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Liebman v. Better Way Wholesale Autos, Inc.

United States District Court, D. Connecticut

March 21, 2017



         Plaintiffs Deena Crystal Liebman and Andre Peter Campbell applied [Doc. # 1] to this Court on August 24, 2015 for an order compelling arbitration of their claims against Defendant, A Better Way Wholesale Autos, Inc., asserting jurisdiction pursuant to 28 U.S.C. § 1332. That Application was granted [Doc. # 8] by agreement on September 28, 2015 and an arbitration (the "Arbitration") was conducted before the American Arbitration Association ("AAA"), which resulted in the Arbitrator finding that Defendant had violated Conn. Gen Stat. § 14-62(g) and the Connecticut Unfair Trade Practices Act ("CUTPA") and issuing an arbitration award (the "Arbitrator's Award") in favor of Plaintiffs. Plaintiffs then moved [Doc. # 10] for judgment, and Defendant opposed and separately moved [Doc. # 12] to vacate the arbitration award. For the reasons that follow, Defendant's Motion to Vacate is denied and Plaintiffs' Motion for Judgment is granted.

         I. Background[1]

         The AAA appointed Attorney Steven Kaplan as arbitrator (the "Arbitrator") and the parties agreed to waive oral hearings and instead have the dispute determined upon written submission. (See Ex. A to Def.'s Mot. to Vacate.)

         The underlying dispute stems from Plaintiffs' purchase of a 2006 Subaru Tribeca (the "Vehicle" or the "Subaru") from Defendant on March 30, 2015. (See Ex. A to Pl.'s Mot. to Vacate ¶ 1; Ex. B (Def.'s Mem. Supp. Mot. to Vacate) to Def.'s Mot. to Vacate at 1.) On the Retail Purchase Order, Plaintiffs checked the box and signed acknowledging the car was sold "AS IS, " as well as the portion of the form indicating there were no promises made to the customer. (Ex. A (Retail Purchase Order for Motor Vehicle) to Statement of Plaintiffs (attached to Pl.'s Opp'n as Ex. B).) However, Plaintiffs represent that they purchased the Vehicle after being assured by a salesperson that Defendant was "required to follow state safety inspection laws and that it has a procedure to make all necessary safety repairs before vehicles are sold." (Ex. C (Plaintiffs' Pre-Arbitration Hearing Memorandum) to Miner Aff. [Doc. # 13-1] at 2.) Based upon this representation and others, including that the Vehicle was "in condition for legal operation on any highway" in Connecticut (Ex. C (K-208 Form) to Def.'s Mot. to Vacate), Plaintiffs decided to purchase the Tribeca at a purchase price of $7, 812[2]. (Ex. C to Miner Aff. at 2.) They then paid an additional $1, 155.99 to have it shipped to their home in California, where it arrived on April 21, 2015. (Id.)

         Driving the Vehicle upon delivery in California, Plaintiffs heard loud noises and felt vibrations, and consequently brought the Tribeca to Mountain View Tire & Service for an inspection, where it was determined that the lower control arm bushings were broken, the right front axle was leaking, the transmission mount was broken, coolant was leaking at the head gasket, and there was corrosion on the undercarriage of the Vehicle. (Id.) Plaintiffs, in order to satisfy Defendant, agreed to take the Vehicle to a Subaru dealership for an additional inspection, which they did on April 28 at Palm Springs Subaru.[3] (Id. at 3.) That inspection noted similar problems as those identified by Mountain View Tire, as well as some additional ones. (Ex. A to Def.'s Mot. to Vacate ¶ 4.) Plaintiffs brought the Vehicle back to Mountain View on July 20, 2015 for a more extensive inspection, where the mechanic found that the "VEHICLE IS NOT ROAD WORTHY AND IS UNSAFE TO OPERATE." (Ex. P (Mountain View Tire & Auto Service Vehicle Inspection) to Ex. C of Pl.'s Opp'n at 1) (emphasis in original.) The report indicated that in order to comply with California highway safety requirements, the left rear brake rotor, front strut mounts, and the front lower and rear upper control arm bushings would need to be repaired. (Id.) The report further states that the defects would have been discovered if Defendant had performed a safety inspection. (Id.; Ex. A to Def.'s Mot. to Vacate ¶ 5.)

         Plaintiffs alleged violations of Conn. Gen. Stat. § 14-62(g), requiring safety inspections and certification of the Vehicle's condition, express warranties as to the Vehicle's condition, and CUTPA. (Ex. C to Miner Aff. at 7; Ex. A to Def.'s Mot. to Vacate ¶ 1.) Plaintiffs therefore sought damages for repairing safety-related defects and loss of use, and additionally sought punitive damages pursuant to CUTPA, plus attorney's fees and costs. (See Ex. A to Def.'s Mot. to Vacate ¶ 1.)

         The Arbitrator found "credible the written evidence submitted by [Plaintiffs] as to the condition of the Vehicle immediately upon its receipt in California." (Ex. A to Def.'s Mot. to Vacate ¶ 4.) He concluded that there were sufficient, serious safety issues with the Vehicle that pre-existed the Vehicle's shipment to California, which a basic safety inspection would have revealed had it been done. The Arbitrator's Award thus rests on the narrow finding that Defendant violated Conn. Gen. Stat. § 14-62(g)[4] due to Defendant's failure to disclose on the Form K-208[5] these issues with the Vehicle. (Ex. A to Def.'s Mot. to Vacate ¶ 6.) In turn, the Arbitrator found that violation of the Connecticut law constitutes a perse violation of CUTPA. (Id.) Accordingly, the Arbitrator awarded Plaintiffs $13, 016.00 in total damages.[6] (Id.)

         II. Discussion

         Defendant claims there is good cause to vacate the Arbitrator's Award because the Arbitrator exceeded his powers and the Award is evidence of his manifest disregard of the law.[7](Def.'s Mot. to Vacate at 5.) Defendant's arguments rest on its assertion that an award of damages for the costs of repairing the Vehicle and loss of its use, as well as the accompanying punitive damages and attorneys' fees, was improper because the car was sold "as is." (Def.'s Mot. to Vacate at 2.) Plaintiffs retort that "[t]he gravamen of Defendant's argument is that it disagrees with the merits of the Arbitrator's decision, " (PL's Opp'n at 2) and highlight Defendant's failure to cite any authority supporting its contention that an "as is" disclaimer protects car dealers from such claims as CUTPA. (Id. at 5).

         A. The Applicable Standards for Vacatur under the Federal Arbitration Act (the "FAA")[8]

         Courts are required to grant an arbitrator's decision significant deference, and the party asking the court to vacate an arbitral award bears a heavy burden of proof. Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 388 (2d Cir. 2003).

         The FAA permits vacatur of an arbitration award, as relevant here, "where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a).[9] For the Arbitrator to have exceeded his authority he must have either (1) considered issues outside those submitted to him by the parties for consideration, or (2) reached issues prohibited by law or the parties' agreement. Jock v. Sterling Jewelers Inc., 646 F.3d 113, 122 (2d Cir. 2011). Essentially, the Court is tasked with determining only "whether the arbitrators had the power based on the parties' submissions or the arbitration agreement, to reach a certain issue, not whether the arbitrators correctly decided that issue." Banco de Seguros del Estado v. Mut. Marine Office, Inc., 344 F.3d 255, 262 (2d Cir. 2003) (internal citation and quotation marks omitted). The Second Circuit has directed courts to narrowly read the FAA's authorization to vacate an award when an arbitrator has exceeded his or her powers. See Matter of Andros Compania Maritima, S.A. (Marc Rich & Co., A.G.), 579 F.2d 691, 703 (2d Cir. 1978).

         An arbital award may also be vacated "if it exhibits a manifest disregard of the law." Goldman v. Architectural Iron Co., 306 F.3d 1214, 1216 (2d Cir. 2002) (internal citation and quotation marks omitted). Under this standard "the governing law must clearly apply to the facts of the case as those facts have been determined by the arbitrator." Westerbeke, 304 F.3d at 213 (emphasis in original); see also In re S.E. Ail. Shipping Ltd., 356 F.2d 189, 191-92 (2d Cir. 1966) ("Under our limited scope of review of arbitration awards, we are bound by the arbitrators' factual findings and by their interpretation of the contract."). Manifest disregard of the law requires finding "something beyond and different from mere error in the law or failure on the part of the arbitrators to understand or apply the law." Westerbeke, 304 F.3d at 208 (internal quotation marks omitted).

         Courts consider first "whether the governing law alleged to have been ignored by the arbitrators was well defined, explicit, and clearly applicable" and second, whether the arbitrator was aware of, but ignored, that clearly governing legal principle. See Id. at 209. Under Section 10, an arbitrator's award may also be vacated if it exhibits manifest disregard of the terms of the parties' agreement. Schwartz v. MerrillLynch & Co., 665 F.3d 444, 452 (2d Cir. 2011). Still, courts are bound by an arbitrator's interpretation of a contract, Westerbeke, 304 F.3d at 213, and "[i]f the arbitrator has provided even a barely colorable justification for his or her interpretation of the contract, the award must stand" id. at 222.[10]

         B. Defendant has not Established the Arbitrator Exceeded his Authority ...

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