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The Fifth Circuit Court of Appeals held that an arbitration clause “capable of expansive reach” applied to claims arising from the sale of an automobile because the claims “touch[ed] matters” covered by the underlying contract.
In Ford Motor Co. v. Ables, No. 05-60391, 2006 WL 3431602 (5th Cir. Nov. 29, 2006), Ables and several others sued Ford, alleging that a Ford dealership sold them pre-owned vehicles that were not properly certified.
Ford filed a motion to compel arbitration based on an arbitration clause in the underlying retail installment contracts. The district court denied the motion on the ground that the claims against Ford “seemingly” fell outside the scope of the arbitration agreement.
On appeal, the Court started its analysis by citing the rule that “[a]rbitration should not be denied unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue.” Applying that rule, the Court noted that the arbitration clause in the retail installment contracts was “capable of expansive reach” and thus would apply to any dispute that “touch[ed]” matters covered by the contract.
Under that construction, the claims against Ford fell within the scope of the arbitration agreement because the claims touched matters covered by the contract – namely, the sale of the automobile. In opposing arbitration, Ables and the other buyers argued that the retail installment contract covered only the extension of credit and not the sale. The Court rejected this argument based on Mississippi’s statutory definition of a “retail installment contract” and the contract’s express references to the sale.
The Court also concluded that the principles of equitable estoppel would allow Ford, a nonsignatory, to claim the benefit of the arbitration agreement because the claimants were alleging “substantially interdependent and concerted misconduct” by Ford (a nonsignatory) and the dealership (a signatory). Accordingly, the Court remanded the case with instructions to order arbitration.
As the Court observed, the federal policy favoring arbitration has given rise to the rule that any ambiguities regarding the scope an arbitration agreement “must be resolved in favor of arbitration.” Some courts apply this presumption in favor of arbitrability not only to the scope but also to the existence of an arbitration agreement. See Franklin v. Sunflower Imports, Inc., No. 95,299, 2006 WL 3257461, *3 (Kan. Ct. App. Nov. 9, 2006).
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