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In a case arising from a repossession mix-up, the Alabama Supreme Court found "clear and unmistakable" evidence that the parties intended to submit questions of arbitrability to the arbitrator. Accordingly, it was improper for the trial court to rule on the scope of the parties' arbitration agreement.
In Title Max of Birmingham, Inc. v. Edwards, No. 1051140, 2007 WL 1454456 (Ala. May 18, 2007), Edwards borrowed money from Title Max using his 2000 Ford F-150 as collateral. When Edwards defaulted on the loan, Title Max sent an agent to repossess the vehicle. However, instead of repossessing Edwards' 2000 Ford F-150, the agent repossessed Edwards' 1998 Ford F-150.
Following the repossession mix-up, Edwards sued Title Max for conversion and negligent repossession. Title Max filed a motion to compel arbitration pursuant to an arbitration clause in the loan agreement. The trial court denied the motion.
The issue on appeal was whether the question of arbitrability (i.e., whether the dispute fell within the scope of the arbitration agreement) should be decided by the court or by the arbitrator. Under the Federal Arbitration Act, the court decides questions of arbitrability unless there is "clear and unmistakable" evidence that the parties intended to submit questions of arbitrability to the arbitrator.
Applying that standard, the Court found clear and unmistakable evidence that Edwards and Title Max intended to submit questions of arbitrability to the arbitrator. This intent was manifest from a provision in the arbitration agreement whereby the parties agreed to arbitrate "all claims, disputes, or controversies arising from or relating directly or indirectly to . . . the validity and scope" of the arbitration agreement.
Since the parties intended to submit questions of arbitrability to the arbitrator, it was improper for the trial court to rule on the scope of the arbitration agreement. Accordingly, the Court remanded the case with instructions to compel arbitration.
In cases presenting a question of arbitrability, courts often look to the rules of arbitration in deciding whether there is "clear and unmistakable" evidence of the parties' intent to submit questions of arbitrability to the arbitrator.
For example, in Nazar v. Wolpoff & Abramson, LLP, No. 07-2025-JWL, 2007 WL 528753 (D. Kan. Feb. 15, 2007), the court relied on both the arbitration agreement and the rules of arbitration in finding "clear and unmistakable" evidence of the parties' intent to arbitrate questions of arbitrability. In that case, the parties agreed to arbitrate in accordance with the National Arbitration Forum Code of Procedure (the FORUM Code of Procedure). Rule 20(F) of the FORUM Code of Procedure authorizes arbitrators to rule on the scope of an arbitration agreement.
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