"Sales and Contracts to Sell in Interstate and Foreign Commerce, and Federal commercial Arbitration," Hearing on S. 4213 and 4214 before a Subcommittee of the Committee on the Judiciary, 67th Cong., 4th Sess. 9-10 (1923) (hereinafter the "Judiciary Committee Hearings")

Additionally, a letter from then Secretary of Commerce Herbert Hoover was "submit[ted] for the record." Judiciary Committee Hearings at 14. The letter was addressed to Senator Thomas Sterling, who introduced the bill, and it stated in part: "If objection appears to the inclusion of workers' contracts in the law's scheme, it might be well amended by stating, but nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in interstate or foreign commerce." Id.

In response to these and similar comments from other Senators, S. 4214 and H.R. 13522 were revised and reintroduced in Congress the following year as S. 1005 and H.R. 646, respectively. Section I of those bills included the language suggested by Secretary Hoover excluding from the proposed laws application employment contracts of "seamen, railroad employees, [and every] other class of workers engaged in foreign or interstate commerce." "Arbitration of Interstate Commercial Disputes: Joint Hearings on S. 1005 and H.R. 646, Bills to Make Valid and Enforceable Written Provisions or Agreements for Arbitration of Disputes Arising Out of Contracts, Maritime Transactions, or Commerce Among the States or Territories or with Foreign Nations, before the Subcommittees of the Committees on the Judiciary," 68th Cong., 1st Sess. 2 (1924) (hereinafter "Joint Hearings"). S. 1005 was referred to the Judiciary Committee. Joint hearings were held on those bills before subcommittees of the Judiciary Committees. At the outset of those hearings, Mr. Piatt, who argued again in favor of passage, stated:

Joint Hearings, at 10. The question of a contracting party's volition in the waiver of her right to a jury trial arose again in those hearings. For example, Julius H. Cohen, a principal draftsman of S. 1005, stated:

The one constitutional provision we have got is that you have a right of trial by jury. But you can waive that. And you can do that in advance. Ah, but the question whether you waive it or not depends on whether that is your signature to the paper, or whether you authorized that signature, or whether the paper is a valid paper or not, whether it was delivered properly. So there is a question there which you have not waived the right of trial by jury on.

Joint Hearings, at 17.

Most binding arbitration clauses in consumer contracts result in an unknowing and involuntary waiver of the right to a jury trial and Georgia does not allow prelitigation waiver of jury trial.

The Seventh Amendment to the United States Constitution provides:

In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any court of the United States, than according to the rules of the common law.

(Emphasis supplied)

Similarly, In Gaylord Dept. Stores of Alabama, Inc. v. Stephens, 404 So.2d 586 (Ala. 1981), the Alabama Supreme Court observed:

While this precious right of trial by jury may be waived, was it properly waived in this particular case?

The validity of waiver of a jury trial in a contract action has been recognized in a number of jurisdictions, including Connecticut, Massachusetts, New Jersey, New York, and Ohio. See 73 A.L.R.2d 1333. The Supreme Court of Florida, construing New York law, upheld the jury waiver provision in a written contract. Central Investment Associates, Inc. v. Leasing Service Corp., 362 So.2d 702 (Fla.1978). However, all of these Courts upholding jury waivers follow a general rule that since the right of jury trial is highly favored, a waiver will be strictly construed. In Edsaid Realty Corp. v. Samuels, City Ct., 92 N.Y.S.2d 897 (1949), the Court held that the waiver must be clear and explicit and leave no room for doubt about the intention of the parties. And in National Equipment Rental Ltd. v. Hendrix, 565 F.2d 255 (2d Cir. 1977), the Court held a waiver of jury trial ineffective, where it was buried in the eleventh paragraph, and there appeared gross inequality in bargaining power between the parties, and it did not appear that the waiver was knowingly and intentionally made. We opine that these statements are applicable here.

The contract between Stephens and Gaylord appears to be a New Jersey form contract with boiler plate-provisions. The jury waiver provision is buried in paragraph thirty-four in a contract containing forty-six paragraphs; the equality of the bargaining power of the parties is questionable; and it does not appear that the waiver by Stephens was intelligently or knowingly made.

Gaylord points to the fact (on pages 139 and 140 of the transcript) that he read the contract before signing it. Our reading of that testimony leads us to conclude that the questioning by Gaylord pointed to a prohibition against opening another pharmacy not to the jury trial waiver.

Finally, we note that Gaylord prevented Stephens from removing his cash after it closed the pharmacy and Stephens was threatened with arrest by a Gaylords security agent if he removed his shelving and fixtures. Under these circumstances we opine that even if we were of the opinion that the waiver was effective as to the violations of the contract, the waiver could not be extended to the tort action stated in Count III of Stephens's complaint.

404 So.2d at 588.

In Mall, Inc. v. Robbins, 412 So.2d 1197 (Ala. 1982), the Alabama Supreme Court noted:

This Court recently enunciated three factors in determining whether to enforce a contractual waiver of the right to trial by jury: (1) whether the waiver is buried deep in a long contract; (2) whether the bargaining power of the parties is equal; and (3) whether the waiver was intelligently and knowingly made. Gaylord Department Stores of Alabama v. Stephens, 404 So.2d 586 (Ala.1981). The contractual waiver in the lease is in section 10.4, which is entitled "Waiver of Trial by Jury: Tenant Not To Counterclaim." Since the section is titled so as to call attention to the waiver of jury trial in the lease, the waiver is not inconspicuously buried deep in the contract. Furthermore, the parties were both businessmen. Robbins owned six or seven other grocery stores at the time he entered into the lease. It cannot be said that the parties had unequal bargaining power.

In Allstar Homes d/b/a Best Value Mobile Homes v. Waters, No. 1951955, 1997 WL 723103 (Ala., Nov. 21, 1997), the Alabama Supreme Court noted that:

[A]ny arbitration agreement is a waiver of a party's right under Amendment VII of the United States Constitution to a trial by jury and, regardless of the federal courts' policy favoring arbitration, we find nothing in the FAA that would permit such a waiver unless it is made knowingly, willingly and voluntarily.

1997 WL 723103 at *6. After reviewing the legislative history of the FAA, Justice Ralph Cook observed:

These comments by the proponents, drafters, and sponsors of the bills that culminated in the FAA, in addition to the revision that excluded employment contracts, illustrate the importance ascribed to the voluntaries of the contracting parties. Indeed, volition is the sine qua non of the FAA's constitutionality, for specific enforcement of an arbitration provision to which a party has not voluntarily agreed would clearly violate the Seventh Amendment.

Indeed, specific enforcement of arbitration contracts for the purchase of consumer goods or services is beset by a number of problems implicating the Seventh Amendment. The reality is that contracts containing these provisions appear with increasing frequency in today's marketplace. As a result, consumers find it increasingly difficult to acquire basic goods and services without forfeiting their rights to try before a jury the common-law claims that may accrue to them. Entire segments of the market for certain goods and services, such as automobile sales and their attendant necessary financing, are being closed to consumers who are unwilling to forfeit the rights guaranteed them by the federal and state constitutions. To sanction this market closure would essentially effect the repeal of the Seventh Amendment by the concurrence of judicial with legislative fiat.

Moreover, the coerced waiver of the right to a trial by jury results in a monetary penalty to the consumer. This is so because it deprives the consumer purchaser or debtor of the benefit of his bargain, along with the time he spent and the expense he incurred in negotiating it. More specifically, many consumer credit transactions containing .,agreements" to arbitrate actually involve two independent "agreements." The credit sale of a new automobile, for example, is, according to ordinary experience, often consummated between the consumer-buyer and an agent of the automobile dealer only after hours, or, in some cases, days, of bargaining and negotiation. Although a number of terms important to both parties may be involved in these negotiations, one term that seldom, if ever, arises during the bargaining process if arbitration. Indeed, it may safely be said that the thought of specific constitutional provisions never impresses itself upon the mind of the consumer buyer, and, seldom, if ever, upon the mind of the dealer's agent, before an agreement has been reached on the lot or the showroom floor encompassing all the essential terms of the sale.

After the consummation of such a "showroom" agreement, the buyer, is, for the first time, then presented with "take-it-or-leave-it" written documents. These documents do not merely memorialize the terms of the prior agreement, but contain a pivotal term, one that was not negotiated and that is, as in this case, non negotiable. At that stage, the buyer typically learns, for the first time, that in order to receive the benefit of the bargain he has already consummated, and to avoid incurring a monetary penalty consisting of the time he spent and the expense he incurred in negotiating that bargain he must then agree to waive his right to a trial by jury.

This second "agreement" constitutes a modification of the first and is a new contract, see Little v. Redditt, 264 Ala. 371, 88 So.2d 354 (1956), subject to the rules regarding consideration and mutual assent set forth in Winegardner v. Bums, 361 So.2d 1054, 1057-58 (Ala. 1978) (quoting with approval Moore v. Williamson, 213 Ala. 274, 104 So. 645 (1925)). The consumer must either sign the contract, and, thereby, waive his Seventh Amendment guarantee, or begin the process anew elsewhere. Because of the penalty that results from such a waiver, the specific enforcement of an adhesion contract containing an arbitration provision places the Seventh Amendment on a different footing than U.S. Const. amend. IV (guaranteeing freedom from "unreasonable searches and seizures"), amend. V (guaranteeing freedom from forced self-incrimination), and amend. VI (guaranteeing the right to legal counsel in criminal proceedings).

...

Thus, the waiver of rights guaranteed by Amendments Four, Five, and six is not punitive, as is the case with the specific enforcement of an arbitration provision to which a consumer is ultimately required to acquiesce in order to avoid losing the value of the time he expended and the expense he incurred in negotiations before learning of the arbitration requirement. Because arbitration provisions are, in consumer transactions, such as the one hypothesized above, virtually "foisted" upon unsuspecting and unsophisticated consumers, and because the result if often punitive to the consumer, the right guaranteed by the Seventh Amendment is accorded less deference than those rights guaranteed by the Fourth, Fifth, and Sixth Amendments.

The fact that the United States Supreme Court has never held the Seventh Amendment to be binding on the states through the Fourteenth Amendment, as it has certain other of the Bill of Rights guarantees, is irrelevant in this context. This is because the FAA is not a state law. Thus, the constitutional deprivation, where one can be shown, derives from an act of Congress, not a state legislature. The Seventh Amendment, like the other Bill of Rights provisions, was ratified as a limitation on the power of Congress. Clearly, Congress had no power to deprive a citizen of Alabama of his right to a trial by jury before the Fourteenth Amendment was ratified--a fortiori, it has none now. Therefore, whether the Seventh Amendment is binding on the states is entirely irrelevant in any consideration of the FAA.

But it has been said, and rightly so, that "[p]robably no greater encomiums or panegyrics have. ever been pronounced upon any legal or civil right than upon this right of trial by jury." Alford v. State ex rel Attorney General, 170 Ala. 178, 187, 54 So. 213, 215 (1920) (Mayfield, J., dissenting). "[I]t has been from very early time insisted upon, by our ancestors, as 'the great bulwark of their civil and political liberties,' and watched with unceasing jealousy and solicitude. . ." Id." "[The Constitution of the United States would have been justly obnoxious to the most conclusive objection if it had not recognized and confirmed it in the most solemn terms...... Id.

For these reasons, I would hold that in a consumer transaction case involving a contract containing an arbitration provision, unless there is a showing that the consumer entered the arbitration agreement voluntarily, the contract will be unenforceable as an encroachment on the right to trial by jury. I offer the following comments as guidance to parties desiring to avoid this result.

If the offeror of consumer goods or services intends to insist upon the arbitration of disputes arising out of its consumer transactions, it must clearly integrate the arbitration requirement with the terms of the transaction that the consumer would consider essential, such as the price of the goods or services and the size and number of the payments. in other words, the consumer must be apprised of his right to a trial by jury and must be given an opportunity to accept or reject arbitration in a manner similar to the choice commonly given consumers either to purchase or refuse credit life Or disability insurance. Such a procedure is merely analogous to the warning given pursuant to Miranda v. Arizona, 384 U.S. 436, 96 S.Ct. 1602, 16 L.Ed.2d 694 (1966), to ensure that other enumerated rights under the Bill of Rights have been voluntarily waived. This would provide one way in which objective evidence as to the level of volition could be demonstrated.

Allstar Homes d/b/a Best Value Mobile Homes v. Waters, No. 1951955, 1997 WL 723103 (Ala., Nov. 21, 1997) (Cook, J., concurring specially).

Recently, in Ex parte McNaughton, No. 1961708, 1998 WL 544926 (Ala., Aug. 28, 1998), Justice Almon of the Alabama Supreme Court noted in his forceful dissent that:

Y

1998 WL 544926 at *9-10.

In the instant case, the alleged arbitration agreements are closely intertwined with an alleged waiver of the right to trial by jury - a right which in Georgia may not be waived in a prelitigation agreement. The alleged arbitration agreements in this case should not be enforced.

III. THE ARBITRATION CLAUSES IN ISSUE ARE UNENFORCEABLE WHEN PLAINTIFF SEEKS REVOCATION OF THE CONTRACT

Revocation of acceptance in whole or in part.

(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it:

(a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or

(b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.

(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

Buyer's remedies in general; buyer's security interest in rejected goods.

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Code Section 11-2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid:

(2) Goods or conduct including any part of a performance are "conforming" or conform to the contract when they are in accordance with the obligations under the contract.

(3) "Termination" occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach. On "termination" all obligations which are still executory on both sides are discharged but any right based on prior breach or performance survives.

(4) "Cancellation" occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of "termination" except that the canceling party also retains any remedy for breach of the whole contract or any unperformed balance.

These statutory provisions provide that all portions of a revoked contract which are executory are discharged. In this case, the agreement to arbitrate is executory and is discharged and unenforceable.

In summary, upon delivery of non conforming goods or upon non conforming performance of the warranty, the buyer may revoke acceptance. Revocation provides for cancellation of the contract. Cancellation terminated the contract and discharges executory obligation such as the arbitration provision in question while resrrving to the revoking party his rights for the breach.

BY NON SIGNATORY PARTIES

A recent Alabama Supreme Court decision addressed a situation where a buyer had signed an arbitration agreement when purchasing an automobile and the dealership had not. The dealership later sought to compel arbitration and the Court said:

This Court recently stated in Ex parte Pointer, [Ms. 1961778, Nov. 21, 1997] ___ So. 2d ___, ___ (Ala. 1997), quoting Crown Pontiac, Inc. v. McCarrell, 695 So. 2d at 618-19 (Ala. 1997):

"The purpose of a signature is to show "mutuality and assent," which are required for a contract to be binding. Lawler Mobile Homes, Inc. v. Tarver, 492 So. 2d 297, 304 (Ala. 1986). Conversely, in this case the absence of a signature under the arbitration clause shows a lack of mutuality and assent, where the contract contains a signature line specifically for the arbitration clause, but where McCarrell did not sign on that line, although he signed on other lines that similarly indicated agreement to specific terms.'"

Med Center seeks to enforce the arbitration clause contained in the buyer's order, although it did not affix its signature to the buyer's order. Although Kimberly Smith signed the buyer's order, as previously pointed out the buyer's order specifically provides that it is "Not valid unless accepted by seller or its authorized representative." Therefore, the buyer's order, which contains the arbitration clause, is not enforceable.

Med Center Cars, Inc. v. Smith 7 ALW 17-2.

Nonsignatory movant Greentree here may not compel arbitration. The alleged arbitration agreement here did not cover the nonsignatory movant. The document on which movant relies is between "dealer and the purchaser". The purpose of a signature is to show "multuality and assent" which are required for a contract to be binding. Lawler Mobile Homes, Inc. v. Tarver, 492 So. 2d 297, 304 (Ala. 1986). The absence of a signature under the arbitration clause shows a lack of mutuality and assent, where the contract contains a signature line specifically for the arbitration clause. Nonsignatory parties should not be allowed to compel arbitration of plaintiff's claims against them. In Ex parte Walter Jones v. Moneytree, Inc., 686 So.2d 1166 the Alabama Supreme Court stated as follows:

Boyd v. Homes of Legend, Inc., 981 F. Supp. 1423 (M.D. Ala.1997) addressed these same issues. In that case the District Court applying the Alabama Supreme Court's reasoning in Ex parte Isbell held that the nonsignatory manufacturer could not compel arbitration based on a purchase contract containing an arbitration provision. The District Court set out the burden of the nonsignatory manufacturer (Homes of Legend, Inc.) as follows:

...here the defendant manufacturer Homes of Legend must establish that, despite the absence of any explicit mention of Homes of Legend in the purchase contracts signed by the plaintiffs and their dealers, the plaintiffs nonetheless constructively, or as a matter of law, agreed to submit to arbitration the tort, breach-of-warranty, and Magnuson-Moss Act claims they now level against Homes of Legend.

The District Court went on to say:

Homes of Legend's reliance on Ex parte Gates, 675 So.2d 371 (Ala.1996), to establish that the contracting parties in these three cases granted Homes of Legend third-party standing to invoke arbitration, is misplaced. While it does appear that in Gates the Alabama Supreme Court found that a defendant mobile home manufacturer could compel arbitration against a purchaser on the basis of an arbitration clause to which the manufacturer was not a signatory, that court subsequently has explained that its holding was not based upon an interpretation of the underlying arbitration clause. See Ex parte Isbell, No. CV-95-8362, 1997 WL 531100, at *3-*4, *12 (Ala. August 29, 1997). (FN7) In Isbell, which also involved a mobile home purchase contract having an arbitration provision, the court clarified that Gates may not be relied upon to establish that a nonsignatory could compel arbitration based upon the contract executed by the buyers and retailer of the mobile home, because this issue was not actually considered by the court in Gates, having never been raised at the trial court. Id. at *3-*4.

The Isbell court went on to interpret the arbitration clause at issue in that case, finding that it was insufficiently broad to encompass the claims against the nonsignatory manufacturer. This arbitration clause, on its face, was significantly broader than those found in the three purchase contracts at issue here. It purported to encompass "[a]ll disputes, claims or controversies arising from or relating to this Contract or the relationships which result from this contract." Id. at *12 (emphasis added). Nonetheless, despite this apparently expansive language, the Alabama Supreme Court concluded that the arbitration provision did not extend to claims against unnamed third parties. In support of its holding, the court pointed out that another provision of the contract specified that the arbitration clause was meant to apply exclusively to the buyers, the retailer and the financing institution involved in the sale, all of whom signed the purchase contract. Id. This express limitation of the scope of the arbitration agreement led the court to conclude that the Isbell agreement was meant to exclude unnamed third parties, and was restricted to disputes arising between or among the signatories of the contract. See also Ex parte Martin, No. CV-96-46, 1996 WL 650307, at *3, --- F.Supp. ----, ---- (Ala. Nov. 8, 1996) (arbitration agreement, lacking broad reference to "relationships which result from this contract," found to be expressly limited to contract signatories).

Thus, the Alabama Supreme Court's decision in Isbell reinforces the conclusion that Homes of Legend is not a third-party beneficiary to the arbitration clauses in the purchase contracts at issue here. Like the arbitration clause considered in Isbell, those found in the Bass, Foster plaintiffs, and Boyd contracts are expressly and unambiguously limited to the contract signatories.

V. THE ARBITRATION CLAUSE IN ISSUE IS NOT ENFORCEABLE BECAUSE IT CONFLICTS WITH THE MAGNUSON-MOSS ACT

The Arbitration Clause in issue is not enforceable as against plaintiffs because it is in violation of the Magnuson-Moss Act. As stated in Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530, 65 USLW 2538 (MD AL 1997) aff'd 127 F.3d 40 (11th Cir.1997):

financing contracts between the plaintiffs and Hart's Mobile Home are binding, rather than non-binding, and are thus a bar to court relief, they conflict with the Magnuson-Moss Act and are unenforceable. [FN2]

FN2. The court does not reach whether the arbitration clauses in the contracts between the plaintiffs and Hart's Mobile Home comply with the "minimum requirements" now prescribed by the Federal Trade Commission in its regulations.

The court also does not reach the issues of whether the FAA and arbitration agreements in general are unenforceable as to all claims based on the Magnuson-Moss Act. The court concludes only that the ones between the plaintiffs and Hart's Mobile Home are unenforceable by Waverlee.

The Act's Legislative History. A review of the legislative history of the Magnuson-Moss Act reinforces this conclusion. The remarks of Congressman Moss, one of the sponsors of the bill, are particularly illuminating:

"First, the bill provides the consumer with an economically feasible private right of action so that when a warrantor breaches his warranty or service contract obligations, the consumer can have effective redress. Reasonable attorney's fees and expenses are provided for the successful consumer litigant, and the bill is further refined so as to place a minimum extra burden on the courts by requiring as a prerequisite to suit that the purchaser give the [warrantor] reasonable opportunity to settle the dispute out of court, including the use of a fair and formal dispute settlement mechanism...."

119 Cong.Rec. 972 (Jan. 12, 1973) (emphasis added). Congressman Moss therefore made clear that the informal dispute settlement mechanisms or procedures are a "prerequisite," not a bar, to suit in court. The House report on the bill makes this point even clearer. The report states that "An adverse decision in any informal dispute settlement proceeding would not be a bar to a civil action on the warranty involved in the proceeding." H.R.Rep. 93-1107, 93d Cong., 2d Sess. 41, reprinted in 1974 U.S.C.C.A.N. 7702, 7723. [FN3] This history reflects that it was Congress's intent that any non-judicial dispute resolution procedures would be nonbinding, and consumers would always retain the right of final access to court.

FN3. The report goes on to say, however, that "the decision reached in any informal dispute settlement procedure relating to any matter considered in such procedure would be admissible in any civil action arising out of a warranty on a consumer product if the procedure complies with the FTC's rules and is incorporated as a part of a written warranty pertaining to consumer products." H.R.Rep. 93-1107, 93d Cong., 2d Sess. 41, reprinted in 1974 U.S.C.C.A.N. 7702, 7723. See infra note 4.

"Several industry representatives contended that warrantors should be allowed to require consumers to resort to mechanisms whose decisions would be legally binding (e.g., binding arbitration). The Rule does not allow for this for two reasons. First, ... Congressional intent was that Section 110 Mechanisms not be legally binding. Second, even if binding Mechanisms were contemplated by Section 110 of the Act, the Commission is not prepared, at this point in time, to develop guidelines for a system in which consumers would commit themselves, at the time of product purchase, to resolve any difficulties in a binding, but nonjudicial, proceeding. The Commission is not now convinced that any guidelines which it set out could ensure sufficient protection for consumers against warrantors, even if the Congressional report had not made clear, as it did, that it wished for such mechanisms to not be binding."

40 Fed.Reg. 60168, 60210 (1975). The Commission then goes on to state that "reference within the written warranty to any binding, non-judicial remedy is prohibited by the Rule and the Act." Id. at 60211. [FN5] These comments make clear that binding arbitration, of the kind contained in the contracts between the plaintiffs and Hart's Mobile Home, is not permissible under the regulations promulgated by the Federal Trade Commission.

FN5. The Commission makes clear, however, that, after the warrantor and the consumer have pursued the settlement procedures established under the Magnuson-Moss Act, the warrantor may "offer a binding arbitration option" to the consumer. 40 Fed.Reg. 60168, 60211 (1975). But reference to such in the warranty is prohibited. Id.

2.

The parties argue at great length about whether the FAA overrides the Magnuson-Moss Act and whether the Magnuson-Moss Act in fact precludes waiver of judicial remedy for violations of the rights of purchasers. What must be remembered, however, is that the court is not here confronted with a direct conflict between these two statutes. The limited and only issue before the court is whether Waverlee's enforcement of the specific binding arbitration clauses contained in the contracts with Hart's Mobile Home would violate the Magnuson-Moss Act. [FN6]

FN6. See supra note 2.

The court is also not presented with a picture pitting the purchaser's right to litigate a breach of seller's warranty against the seller's right to invoke a contractual arbitration clause. In other words, the combatants here are not Hart's Mobile Home and the plaintiffs. Rather, the issue is once removed; it is a cousin issue. Here, because Congress has addressed, in a definitive manner, the availability and scope of nonjudicial remedies for resolution of disputes between warrantors and consumers, it is no surprise, and no oversight, that the Waverlee warranty for the plaintiffs' motor homes makes no mention of alternative mechanisms. Had Waverlee sought to include, in its warranty, the type of absolute bar on judicial remedies it is seeking here, it would have been in clear and direct violation of the Magnuson-Moss Act. Instead, by relying on the installment sales and financing contracts between the plaintiffs and Hart's Mobile Home, Waverlee seeks to do by surrogate or vicarious means what it is forbidden to do on its own behalf. The striking consequence of allowing a manufacturer like Waverlee to piggyback on an arbitration clause in a consumer contract between seller and consumer, limited on its very face to disputes between those signatory parties, would be the complete and utter evisceration of the Magnuson-Moss Act. If Waverlee had third-party standing, or estoppel grounds, for compelling arbitration with a dissatisfied consumer, then every manufacturer, obligated by state and federal law to provide certain warranties for the protection of consumers, merely by introducing its products into the stream of commerce, and *1540 colluding with product retailers to insert broad and all-inclusive arbitration clauses in consumer contracts, would always be able to avoid the strictures and edicts of the Magnuson-Moss Act. The court refuses to extend the law of third-party beneficiary contract rights, or of equitable estoppel, to reach so profoundly inequitable a result under the Act.

Waverlee at 1540.(emphasis supplied)

This rationale has been followed and applied in additional cases. For example in Rhode

v. E & T Investments, Inc., 6 F.Supp.2d 1322 (M. D. AL 1998), it was held:

[17] Finally, as a further basis for urging the court to deny Defendants' Motion to Compel Arbitration, Plaintiff argues that the Magnuson- Moss Warranty Act and the regulations issued pursuant to the Act by the Federal Trade Commission prevent binding arbitration to be imposed by a seller of goods on a consumer. (Br. in Opp'n at 4 .) Plaintiff relies on Wilson v. Waverlee Homes, 954 F.Supp. 1530 (M.D.Ala.1997), in support of this argument.

[18] The FAA's mandate that agreements to arbitrate statutory claims must be enforced may be overridden by a statute evincing a contrary congressional mandate. McMahon, 482 U.S. at 226, 107 S.Ct. 2332. In Waverlee Homes, the court analyzed highly detailed and specific provisions of the Magnuson-Moss Act and concluded that Congress intended to preclude binding arbitration of written or express warranty claims arising under the Act. Waverlee Homes, 954 F.Supp. at 1537-1539. In Boyd v. Homes of Legend, Inc., 981 F.Supp. 1423 (M.D.Ala.1997) (Thompson, J.), however, the court concluded that non- written and implied warranty claims arising under the Magnuson-Moss Act could be subject to arbitration. Boyd, 981 F.Supp. at 1440. Hence, in Boyd, the court ordered arbitration of non-written and implied warranty claims under the Magnuson-Moss Act, Boyd, 981 F.Supp. at 1440, even though it declined to do so for written warranties in Waverlee Homes. Waverlee Homes, 954 F.Supp. at 1537-39. The Eleventh Circuit recently affirmed the court's decision in Waverlee Homes. Wilson v. Waverlee Homes, 127 F.3d 40 (11th Cir.1997). Further, the court finds Boyd to be soundly reasoned and adopts and incorporates the court's conclusions herein. Thus, both Waverlee Homes and Boyd control the court's findings in the matter currently before it.

I agree that there are no warranties of any type covering the Manufactured Home. I am buying the Manufactured Home AS IS and WITH ALL FAULTS and THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE MANUFACTURED HOME IS WITH ME. I agree that any implied warranty of merchantilibilty and any implied warranty of fitness for a particular purpose are specifically excluded and do not cover the Manufactured Home. This No Warranties provision does not apply to the extent that the law prohibits it and does not cover any separate written warranties.

The court construes Defendants' argument as challenging the merits of Plaintiff's claims against Defendant E & T Investments for breach of express warranty, rather than addressing Plaintiff's argument that binding arbitration of Magnuson-Moss Act claims is precluded. The court finds that a Response to Plaintiff's Opposition to Defendants' Motion to Compel Arbitration is not the appropriate mechanism for challenging the merits of Plaintiff's claims of breach of express warranties. Accordingly, based on the foregoing, the court finds that Defendants' Motion to Compel Arbitration with respect to Plaintiff's claims against Defendant E & T Investments is due to be granted, with the limited exception that Plaintiff is not compelled to arbitrate any claims for breach of written or express warranties she may have against Defendant E & T Investments. [FN6]

FN6. The court notes the recent Eleventh Circuit opinion in Paladino v. Avnet Computer Technologies, Inc., 134 F.3d 1054 correctly refused to compel arbitration of plaintiff's Title VII claim pursuant to an arbitration agreement on grounds that the arbitration clause deprived the employee of any prospect for meaningful relief. Paladino, 134 F.3d at 1060.

The court based its holding on the proposition that, when an arbitration clause has provisions that defeat the remedial purpose of the statute, the arbitration clause is unenforceable. Paladino, 134 F.3d at 1062 (citing Cole v. Burns Int'l Sec. Services, 105 F.3d 1465, 1468 (D.C.Cir.1997)). Specifically, the court examined two provisions of the arbitration clause at issue in that case and held that the provisions, read together, made plaintiff's Title VII claims subject to arbitration, yet circumscribed the arbitrator's authority to grant relief for those claims. Id. at 1061. The court found that, by precluding relief for the Title VII claims, these provisions violated the remedial purpose of Title VII, thereby rendering the arbitration clause unenforceable. Id. at 1062.

The court also stated that arbitration would impose a "hefty cost" on the Plaintiff, thereby further violating the remedial purpose of Title VII. Id. The court stated:

The difficulty of obtaining meaningful relief is not, moreover, the only infirmity of this clause. Because [the employer] makes no promises to pay for an arbitrator, employees may be liable for at least half the hefty cost of an arbitration and must, according to the American Arbitration Association rules the clause explicitly adopts, pay steep filing fees (in this case $2000). One circuit has in dicta stated that such "fee-shifting" is a per se basis for nonenforcement. Cole, 105 F.3d at 1484. We consider costs of this magnitude a legitimate basis for a conclusion that the clause does not comport with statutory policy.... [A] clause such as this one that deprives an employee of any hope of meaningful relief, while imposing high costs on the employee, undermines the policies that support Title VII. It is not enforceable.

Paladino, 134 F.3d at 1062.

As the court states, infra, The Magnuson-Moss Act--pursuant to which Plaintiff brings several of his claims--was passed with purpose of improving the adequacy of information to consumers and preventing consumer deception. Congress's overall goal in the Act is to protect consumers from unfair written warranties. Boyd v. Homes of Legend, 981 F.Supp. 1423, 1438 n. 11 (M.D.Ala.1997) (Thompson, J.) Based on the Eleventh Circuit's recent holding, an argument could be made that, by requiring consumers to absorb the costs of arbitration, arbitration provisions incorporating the rules of the American Arbitration Association may, in fact, undermine the statutory policy of the Magnuson-Moss Act, thereby depriving a consumer of meaningful relief of his or her Magnuson-Moss Act warranty claims and rendering the Arbitration Provision unenforceable. Such an assertion, however, would require a detailed and carefully researched analysis of the remedial purposes of the Magnuson-Moss Act and the effect of requiring consumers to pay money, the amount of which must be calculated in accordance with the applicable rules of the American Arbitration Association, in order to effectuate arbitration and obtain meaningful relief. The court explicitly notes that this issue is not raised by the pleadings, and thus is not currently before it. Hence, the court makes no findings to this effect, at this time.

Rhode v. E & T Investments, Inc., 6 F.Supp.2d at 1332 (Emphasis supplied)

VI. THE ARBITRATION CLAUSES IN ISSUE ARE UNENFORCEABLE BECAUSE THEY ARE UNCONSCIONABLE UNDER GEORGIA LAW

Unconscionable contract or clause.

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.

 

R.L. Kimsey Cotton Co. v. Ferguson, 233 Ga. 962, 965(3), 214 S.E.2d 360 (1975). The process by which a court reaches the conclusion that a contract provision is unconscionable has been discussed by our appellate courts only in abbreviated and conclusory fashion. E.g., Ga. Magnetic Imaging v. Greene County Hosp. Auth., 219 Ga.App. 502(5), 466 S.E.2d 41 (1995); Fiat Auto U.S.A. v. Hollums, 185 Ga.App. 113(2), 363 S.E.2d 312 (1987); Esquire Mobile Homes v. Arrendale, 182 Ga. App. 528 (1987)(limitation of remedies and warranties unconscionable); Freeman v. Hubco, 253 Ga. 698 (1985)(limitation of remedies and warranties unconscionable). Georgia Courts have looked to foreign authority to assist in resolving this the definition of unconscionability:

NEC Technologies, Inc. v. Nelson, 267 Ga. 390 (1996)(emphasis supplied).

As the Alabama Supreme Court noted in Allstar Homes d/b/a Best Value Mobile Homes v. Waters, No. 1951955, 1997 WL 723103 (Ala., Nov. 21, 1997):

Although we do not address the full implications of waiving one's right to a trial by jury in favor of arbitration of disputes, we do point out that the due process safeguards found in judicial proceedings are largely absent in arbitration. The reputed informality and the relative speediness of an arbitration procedure are achieved by severely limiting discovery; imposing few evidentiary rules; giving the arbitrator almost unbridled discretion to make decisions without basing them on established principles of law or making written findings to support the arbitrator's conclusions; and providing virtually no right of appeal in the case of error in the arbitrator's decision.

1997 WL 723103 at *6 n. I;

CONCLUSION

WHEREFORE, plaintiff prays:

a) that the attempted limitation of remedies and exclusions of warranties be found ineffective or unenforceable;

c) that he be awarded such further relief as he is entitled to under the statutes cited above; and

d) for such other and further legal and applicable relief as he may entitled to under the premises.

Respectfully Submitted,

LAW OFFICES OF T. MICHAEL FLINN

___________________________________

402 Tanner Street T. Michael Flinn

Carrollton, GA 30117 Attorney at Law

(770) 832-0300 Georgia State Bar No. 264530

CERTIFICATE OF SERVICE

I, T. Michael Flinn, have this day served a true and correct copy of the within and foregoing PLAINTIFF'S RESPONSE TO GREENTREE MOTION on defendants by depositing a copy of same in the US Mail with sufficient postage thereon to assure proper dielvery addressed to:

Cavalier Homes of Alabama, Inc.,

Ian Rapaport

CHAMBER, MABRY, MCCLELLAND & BROOKS

2200 Century Parkway NE

Suite 825

Atlanta, Ga 30345-3105

Results Oriented d/b/a Assured Housing

Larry Iman, reg agent

1716 Nordic Trace

Marietta GA

Greentree Financial Servicing

KENNEY & SOLOMON

Thomas S. Kenney

Suite 110

3675 Crestwood Parkway

Duluth, GA 33096

This ____ day of ________________, 19____.

LAW OFFICES OF T. MICHAEL FLINN

____________________________________

T. Michael Flinn

Attorney at Law

Georgia State Bar No. 264530

402 Tanner Street

Carrollton, GA 30117

MYERS

v.

TERMINIX INTERNATIONAL COMPANY et al. [FN*]

FN* Reporter's Note: This case has been settled by the parties.

No. CI97-1797.

Court of Common Pleas of Ohio,

Lucas County.

Decided Jan. 27, 1998.

Homeowner brought action against exterminator in which she asserted contract

and warranty claims. Exterminator moved to stay pending arbitration, and

homeowner moved for summary judgment. The Court of Common Pleas, Charles J.

Doneghy, J., held that arbitration clause in contractual agreement was

rendered unconscionable, and thus unenforceable, by requirement that

homeowner pay nonrefundable arbitration filing fee, which could range from

$750 to $2,000.

Defendant's motion denied, and plaintiff's motion granted.

CHARLES J. DONEGHY, Judge.

This consumer sales case is before the court on the defendants' [FN1] motion

to stay this action pending arbitration and on the plaintiff's motion for

partial summary judgment. Upon review of the pleadings, evidence, memoranda

of the parties, and applicable law, the court finds that the defendants'

motion should be denied and the plaintiff's motion should be granted.

FN1. The defendants in this case are Terminix International Company and two

of its agents, Sam Scamardo and Eugene Gauthreaux, Jr.

I. FACTS

On or about September 8, 1993, the plaintiff, Judy Myers, and defendant

Terminix International Company ("Terminix") entered into a contract that was

captioned "Termite Service Plan" ("the contract"). The main purpose of the

contract was for Terminix to inspect for and eradicate termites that were

parasitically living in Myers's home. Myers agreed to pay Terminix over

$1,300 on the contract. Myers and Terminix subsequently entered into one or

more annual "renewal" contracts that provided for further inspections and

insecticide treatments if necessary. Myers agreed to pay $85 for each

renewal. At paragraph 10, on the backside of the one-page contract, the

document provided for the arbitration of disputes between the parties. In

relevant part, the contract's arbitration clause reads as follows:

"10. ARBITRATION. The Purchaser and Terminix agree that any controversy or

claim between them arising out of or relating to this agreement shall be

settled exclusively by arbitration. Such arbitration shall be conducted in

accordance with the Commercial Arbitration Rules then in force of the

American Arbitration Association. * * *"

Myers became dissatisfied with Terminix's service when termites reinfested

her home and allegedly caused significant damage. She contends that the

termites caused more than $41,000 in damage to her home.

On January 22, 1997, Myers brought this action alleging that the defendants

(1) breached the contract (count I); (2) violated **279 provisions of the

Ohio Consumer Sales Practices Act, R.C. Chapter 1345 (count II); (3)

negligently, recklessly, and intentionally breached duties to exercise

reasonable care to provide goods and services under the contract (count

III); (4) breached warranties, representations, guarantees, and/or promises

owed and/or made to Myers (count IV); (5) are legally and equitably estopped

from denying representations made to Myers (count V); and (6) placed limits

on the remedies allowed in the contract and upon *44 warranties, guarantees,

and damages that are unconscionable and unenforceable (count VI).

Pursuant to R.C. Chapter 2711 ("the Ohio Arbitration Act") and Section 2,

Title 9, U.S.Code ("the Federal Arbitration Act"), the defendants seek to

stay this action and to compel arbitration. Myers opposes the defendants'

motion and seeks a partial summary judgment declaring that the arbitration

clause is void and unenforceable.

II. STANDARDS OF REVIEW

A. SUMMARY JUDGMENT STANDARD

The general rules governing motions for summary judgment filed pursuant to

Civ.R. 56 are well established. In Harless v. Willis Day Warehousing Co.

(1978), 54 Ohio St.2d 64, 66, 8 O.O.3d 73, 74, 375 N.E.2d 46, 47, the

Supreme Court of Ohio stated the requirements that must be met before a

Civ.R. 56 motion for summary judgment can be granted:

"The appositeness of rendering a summary judgment hinges upon the tripartite

demonstration: (1) that there is no genuine issue as to any material fact;

(2) that the moving party is entitled to judgment as a matter of law; and

(3) that reasonable minds can come to but one conclusion, and that

conclusion is adverse to the party against whom the motion for summary

judgment is made, who is entitled to have the evidence construed most

strongly in his favor.

"The burden of showing that no genuine issue exists as to any material fact

falls upon the moving party in requesting a summary judgment."

B. MOTION TO STAY ACTION PENDING ARBITRATION

Both federal and Ohio public policy favor and encourage resolution of

disputes through arbitration. Southland Corp. v. Keating (1984), 465 U.S. 1,

10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1, 11-12; Lake Cty. Bd. of Mental

Retardation & Dev. Disabilities v. Professional Assn. for the Teaching of

the Mentally Retarded (1994), 71 Ohio St.3d 15, 17, 641 N.E.2d 180, 181-182.

Many provisions of the Federal and the Ohio Arbitration Acts are similar.

The relevant portion of the Federal Arbitration Act, at Section 2, Title 9,

U.S.Code, reads as follows:

"A written provision in * * * a contract evidencing a transaction involving

commerce to settle by arbitration a controversy thereafter arising out of

such contract or transaction, or the refusal to perform the whole or any

part thereof, or an agreement in writing to submit to arbitration an

existing controversy arising out of such a contract, transaction, or

refusal, shall be valid, irrevocable, *45 and enforceable, save upon such

grounds as exist at law or in equity for the revocation of any contract."

(Emphasis added.)

The United States Supreme Court has interpreted this statute as requiring

federal and state courts to stay actions addressing claims involving

arbitration clauses until arbitration of the disputes is completed. See

Southland Corp., 465 U.S. at 16-17, 104 S.Ct. at 861-862, 79 L.Ed.2d at 15-

16.

The relevant portion of the Ohio Arbitration Act, at R.C. 2711.01, provides

as follows:

"A provision in any written contract [providing for arbitration of a

dispute] shall be valid, irrevocable, and enforceable, except upon grounds

that exist at law or in equity for the revocation of any contract."

(Emphasis added.)

R.C. 2711.02 provides for a stay of court actions pending arbitration.

Bellaire Bd. of Edn. v. Paxton (1979), 59 Ohio St.2d 65, 13 O.O.3d 58, 391

N.E.2d 1021, syllabus. Thus, according to both the Federal and the Ohio

Arbitration Acts, courts must enforce an arbitration clause unless the

arbitration clause could be revoked upon grounds as **280 exist at law or in

equity for the revocation of any contract. Doctor's Assoc., Inc. v.

Casarotto (1996), 517 U.S. 681, 684-686, 116 S.Ct. 1652, 1655, 134 L.Ed.2d

902, 907-908 (the federal Act); Zalecki v. Terminix Internatl., Inc. (Feb.

23, 1996), Lucas App. No. L-95-156, unreported, 1996 WL 76052 (the Ohio

Act); Smith v. Ohio State Home Serv., Inc. (May 25, 1994), Summit App. No.

16441, unreported, 1994 WL 200801 (the Ohio Act). Even arbitration clauses

in consumer contracts generally are enforceable. See Southland Corp., 465

U.S. at 16-17, 104 S.Ct. at 861-862, 79 L.Ed.2d at 15-16; Smith v. Ohio

State Home Serv., Inc., supra.

III. DISCUSSION

In its motion to stay, Terminix argues that, pursuant to either the federal

or the Ohio Arbitration Acts, it is entitled to an order by this court

staying these proceedings. In opposition, Myers submits her motion for

partial summary judgment in which she seeks a declaration that the

arbitration clause in the contract is not enforceable for two reasons.

First, she argues that the result reached by the Sixth Appellate District,

in Zalecki v. Terminix Internatl., Inc., supra, indicates that arbitration

is not mandated in this case. The Zalecki court held that an arbitration

clause contained in a Terminix "Termite Service Plan" was not enforceable

against Zalecki because his claims, based on the Ohio Consumer Sales

Practices Act, arose before the parties in that case executed the contract.

Therefore, according to the court, Zalecki's claims did not "aris[e] out of

the contract" and, thus, an arbitration panel had no authority to decide the

applicability to the Consumer Sales Practices Act to his claim. However,

this *46 court finds that Zalecki is properly distinguishable because that</