresentations regarding income, employment, or debt of the buyer or lessee, as long as the dealer, or his or her staff, has not, with knowledge of the material misrepresentation, aided, assisted, encouraged, or participated, directly or indirectly, in the misrepresentation. A dealer shall not be in violation of this subsection (4)(a) if the buyer or lessee made a material misrepresentation to the dealer, as long as the dealer, or his or her staff, has not, with knowledge of the material misrepresentation, aided, assisted, encouraged, or participated, directly or indirectly, in the misrepresentation.
When a dealer informs a buyer or lessee under this subsection (4)(a) regarding the unconditional acceptance or rejection of the contract, lease, or financing by an electronic mail message, the dealer must also transmit the communication by any additional means;
On November 6, 2007, Barcelon's moved to compel arbitration, invoking the dispute resolution provision in the vehicle order agreement. On November 30, 2007, the superior court granted the motion to compel arbitration. Wegeleben died after filing this appeal and his estate now represents his interest.
ANALYSIS
I. Existence of Contract As Prerequisite To Arbitration
Wegeleben argues that the existence of a valid contract is a prerequisite determination before addressing arbitrability. He reasons that without a valid contract, there is no enforceable arbitration clause within that contract. Here, he argues, because Barcelon's never formally accepted or rejected the vehicle order within four days, no contract ever formed.
The United State Supreme Court rejected a similar argument in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006). The question posed there was "whether a court or an arbitrator should consider the claim that a contract containing an arbitration provision is void for illegality." Buckeye, 546 U.S. at 442. In answering this question, the Court examined the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1- 16. The Court recited section 2 of that Act, which provides, in part:
A written provision in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of such contract . . . or an agreement in writing to submit to arbitration an existing controversy arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist [in] law or in equity for the revocation of any contract.
Buckeye, 546 U.S. at 443-44. The Court then noted that two types of challenges to arbitration agreements can be made: One may challenge the validity of the agreement to arbitrate or one may challenge the contract as a whole, claiming fraudulent inducement or illegality. The Buckeye plaintiffs claimed that the contract was void in its entirety because of fraud in the inducement. 546 U.S. at 444-45. After examining its earlier decisions, the Court reiterated three applicable principles:
First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract's validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in state as well as federal courts.
Buckeye, 546 U.S. at 445-46. The Court then concluded "that because respondents challenge the Agreement, but not specifically its arbitration provisions, those provisions are enforceable apart from the remainder of the contract. The challenge should therefore be considered by an arbitrator, not a court." Buckeye, 546 U.S. at 446. See also Vaden v. Discover Bank, 566 U.S. ___, 129 S. Ct. 1262, ___ L. Ed. 2d ___ (2009) (when there is substantive preemption, but lack of federal independent jurisdictional basis, state courts play prominent enforcement role in enforcing the FAA).
The scenario and the result are the same here. Wegeleben is challenging the contract as a whole, arguing that it never formed and that, in any case, statutory violations rendered it void. Clearly, under Buckeye, an arbitrator needs to address these substantive issues in the first instance.
Division One recently agreed in The Heights at Issaquah Ridge Owners' Assoc. v. Burton Landscape Group, Inc.:
Courts resolve the threshold legal question of arbitrability of the dispute by examining the arbitration agreement without inquiry into the merits of the dispute. If the dispute can fairly be said to invoke a claim covered by the agreement, any inquiry by the courts must end. Washington State has a strong public policy favoring arbitration of disputes.
148 Wn. App. 400, 403-04, 200 P.3d 254 (2009) (citing Mendez v. Palm Harbor Homes, Inc., 111 Wn. App. 446, 454, 45 P.3d 594 (2002) (quoting Perez v. Mid-Century Ins. Co., 85 Wn. App. 760, 765, 934 P.2d 731 (1997)).
Similarly, our Supreme Court has noted in reviewing a motion to compel arbitration:
Although it is the court's duty to determine whether the parties have agreed to arbitrate a particular dispute, the court cannot decide the merits of the controversy, but may determine only whether the grievant has made a claim which on its face is governed by the contract.
Peninsula Sch. Dist. No. 401 v. Pub. Sch. Employees of Peninsula, 130 Wn.2d 401, 413, 924 P.2d 13 (1996) (quoting Council of County City Employees v. Spokane County, 32 Wn. App. 422, 424-25, 647 P.2d 1058 (1982) (citations omitted) (alteration in original). Further, we resolve any doubts in favor of arbitrability. Peninsula Sch. Dist. No. 401, 130 Wn.2d at 413-14. See also Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983); see also Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84, 123 S. Ct. 588, 154 L. Ed. 2d 491 (2002) ("the presumption is that the arbitrator should decide `allegation[s] of waiver, delay, or a like defense to arbitrability.'") (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25); Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293, 301, 103 P.3d 753 (2004) (quoting Moses H. Cone Mem'l Hosp., 460 U.S. at 25).
A. Uniform Commercial Code (UCC) Issues Do Not Affect Arbitrability
The trial court orally ruled that there was a valid contract because there was an offer, acceptance, and consideration. It then recognized that under the UCC, one may form a contract while reserving the right to terminate it for reasons other than a breach of contract. Finally, the trial court ruled that simply because there was a contingency that Barcelon's did not follow through with did not prevent a final acceptance and this lack of follow through did not result in a void contract. In light of the case law discussed above, the trial court's observations were superfluous. The only decision the trial court had authority to decide was whether the arbitration agreement itself was enforceable.
B. Alleged RCW 46.70.180(4) Violation Not Decided
Wegeleben argues that because the dealership violated the anti-bushing statute, it cannot claim that a valid contract formed. Barcelon's responds that there is no authority to support Wegeleben's argument that a bushing violation voids an otherwise legal contract. Barcelon's explains that bushing violations are treated as licensing violations subject to Department of Licensing regulations.
A fact finder has never resolved whether there has been a bushing violation and Wegeleben presents no authority for his broad claim that we have to construe the facts in a light most favorable to him for purposes of review, analogizing to CR 56. As the case law set out above makes clear, though, this is not for the court to decide but for the arbitrator to decide.
II. Statutory and Consumer Protection Claims
Wegeleben argues that even if the arbitration clause is enforceable, his anti-bushing claim and consumer protection claims are not subject to arbitration. He argues that they are not dependent on the formation of a valid contract and, in fact, a contract is unnecessary to even make these claims. He deems his claims entirely independent of the contract.
In Mendez, 111 Wn. App. at 457, the court held "that CPA and other statutory claims are generally amenable to arbitration under chapter 7.04 RCW." It noted the broad language in the arbitration clause before it encompassed "all issues arising from `contract, warranty, statutory, property or common law.'" Mendez, 111 Wn. App. at 457. As Mendez discusses, our Supreme Court has held that CPA claims are arbitrable under federal law and that court would have enforced the arbitration clause under state law absent federal preemption. 111 Wn. App. at 457 (discussing Garmo v. Dean, Witter, Reynolds, Inc., 101 Wn.2d 585, 590 n. 2, 591, 681 P.2d 253 (1984)).
Here the language in the dispute resolution provision is equally broad. The trial court properly decided that Wegeleben's statutory and consumer protection claims were arbitrable.
III. Interstate Commerce
Wegeleben argues that this case involves intrastate commerce because it is simply a transaction within the state and not an interstate transaction. He argues this primarily so that this court might apply Wineland v. Marketex Int'l, Inc., 28 Wn. App. 830, 627 P.2d 967 (1981), reversed by Garmo, 101 Wn.2d 585. In Wineland, the court held that CPA claims are akin to federal anti-trust claims and are not subject to arbitration. In Garmo, our Supreme Court held that the FAA preempts Washington CPA when there is an arbitration clause in a brokerage agreement. 101 Wn.2d at 590. The court expressly overruled Wineland, 101 Wn.2d at 590 n. 3.
After examining Supreme Court decisions involving transportation from 1914 to present, the Court in U.S. v. Bishop, 66 F.3d 569, 590 (3rd Cir. 1995), observed, "we can only conclude that motor vehicles are instrumentalities of interstate commerce." The business of purchasing and selling automobiles is not purely an intrastate function and the FAA applies, preempting the CPA claims here. Thus, CPA claims are addressable in arbitration.
IV. Voluntariness
Lastly, Wegeleben argues that he never voluntarily, knowingly, and intelligently waived his right to a free public trial in favor of expensive private arbitration. He argues that he never understood that he was giving up one-way fee shifting for reciprocal fee shifting or that he was giving up his right to injunctive relief.
The dispute resolution provision set out above unmistakably informed Wegeleben that he was giving up his right to pursue "any and all legal and equitable claims" in court. CP at 46. It informed him that he was agreeing to share one-half the costs of arbitration and that he was waiving his right to have a judge or jury decide his claims.
As the court noted in Mendez, a contract may be unconscionable substantively or procedurally. 111 Wn. App. at 459. Substantive unconscionability involves one-sided or overly harsh contract terms. Mendez, 111 Wn. App. at 459. Procedural unconscionability occurs when an irregularity taints the process of contract formation. This involves a lack of meaningful choice, a lack of opportunity to understand the contract terms, or having a contract where the terms are hidden in a maze of fine print. Mendez, 111 Wn. App. at 459. (Citations omitted.)
As in Mendez, the contract here appears to be an adhesion contract but that does not necessarily make it unconscionable; it simply means we construe ambiguities against the drafter. 111 Wn. App. at 459. Wegeleben does not argue that the dispute resolution provisions are ambiguous and there is no evidence to suggest that Wegeleben did not have an opportunity to read the contract, ask questions, or understand the agreement before he signed it. Wegeleben also makes no assertions of inducement, as the salesman did in Mendez, that arbitration was a less expensive dispute resolution process than a public trial.
In any case, the trial court did not address this issue in either its oral or written ruling and Wegeleben did not request the court to do so during argument on the motion to compel. As such, we have no finding of fact on this entirely factual issue and thus, nothing to review. While Wegeleben briefed unconscionability, it was incumbent on him to get a ruling from the trial court. His failure to do so precludes considering it on the merits.
V. Attorney Fees
Both parties request fees. Wegeleben cites RCW 46.70.190 (Auto Dealer Practices Act) and RCW 19.86.090 (CPA). Barcelon's cites RAP 18.1(a) and (b), the attorney fees provision in the contract, and RCW 4.84.330 in support of its request.
As this matter has not yet fully resolved, an award of attorney fees and costs is premature. The arbitrator has authority under the contract to award fees and costs and may do so once he or she makes a final binding decision.
Affirmed.
A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.
HOUGHTON and QUINN-BRINTNALL, JJ., concur.