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ARBITRATION - ENFORCEMENT BY NON-PARTY - APPELLATE PROCEDURE - WAIVER - ALTERATION OF INSTRUMENT: LOCKLEAR AUTOMOTIVE GROUP, INC. V. HUBBARD, ET AL.

Locklear Automotive Group, Inc. v. Hubbard, et al., [Ms. 1160335, 1160336, 1160337, 1160375, 1160435, 1160436, 1160437, Sept. 29, 2017] __ So. 3d __ (Ala. 2017). In this unanimous decision by Justice Murdock (Stuart, C.J., and Bolin, Main, and Bryan, JJ., concur), the Court reverses orders of the circuit courts of Bibb and Tuscaloosa counties denying motions to compel arbitration in six of the seven appeals and affirms the Bibb Circuit Court’s order denying the defendants’ motion to compel arbitration in the other appeal (Lollar).

The various actions alleged that the respective plaintiffs were victims of identity theft as a result of having dealt with Locklear Chrysler Jeep Dodge, LLC (“Locklear CJD”). Plaintiffs also sued Locklear Automotive Group, the sole member of Locklear CJD. Ms. *5. The operative language in each of the seven arbitration agreements was identical; the material part concerning the scope of the agreements was as follows:

The undersigned agree that all disputes not barred by applicable statutes of limitation, resulting from, arising out of, relating to or concerning the transaction entered into or sought to be entered into (including but not limited to: any matters taking place either before or after the parties entered into this agreement, including any prior agreements or negotiations between the parties; the terms of this agreement and all clauses herein contained, their breadth and scope, ... shall be submitted to BINDING ARBITRATION.

Ms. *5-6.

The Court agreed with the plaintiffs that Locklear Group had waived its argument that the arbitrator should decide the issue of arbitrability. In agreeing with plaintiffs on waiver, the Court held that Locklear Group’s solitary sentence in its motions to compel was not sufficient to apprise the trial courts of Locklear Group’s position that arbitrability issues had to be decided by the arbitrator. Ms. *32. The Court cited a number of cases holding that a fleeting mention of a contention in a sentence in a lengthy trial court filing was not sufficient to raise an argument in the trial court so as to preserve the issue for appellate review. Ms. *33.

The Court also granted the plaintiffs’ motion to strike references in Locklear Group’s appellate brief to arguments and statements Locklear Group allegedly made in hearings before the trial court which were not transcribed. The Court noted that “[t]his court is limited to a review of the record alone and the record cannot be changed, altered, or varied on appeal by statements in briefs of counsel.” Ms. *35.

The Court reversed the trial courts’ orders denying Locklear Group’s motion to compel arbitration in six of the seven appeals. The Court concluded that those plaintiffs were equitably estopped from contending that non-signatory Locklear Group was not entitled to enforce the arbitration provisions. The Court pointed to language in the agreements that “the undersigned agree that all disputes ... resulting from, arising out of, relating to, or concerning the transaction ... shall be submitted to binding arbitration.” Ms. *47. The Court also concluded that the claims against Locklear Group were sufficiently intertwined with the underlying contract obligations of Locklear CJD to support invocation of estoppel of the plaintiffs to oppose the non-signatory’s enforcement of the arbitration provision. The Court noted that “[t]he plaintiffs’ complaints make virtually no distinction between the bad acts of Locklear Group and those of Locklear CJD.” Ms. *52. The Court ultimately concluded “that the plaintiffs’ claims against Locklear Group as a non-signatory to the arbitration agreement are ‘intimately founded in and intertwined with’ the underlying contract obligations and with the plaintiffs’ contract-related claims against the signatory to the arbitration agreement, Locklear CJD, so that the doctrine of equitable estoppel is applicable.” Ms. *53.

As to the appeal of Jeffery Lollar and Betsy Lollar, the Court affirmed the Bibb Circuit Court’s order denying the defendants’ motion to compel arbitration. This was a fact-specific holding driven by the fact that the Lollars alleged that they were the victims of identity theft arising from their having given the defendants their personal financial information in December 2015, an occasion on which they did not buy a vehicle or sign any purchase/arbitration agreement. The purchase agreement which contained the arbitration provision was executed by the Lollars in May 2013 when they purchased a 2009 Dodge Ram truck. Accordingly, the Court held that from the face of the plaintiffs’ complaint, that the claims alleged by the plaintiffs were not within the scope of the arbitration provision signed in 2013. Ms. *59.

In the appeal involving plaintiff Anthony Hood, the Court also rejected Hood’s unsupported contention that the arbitration agreement was “fabricated.” Ms. *71. Hood contended that the agreement was fabricated because it had been altered after his signature by the addition of the words “Locklear Chrysler Jeep Dodge, LLC.” The Court rejected this contention holding “‘[i]n general, for the alteration of an instrument to be ‘material,’ the alteration must be such as to change the legal effect of the instrument.” Ms. *66. The Court found that there was no material alteration of the arbitration agreement because

Hood knew and admitted he was signing an arbitration agreement with Locklear CJD in connection with his purchase of a vehicle. A representative of the dealership signed the agreement. The terms of that agreement were not changed in any degree by the alleged addition of the words Locklear Chrysler Jeep Dodge, LLC. Accordingly, the arbitration agreement was not “fabricated,” and Hood’s argument does not defeat the arbitration of Hood’s underlying claims.

Ms. *66-67.

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