Opposition Brief — Jim Skinner Ford, Inc. v. Warren

ms (CCLTCUPUEL EO

NOV 3 1989

’ JOSEPH F. SPANIOL, J

No. 89-210 CLERK

In The

Supreme Court of the United States

October Term, 1989

,

—

JIM SKINNER FORD, INC.,

Petitioner,

JACK D. WARREN and JUANITA WARREN,

Respondents.

sé.

wv

On Petition For A Writ Of Certiorari

To The Alabama Supreme Court

,

_

BRIEF FOR RESPONDENTS JACK D. WARREN AND

JUANITA WARREN IN OPPOSITION

sé,

4

WituiaM J. TRUSSELL

Counsel of Record

Of

CHURCH, TRUSSELL &

Rosinson, P.C.

1609 Cogswell Avenue

Pell City, AL 35125

(205) 338-2295

Attorneys for Respondents,

Jack D. Warren and

Juanita. Warren

COCKLE LAW BRIEF PRINTING CO., (600) 225-6964

OR CALL COLLECT (402) 342-2831

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QUESTION PRESENTED

1. Do the provisions of the Federal Arbitration Act, 9

U.S.C. § 1 (1982), et seq., apply to disputes arising from

the purchase for consumer use of a motor vehicle pur-

suant to an adhesion contract by an Alabama resident

from an automobile dealership with its sole place of

business located in the State of Alabama?

ii

TABLE OF CONTENTS

Page

CRIME Ee FEE? vvicccccccnesexeeserdudues i

TABLE OF CONTENTS pe edes fe seddeiesee eae ii

SA A PP REIEED cc ccccccccccnedanvvetws iii

SUMMARY OF ARGUMENT.................2000-- 1

ARGUMENT ......0c0é0. Wavwessecunnesateaaeoonie 2

CPE Neos acc0dcceneees suakregaeaceeenes 14

iii

TABLE OF AUTHORITIES

CASEs:

Burke County Public Schools Board of Education v.

Shaver, 303 N.C. 408, 279 S.E. 2d 816 (1981)...... 7,8

Cahoon v. Ziman, 298 S.E. 2d 729 (N.C. App., 1983),

review denied, 301 S.E. 2d 388 (N.C., 1983)........ 8

Vv

Dickstein v. duPont, 320 F. Supp. 150 (D.C., Mass.,

1970) affirmed 443 F. 2d 783 (ist Cir., 1971)........ 6

E. I. Du Pont De Nemours & Co. v. Lyles & Lang

Const. Co., 219 F. 2d 328, cert. denied 349 US.

Ee ta Fe a a 6

Electronic & Missle Facilities, Inc. v. United States,

306 F. 2d 554 (5th Cir., 1962), Reviewed on other

SE ES BU GEO. cer cece nvcccccccces 6

GAF Corp. v. Werner, 485 N.E. 2d 977 (N.Y. App.

Ct., 1985), cert. denied 475 U.S. 1083 (1986)........ 6

Galt v. Libbey-Owens-Ford Glass Co., 376 F. 2d 711

ES ches vices esonbccceessesecccsess 6

Kanmak E. Mills v. Society Brand Hat Co., 236 F. 2d

Er 5

Krauss Bros. Lumber Co. v. Lewis Bossert & Sons,

eS Ge eS |.) 5

Lawson Fabrics, Inc. v. Akzona, Inc., 355 F. Supp.

1146 (S.D. N.Y., 1973), affirmed, 486 F. 2d 1394

(2nd Cir., 1973) Oe OF IE OPP . Te ee 5

McElwee-Courbis Const. Co. v. Rife, 133 F. Supp. 790

Edis Cecn cece s cetivnccebicecscees 6

Macchiavelli v. Shearson, Hammill & Co., Inc., 384 E

eB) 10

iv

TABLE OF AUTHORITIES —- Continued

Page

Metro Industrial Painting Corp. v. Terminal Const.

Co., 287 F. 2d 382 (2nd Cir., 1961) cert. denied,

I roo 5 os o:0 0s vewnete ts te A Re

Monte v. Southern Delaware County Authority, 321 F.

EE vi vivordevscnvcscevagaccncenes 6

Paramore v. Inter-Regional Fin. Group Leasing, 316

Slee Se ee SU BI ODs ooecjnns ccrcdevecsocces 8

Perry v. Thomas, 482 U.S. 483 (1987)............ 1, 9, 10

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388

ANS ene er en eee 6

Riverfront Properties, Ltd. v. Max Factor III, 460

So.2d 948 (Fla App., 2nd Dist. 1984)............... 9

Robert Lawrence Company v. Devonshire Fabrics, Inc.,

271 F. 2d 402 (2nd Cir., 1959), cert. dismissed,

SE GEM I 5 ie CR a cl eekepisensdercccccsces 5

Shanferoke Coal & Supply Corp. of Delaware v. West-

chester Service Corp., 70 F. 2d 297 (2nd Cir.,

1934), cert. granted, 293 U.S. 541, aff’d., 293 U.S.

ES AR EIS RG Cree“ a 5

Shearson Hayden Stone, Inc. v. Liang, 493 F. Supp.

Se I io ds nance nteee cctcesenecse. 10

Southland v. Keating, 465 U.S. 1 (1984).............. 1,2

Standard Magnesium Corp. v. Fuchs, 251 F. 2d 455

Ge EA iis 0 vice SNAG aASUV ees 6Cdd ne covcces 5

Sterling Foundations v. Merritt-Chapman & Scott

Corp., 134 F. Supp. 327 (D.C. N.Y., 1955)........... 6

Stokes v. Merrill Lynch Pierce Fenner & Smith, 523 F.

Be SF Se ig SEO esc cervesbetdbedescecsess 10

Vv

TABLE OF AUTHORITIES —- Continued

Tonetti v. Shirley, 173 Cal. App. 3d 1144 (4th Dist.,

SOE 5 has detenteuep oad vaveaescalay SVeneertars

Varley v. Tarrytown Associates, Inc., 477 F. 2d 208

Cees See SN E+ LS ole-caw Cues cas bee ktee tas

Warren Bros. Co. v. Community Building Corp. of

Atlanta, Inc., 386 F. Supp. 656 (D.C. N.C., 1974)

STATUTES:

Federal Arbitration Act, 9 U.S.C. § 1, et seq. (1982)

Fair Labor Standards Act, § 6(a), 7(a), 29 U.S.C.A.

3 RRR geal Sonal

Magnuson-Moss Warranty-Federal Trade Com-

mission Improvements Act, 15 U.S.C. § 230...

Motor Vehicle Information and Cost Savings Act,

ks ee rere

National Relations Act, 29 U.S.C.A. § 10(a) and

PPP UT a raskvibnceateenescceVivedisiseaces

CONSTITUTIONAL PROVISIONS:

The commerce clause of Article I of the United

A FR ke ara NN AR Ue

OTHERS:

Atwood, Issues in Federal-State Relations Under the

Federal Arbitration Act, 37 University of Fla.

nn ae ou decd oucs eeu

Cohen & Dayton, The New Federal Arbitration Law,

je Se eee

vi

TABLE OF AUTHORITIES - Continued

Page

Commerce, Federal Practice Digest, 3rd Ed., key

PE EEE EE DUES Te OON GOP CE Eee Oe Sear 9

Hearings on S. 4213 and 4214 before the Subcom-

mittee of the Senate Committee on the Judiciary,

67th Congress, Fourth Session ................... 3, 4

Joint hearings on S. 1005 and H.R. 646 before the

Subcommittee of the Committees on the Judici-

ary, 68th Congress, First Session (1924) ............ 4

SUMMARY OF ARGUMENT

The Alabama Supreme Court ruling in this case is not

governed by Perry v. Thomas, 482 U.S. 483 (1987) or South-

land v. Keating, 465 U.S. 1 (1984). In these cases, the

subject contracts evidenced a transaction involving com-

merce within the meaning of the Federal Arbitration Act,

9 U.S.C. § 1, et seq. (1982), hereinafter referred to as the

FAA. It is a well settled principle that state law is pre-

empted by the FAA for those disputes within its opera-

tion. However, the question presented here is whether the

FAA applies to the contract at issue. The Petitioner

asserts that the Alabama Supreme Court’s ruling in this

case conflicts with numerous federal statutes that regu-

late the sale of motor vehicles. The logic of this conclu-

sion escapes the Respondent. This decision does not hold

that Congress lacks the authority under the commerce

clause of the Federal Constitution to pass laws to protect

consumer interests in connection with the purchase of a

motor vehicle. Clearly, Congress has such authority.

Rather, this decision simply holds, based upon the iegis-

lative history of the Act and prior judicial decisions, that

the FAA does not apply to intrastate consumer purchases.

The Petitioner argues that arbitration is required under

the FAA in adhesion contracts. Whether arbitration

should be mandated in these type transactions which are

not arms-length and bargained for provisions, is a ques-

tion properly left with Congress after hearings and

debates. It is unlikely that Congress would ever seriously

consider passing the type of legislation advanced by Peti-

tioner under its strained interpretation of the FAA. The

denial of access to the courts for defective consumer

products which would result from this construction of the

2

FAA constitutes a threat to the rights of every citizen. It is

not a subjective application of the law to hold that these

transactions are not governed by the FAA, but rather

such a ruling is a reaffirmation of historical precedent.

,%

v

ARGUMENT

Contrary to Petitioner’s assertion, this case does not

represent hostility by the Respondents or the Alabama

Courts to the appropriate application of the Federal Arbi-

tration Act. This case illustrates that the FAA is not a

statute intended for general application to all contracts,

but Congress limited it to specific types of agreements.

Section 2 of the FAA specifically limits it to maritime

transactions and to “contracts evidencing transactions

involving commerce.” 9 U.S.C. § 2 (1982). The term com-

merce is specifically defined in § 1 of the Act.!

The Respondents acknowledge that if the subject

agreement is a contract evidencing a transaction involv-

ing commerce as that term is defined in the FAA, then

due to federal preemption announced by this Court in

Southland v. Keating, 465 U.S. 1 (1984), the Petition for

1 9 U.S.C. § 1(1982) provides in pertinent part: ... “com-

merce”, as herein defined means comnicrce among the several

states or with foreign nations, or in any territory of the United

States or in the District of Columbia or between any such

territory or another or between any such territory and any

state or foreign nation or between the District of Columbia and

any state or territory or foreign nation but nothing herein

contained shall apply to contracts of employment of seamen,

railroad employees, or any other class of workers engaged in

foreign or interstate commerce.

Certiorari is due to be granted. However, the Respon-

dents submit that the legislative history as well as the

previous judicial rulings construing the Act clearly dem-

onstrate that it does not apply to the type of transaction

presently before the Court. The provisions of the FAA do

not and never were intended to apply to contracts of

adhesion involving the consumer purchase of a product

by a citizen from one state from a retailer residing in the

same state.

The Petitioners principally argue that the power of

Congress to regulate interstate commerce under Article |

of the Federal Constitution is identical with the statutory

definition of commerce used by § 1 of the FAA. Stated

differently, Petitioners assert that the phrase “contract

evidencing a transaction involving commerce” under the

FAA has the identical meaning as the affecting interstate

commerce standard used in construing the power of Con-

gress under Article I of the Constitution. This assertion

ignores the differing legislative histories of these laws

and their origins, the problems sought to be remedied,

and the numerous judicial decisions construing the pre-

cise language used in the respective provisions.

To distinguish between the jurisdiction of the FAA

and Congress’ authority under the commerce clause of

Article One, it is useful to review the legislative history of

the Act. The FAA was passed by Congress in 1924. The

original proposal was drafted by the American Bar Asso-

ciation Committee on Commerce, Trade and Commercial

Law using New York State Law as a model.? Hearings

2 Hearings on S. 4213 and 4214 before the Subcommittee of

the Senate Committee on the Judiciary, 67th Congress, Fourth

Session, page 1 through 3 (1923) (Remarks by Charles

Bernheimer) hereinafter cited as Hearings on S. 4214.

were originally held by the Senate Judiciary Committee

in 1923. At these hearings some members of the Senate

were concerned about the application of the Act to adhe-

sion contracts or other “take it or leave it” type arrange-

ments. The debates during these hearings revealed that

the legislation was not aimed at such contracts, but was

intended to empower courts to enforce arbitration clauses

entered into in arms-length transactions between mer-

chants. Senator Julius Cohen, a key drafter of the legisla-

tion testified extensively at the subsequent 1924 joint

Congressional hearings on the proposed bill. It was Mr.

Cohen’s view that the proposed legislation was not suited

for all types of contractual disputes, but it was a remedy

particularly useful to disputes between merchants.® In an

article jointly authored by Senator Cohen in the Virginia

Law Review in 1926, he observed:

“Not all questions arising out of contracts ought

to be arbitrated. It is a remedy peculiarly suited

to the disposition of the ordinary disputes

between merchants as to questions of fact-quan-

tity, quality, time of delivery, compliance with

terms of payment, excuses for nonperformance,

and the like. It has a place also in the determina-

tion of the simpler questions of law — the ques-

tions of law which arise out of the daily

relations between merchanis as to the passage of

3 Hearings on S. 4214, supra, note 2 at 9-11. See also,

Atwood, Issues in Federal-State Relations Under the Federal Arbi-

tration Act, 37 University of Fla. L. Rev. 61, 75 (1985).

4 Hearings on S. 4214, supra, note 2 at pages 9-11.

5 Joint Hearings on S. 1005 and H.R. 646, before the Sub-

committee of the Committees on the Judiciary, 68th Congress,

First Session (1924).

ee

——_

5

title, the existence of warranties, or the ques-

tions of law which are complementary to the

questions of fact which we have just

mentioned.”®

Early disputes involving the FAA dealt with the type

transactions in which Congress was primarily concerned

when the legislation was adopted. Most of the reported

cases did not attempt to define the phrase “contract evi-

dencing a transaction involving commerce” other than to

determine whether the facts then before the court satis-

fied this requirement. These decisions concerned disputes

arising out of contracts between citizens of different

states involving the shipment of goods through interstate

commerce or concerned construction contracts where

much of the material was shipped through interstate

commerce.” In these cases the courts had little difficulty

in finding that sufficient interstate commerce was

involved so as to cause the claims to come within the

purview of the FAA.

, © Cohen & Dayton, The New Federal Arbitration Law, 12 Va.

L. Rev. 265, 281 (1926).

7 The following cases have dealt with interstate shipment of

goods by merchants: Krauss Bros. Lumber Co. v. Lewis Bossert &

Sons, Inc., 62 F. 2d 1004 (2nd Cir., 1933); Shanferoke Coal & Supply

Corp. of Delaware v. Westchester Service Corp., 70 F. 2d 297 (2nd

Cir., 1934), cert. granted, 293 U.S, 541, aff’d., 293 U.S. 449 (1934);

Robert Lawrence Company v. Devonshire Fabrics, Inc., 271 F. 2d 402

(2nd Cir., 1959), cert. dismissed, 364 U.S. 801 (1960); Kanmak E.

Mills v. Society Brand Hat Co., 236 F. 2d 240 (8th Cir., 1956),

_ Standard Magnesium Corp. v. Fuchs, 251 F. 2d 455 (10th Cir., 1957).

The following cases dealt with construction contracts: Lawson

Fabrics, Inc. v. Akzona, Inc., 355 F. Supp. 1146 (S.D. N.Y., 1973),

(Continued on following page)

Eventually, this Court determined that disputes

could come within the jurisdiction of the FAA even

though the subject contract was not for the interstate

shipment of goods but only where it related to interstate

commerce. Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395 (1967). Following Prima Paint, a number of

cases held that employment contracts which did not

involve the interstate shipment of goods were controlled

by the FAA.® As a result of the ever-expanding scope of

the FAA, a general principle evolved which underlies the

factual determination of when a contract evidences a

transaction involving commerce. One of the earliest deci-

sions to announce this principle was Metro Industrial

Painting Corp. v. Terminal Const. Co., 287 F. 2d 382 (2nd

Cir., 1961) cert: denied, 368 U.S. 817 (1961). In Metro,

Chief Judge Lumbard in his concurring opinion deter-

mined that a contract by a Connecticut and New Jersey

(Continued from previous page)

affirmed, 486 F. 2d 1394 (2nd Cir., 1973); McElwee-Courbis

Const. Co. v. Rife, 133 F. Supp. 790 (D.C., P.A., 1955); Sterling

Foundations v. Merritt-Chapman & Scott Corp., 134 F. Supp. 327

(D.C. N.Y., 1955); E. J. Du Pont De Nemours & Co. v. Lyles & Lang

Const. Co., 219 F. 2d 328, cert. denied 349 U.S. 956 (1955);

Warren Bros. Co. v. Community Building Corp. of Atlanta, Inc., 386

F. Supp. 656 (D.C. N.C., 1974); Galt v. Libbey-Owens-Ford Glass

Co., 376 F. 2d 711 (7th Cir., 1967); Monte v. Southern Delaware

County Authority, 321 F. 2d 870 (3rd Cir., 1963); Electronic &

Missle Facilities, Inc. v. United States, 306 F. 2d 554 (5th Cir.,

1962), Reviewed on other grounds, 374 U.S. 167 (1963).

8 GAF Corp. v. Werner, 485 N.E. 2d 977 (N.Y. App. Ct.,

1985), cert. denied 475 U.S. 1083 (1986); Tonetti v. Shirley, 173

Cal. App. 3d 1144 (4th Dist., 1985); Varley v. Tarrytown Associ-

ates, Inc., 477 F. 2d 208 (2nd Cir., 1973); Dickstein v. duPont, 320

F. Supp. 150 (D.C., Mass., 1970) affirmed 443 F. 2d 783 (Ist Cir.,

1971).

corporation to paint certain buildings in Florida did evi-

dence a transaction involving commerce. In reaching this

conclusion, Judge Lumbard observed:

“The language of § 2 of the Arbitration Act

might suggest that the test-to be applied is a

formalistic one. The statute does not purport to

affect arbitration provisions in all contracts

involving commerce; it puts its stamp only on

such provisions when incorporated in contracts

evidencing a transaction involving commerce.

Were it not for the broad remedial purpose of

the statute and for contrary indications in the

legislative history, we might be justified in lim-

iting the effect of the act to only those contracts

which, on their face, reveal that some interstate

transaction is to take place...

The significant question, therefore, is not

whether, in carrying out the terms of the con-

tract, the parties did cross state lines, but

whether, at the time they entered into it and

accepted the arbitration clause, they contem-

plated substantial interstate activity.” Metro

Industrial Painting Corp. v. Terminal Const. Co.,

287 F. 2d 382, 387 (2nd Cir., 1961).

The decision in Metro enunciating the test of whether

the parties contemplated substantial interstate activity

was adopted by the North Carolina Court in Burke County

Public Schools Board of Education v. Shaver, 303 N.C. 408,

279 S.E. 2d 816 (1981). In Burke, the Court, using the test

enunciated in Metro, found a contract for the construction

of a school building between a multi-state architectural

firm and local Indiana school boards contemplated sub-

stantial interstate activity so as to be governed by the

FAA. After quoting Judge Lumbard in Metro, with

ay proval, the Court stated:

“We do not mean to suggest that where the

contracting parties are merely located in differ-

ent states or where other facts tending only to

show diversity of citizenship are present, the

contract must necessarily be found to contem-

plate substantial interstate activity so as to trig-

ger the act’s rt Tapers Where, however,

performance of the contract itself necessarily

involves, so that the parties to the agreement

must have contemplated substantial interstate

activity the contract evidences a transaction

involving commerce within the meaning of the

Federal Arbitration Act.” Burke County Public

Schools Board of Education v. Shaver, 279 S.E. 2d

816, 822 (1981).9

This decision was subsequently followed in North Caro-

lina in Paramore v. Inter-Regional Fin. Group Leasing, 316

S.E. 2d 90 (N.C. App., 1984), where the court held that a

dispute concerning a tractor leased by the Plaintiff from

the Defendant was not governed by the FAA because

performance under the contract did not involve substan-

tial interstate activity even though the rental payments

were received by the Defendant at its out of state office.

See also Cahoon v. Ziman, 298 S.E. 2d 729 (N.C. App.,

1983), review denied, 301 S.E. 2d 388 (N.C., 1983).

9 In footnote number eleven in Burke County Public School

Board of Education v. Shaver, the North Carolina Supreme Court

quoting Judge Lumbard’s analysis observed “We note further

that the Federal Arbitration Act unlike other statutes involving

the commerce power does not attempt to regulate activity

affecting interstate commerce. Instead, it provides for those

who so desire and expeditious quasi-judicial process for set-

tling disputes...” Burke County Public School Board of Educa-

tion v. Shaver, 279 S.E. 2d 816, 820 (1981).

The Florida Court in Riverfront Properties, Ltd. v. Max

Factor III, 460 So. 2d 948 (Fla App., 2nd Dist. 1984) also

cited Judge Lumbard’s analysis, with approval, in deter-

mining that a joint venture agreement executed in Cali-

fornia and to be substantially performed there was not a

contract evidencing a transaction in commerce. Thus, the

Court concluded that the FAA did not apply even though-

the financing of the joint venture was obtained from a

Florida lending institution.

The Respondents submit that the foregoing test enun-

ciated by Judge Lumbard has been implicitly recognized,

if not clearly stated, in almost every reported case dealing

with the scope of the FAA. The Courts have uniformly

applied the FAA only where the parties have contem-

plated substantial interstate activity.1!° Nevertheless, Peti-

tioners assert that Perry v. Thomas, 482 U.S. 483 (1987)

stands for the proposition that the affecting commerce

standard used in determining the extent of Congress’

power under the commerce clause is identical to the

scope of the FAA. Perry v. Thomas involved a dispute with

a national brokerage company over commissions from the

sale of securities. The issue of whether a contract involv-

ing the sale of securities is a contract evidencing a trans-

action involving commerce was not seriously contested.

By this time it was well settled that transactions involving

the purchase and sale of securities on the national

exchanges constituted commerce within the meaning of

10 The cases generally can be grouped into four categories:

(1) Employment agreements; (2) merchant contracts involving

interstate shipping; (3) contracts involving securities; and (4)

construction contracts. See Commerce, Federal Practice Digest,

3rd Ed., key 80.5.

10

the FAA. See Macchiavelli v. Shearson, Hammill & Co., Inc.,

384 F. Supp. 21 (E.D., Cal., 1974); Stokes v. Merrill Lynch

Pierce Fenner & Smith, 523 F. 2d 433 (6th Cir., 1975);

Shearson Hayden Stone, Inc. v. Liang, 493 F. Supp. 104 (N.

Dist. Ill., 1980). However, in Perry v. Thomas the principal

issue confronting the court was whether the FAA pre-

empted California state law on the subject of arbitration.

In holding that state law was preempted by the FAA, the

court observed that it was “Congress’ intent to provide

for the enforcement of arbitration agreements within the

full reach of the commerce clause.” Perry v. Thomas, 482

U.S. 483, 490 (1987). The court was not saying that the

FAA’s jurisdiction was identical with Congress’ authority

under the commerce clause. Rather, in the context of the

issue of preemption, the court was noting that Congress’

authority is supreme in those matters involving interstate

commerce. Furthermore, if a transaction is governed by

the FAA, then pursuant to Congress’ authority under the

commerce clause, state law is preempted. It is important

to recognize in Perry that the court was focusing on the

preemption of state law and was not attempting to estab-

lish or overrule any existing precedent on what type of

contracts evidence a transaction in commerce so as to be

governed by the FAA.

Petitioner further argues that since Congress has the

power under the commerce clause to pass an arbitration

act applicable to cases such as the present case, then it

necessarily follows that the FAA applies to the present

transaction. (Petitioner’s brief, p. 9). The Respondents do

not contest Petitioner’s assertion that Congress has the

authority under the commerce clause to adopt arbitration

11

laws applicable to intrastate consumer purchases involv-

ing resideuis of the same state where the goods

purchased have some nexus with interstate commerce. In

fact, as Petitioner points out in his brief, the Motor Vehi-

cle Information and Cost Savings Act, 15 U.S.C. § 1981, et

seq., and the Magnuson-Moss Warranty-Federal Trade —

Commission Improvements Act, 15 U.S.C. § 230 et seq.,

are appropriate examples of the exercise of Congress’

authority. However, it does not follow that Congress

intended for the FAA to apply to intrastate consumer

sales simply because they may have the authority to

adopt such a law. If Congress determines that the auto-

mobile dealer associations and other retailers need pro-

tection from consumers, there is no doubt it could make

the appropriate legislative findings and enact statutory

protections. However, the issue presented here is whether

Congress intended for § 2 of the FAA to apply to con-

tracts of adhesion where a consumer purchases a product

from a retailer residing in the same state. The legislative

history as previously stated, not only militates against

such an unwarranted expansion of the Act, but it clearly

indicates.that such was not Congress’ intent.

Not only have the courts consistently required more

than the “affecting commerce standard” advocated by

Petitioner, this standard was specifically repudiated by

Judge Lumbard in Metro, where he stated:

“Notwithstanding the finding in Lawrence that

‘Congress intended to use to the fullest possible

extent its powers to regulate commerce.as it was

affected by arbitration agreements,’ the legisla-

tive history of the Arbitration Act of 1925

reveals little awareness on the part of Congress

that state law might be affected. See Note, 69

12

Yale L.J. 847, 863 (1960). Having no clear man-

date from Congress as to the extent to which

state statutes and decisions are to be super-

ceded, we must be cautious in construing the act

lest we excessively encroach on the powers

which Congressional policy if not the Constitu-

tion would reserve to the states. It may be a

close constitutional question indeed whether

Congress could regulate arbitration provisions

in all contracts ‘affecting commerce’ or between

persons ‘engaged in commerce’ as these phrases

have been defined by countless cases under the

National Relations Act § 10(a), 29 U.S.C.A.

§ 160(a), or the Fair Labor Standards Act,

§§ 6(a), 7(a), 29 U.S.C.A §§ 206(a), 207(a).” Metro

Industrial Painting Corp. v. Terminal Const. Co.,

287 F. 2d 382, 386 (1961).

The Petitioner further attacks Judge Lumbard’s test

requiring that the parties contemplate substantial inter-

state activity in performing their contract as being subjec-

tive and, thus, hinders the policies behind promoting

arbitration. This analysis reflects Petitioner’s confusion

over how the standard is applied by the court. The terms

of the contract are the primary evidence in determining

whether the parties contemplated substantial interstate

activity. As noted by Judge Lumbard:

“Cogent evidence regarding their state of mind

at the time would be the terms of the contract

and if it on its face evidences interstate traffic,

such as did the shipment from New York to

Massachusetts in the Lawrence case, the contract

~ should come within § 2. In addition, evidence as

to how_the parties expected the contract ts be

performed and how it was performed is relevant

to whether substantial interstate activity was

contemplated.” Metro Industrial Painting Corp. v.

Terminal Const. Co., 287 F. 2d 382, 387 (1961).

13

Such an analysis is far less subjective than the

approach advanced by Petitioner. The Petitioner would,

in effect, abandon any test or standard in applying the

FAA. If any remote nexus to interstate commerce could be

developed, the Petitioner would argue that the FAA

would control. Thus, as a practical matter, all consumer

purchases would be affected since the majority of prod-

ucts bought and sold within a given state are manufac-

tured elsewhere or at least packaged using materials or

equipment from another state or country. Almost any

contract which requires the use of tools, equipment or

instruments in its performance, regardless of the remote-

ness to interstate commerce, would be governed by the

FAA since in all likelihood such tools and equipment

would be manufactured in another state. In the final

analysis, Petitioners would use the FAA to usurp con-

sumer protection laws and state contract laws irrespec-

tive of the adhesion nature of the agreement and the

remoteness to interstate commerce. The present case is a

typical example of Petitioner’s argument taken to its logi-

cal conclusion. If an Alabama resident who purchases a

motor vehicle for consumer use from another Alabama

resident under an adhesion contract is required to arbi-

trate under the FAA, then consumer protection laws in

every state are in peril. It is certain that Congress did not

intend this perverted application of the FAA and neither

has this court nor any other court to date applied the Act

in such a fashion. In this regard, it is interesting to note

that Petitioner fails to cite a single case in its brief with

facts similar to the case at bar. The reason for this glaring

omission is that neither Congress, the courts, nor even

parties to private agreements, ever considered that the

14

FAA was intended to apply in such transactions. The

Respondents submit that such legislation should be

undertaken by Congress or State Legislatures only after

careful consideration of the consequences to consumer

rights.

,%

-_

CONCLUSION

For the reasons set forth above, the Petitioner’s Writ

for Certiorari should be denied.

Respectfully submitted,

WituaM J. TRussELL

Attorney for Respondents

CHuRCH, TRUSSELL & Rosinson, P.C.

1609 Cogswell Avenue

Pell City, Alabama 35125

(205) 338-2295