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ARBITRATION - SCOPE OF AGREEMENT - DAPHNE AUTOMOTIVE, LLC V. EASTERN SHORE NEUROLOGY CLINIC, INC.

Daphne Automotive, LLC v. Eastern Shore Neurology Clinic, Inc., [Ms. 1151296, Aug. 11, 2017] __ So. 3d __ (Ala. 2017). In a decision by Justice Sellers (Stuart, C.J., and Parker and Wise, JJ., concur; and Shaw, JJ., concurs in the result), the Court affirms the circuit court’s denial of the automobile dealership’s motion to compel arbitration. The plaintiff’s medical practice and its principal sued Daphne Automotive, LLC, and its salesperson, asserting various tort theories of recovery arising from the dealership’s alleged failure to list the medical practice as a lienholder on an automobile the medical practice purchased for an employee. As a result of the automobile dealership’s failure to list the medical practice as a lienholder on the vehicle, when the employee was terminated he held free and clear legal title to the vehicle and refused to relinquish the vehicle. In affirming the circuit court’s refusal to compel arbitration, the Supreme Court held:

It is well established that “ ‘ “ ‘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.’ ” ’ ” Custom Performance, Inc. v. Dawson, 57 So. 3d 90, 97 (Ala. 2010) (quoting Central Reserve Life Ins. Co. v. Fox, 869 So. 2d 1124, 1127 (Ala. 2003), quoting in turn AT & T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986), quoting in turn United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960)). “A party typically manifests its assent to arbitrate a dispute by signing the contract containing the arbitration provision.” Smith v. Mark Dodge, Inc., 934 So. 2d 375, 380 (Ala. 2006).

Ms. at 8-9. The defendants contended that the plaintiffs were third-party beneficiaries of the sales contract signed by the employee (which contained an arbitration provision), because the plaintiffs’ medical practice purchased the vehicle to compensate the nephew for his employment. The Court ultimately found it unnecessary to determine whether the plaintiffs were third-party beneficiaries of the arbitration agreement because it found that the dealership was “seeking to enforce the arbitration agreements beyond the scope of those agreements.” Ms. at 12. The Court noted that the scope of the arbitration agreement signed by the dealership and the employee, though broad in terms of the types of disputes covered, was “limited to disputes that arise ‘between them,’ i.e., the ‘buyer/lessor’ (employee) and the ‘dealership.’” Ms. at 12. The Court concluded that the dealership could not compel arbitration because the agreements were “limited by the terms to disputes between the signatories.” Ms. at 14.

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