District Court Grants Non-Party’s Motion to Compel Arbitration Two Years After Complaint Was Filed
Despite my attention-grabbing header, I think this case is likely correctly decided under our current system, where just about everything goes to arbitration. FCA (Fiat Chrysler Automobiles) likely could not have brought its motion to compel arbitration any earlier, and whether or not it has standing to bring its motion goes to the scope of arbitration, a matter that the parties delegated to the arbiter.
In February, 2023, plaintiffs bought FCA vehicles and allege that the hybrid engines in the vehicles were faulty. Plaintiffs bought from dealerships, not from FCA directly. Each sales contract included arbitration provisions, but those arbitration provisions differed, except that they all provided that the arbiter would decide issues of arbitrability. In July, 2023, FCA moved to dismiss the action for failure to state a claim. It also moved to compel arbitration. The latter motion was not based on the sales contract but on the written warranties that came with plaintiffs’ vehicles. At a hearing on that motion, FCA represented that it did not yet have access to the dealers’ contracts with plaintiffs, contracts to which it was not a party.
Plaintiffs voluntarily dismissed their warranty claims. In February, 2024, FCA sought discovery from its dealers to establish the parameters of the arbitration clause in the sales agreements. Now in possession of those sales agreements, FCA moved to compel arbitration. Plaintiffs argued that FCA, through its delay, had waived its right to arbitration and that FCA had no standing to invoke the arbitration clause in sales agreements to which it was not a party. In the alternative, plaintiffs asked the court to decide the issue of arbitrability and to answer it in the negative.
In Fisher v. FCA US, LLC, the U.S. District Court for the Eastern District of Michigan rejected plaintiffs’ arguments and compelled arbitration. Ordinarily, a party would be held to have waived its right to arbitrate once it has filed a motion to dismiss. Here, however, FCA persuaded the Court that it brought its motion to compel based on the arbitration provisions in the sales agreements as soon as it got access to those agreements. Another court in the Eastern District had found otherwise, writing that it “taxe[d] credulity to posit that FCA was not aware of the standard sales documents [containing arbitration provisions] its dealers were using.” While the Court acknowledged the strength of the argument, in this case, it was persuaded that FCA could not have brought its motion earlier as it really did not know the terms of its dealers’ arbitration agreements. They are not uniform. In any case, nothing in FCA’s conduct suggested any intention to waive its right to compel arbitration.
As to standing, the Court forthrightly acknowledges that FCA’s standing to invoke an arbitration clause in an agreement to which it is not a party is a serious question. However, here, the arbitration provision delegates questions of arbitrability to the arbiter. The language at issue in these arbitration agreements has been construed before in the Sixth Circuit. The Court cites precedential opinions at length. The Court addresses each of plaintiffs’ counterarguments attentively, but it really just comes down to the fact that the relevant agreements clearly and unambiguously delegate questions of arbitrability to the arbiter, and our law sends such issues to the arbiter even when a party has a colorable argument that no arbitration agreement exists between the parties.