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National Motors, Inc. v. Universal Warranty Corporation

United States District Court, D. Maryland

January 3, 2020



          Ellen L. Hollander United States District Judge

         This Memorandum Opinion resolves a motion to compel arbitration with respect to a suit initiated by plaintiff National Motors, Inc. (“National”), against Universal Warranty Corporation (“Universal”). ECF 1-1 (“Complaint”).[1] National is a Maryland corporation engaged in the business of buying and selling used cars. Universal is a Michigan corporation engaged in the finance and warranty of motor vehicles. ECF 1-1 at 14-18.

         This suit is rooted in a contract between the parties dated April 2, 2012 (ECF 1-1 at 19-20), called “Universal Advantage Agreement” (the “Agreement”). It concerns a sales incentive program offered by Universal, by which National was to sell Universal's vehicle service contracts in exchange for payment of commissions. ECF 1-1. According to National, Universal did not pay the commissions due under the Agreement.

         The Complaint contains three counts. Count I is titled “Action for Accounting and Injunctive Relief.” Id. ¶¶ 8-12. Count II alleges breach of contract. Id. ¶¶ 13-17. In Count III, plaintiff lodges a claim for “Unjust Enrichment.” Id. ¶¶ 18-21.

         Universal has moved to compel arbitration and to dismiss the suit (ECF 15), supported by a memorandum of law. ECF 15-1 (collectively, the “Motion”). According to Universal, “every claim made in this action is subject to the terms and conditions of an arbitration provision” in the Agreement. ECF 15-1 at 1 (citing ECF 1-1 at 19-20); see also ECF 19-1 (same). Plaintiff opposes the Motion. ECF 19. According to National, the arbitration clause is unenforceable because it is unconscionable, id. at 5, and because the arbitration clause is “impermissibly vague.” Id. at 8. Universal has replied (ECF 20), disputing plaintiff's contentions.

         No hearing is necessary to resolve the Motion. Local Rule 105.6. For the reasons that follow, I shall grant the Motion.

         I. Factual Background

         National buys and sells used cars throughout the State of Maryland. ECF 1-1, ¶ 1; see ECF 19-2 (Affidavit of Gabriela Furdyna), ¶ 4. It maintains its principal place of business in Ellicott City, Maryland. ECF 1-1, ¶ 1. Universal provides automotive financial services, including vehicle financing and warranties. Id. ¶ 2. Its principal place of business is located in Detroit. Id.

         On April 2, 2012, Tom Hanlon, a salesperson from Universal, and Mark Brownhill, a representative from Ally Financial (“Ally”), which owns and operates Universal, met with Ms. Furdyna, a manager of National, at National's headquarters. ECF 19-2, ¶ 5. Mr. Hanlon and Mr. Brownhill proposed that National enroll in the Universal Advantage Program (the “Program”). Id. In general terms, under the Program, National would sell Universal's products, namely vehicle service contracts (“Qualifying VSCs”), in exchange for a commission and/or payment on those sales. ECF 1-1, ¶ 5.

         According to Ms. Furdyna, Mr. Hanlon and Mr. Brownhill represented that there were no drawbacks to joining the Program, and they averred that National would receive payments within a year of joining. ECF 19-2, ¶ 7. Further, they allegedly advised that participating in the Program would improve National's relationship with Ally, which is a major creditor in the automotive sales industry. Id. ¶¶ 6, 7.

         Based on these representations, National and Universal executed the Agreement on April 2, 2012. ECF 1-1, ¶ 5; ECF 19-2, ¶ 11; see also ECF 1-1 at 19-20. The Agreement contains seven sections. Relevant here, Section IV provides, ECF 1-1 at 20:

If either party fails to agree with respect to this Program, such differences shall be submitted to arbitration upon the request of either party. Each party shall then nominate a competent and disinterested arbitrator within thirty (30) days of being requested to do so and the two named shall select a competent and disinterested umpire before entering into arbitration. In the event that either party fails to appoint a competent and disinterested arbitrator within the time specified, the other party shall have the right to appoint said arbitrator. If the arbitrators do not agree as to a competent and disinterested umpire within thirty (30) days of this appointment, a third arbitrator shall be chosen by the manager of the American Arbitration Association. The said arbitrators shall not be under the control of either party to this Agreement.
Each party shall submit its case to its arbitrator within thirty (30) days of the appointment or within such period as may be agreed by consent of both arbitrators.
The decision in writing of any two of these three, when filed with both parties, shall be final and binding. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear the expense of the umpire and of the arbitration. Any arbitration shall take place in the State of Nebraska unless otherwise mutually agreed.

         Further, Section V contains a choice of law provision. Id. at 20. It states: “The parties expressly agree that this Agreement is to be interpreted and the right of the parties governed and enforced by the substantive law of the State of Nebraska.” Id.

         National alleges that, following execution of the Agreement, it sold Qualifying VSCs to customers. ECF 1-1, ¶ 6. However, according to National, it has not received payment for these sales, as provided by the Agreement. Id. ¶ 7. Further, Universal allegedly failed to furnish information or reports as to National's performance under the Program, despite such requests. See Id. ¶¶ 8-11.

         This lawsuit followed. Additional facts are included in the Discussion.

         II. Legal Standards

         A. The Federal Arbitration Act

         Universal moves to compel arbitration and to dismiss this action pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. The FAA, which was enacted in 1925, “requires courts to enforce covered arbitration agreements according to their terms.” Lamps Plus, Inc. v. Varela, __U.S.__, 139 S.Ct. 1407, 1412 (2019); see also McCormick v. Am. Online, Inc., 909 F.3d 677, 679 (4th Cir. 2018) (the FAA “provides for the enforceability of arbitration agreements and specifies procedures for conducting arbitrations and enforcing arbitration awards”). Under § 2 of the FAA, an arbitration contract is “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” Thus, the FAA “establishes ‘a liberal federal policy favoring arbitration agreements.'” Epic Sys. Corp. v. Lewis, __U.S.__, 138 S.Ct. 1612, 1621 (2018) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)); see also McCormick, 909 F.3d at 680 (“[T]he FAA elevates the arbitration of claims as a favored alternative to litigation when the parties agree in writing to arbitration.”).

         In Adkins v. Labor Ready, Inc., 303 F.3d 496 (4th Cir. 2002), the Fourth Circuit explained, id. at 500-01 (quoting Whiteside v. ...

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