Opinion
Civil Action No.: 2:06-123-CWH.
May 11, 2006
ORDER
This matter is before the Court on (1) the plaintiff's motion for reconsideration, (2) Defendant Roger S. Penske's ("Penske) motion to dismiss for lack of personal jurisdiction, and (3) Defendant United Auto Group's (UAG's) motion to compel arbitration.
HBL, a limited liability company organized under the laws of Delaware with its principal place of business in Virgina, operates a car dealership, Porsche Tyson's Corner, in Virginia. HBL contracted with Auction 123 to list a new black Porsche Carrera GT for sale. Auction 123 listed the black Porsche model on Ebay as new. Driscoll, an HBL employee, was listed as the contact person for the listed black Porsche model. The plaintiff Robert A. Gosett ("Gossett") placed the highest bid of $380,000.00 on the black Porsche model. The parties agreed to substitute a silver Porsche (VIN number: WP0CA29885L001398) (hereinafter "Porsche") for the listed black Porsche model.
When Gossett received the Porsche, he started it and heard a knocking noise. Gossett took the Porsche to Porsche Cars North America, an authorized dealer ("Dealer"), in Bluffton, South Carolina. The Dealer stated that the engine would have to be lifted to determine the problem. Gosett did not consent because he believes that lifting the engine would diminish the value of the Porsche.
Gossett is suing for breach of contract, breach of warranty, quantum meruit, promissory estoppel, breach of implied covenant of good faith and fair dealing, breach of contract accompanied by a fraudulent act, violation of Virginia motor vehicle dealer's statute, negligence, unfair trade practices, misrepresentation, conspiracy, the Racketeer Influenced and Corrupt Organizations statute 18 U.S.C. §§ 1961- 1964, and the Magnusson Moss Warranty Act 15 U.S.C. §§ 2301- 2308.
Plaintiff's Motion for Reconsideration
At the April 10, 2006, hearing, this Court dismissed defendants HBL, LLC and Patrick Driscoll on the record for lack of personal jurisdiction. On April 24, 2006, the plaintiff moved for reconsideration. A Rule 59(e) motion seeks an extraordinary remedy that district courts should use sparingly. See Pacific Insurance Co. v. American National Fire Insurance Co., 148 F.3d 396, 403 (4th Cir. 1998). Indeed, the Fourth Circuit recognizes only three grounds for a Rule 59(e) motion: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or to prevent manifest injustice. See id. at 402;EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997); Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir. 1993). The plaintiff alleges that the Court committed a clear error of law in its application of Carefirst of Md. v. Carefirst Pregnancy Ctr., Inc., 334 F.3d 390, 398 n. 7 (4th Cir. 2003).
HBL listed the Porsche for auction on Ebay. Gossett was the highest bidder. All communications between HBL and Gossett were conducted via internet, e-mail, telephone, or Fed Ex. Gosett granted HBL a power of attorney to title the Porsche in his name. All documents relating to the sale were executed in Virginia. Finally, HBL hired a third party to deliver the Porsche.
HBL's mere listing on Ebay is not enough to invoke jurisdiction in South Carolina. "[I]solated items or activities in a state in the corporation's behalf are not enough to subject it to [general jurisdiction]." Int'l Shoe, 326 U.S. at 317. In Carefirst, the Fourth Circuit held that a Maryland court lacked personal jurisdiction over a defendant who set up its generally accessible website to facilitate sales throughout the United States and Canada because the defendant did not purposefully direct its activity into the forum state with the manifest intent of engaging in that business in that state in particular. Carefirst of Md., Inc. v. Carefirst Pregnancy Ctr, Inc., 334 F.3d 390, 401 (2003). The plaintiff argues that the Carefirst holding should not be applied to this case because the website in theCarefirst case had a strongly local character. This argument is without merit. Specific jurisdiction may be based on the defendant's internet activity when the defendant directed his internet activity at the forum state and caused injury giving rise to a claim in the forum state. ALS Scan, Inc. v. Digital Serv. Consultants, Inc., 293 F.3d 707, 714 (4th Cir. 2002). HBL states that it did not advertise specifically toward South Carolina and that anyone could have accessed its listing on the internet. A copy of the Ebay listing indicates that any Ebay user worldwide could have purchased the Porsche providing that the buyer pay for shipping. HBL did not direct its activities at South Carolina. Therefore, this Court lacks personal jurisdiction over HBL.
Driscoll, a Virgina resident, is an HBL employee and was listed on Ebay as the "contact person" for the Porsche listing. On several occasions prior to purchase, Driscoll spoke with Gosett via phone and e-mail. After Gossett purchased the Porsche, Driscoll helped make delivery arrangements.
This Court lacks personal jurisdiction over Driscoll because such jurisdiction is inconsistent with constitutional due process. Due process requires that the defendant have certain minimum contacts with the forum state and that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.
This suit did not arise out of Driscoll's contacts with South Carolina. Driscoll acted on behalf of HBL. He did not purposefully avail himself of the privilege of conducting business within the forum state, invoking the benefits and protection of its laws so that he could reasonably anticipate being haled into court in South Carolina. This Court lacks jurisdiction over Driscoll, whose only connection to this case are his acts in the scope of his employment at HBL. Therefore, the plaintiff's motion for reconsideration with respect to the dismissal of HBL and Driscoll for lack of personal jurisdiction is denied. Penske's Motion to Dismiss for Lack of Jurisdiction
Personal jurisdiction arises out of "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). There are two types of personal jurisdiction: general and specific. A court has general jurisdiction over a cause of action that arises outside of the forum state. Calder v. Jones, 465 U.S. 783, 786 (1984). A court has specific jurisdiction over a cause of action which directly arises out of or relates to the defendant's forum state activities.
"When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff ultimately bears the burden of proving to the district court judge the existence of jurisdiction over the defendant by a preponderance of the evidence." New Wellington Fin. v. Flagship Resort Dev., 416 F.2d 290, 294 (3d Cir. 1969) ( citing Combs v. Bakker, 886 F.2d 673, 676).
However, when a district court rules on a motion to dismiss for lack of jurisdiction without conducting a hearing or deferring its ruling pending receipt of evidence relevant to the jurisdictional issue, the burden on the plaintiff is simply to make a prima facie showing of a sufficient jurisdictional basis to survive the jurisdictional challenge. See New Wellington Fin. v. Flagship Resort Dev., 416 F.2d at 294; Celotex Corp. v. Rapid Am. Corp., 124 F.3d 619, 628 (1997); Combs v. Bakker, 886 F.2d 673, 676 (1989).
General jurisdiction is permissible under the due process clause when the defendant has an enduring relationship with the forum state, and his connection to and activities in the forum state are so substantial that the defendant would expect to be subject to suit there on any claim and would suffer no inconvenience from defending there.
"The essence of the issue . . . is . . . one of general fairness to the [defendant]." Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445 (1952). In Perkins, the U.S. Supreme Court examined the quality and nature of a company's activities in the forum state and held that the forum state had general jurisdiction over the defendant company, which carried on continuous and systematic business correspondence, maintained bank accounts, paid salaries, and made managerial decisions in the forum state. Perkins v. Benuguet Consol. Mining Co., 342 U.S. at 448.
In contrast, the U.S. Supreme Court held that a Texas court had no general jurisdiction over a defendant, whose only contacts consisted of "sending its chief executive officer to Houston for a contract-negotiation session; accepting its New York bank account checks drawn on a Houston bank; purchasing helicopters, equipment, and training services from [a Texas company]; and sending personnel to [Bell Helicopter's] facilities in Fort Worth for training." Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 416 (1984).
A court has specific jurisdiction over a cause of action, which arises directly out of or relates to the defendant's forum state activities. The South Carolina Supreme Court sometimes analyzes specific jurisdiction in a two step process, first examining the applicability of specific subsections of the South Carolina long arm statute and then examining whether jurisdiction violates the due process clause. S. Plastics Co. v. S. Commerce Bank, 423 S.E.2d 128, 130 (S.C. 1992). However, because the South Carolina Supreme Court has held that the South Carolina long arm statute is deemed to reach the limits of due process, federal courts normally conduct a single inquiry under the due process clause.Fed. Ins. Co. v. Lake Shore, Inc., 886 F.2d 654, 657 n. 2 (4th Cir. 1989).
Beginning with its decision in World-Wide Volkswagen Corp. v. Woodson, the U.S. Supreme Court articulated a two-branch due process test for determining specific jurisdiction. 444 U.S. 286, 291(1980). The first branch, the traditional minimum contacts branch, focuses on the defendant's connection with the forum state and the relationship between that connection and the litigation. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471-76 (1985). The second branch is frequently referred to as the fairness, convenience, or reasonableness branch. In World-Wide, Burger King and Asahi Metal Indus. Co. v. Super. Ct. ( 480 U.S. 102, 113 (1987)), the U.S. Supreme Court explained that beyond the requirement of minimum contacts, due process requires further factual evaluation to determine whether an assertion of personal jurisdiction comports with fair play and substantial justice. See Burger King Corp. v. Rudzewicz, 471 U.S. at 476 ( quoting Int'l Shoe Co. v. Wash., 326 U.S. 310, 320 (1945). Penske is a Michigan resident and member of HBL, LLC, who has been dismissed from this action for lack of personal jurisdiction. This Court lacks personal jurisdiction over Penske because such jurisdiction fails to comport with due process. Due process requires that the defendant have certain minimum contacts with the forum state and that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.
This suit did not arise out of Penske's contacts with South Carolina. Penske did not participate in the sale of the Porsche to Gossett and did not direct his activities to South Carolina. He did not purposefully avail himself of the privilege of conducting business within the forum state, invoking the benefits and protection of its laws so that he could reasonably anticipate being haled in court in South Carolina. Because this Court lacks jurisdiction over HBL, it also lacks jurisdiction over Penske whose only connection to this case is his membership in HBL. Penske's mere HBL membership is insufficient to invoke jurisdiction in South Carolina. Gossett's claim against Penske rests on nothing more than his membership in HBL, and any connection that Penske had with HBL occurred outside of South Carolina. Therefore, the nexus between Penske and South Carolina is too tenuous to support personal jurisdiction over Penske. See Columbia Briargate Co. v. First Nat. Bank in Dallas, 713 F.2d 1052, 1064-65 (4th Cir. 1983). Penske's motion to dismiss for lack of jurisdiction is granted.
Motion to Compel Arbitration
United Auto Group ("UAG") asks this Court to compel an arbitration clause in the purchase agreement. The arbitration clause states that it covers all causes of action relating to the sale of the Porsche except for a new car lemon claim, Magnusson Moss Warranty Act claim, and small claims. The Ebay terms required Gossett to pay 10% of the purchase price and to communicate with HBL and Driscoll within 24 hours of the close of the auction in order "to make arrangements to complete the transaction." The provision also explained that "before vehicle is released for shipment to buyer, all sale related and title related paperwork must be signed and returned complete to seller." (Auction Ebay Terms, Section 11).
When the auction closed, Gossett contacted Driscoll to finalize the purchase. He paid 10% down and signed the sale and title related paperwork. One document that Gossett signed was the Purchase Agreement, which provided that any claim, dispute, or controversy relating to the sale of the Porsche is subject to the Federal Arbitration Act.
Gossett argues that the arbitration clause should be unenforceable because the sale was complete at the fall of the electronic hammer. "A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner." S.C. CODE ANN. § 36-2-207(1). Gossett states that the Purchase Agreement was an attempt to modify the complete Ebay agreement and is unenforceable pursuant to the Uniform Commercial Code.
UAG argues that the sale was not complete upon the fall of the electronic hammer. Section 11 of the Auction Ebay Terms is entitled "Finalizing Your Purchase" and clearly states that the successful high bidder must: (1) contact Driscoll and HBL within 24 hours, (2) pay 10% down within 24 hours, and (3) complete all sale and title related paperwork. In this section, HBL reserved the right to re-list the Porsche in an auction or sell it to another party if the successful high bidder failed to carry out any of the three requirements. UAG states that Section 11 constituted a condition precedent to the contract. A condition precedent is "any fact other than the lapse of time, which, unless excused must exist or occur before a duty of immediate performance arises." Brewer v. Stokes Kia, Isuzu, Subaru, Inc., 613 S.E.2d 802, 805 (S.C.Ct.App. 2005). Gossett's argument that the contract was complete upon the close of the Ebay sale is without merit. Therefore, this Court turns to the Arbitration Clause of the Purchase Agreement, which provides:
The parties to this agreement agree to arbitrate any claim, dispute, or controversy, including all statutory claims and any state or federal claims, that may arise out of or are related to the purchase or lease of the automobile identified in the Motor Vehicle Retail Order and the financing thereof, including the validity of this agreement. This Arbitration Agreement is made pursuant to a transaction involving interstate commerce and should be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1, and not by state law regarding arbitration. By agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes. State Consumer Fraud Act, Used Car Lemon Law and Truth-in Lending claims are just three examples of the various types of claims subject to arbitration under this agreement. The parties also agree to waive any right to pursue any such claims including statutory, state or federal claims, as a class action, either in arbitration or through a court action. There are no limitations on the types of claims that must be arbitrated, except for new car lemon claims, Magnusson-Moss Warranty Act claims, and small claims filed as a court action, unless such small claim is then removed, transferred, or appealed to a different court. The arbitration shall be conducted in accordance with this agreement with the Rules of the American Arbitration Association (the "Rules") before a single arbitrator. If a conflict exists between the terms of this Arbitration Agreement and the Rules, then this Arbitration Agreement shall govern. The costs incurred in the arbitration process shall be shared as provided by the Rules. The arbitration shall take place in Virginia in a mutually agreed upon location. The decision of the arbitrator shall be binding upon the parties. Any further relief sought by either party will be subject to the decision of the arbitrator. THIS ARBITRATION AGREEMENT LIMITS YOUR RIGHT TO MAINTAIN A COURT ACTION, HAVE A JURY TRIAL, OR PURSUE YOUR CLAIM AS A CLASS ACTION. PLEASE READ IT CAREFULLY, PRIOR TO SIGNING.
The terms of the agreement exclude a claim brought under the Magnusson-Moss Warranty Act. Therefore, this Court retains jurisdiction over the plaintiff's Magnusson-Moss Warranty Act Claim.
The Federal Arbitration Act "is a congressional declaration of a liberal federal policy favoring arbitration agreements." Drews Distrib. V. Sillicon Gaming, Inc., 245 F.3d 347, 349 (4th Cir. 2001). The U.S. Supreme Court has held that "as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). The court's "task in assessing the arbitrability of a dispute is `primarily one of contract interpretation.'" Wachovia Bank, Nat'l Assoc. v. Schmidt, No. 03-2061, slip op. at 6 (4th Cir. 2006) ( quoting Summer Rain v. Donning Co., 964 F.2d 1455, 1460 (4th Cir. 1992). When a arbitration agreement governed by the Federal Arbitration Act covers claims that have been asserted in a lawsuit, the court must compel arbitration and either dismiss the action or stay further judicial proceedings until the arbitration has been held. 9 U.S.C. §§ 3,4; Moses H. Cone, 460 U.S. at 24-25.
Congress, in the Federal Arbitration Act, declared written agreements to arbitrate "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Courts have consistently interpreted this mandate broadly, addressing questions of arbitrability "with a healthy regard for the federal policy favoring arbitration." Moses H. Cone Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). "The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Id. at 24-25. Sometimes "the relevant federal law requires piecemeal resolution . . . to give effect to an arbitration agreement . . . even where the result would be inefficient maintenance of separate proceedings in different forums."Gardner v. Bishop, 983 F.2d 1056, slip op. at 4 (4th Cir. 1993).
The U.S. Supreme Court has held that as a general rule, the court, and not the arbitrator, must decide whether the parties have agreed that a claim is or is not subject to arbitration. AT T Techs. v. Communications Workers of Am., 475 U.S. 643, 648 (1986). Interpretation of arbitration clauses is a matter of contract interpretation and involves discernment of the parties' intent. Mitsubishi Motors v. Soler Chrysler Plymouth, 473 U.S. 614, 626 (1985). The "first principle of arbitration law is that a party cannot be compelled to arbitrate a dispute unless that party has agreed to arbitration." Gregory v. Interstate/Johnson Lane Corp., 188 F.3d 501, slip op. at 5 (4th Cir. 1999). In this case, UAG seeks to compel arbitration against Gossett, who agreed to arbitrate any claim arising out of the purchase of the Porsche. Gossett agreed to arbitration.
Section 4 of the Federal Arbitration Act states that an arbitration agreement must be enforced by its terms. The arbitration clause in this case states that "any claim, dispute, or controversy, including all statutory claims that may arise out of or relate to the purchase of the automobile" shall be arbitrated. The Fourth Circuit Court of Appeals has held that "an arbitration clause encompassing all disputes `arising out of or relating to' a contract embraces `every dispute between the parties having a significant relationship to the contract regardless of the label attached to the dipsute.'" Wachovia Bank, Nat'l Assoc. v. Schmidt, No. 03-2061, slip op. at 6 (4th Cir. 2006) ( quoting Am. Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93 (4th Cir. 1996)). In this case, the plaintiff's claims against UAG arise out of his purchase of the Porsche, which is the subject matter of the contract. Therefore, the significant relationship requirement is met.
UAG seeks to compel arbitration pursuant to an arbitration clause in an agreement to which UAG was not a party. In Summer Rain v. Donning Co. Publishers, Inc., a group of authors sued two publishing companies, officers of the publishing companies, and the CEO of one publishing company. 964 F.2d 1455 (4th Cir. 1992). All defendants banned together to enforce the arbitration clause contained in a contract between the authors and one of the publishing companies. The Fourth Circuit stated "[i]t is important to note, we feel, that by requesting arbitration and prosecuting this suit to compel it, all of the defendants have waived any argument that, because they are not parties to the agreement [containing the arbitration clause], they are not bound by the arbitrators' decision." Summer Rain v. Donning Co. Publishers, 964 F.2d at 1462 FN 6. In Summer Rain, the Fourth Circuit Court of Appeals cited a Ninth Circuit Case, Local 1020 v. FMC Corp., 658 F.2d 1285 (9th Cir. 1981). In that case, a carpenters union submitted their case to arbitration in accordance with the Federal Arbitration Act. The Ninth Circuit Court of Appeals held that the union could have declined arbitration because it was a non-singator. However, after arbitration "it is too late for the Carpenters to complain after having voluntarily agreed to arbitrate and having participated therein without objection." Id. at 1295. Therefore, although UAG was not a party to the Purchase Agreement containing the Arbitration Clause, UAG may enforce the Arbitration Clause against Gossett.
"[C]ases indicate a case-by-case approach to determining the collateral estoppel effects of arbitration on federal claims, focusing on the federal interests in insuring a federal court determination of the federal claim, the expertise of the arbitrator and his scope of authority under the arbitration agreement, and the procedural adequacy of the arbitration proceeding." Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1361 (11th Cir. 1985). Therefore, in the interests of justice and pursuant to 9 U.S.C. § 3, this Court stays this action "until arbitration has been had in accordance with the terms of the agreement." 9 U.S.C. § 3.
The plaintiff's motion for reconsideration is denied. Penske's motion to dismiss for lack of jurisdiction is granted. UAG's motion to compel arbitration is granted. Pursuant to the terms of the Arbitration Agreement, the Court retains jurisdiction over Gossett's claim against UAG under the Magnusson Moss Warranty Act. This action is stayed pending arbitration.
AND IT IS SO ORDERED.