Deer Automotive Group, LLC v. Brown

Greene, J. Appellant 1 , Deer Automotive Group, LLC t/a Liberty Ford (“Liberty Ford” or “Appellant”) is a Maryland limited liability company, which operates a new and used automobile dealership in Baltimore County. Appellees, Barbara Brown and Herbert E, Spencer, Jr., (“Brown and Spencer”, or collectively “Appellees”) are individuals who each purchased vehicles from ⁵⁵ Appellant’s dealership. On March 13, 2015, Brown and Spencer filed a class action lawsuit (the “Class Action”) in the Circuit Court for Baltimore County against Liberty Ford, in which they challenged Liberty Ford’s practice of providing customers with an alleged free lifetime Limited Warranty for their vehicles. The alleged free warranty was conditioned on the consumer’s continued use of and payment for other services provided by Liberty Ford, which, Appellees aver, is an arrangement that violates federal law.

In lieu of filing a motion to compel arbitration in the Class Action matter, Liberty Ford commenced an independent action in the same court on April 27, 2015 (“the Arbitration Action”) seeking to compel arbitration in the existing Class Action case. The Circuit Court ruled that Brown and Spencer’s claims in the Class Action were not subject to binding arbitration. Liberty Ford appealed. In the Court of Special Appeals, Brown and Spencer filed a motion to dismiss the appeal arguing that the Circuit Court’s order denying arbitration was not an appealable final judgment.

The Court of Special Appeals denied the motion, and Brown and Spencer petitioned this Court for review. FACTUAL AND PROCEDURAL BACKGROUND On or about July 6, 2007, Appellee Brown purchased a used 2002 Hyundai Santa Fe from Liberty Ford. Ms. Brown signed multiple documents in connection with the sale, including a buyer’s order, dated July 6, 2007, and a retail installment sales contract (“RISC”), dated July 11, 2007. The buyer’s order presented to Ms. Brown by Liberty Ford reflected the following provisions related to claims and disputes arising out of or relating to the purchase of the Santa Fe: The parties irrevocably agree that any controversy, claim or dispute arising out of or relating to the purchase or the financing of this vehicle included but not limited to this Purchase Agreement or the breach thereof shall be settled by binding arbitration, pursuant to the separate Agreement to Arbitrate Disputes.

However, binding arbitration will not ⁵⁶ apply to the failure of the Purchaser to provide consideration including failure to pay a note, a dishonored check, failure to provide a trade title, or failure to pay a deficiency resulting from an additional payoff on a trade. In addition, binding arbitration will not apply to Dealer’s right to retake possession of the vehicle. SEE SEPARATE ARBITRATION AGREEMENT ATTACHED HERETO AND INCORPORATED BY REFERENCE HEREIN FOR SPECIFIC DETAILS. On or about April 28, 2012, Appellee Spencer purchased a used 2010 Chrysler 800 from Liberty Ford and signed numerous documents in connection with this purchase, including a RISC, dated April 28, 2012.

The RISC presented to Mr. Spencer by Liberty Ford reflected the following information related to arbitration and class action lawsuits: READ THIS ARBITRATION PROVISION CAREFULLY AND IN ITS ENTIRETY ARBITRATION Arbitration is a method of resolving any claim, dispute, or controversy (collectively, a “Claim”) without filing a lawsuit in court. Either you or Creditor (“us” or “we”) (each, a “Party”) may choose at any time, including after a lawsuit is filed, to have any Claim related to this contract decided by arbitration. Such Claims include but are not limited to the following: 1) Claims in contract, tort, regulatory or otherwise; 2) Claims regarding the interpretation, scope or validity of this clause, or arbitrability of any issue; 8) Claims between you and us, your/our employees, agents, successors, assigns, subsidiaries or affiliates; 4) Claims arising out of or relating to your application for credit, this contract, or any resulting transaction or relationship, including that with the dealer, or any such relationship with third parties who do not sign this contract. RIGHTS YOU AND WE AGREE TO GIVE UP If either you or we choose to arbitrate a Claim, then you and we agree to waive the following rights: • RIGHT TO A TRIAL, WHETHER BY A JUDGE OR JURY ⁵⁷ • RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE OR A CLASS MEMBER IN ANY CLASS CLAIM YOU MAY HAVE AGAINST US WHETHER IN COURT OR IN ARBITRATION • BROAD RIGHTS TO DISCOVERY AS ARE AVAILABLE IN A LAWSUIT • RIGHT TO APPEAL THE DECISION OF AN ARBITRATOR • OTHER RIGHTS THAT ARE AVAILABLE IN A LAWSUIT You may choose the organization to conduct the arbitration subject to our approval.

The applicable rules (the “Rules”) may be obtained from the selected organization. If there is a conflict between the Rules and this contract, this contract shall govern. This contract is subject to the Federal Arbitration Act ( 9 U.S.C. § 1 et seq.) and the Federal Rules of Evidence. The arbitration decision shall be in writing with a supporting opinion.

Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. We will pay your total reasonable arbitration fees and expenses (not including attorneys fees, except where applicable law otherwise provides) in excess of $125. We will pay the whole filing fee if we demand arbitration first. Any portion of this arbitration clause that is unenforceable shall be severed, and the remaining provisions shall be enforced.

If a waiver of class action rights is deemed or found to be unenforceable for any reason in a case in which class action allegations have been made, the remainder of this Arbitration Clause shall be unenforceable. Notwithstanding any other provision of this Arbitration clause, the validity and scope of the waiver of class action rights shall be decided by the court and not by the arbitrator. On March 13, 2015, Barbara Brown and Herbert E. Spencer, Jr., filed a class action lawsuit in the Circuit Court for Baltimore County against Liberty Ford. Brown and Spencer’s complaint alleged that Liberty advertised a “Liberty for Life” Warranty for new and used vehicles that was “free of charge” ⁵⁸ and “for life” then conditioned those benefits upon certain mandatory and costly requirements of the consumer.

Specifically, Brown and Spencer allege that, with respect to Mr. Spencer’s warranty, when “Mr. Spencer refused to have the mandatory 15,000 mile service performed by Liberty Ford because of the dealership’s excessive $265 charge, Liberty Ford voided his warranty and refused to honor or provide Mr. Spencer any of the benefits under the [‘jLiberty for Life’ Limited Warranty program.” Brown and Spencer allege that Liberty Ford “informed Ms. Brown that, by obtaining required service work on her vehicle at a location other than Liberty Ford, Ms. Brown voided the terms of her ‘Liberty for Life’ Limited Warranty.” According to Brown and Spencer, the practice of requiring additional costly maintenance services, which were outside the scope of a vehicle’s warranty and could only be performed at Liberty Ford, is a “tying arrangement” because the consumer is forced to pay for non-warranty service and maintenance charges if the consumer wants the promised benefits of the “Liberty for Life” Warranty. In effect, the consumer is “tied to” the continued receipt of benefits through non-warranty and costly services at Liberty Ford. Brown and Spencer allege that this tying arrangement constitutes a violation of the Magnuson-Moss Warranty Act (“MMWA”), 15 U.S.C. § 2301 et seq. 2 ⁵⁹ In lieu of filing a motion to compel arbitration in the Class Action suit, Liberty Ford commenced the independent Arbitration Action in the same court on April 27, 2015. The matter was assigned to the same judge presiding in the Class Action.

In the Arbitration Action, Liberty Ford sought to compel arbitration of any and all claims contained in the Class Action and to stay the Class Action. On June 23, 2015, Brown and Spencer filed a Motion to Consolidate the Class Action and the Arbitration Action. Liberty Ford did not file a response. The Circuit Court denied Brown and Spencer’s motion pursuant to an order issued on June 29,2015.

The court explained: While Plaintiffs are correct that these actions involve common questions of law and fact and a common subject matter, in this instance the consideration of “convenience” addressed in Md. Rule 2-503(b) dictates that these matters not be consolidated. This is the case because Plaintiffs are correct about another point, that enough information is before the Court to allow a determination to be made in the Arbitration Action. A hearing will be held on the pending Petition in that case on August 4, 2015. The Court’s determination of that Petition will end proceedings in the Arbitration Action and will either result in the staying of the Class Action or in allowing the Class Action to proceed outside of the shadow of the Arbitration Action.

That is, one way or the other, aside from any potential appeal, the Arbitration Action will be concluded after August 4, 2015. That being the case, the only thing consolidation will accomplish at this point will be to keep the case file in the Arbitration Action active after it should be closed. It has been the Court’s experience that the Office of the Clerk of the Court has a great deal of difficulty docketing papers in an orderly fashion where cases—especially cases involving complex civil litigation as in these matters—are consolidated. Where cases have been consolidated, but then one case ⁶⁰ file subsequently should be closed, further chaos—and the habitual misdocketing of papers—ensues.

Therefore, since the Arbitration Action will not need to be active after August 4, 2015—unless, again, the matter is appealed—it will only cause inconvenience to the Court—and negatively impact judicial efficiency—to consolidate the matters. On August 4, 2015, the Circuit Court held a hearing on the petition in the Arbitration Action. On August 7, 2015, the Circuit Court issued a written order ruling that Brown and Spencer’s MMWA claims in the Class Action were not subject to binding arbitration. In denying the petition to compel arbitration, the Circuit Court wrote, in pertinent part: Having considered the various arguments advanced by [Liberty Ford], the Court is not convinced that the instant matter can be meaningfully distinguished from Koons Ford of Baltimore, Inc. v. Lobach, 398 Md. 38 , 919 A.2d 722 (2007).

The language of Koons Ford is clear and it is broad: “It is clear ... that Congress intended to preclude arbitration [of Magnuson-Moss Warranty Act claims].” Koons Ford, 398 Md. at 62 , 919 A.2d 722 . The Court of Appeals has held that, per its reading of the intent of Congress, all Magnuson-Moss Warranty Act claims are exempt from binding arbitration. While the Court understands that [Liberty Ford] disagrees with this holding, this Court is not free to disregard a decision of this state’s highest court. On August 10, 2015, Liberty Ford filed a notice of appeal of the Circuit Court’s order.

On January 27, 2016, Brown and Spencer filed a motion to dismiss the appeal in the Court of Special Appeals, arguing that the judgment of the Circuit Court denying the petition to compel arbitration was not an appealable final judgment under Md. Code (1973, 2013 Repl. Vol.), § 12-301 of the Courts and Judicial Proceedings Article (“Cts. & Jud. Proc.”). The intermediate appellate court denied Brown and Spencer’s motion to dismiss on February 11, 2016, and Brown and Spencer petitioned this Court for review on September 16, 2016.

We granted certiorari to answer the following question: ⁶¹ Is an order of the circuit court denying a petition to compel arbitration, the sole issue in a separately-docketed case, a final judgment when there is pending a previously-filed case in the same court addressing all the substantive issues between the same parties in the same transactions? Deer Auto. Group v. Brown, 450 Md. 419 , 149 A.3d 646 (2016). For the reasons that follow, we shall answer this question in the negative and remand the case to the Court of Special Appeals, directing it to dismiss the appeal.

DISCUSSION Parties’ Contentions Brown and Spencer argue that the order denying the petition to compel arbitration is not a final judgment and, therefore, not subject to appeal. They contend that in Am. Bank Holdings, Inc. v. Kavanagh, 436 Md. 457 , 82 A.3d 867 (2013), Schuele v. Case Handyman & Remodeling Servs., LLC, 412 Md. 555 , 989 A.2d 210 (2010) and Addison v. Lochearn Nursing Home, LLC, 411 Md. 251 , 983 A.2d 138 (2009), this Court held that an order denying a petition to compel arbitration filed within a case already pending was not a final judgment. Brown and Spencer concede that this Court has never had occasion to decide whether a denial of a petition to compel arbitration in a separately-filed action is a final judgment where there is a previously-filed case currently pending in the same court between the same parties and regarding the same substantive disputes in the same transactions.

Brown and Spencer acknowledge that in Litton Bionetics, Inc. v. Glen Const. Co., Inc., 292 Md. 34 , 437 A.2d 208 (1981), this Court held that the denial of a petition to consolidate two separate arbitration disputes into one proceeding is a final judgment where there is no pending ease in the circuit court other than the petition to consolidate. Brown and Spencer distinguish Litton from the present case because in Litton there was not a pending related case in circuit court. Brown and Spencer additionally suggest that the rationale of Brew ⁶² ster v. Woodhaven Bldg. & Dev., Inc., 360 Md. 602 , 759 A.2d 738 (2000) supports their contention, in that the granting of a motion to transfer venue, which is appealable as a final order, puts the parties out of a particular court, whereas the denial of such a motion, which is not an appealable final order, permits litigation to continue in the court that issues the order.

Brown and Spencer rely on Haynie v. Gold Bond Bldg. Prods., 306 Md. 644 , 511 A.2d 40 (1986) to bolster their assertion that Liberty Ford filed a separate action in an attempt to artificially manufacture appellate jurisdiction. In Haynie , this Court declined to decide an appeal from a separately-filed declaratory judgment action where there was an existing tort action between the parties. Brown and Spencer assert that the end-run that was rejected in Haynie is the same end-run that Liberty Ford is attempting in this case.

Next, Brown and Spencer posit that whether the action—here, the Arbitration Action—is embedded in the previously-filed action or is an independent action where there is a currently-pending action is a distinction without a difference. For that proposition, Brown and Spencer rely on a case from the Supreme Court of the United States, Green Tree Fin. Corp-Alabama v. Randolph, 531 U.S. 79 , 121 S.Ct. 513 , 148 L.Ed.2d 373 (2000), which rejected the distinction between embedded and independent actions as to the finality of judgments when interpreting the Federal Arbitration Act. Brown and Spencer, finally, contend that permitting an appeal of the denial of a petition to compel arbitration would allow parties to eviscerate the final judgment rule.

Liberty Ford, of course, disagrees. Liberty Ford contends that Brown and Spencer’s efforts to distinguish Litton are unavailing because the sole issue raised in the separately-filed action was whether arbitration could be compelled, and the Circuit Court’s denial of the petition to compel arbitration denied all relief sought by Liberty Ford, thereby, terminating the case. Further, Liberty Ford contends that the test of appealability cannot be based on the pendency of a related case because that test conflates otherwise separate proceedings. Liberty Ford asserts that Haynie is inapplicable in the ⁶³ present context, because a ruling on arbitration, if sustained, puts the parties out of court.

In addition, Liberty Ford distinguishes Addison, Case Handyman, and Kavanagh from the instant case based on the filing and subsequent denial of a petition to compel arbitration in an existing case. Liberty Ford insists that where such an order denying a petition to compel arbitration was issued in “a separate, independent, and freestanding action” with arbitra-bility of a claim as the sole issue in that case, the order was final. To support its conclusion, Liberty Ford relies on dicta from Kavanagh where we suggested that an order denying a petition to compel arbitration in a separate and independently-filed action is a final, appealable order. Liberty Ford further asserts that the Federal Arbitration Act applies, by virtue of reference to the Federal Arbitration Act in the Appellees’ RISC.

To the extent that this Court finds that the order is not appealable under the Maryland Uniform Arbitration Act, Liberty Ford asks this Court to follow the federal statute, which expressly allows an immediate appeal of an order denying arbitration. Finally, Liberty Ford urges this Court to adopt the reasoning employed by the Court of Special Appeals in FutureCare NorthPoint, LLC v. Peeler, where the intermediate appellate court held that “an order denying an independent, freestanding petition to compel arbitration is a final judgment from which the aggrieved party has the right to appeal.” 229 Md.App. 108, 115 , 143 A.3d 191, 194 (2016). The Final Judgment Rule Pursuant to Cts. & Jud. Proc. § 12-301, a party may appeal from a final judgment entered by a circuit court in a civil case Except as provided in § 12-302 of this subtitle, a party may appeal from a final judgment entered in a civil or criminal case by a circuit court.

The right of appeal exists from a final judgment entered by a court in the exercise of original, special, limited, statutory jurisdiction, unless in a particular case the right of appeal is expressly denied by law. ... In a ⁶⁴ civil case, a plaintiff who has accepted a remittitur may cross-appeal from the final judgment. A final judgment is “a judgment, decree, sentence, order, determination, decision, or other action by a court ... from which an appeal, application for leave to appeal, or petition for certiorari may be taken.” Md. Code (1974, 2013 Repl. Vol), § 12—101(f) of the Courts and Judicial Proceedings Article.

To constitute a final judgment, an order of the circuit court must satisfy three requirements (1) it must be intended by the court as an unqualified, final disposition of the matter in controversy!;] (2) unless the court acts pursuant to Maryland Rule 2-602(b) to direct entry of a final judgment as to less than all of the claims or all of the parties, it must adjudicate or complete the adjudication of all claims against all parties; (3) it must be set forth and recorded in