Bailey v. Ford Motor Co. , 244 N.C. App. 346 ( 2015 )


Menu:
  •               IN THE COURT OF APPEALS OF NORTH CAROLINA
    No. COA15-9
    Filed: 15 December 2015
    Wake County, No. 14 CVS 4465
    RICARDO L. BAILEY, Plaintiff,
    v.
    FORD MOTOR COMPANY, FORD MOTOR CREDIT COMPANY, LLC, and
    KATHLEEN BURNS, individually, Defendants.
    Appeal by defendant from order entered on 20 August 2014 by Judge Elaine
    M. Bushfan in Superior Court, Wake County. Heard in the Court of Appeals on 4
    June 2015.
    Sharpless & Stavola, P.A., by Pamela S. Duffy, for plaintiff-appellee.
    Kilpatrick Townsend & Stockton LLP, by Adam H. Charnes and Chris W. Haaf,
    and Williams Mullen, by M. Keith Kapp, for defendant-appellant.
    STROUD, Judge.
    Ford Motor Company (“defendant”) appeals from an order denying its motion
    to compel arbitration and dismiss. Defendant specifically argues that the trial court
    erred in concluding that (1) the Federal Arbitration Act (“FAA”) did not apply to this
    dispute; (2) the parties had agreed that a court, instead of an arbitrator, would decide
    the arbitrability of plaintiff’s claims; and (3) that plaintiff’s claims were not
    arbitrable. We reverse.
    I.      Background
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    In February 2003, Ricardo L. Bailey (“plaintiff’), an employee of defendant,
    moved to Sanford to operate and invest in a car dealership. Plaintiff and defendant
    executed a Stock Redemption Plan Dealer Development Agreement (“the Dealer
    Development Agreement”) in which plaintiff invested $180,000 in exchange for 1,800
    shares of common stock in the dealership and defendant invested $1,080,000 in
    exchange for 10,800 shares of preferred stock in the dealership.              Under the
    agreement, defendant also loaned $540,000 to the dealership.
    Under article 10 of the Dealer Development Agreement, plaintiff and
    defendant agreed to arbitrate any dispute “arising out of or relating to” the
    agreement:
    10.01. Resolution of Disputes. If a dispute arises
    between [plaintiff] and [defendant] arising out of or
    relating to this Agreement, the following procedures shall
    be implemented in lieu of any judicial or administrative
    process:
    (a)    Any protest, controversy, or claim by
    [plaintiff] (whether for damages, stay of action or
    otherwise) with respect to any termination of this
    Agreement, or with respect to any other dispute
    between [plaintiff] and [defendant] arising out of or
    relating to this Agreement shall be appealed by
    [plaintiff] to the Ford Motor Company Dealer Policy
    Board (the “Policy Board”) within fifteen (15) days
    after [plaintiff’s] receipt of notice of termination, or
    within 60 days after the occurrence of any event
    giving rise to any other claim by [plaintiff] arising
    out of or relating to this Agreement. Appeal to the
    Policy Board within the foregoing time periods shall
    be a condition precedent to the right of [plaintiff] to
    -2-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    pursue any other remedy available under this
    Agreement or otherwise available under law.
    [Defendant], but not [plaintiff], shall be bound by the
    decision of the Policy Board.
    (b)    If appeal to the Policy Board fails to resolve
    any dispute covered by this Article 10 within 180
    days after it was submitted to the Policy Board, or if
    [plaintiff] shall be dissatisfied with the decision of
    the Policy Board, the dispute shall be finally settled
    by arbitration in accordance with the rules of the
    CPR Institute for Dispute Resolution (the “CPR”) for
    Non-Administered        Arbitration    for   Business
    Disputes, by a sole arbitrator, but no arbitration
    proceeding may consider a matter designated by this
    Agreement to be within the sole discretion of one
    party (including without limitation, a decision by
    such party to make an additional investment in or
    loan or contribution to [the dealership]), and the
    arbitration proceeding may not revoke or revise any
    provisions of this Agreement. Arbitration shall be
    the sole and exclusive remedy between the parties
    with respect to any dispute, protest, controversy or
    claim arising out of or relating to this Agreement.
    (c)    Arbitration shall take place in the City of
    Dearborn, Michigan unless otherwise agreed by the
    parties. The substantive and procedural law of the
    State of Michigan shall apply to the proceedings.
    Equitable remedies shall be available in any
    arbitration. Punitive damages shall not be awarded.
    This Section 10.01(c) is subject to the Federal
    Arbitration Act, 9 U.S.C.A. § 1 et seq., and any
    judgment upon the award rendered by the arbitrator
    may be entered by any court having jurisdiction
    thereof.
    (d)    Any arbitration decision or award shall be
    final and binding on all parties and shall deal with
    the question of costs of arbitration, including
    -3-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    without limitation, legal fees, which shall be borne
    by the losing party to the arbitration proceeding, and
    all matters related thereto.
    (Portion of original in bold.)
    On 17 April 2009, defendant sent a letter (“Dollar Buyout Offer”) to plaintiff in
    which it offered to “waive the repayment of the outstanding balance of preferred stock
    and note associated with” the Dealer Development Agreement in exchange for one
    dollar, provided plaintiff satisfied all of the offer’s conditions by 30 September 2009.
    Plaintiff attempted to satisfy all of the conditions necessary to effectuate his
    acceptance, but the parties dispute whether plaintiff was successful.
    On 10 April 2014, plaintiff sued defendant for breach of contract, breach of the
    implied covenant of good faith and fair dealing, and unjust enrichment, as well as
    Ford Motor Credit Company, LLC (“FMCC”) and Kathleen Burns, an employee of
    FMCC, for related claims. Plaintiff alleged that one of the conditions of the Dollar
    Buyout Offer was that he obtain a standby letter of credit for $300,000 and that he
    successfully obtained such a letter from Branch Banking & Trust Company (“BB&T”).
    Plaintiff also alleged that he satisfied all of the offer’s conditions but that defendant
    later changed the offer’s conditions to require that his standby letter of credit “be
    converted to cash[.]” Plaintiff further alleged that he spoke with Burns about this
    new condition, that she agreed to contact BB&T, but that she never in fact contacted
    BB&T, which prevented plaintiff from satisfying the new condition by the offer’s
    -4-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    deadline. Plaintiff alleged that as a result, he was “immediately terminated” and
    “lost his home to foreclosure.”
    On 19 May 2014, defendant answered and moved to compel arbitration and
    dismiss plaintiff’s claims against it. After holding a hearing on 22 July 2014, the trial
    court denied the motion on 20 August 2014. On 4 September 2014, defendant gave
    timely notice of appeal.
    II.   Appellate Jurisdiction
    Although the trial court’s order is interlocutory, defendant contends that the
    order is immediately appealable because it affects a substantial right. “[T]he right to
    arbitrate a claim is a substantial right which may be lost if review is delayed, and an
    order denying arbitration is therefore immediately appealable.”         Hobbs Staffing
    Servs., Inc. v. Lumbermens Mut. Cas. Co., 
    168 N.C. App. 223
    , 225, 
    606 S.E.2d 708
    ,
    710 (2005) (brackets omitted). Accordingly, we hold that this appeal is properly
    before us.
    III.     Motion to Compel Arbitration and Dismiss
    Defendant contends that the trial court erred when it denied its motion to
    compel arbitration and dismiss. Defendant specifically argues that the trial court
    erred in concluding that (1) the FAA did not apply to this dispute; (2) the parties had
    agreed that a court, instead of an arbitrator, would decide the arbitrability of
    -5-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    plaintiff’s claims; and (3) plaintiff’s claims were not arbitrable. Because we agree
    with defendant on issue (2), we do not reach issue (3).
    A.    Standard of Review
    “The trial court’s conclusion as to whether a particular dispute is subject to
    arbitration is a conclusion of law, reviewable de novo by the appellate court.” Sloan
    Fin. Grp., Inc. v. Beckett, 
    159 N.C. App. 470
    , 478, 
    583 S.E.2d 325
    , 330 (2003), aff’d
    per curiam, 
    358 N.C. 146
    , 
    593 S.E.2d 583
    (2004).            “[Q]uestions of contract
    interpretation are reviewed as a matter of law and the standard of review is de novo.”
    Price & Price Mech. of N.C., Inc. v. Miken Corp., 
    191 N.C. App. 177
    , 179, 
    661 S.E.2d 775
    , 777 (2008).
    B.    Choice of Law
    We preliminarily note that the trial court’s order suggests that it based its
    conclusion that the FAA did not apply to this dispute on its previous conclusion that
    the parties had not agreed to arbitrate disputes arising from the Dollar Buyout Offer.
    But the trial court should have addressed the issue of choice of law before addressing
    any other legal issue. See King v. Bryant, 
    225 N.C. App. 340
    , 344, 
    737 S.E.2d 802
    ,
    806 (2013) (“[I]t is incumbent upon a trial court when considering a motion to compel
    arbitration to address whether the Federal Arbitration Act (‘FAA’) or the North
    Carolina Revised Uniform Arbitration Act (‘NCRUAA’) applies to any agreement to
    arbitrate.” (emphasis added and quotation marks and brackets omitted)).          It is
    -6-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    undisputed that the parties agreed to arbitrate disputes “arising out of or relating to”
    the Dealer Development Agreement. Accordingly, we must first address whether the
    FAA applies to the Dealer Development Agreement. See 
    id. at 344,
    737 S.E.2d at
    806.
    If the parties affirmatively chose the FAA to govern an agreement to arbitrate,
    then the FAA will apply to that agreement. 
    Id. at 345,
    737 S.E.2d at 806-07; see also
    9 U.S.C.A. ch. 1 (2009). Here, the parties affirmatively chose the FAA to govern the
    Dealer Development Agreement: “This Section 10.01(c) is subject to the Federal
    Arbitration Act, 9 U.S.C.A. § 1 et seq., and any judgment upon the award rendered by
    the arbitrator may be entered by any court having jurisdiction thereof.” Accordingly,
    we hold that the FAA applies to any dispute arising from the Dealer Development
    Agreement. See King, 225 N.C. App. at 
    345, 737 S.E.2d at 806-07
    .
    C.     Arbitrability
    Defendant next argues that the trial court erred in concluding that the parties
    had agreed that a court, instead of an arbitrator, would decide the arbitrability of
    plaintiff’s claims.
    i.     Substantive Arbitrability vs. Procedural Arbitrability
    “The twin pillars of consent and intent are the touchstones of arbitrability
    analysis. Arbitration is a matter of contract and a party cannot be required to submit
    to arbitration any dispute which he has not agreed so to submit.” Peabody Holding
    -7-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    v. United Mine Workers of America, 
    665 F.3d 96
    , 103 (4th Cir. 2012) (quotation marks
    omitted).
    Where ordinary contracts are at issue, it is up to the
    parties to determine whether a particular matter is
    primarily for arbitrators or for courts to decide. If the
    contract is silent on the matter of who primarily is to decide
    “threshold” questions about arbitration, courts determine
    the parties’ intent with the help of presumptions.
    On the one hand, courts presume that the parties
    intend courts, not arbitrators, to decide what we have
    called disputes about “arbitrability.”       These include
    questions such as “whether the parties are bound by a
    given arbitration clause,” or “whether an arbitration clause
    in a concededly binding contract applies to a particular
    type of controversy.”
    On the other hand, courts presume that the parties
    intend arbitrators, not courts, to decide disputes about the
    meaning and application of particular procedural
    preconditions for the use of arbitration. These procedural
    matters include claims of waiver, delay, or a like defense to
    arbitrability.     And they include the satisfaction of
    prerequisites such as time limits, notice, laches, estoppel,
    and other conditions precedent to an obligation to
    arbitrate.
    BG Group plc v. Republic of Arg., ___ U.S. ___, ___, 
    188 L. Ed. 2d 220
    , 228-29 (2014)
    (citations and quotation marks omitted).
    Both sections 3 and 4 [of the FAA] call for an
    expeditious and summary hearing, with only restricted
    inquiry into factual issues. Hence, whether granting an
    order to arbitrate under section 3 or section 4, the district
    court must first determine if the issues in dispute meet the
    standards of either “substantive arbitrability” or
    “procedural arbitrability.” A substantive arbitrability
    inquiry confines the district court to considering only those
    issues relating to the arbitrability of the issue in dispute
    -8-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    and the making and performance of the arbitration
    agreement. . . . [T]he first duty of the district court when
    reviewing an arbitration proceeding under section 4 of the
    Act is to conduct a substantive arbitrability inquiry—
    meaning the court engages in a limited review to ensure
    that the dispute is arbitrable—i.e., that a valid agreement
    to arbitrate exists between the parties and that the specific
    dispute falls within the substantive scope of that
    agreement. If the court determines that an agreement
    exists and that the dispute falls within the scope of the
    agreement, it then must refer the matter to arbitration
    without considering the merits of the dispute. All other
    issues raised before the court not relating to these two
    determinations fall within the ambit of “procedural
    arbitrability.”
    ....
    It is clear from these decisions, which represent over
    thirty years of Supreme Court and federal circuit court
    precedent that issues of “substantive arbitrability” are for
    the court to decide, and questions of “procedural
    arbitrability[]” . . . are for the arbitrator to decide.
    Glass v. Kidder Peabody & Co., Inc., 
    114 F.3d 446
    , 453-54 (4th Cir. 1997) (citations,
    quotation marks, brackets, and footnotes omitted); see also 9 U.S.C.A. §§ 3, 4.
    Here, defendant argues that the trial court erred in concluding that plaintiff’s
    claims did not fall within the scope of the arbitration clause of the Dealer
    Development Agreement. This issue is a question of substantive arbitrability. 
    Glass, 114 F.3d at 453
    ; BG Group, ___ U.S. at ___, 188 L. Ed. 2d at 228. Therefore, as an
    initial matter, we presume that the parties intended that the trial court decide this
    issue of substantive arbitrability. 
    Glass, 114 F.3d at 454
    ; BG Group, ___ U.S. at ___,
    188 L. Ed. 2d at 228.
    -9-
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    ii.    Clear and Unmistakable Intent
    A party can overcome this presumption if it shows that the parties “clearly and
    unmistakably” intended for an arbitrator, instead of a court, to decide issues of
    substantive arbitrability. See AT&T Technologies v. Communications Workers, 
    475 U.S. 643
    , 649, 
    89 L. Ed. 2d 648
    , 656 (1986); Peabody 
    Holding, 665 F.3d at 102
    .
    Those who wish to let an arbitrator decide which issues are
    arbitrable need only state that “all disputes concerning the
    arbitrability of particular disputes under this contract are
    hereby committed to arbitration,” or words to that clear
    effect. Absent such clarity, we are compelled to find that
    disputes over the arbitrability of claims are for judicial
    resolution.
    Carson v. Giant Food, Inc., 
    175 F.3d 325
    , 330-31 (4th Cir. 1999).
    At least eight federal appellate courts have held that the parties’ express
    adoption of an arbitral body’s rules in their agreement, which delegate questions of
    substantive arbitrability to the arbitrator, presents clear and unmistakable evidence
    that the parties intended to arbitrate questions of substantive arbitrability. See
    Petrofac, Inc. v. DynMcDermott Petroleum, 
    687 F.3d 671
    , 675 (5th Cir. 2012) (holding
    that the parties’ express adoption of the American Arbitration Association rules in
    their agreement constituted clear and unmistakable evidence); Fallo v. High-Tech
    Institute, 
    559 F.3d 874
    , 878 (8th Cir. 2009) (same); Qualcomm Inc. v. Nokia Corp.,
    
    466 F.3d 1366
    , 1373 (Fed. Cir. 2006) (same); Terminix Intern. v. Palmer Ranch Ltd.
    Partnership, 
    432 F.3d 1327
    , 1332-33 (11th Cir. 2005) (same); Contec Corp. v. Remote
    - 10 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    Solution, Co., Ltd., 
    398 F.3d 205
    , 208 (2d Cir. 2005) (same); Chevron Corp. v. Ecuador,
    
    795 F.3d 200
    , 207-08 (D.C. Cir. 2015) (same result under the United Nations
    Commission on International Trade Law rules); Oracle America, Inc. v. Myriad Group
    A.G., 
    724 F.3d 1069
    , 1074-75 (9th Cir. 2013) (same); Apollo Computer, Inc. v. Berg,
    
    886 F.2d 469
    , 473-74 (1st Cir. 1989) (same result under International Chamber of
    Commerce rules).
    We note that three federal appellate courts have held that the parties had not
    delegated issues of substantive arbitrability to the arbitrator despite their express
    adoption of an arbitral body’s rules in their agreement.        See Quilloin v. Tenet
    HealthSystem Philadelphia, Inc., 
    673 F.3d 221
    , 225-26, 229-30 (3rd Cir. 2012); Oblix,
    Inc. v. Winiecki, 
    374 F.3d 488
    , 490 (7th Cir. 2004); Riley Mfg. Co. v. Anchor Glass
    Container Corp., 
    157 F.3d 775
    , 777 n.1, 780-81 (10th Cir. 1998). But in each of these
    cases, the court did not specifically address whether the parties’ express adoption of
    these rules constituted clear and unmistakable evidence that they intended to
    arbitrate questions of substantive arbitrability, nor did the court examine the rules
    to determine if they delegated questions of substantive arbitrability to the arbitrator.
    
    Quilloin, 673 F.3d at 229-30
    ; 
    Oblix, 374 F.3d at 490
    ; 
    Riley, 157 F.3d at 780-81
    .
    Accordingly, we hold that Quilloin, Oblix, and Riley are inapposite.
    Plaintiff argues that while the Fourth Circuit Court of Appeals “has not ruled
    explicitly” on this issue, two cases from that Court suggest that parties’ express
    - 11 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    adoption of an arbitral body’s rules does not constitute “clear and unmistakable”
    evidence that the parties intended to arbitrate questions of substantive arbitrability.
    See Cathcart Properties, Inc. v. Terradon Corp., 364 F. App’x 17, 18 (4th Cir. Feb. 4,
    2010) (per curiam) (unpublished); Central West Virginia Energy v. Bayer Cropscience,
    
    645 F.3d 267
    , 273-74 (4th Cir. 2011). But neither case stands for this proposition or
    even addresses this issue.
    In Cathcart Properties, the Fourth Circuit held that the parties did not “clearly
    and unmistakably” agree to arbitrate questions of substantive arbitrability,
    “[b]ecause there was no contract provision that expressly stated that the parties
    agreed to arbitrate the arbitrability of a claim[.]” Cathcart Properties, 364 F. App’x
    at 18. The Court did not address or even mention the issue of whether parties can
    delegate questions of substantive arbitrability to the arbitrator by expressly adopting
    an arbitral body’s rules. Plaintiff points out that in the relevant arbitration provision,
    the parties identified the arbitral body that would decide any arbitration claims:
    “[T]he parties agree that any dispute or controversy arising from this Contract which
    would otherwise require or allow resort to any court or other governmental dispute
    resolution forum, shall be submitted for determination by binding arbitration under
    the Construction Industry Dispute Resolution of the America[n] Arbitration
    Association.” Cathcart Properties, Inc. v. Terradon Corp., Civil Action No. 3:08-0298,
    slip op. at 2 (S.D. W. Va. Feb. 6, 2009) (unpublished), aff’d per curiam, 364 F. App’x
    - 12 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    17 (4th Cir. Feb. 4, 2010) (unpublished). But the parties did not expressly adopt the
    rules of an arbitral body; rather, they merely identified the arbitral body.
    Accordingly, we distinguish Cathcart Properties. We also note that as an unpublished
    opinion, Cathcart Properties is not binding precedent in the Fourth Circuit. Cathcart
    Properties, 364 F. App’x at 18.
    Plaintiff next points out that in Central West Virginia Energy, the Fourth
    Circuit held that the parties’ dispute was “not a matter of arbitrability that
    necessitates resolution by a court” and that “delineating an issue as either one of
    arbitrability or one of procedure serves the goal of preserving the former for judicial
    resolution.” Central West Virginia 
    Energy, 645 F.3d at 273-74
    . But the Court also
    qualified this distinction in accordance with U.S. Supreme Court precedent and
    quoted Howsam v. Dean Witter Reynolds, Inc.: “[T]he question whether the parties
    have submitted a particular dispute to arbitration, i.e., the question of arbitrability,
    is an issue for judicial determination unless the parties clearly and unmistakably
    provide otherwise.”   
    Id. at 273
    (emphasis added and brackets omitted) (quoting
    Howsam v. Dean Witter Reynolds, Inc., 
    537 U.S. 79
    , 83, 
    154 L. Ed. 2d 491
    , 497 (2002)).
    As the Fourth Circuit has not yet addressed the issue of whether parties’
    express adoption of an arbitral body’s rules, which delegate questions of substantive
    arbitrability to the arbitrator, constitutes “clear and unmistakable” evidence that the
    - 13 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    parties intended to arbitrate questions of substantive arbitrability, we will follow the
    majority rule.
    We recognize that this Court has held that the parties’ adoption of an arbitral
    body’s rules was clear and unmistakable evidence that the parties intended for an
    arbitrator to decide a question of procedural arbitrability. See Smith Barney, Inc. v.
    Bardolph, 
    131 N.C. App. 810
    , 817, 
    509 S.E.2d 255
    , 259-60 (1998).             There, the
    defendant argued that an arbitrator should decide the question of whether his claims
    were barred as untimely under the National Association of Securities Dealers
    (“NASD”) arbitration rules. 
    Id. at 813,
    509 S.E.2d at 257. This Court held: “The
    parties’ adoption of [the NASD rules] is a ‘clear and unmistakable’ expression of their
    intent to leave the question of arbitrability to the arbitrators. In no uncertain terms,
    Section 10324 [of the NASD rules] commits interpretation of all provisions of the
    NASD Code to the arbitrators.” 
    Id. at 817,
    509 S.E.2d at 259 (brackets omitted).
    Following the majority rule among the federal appellate courts, we extend this
    holding to the context of substantive arbitrability.
    In article 10.01(b) of the Dealer Development Agreement, the parties expressly
    adopted the CPR Institute for Dispute Resolution (“CPR”) rules:
    If appeal to the Policy Board fails to resolve any dispute
    covered by this Article 10 within 180 days after it was
    submitted to the Policy Board, or if [plaintiff] shall be
    dissatisfied with the decision of the Policy Board, the
    dispute shall be finally settled by arbitration in accordance
    with the rules of the CPR Institute for Dispute Resolution
    - 14 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    (the “CPR”) for Non-Administered Arbitration for Business
    Disputes, by a sole arbitrator, but no arbitration proceeding
    may consider a matter designated by this Agreement to be
    within the sole discretion of one party (including without
    limitation, a decision by such party to make an additional
    investment in or loan or contribution to [the dealership]),
    and the arbitration proceeding may not revoke or revise
    any provisions of this Agreement. Arbitration shall be the
    sole and exclusive remedy between the parties with respect
    to any dispute, protest, controversy or claim arising out of
    or relating to this Agreement.
    (Emphasis added.) Rule 8.1 of the CPR rules provides: “The Tribunal shall have the
    power to hear and determine challenges to its jurisdiction, including any objections
    with respect to the existence, scope or validity of the arbitration agreement.”
    (Emphasis added.) Given the parties’ adoption of the CPR rules, which includes CPR
    Rule 8.1., we hold that the parties clearly and unmistakably intended that an
    arbitrator would decide questions of substantive arbitrability, like the one at issue
    here. See 
    Petrofac, 687 F.3d at 675
    ; 
    Fallo, 559 F.3d at 878
    ; 
    Qualcomm, 466 F.3d at 1373
    .
    iii.   “Wholly Groundless” Exception
    Plaintiff responds that even if the parties intended to arbitrate issues of
    substantive arbitrability, the trial court did not err in denying defendant’s motion to
    compel arbitration because defendant’s motion was “wholly groundless.” If a party’s
    claim of arbitrability is “wholly groundless,” the trial court must deny the party’s
    motion to compel arbitration even if the parties have agreed that an arbitrator should
    - 15 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    decide questions of substantive arbitrability. See Local No. 358, Bakery & Confec.,
    etc. v. Nolde Bros., 
    530 F.2d 548
    , 553 (4th Cir. 1975) (“[T]he arbitrability of a dispute
    may itself be subject to arbitration if the parties have clearly so provided in the
    agreement. Of course, the court must decide the threshold question whether the
    parties have in fact conferred this power on the arbitrator. If they have, the court
    should stay proceedings pending the arbitrator’s determination of his own
    jurisdiction, unless it is clear that the claim of arbitrability is wholly groundless.”)
    (emphasis added), aff’d, 
    430 U.S. 243
    , 
    51 L. Ed. 2d 300
    (1977). The purpose of this
    inquiry is to “prevent[] a party from asserting any claim at all, no matter how divorced
    from the parties’ agreement, to force an arbitration.” 
    Qualcomm, 466 F.3d at 1373
    n.5.
    Because the wholly groundless inquiry is supposed to be
    limited, a court performing the inquiry may simply
    conclude that there is a legitimate argument that the
    arbitration clause covers the present dispute, and, on the
    other hand, that it does not[,] and, on that basis, leave the
    resolution of those plausible arguments for the arbitrator.
    Nevertheless, the wholly groundless inquiry necessarily
    requires the courts to examine and, to a limited extent,
    construe the underlying agreement.
    Douglas v. Regions Bank, 
    757 F.3d 460
    , 463 (5th Cir. 2014) (quotation marks,
    brackets, and ellipsis omitted).
    Here, the scope of the parties’ arbitration agreement is broad and covers “any
    dispute, protest, controversy or claim arising out of or relating to” the Dealer
    - 16 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    Development Agreement. See American Recovery v. Computerized Thermal Imaging,
    
    96 F.3d 88
    , 93 (4th Cir. 1996) (holding that substantively identical language in an
    arbitration provision was “capable of an expansive reach” and “embraced every
    dispute between the parties having a significant relationship to the contract
    regardless of the label attached to the dispute” (brackets omitted)). All of plaintiff’s
    claims against defendant arise from his allegation that after he satisfied all of the
    conditions necessary to effectuate his acceptance of the Dollar Buyout Offer,
    defendant unilaterally changed one of the offer’s conditions, which plaintiff then was
    unable to satisfy. Under the Dollar Buyout Offer, defendant offered to “waive the
    repayment of the outstanding balance of preferred stock and note associated with”
    the Dealer Development Agreement in exchange for one dollar, provided plaintiff
    satisfied all of the offer’s conditions. Given the broad scope of the parties’ arbitration
    clause in the Dealer Development Agreement and the fact that the Dollar Buyout
    Offer directly relates to the Dealer Development Agreement, we hold that it is
    plausible that plaintiff’s claims are arbitrable and thus defendant’s motion to compel
    arbitration is not “wholly groundless.” See 
    Douglas, 757 F.3d at 463
    . Accordingly,
    we hold that the trial court erred in concluding that the parties had agreed that a
    court, instead of an arbitrator, would decide the arbitrability of plaintiff’s claims.
    IV.    Conclusion
    - 17 -
    BAILEY V. FORD MOTOR CO.
    Opinion of the Court
    For the foregoing reasons, we reverse the trial court’s order denying
    defendant’s motion to compel arbitration and dismiss.
    REVERSED.
    Judges McCULLOUGH and INMAN concur.
    - 18 -
    

Document Info

Docket Number: 15-9

Citation Numbers: 780 S.E.2d 920, 244 N.C. App. 346

Filed Date: 12/15/2015

Precedential Status: Precedential

Modified Date: 1/12/2023

Authorities (20)

Apollo Computer, Inc. v. Helge Berg , 886 F.2d 469 ( 1989 )

riley-manufacturing-company-inc-plaintiff-counter-defendant-appellee-v , 157 F.3d 775 ( 1998 )

PEABODY HOLDING v. United Mine Workers of America , 665 F.3d 96 ( 2012 )

CONTEC CORPORATION, Plaintiff-Counter-Defendant-Appellee, v.... , 398 F.3d 205 ( 2005 )

Terminix International Co. LP v. Palmer Ranch Ltd. ... , 432 F.3d 1327 ( 2005 )

Quilloin v. Tenet HealthSystem Philadelphia, Inc. , 673 F.3d 221 ( 2012 )

Price & Price Mechanical of N.C., Inc. v. Miken Corp. , 191 N.C. App. 177 ( 2008 )

Fallo v. High-Tech Institute , 559 F.3d 874 ( 2009 )

Oblix, Inc. v. Felicia Ferguson Winiecki , 374 F.3d 488 ( 2004 )

Martin Glass v. Kidder Peabody & Co., Inc., a Delaware ... , 114 F.3d 446 ( 1997 )

Sloan Financial Group, Inc. v. Beckett , 358 N.C. 146 ( 2004 )

Central West Virginia Energy, Inc. v. Bayer Cropscience LP , 645 F.3d 267 ( 2011 )

gregory-carson-wilbert-skipper-jr-melvyn-connors-william-ingram-david , 175 F.3d 325 ( 1999 )

american-recovery-corporation-v-computerized-thermal-imaging-incorporated , 96 F.3d 88 ( 1996 )

Smith Barney, Inc. v. Bardolph , 131 N.C. App. 810 ( 1998 )

Hobbs Staffing Services, Inc. v. Lumbermens Mutual Casualty ... , 168 N.C. App. 223 ( 2005 )

Nolde Bros., Inc. v. Local No. 358, Bakery & Confectionery ... , 97 S. Ct. 1067 ( 1977 )

At&T Technologies, Inc. v. Communications Workers , 106 S. Ct. 1415 ( 1986 )

Howsam v. Dean Witter Reynolds, Inc. , 123 S. Ct. 588 ( 2002 )

BG Group, PLC v. Republic of Argentina , 134 S. Ct. 1198 ( 2014 )

View All Authorities »