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Brown v. David Stanley Cheverolet, Inc.

United States District Court, W.D. Oklahoma

November 17, 2017




         Before the Court is Defendants' motion [Doc. No. 3] to dismiss this action[1] or, in the alternative, to compel arbitration. Plaintiffs timely responded in opposition [Doc. No. 8], and Defendants filed a reply [Doc. No. 9].


         On February 1, 2016, Plaintiffs purchased a 2008 Cadillac STS-V from David Stanley Chevrolet [Doc. No. 1-1 at ¶ 5]. As part of the purchase, Plaintiffs signed a Purchase Agreement, which contained a Dispute Resolution Clause [Doc. No. 3-1].[2] The Dispute Resolution Clause provides in pertinent part:

This Dispute Resolution Clause applies to any controversy, claim or dispute between the Purchaser and the Dealer arising out of, or related, to this sale or transaction, including, but not limited to, any and all issues or disputes arising as a result of this sale or transaction, whether said issues arise prior to, during or subsequent to the sale or attempted sale of a vehicle and whether said sale or attempted sale is a cash sale or is based upon financing or extended credit, or arises as a result of any financing contract, agreement or sales document related to the sale or attempted sale of a vehicle. The Purchaser and Dealer agree that all matters addressed within this Clause shall be submitted to binding arbitration, with an Arbitration Service or Arbitrator of the parties' choosing, pursuant to the Federal Arbitration Act, Title 9 U.S.C. § 1, et seq. The parties agree and understand that all disputes arising under case law, statutory law, and all other laws, including, but not limited to, all contract, tort and property disputes, including any claim regarding the use, misuse and/or disclosure of any information or documentation, including, but not limited to, personal or financial information obtained by the Dealer from the Purchaser, or about the Purchaser, which may arise from the sale relationship or otherwise during the sale, or at any time in the future, will be subject to binding arbitration in accord with this Contract.

[Doc. No. 3-1 at 1]. Additionally, as part of the sale, Plaintiffs executed a Retail Installment Sale Contract (“RISC”) [Doc. No. 3-2 at 10], which David Stanley Chevrolet later assigned to Compass Bank[3]. Plaintiffs allege that about one month after the sale, David Stanley Chevrolet demanded an additional payment of $1, 500.00 [Doc. No. 1-1 at ¶ 13]. Plaintiffs also allege that David Stanley Chevrolet failed to pay off the loan on the trade-in vehicle and sold it to a third party [Doc. No 1-1 at ¶ 16]. Compass Bank allegedly repossessed the trade-in vehicle, sold it and demanded Plaintiffs pay the deficiency balance [Doc. No. 1-1 at ¶ 21].

         On February 1, 2017, Plaintiffs filed the instant action in the District Court of Oklahoma County [Doc. 1-1], asserting 13 causes of action. On February 22, 2017, Defendants removed this action to federal court [Doc. No. 1]. Defendants now move the Court to enter an order compelling arbitration pursuant to the Federal Arbitration Act (FAA) and the Dispute Resolution Clause in the Purchase Agreement [Doc. No. 3].


         Defendants assert that Plaintiffs entered into a valid and enforceable agreement to arbitrate all claims arising from their purchase of the Cadillac STS-V. Plaintiffs, however, contend that arbitration is not appropriate. Specifically, Plaintiffs assert: (1) the RISC is the only contract between the parties as a result of the merger doctrine, and it does not contain an arbitration clause; (2) there is no valid arbitration agreement as there was no meeting of the minds and the two arbitration clauses conflict; (3) Compass Bank's Dealer Agreement precludes David Stanley Chevrolet from adding or altering the RISC, even to include an arbitration clause; and (4) David Stanley Chevrolet's agent fraudulently induced Plaintiffs into signing the Dispute Resolution Clause by falsely representing the contents of the Purchase Agreement, including the arbitration clause.

         A. Whether the Dispute Resolution Clause in the Purchase Agreement is included in the parties' final contract

         Plaintiffs contend that the Dispute Resolution Clause is unenforceable because the RISC contains a merger clause. Defendants assert that since the Purchase Agreement and the RISC were executed as one transaction, they must be construed together.[4] “It is the general rule that instruments executed at the same time, and for the same purpose, and in the course of the same transaction, are, in the eye of the law, one instrument, and will be read and construed together, as if they were as much one in form as they are in substance.” Mid-Continent Life Ins. Co. v. Goforth, 143 P.2d 154, 157 (Okla. 1943); see also F.D.I.C. v. Hennessee, 966 F.2d 534, 537 (10th Cir. 1992) (“Oklahoma adheres to the widely-accepted rule that when several contracts relating to the same matter are made by the parties as parts of one transaction, all of the instruments should be construed together.”). Moreover, it is not necessary that the instruments refer in express terms to one another, if they are part of a single transaction. Morgan v. Griffith Realty Co., 192 F.2d 597, 599 (10thCir. 1951).

         David Stanley Chevrolet and Plaintiffs executed the Purchase Agreement, the Spot Delivery Agreement and the RISC at the same time as part of one transaction - Plaintiffs' purchase of the Cadillac STS-V on February 1, 2016. The Purchase Agreement contained the terms of the sale, including the Dispute Resolution Clause, while the RISC contained the credit terms. Further, the Dispute Resolution Clause specifically provides that it applies to disputes concerning sales “based upon financing or extended credit” or disputes that arise “as a result of any financing contract, agreement or sales document related to the sale or attempted sale of the vehicle.” [Doc. No. 3-1]. The Spot Delivery Agreement provides that it is “executed as a prelude to an exchange of ownership of the vehicle[] described herein; subject to Dealer finding a lending institution willing to purchase the Retail Installment Sales Contract executed between the parties hereto on the same terms and conditions as those set forth more particularly in the Purchase Agreement and Retail Installment Sales Contract.” [Doc. No. 8-3].

         Plaintiffs do not dispute that they signed all three documents at the same time. Plaintiffs also do not dispute the fact that the Purchase Agreement itself explicitly incorporates the RISC.[5] Rather, Plaintiffs contend that the RISC must incorporate the Purchase Agreement pursuant to the Oklahoma Supreme Court's ruling in Walker. See Walker v. BuildDirect.Com Technologies, Inc., 349 P.3d 549 (Okla. 2015). Walker, which is factually distinguishable, concerned incorporation “of an extrinsic document warehoused in cyberspace” that did not contain the parties' signature. Id. at 553. Limiting its holding to the particular facts of that case, the court in Walker found that no reasonable person under those circumstances would have thought the online “Terms of Sale” were part of the parties' agreement. Id. at 554.

         Although the facts are different, the rationale in Walker supports Defendants' argument of incorporation. In Walker, the plaintiffs purchased hardwood flooring from the defendant. The defendant e-mailed a two-page written contract, which the plaintiffs signed, dated and returned to the defendant. Id. at 551. The contract described the type, amount, and price of the flooring purchased by the Walkers and included 14 bullet points setting forth additional terms. Id. The sixth bullet point provided that “All orders are subject to [defendant's] ‘Terms of Sale.'” Id. The “Terms of Sale” was a document on the defendant's website, which contained 15 numbered paragraphs, including an arbitration clause. Id. at 552.

         BuildDirect filed a motion in district court seeking to compel arbitration pursuant to the arbitration clause in the “Terms of Sale.” The Walkers responded that they were unaware of the online document and that it was not adequately referenced in the contract they signed. Id. The district court initially denied BuildDirect's motion, explaining that the contract was ambiguous and that it could not say as a matter of law that the contract incorporated the “Terms of Sale.” Id. BuildDirect filed an interlocutory appeal, and the Tenth Circuit certified a question[6] to the Oklahoma Supreme Court. Id.

         In analyzing this question, the Oklahoma Supreme Court reviewed Oklahoma contract law concerning the doctrine of incorporation. The court noted that a “chief consideration of incorporation is whether the party to be bound had reasonable notice of and assented to the terms to be incorporated.” Id. at 553 (citing One Beacon Ins. Co. v. Crowley Marine Services, Inc., 648 F.3d 258, 268 (5th Cir. 2011). Notice of incorporated terms is reasonable when a “reasonably prudent person should have seen them.” Walker, 349 P.3d at 553. “A party's failure to read duly incorporated terms will not excuse the obligation to be bound.” Id. (citing McDonald v. McKinney Nursery Co., 143 P. 191 (Okla. 1914). “Neither physical attachment nor magic words are necessary.” Walker, 349 P.3d at 553. Applying these ...

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