Alabama Supreme Court sends eight Family Security Credit Union cases to arbitration

By Melissa Busch | Jun 2, 2017

MONTGOMERY, Ala. (Legal Newsline) – Eight separate claims filed against a credit union for allegedly failing to perfect its security interest in vehicles before financing the purchasers of the vehicles will head arbitration, according to a court ruling.

On May 19, the Supreme Court of Alabama ruled that the trial court erred in denying Family Security Credit Union’s (FSCU) motions to compel arbitration under the arbitration provision in the dealer's assignment and buyer's consent to assignment agreement. The court reversed and remanded the Clarke Circuit Court decision, denying FSCU’s motion to compel arbitration in eight separate but closely related cases. 

The cases involving these plaintiffs will head to arbitration: Richard W. Etheredge, Kendrick M. Nettles, Wanda J. Pezent, David Moore, Martha H. Dunagan, Gene McClure, Kayla N. Williams, and Dana and Timothy Dunn

Action Auto Sales financed the vehicle inventory of the used car dealership, Pine City Auto. Action Auto held the titles to the vehicles it financed and released a title only when a vehicle was sold and Pine City paid off a proportional amount of the inventory financing, the suit states.

Pine City went out of business without paying off the inventory financing on some of the vehicles it had sold, the suit states, resulting in Action Auto suing the dealership and the purchasers of eight vehicles who had bought vehicles and financed them through FSCU. The car-financing business sought possession of the eight vehicles plus damages.

This resulted in each of the purchasers filing counterclaims and cross-claims against Action Auto and Pine City and third-party claims against FSCU, alleging negligence, wantonness, and conspiracy, according to court documents.

FSCU moved for each of those third-party claims to be submitted to arbitration based on a retail installment sale contract and a dealer's assignment and buyer's consent to assignment that each purchaser had signed. 

There was a provision in the contract that stated: "Any controversy or claim arising out of or relating to this agreement shall be settled by binding arbitration. Dealer and buyer further agree that any such arbitration shall take place in Morgan County, Alabama. Judgment upon any award rendered by the arbitrator may be entered by any court having jurisdiction thereof.”

During the lower court’s hearing, the vehicle purchasers opposed the motions to compel arbitration but submitted no evidence to support it. The trial court called the arbitration provision “unconscionable” and ruled in favor of each of the eight purchasers, according to court documents.

On appeal, the purchasers argued that "the lack of any valid jury trial waiver provides another viable basis for the setting aside of the assignment's arbitration requirement,” according to court documents. 

However, no issue concerning a jury-waiver provision was properly presented before the high court. Therefore, the court determined that this argument did not present a basis for it to uphold the trial court’s judgment.

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