COA vacates arbitration award for lack of agreement

January 12, 2017

The Indiana Court of Appeals vacated an arbitration award Thursday after determining that an arbitration agreement did not exist, thus making the arbitration proceedings between a Lake County couple and an automotive company pointless.

In Paul and Michelle Riley v. AAA Automotive, LLC, d/b/a/ 3A Automotive, 45A04-1602-PL-454, 3A Automotive bought a Dodge Durango and agreed to sell it to Paul and Michelle Riley for $15,095, subject to the procurement of financing. The Rileys paid $500 as a down payment and took possession of the Durango in December 2013.

When the couple didn’t comply with requests to make a bigger down payment or trade in another vehicle, 3A Automotive demanded that they return the car and filed a complaint for breach of contract and conversion in May 2014. 3A sought judgment of $14,000 or the return of the Durango with compensation. However, the complaint did not include a demand for arbitration.

After 3A filed a motion for a temporary restraining order, the Lake Superior Court held a hearing and ordered that the auto company deposit the $500 down payment with the court clerk and that the Rileys return the vehicle. Both parties eventually complied.

Then, the Rileys filed a counterclaim alleging that “the procurement of financing was part of the consideration to be provided by the seller.” Further, the couple argued that 3A did not have a marketable title to sell the Durango because it had a lien on it held by Next Gear Capital and because the information on the title read “Non-Transferable.” Thus, any contract 3A had with the couple was null and void.

The trial court then entered an order referring the case to mediation. However, mediation failed, so the court then ordered the parties to complete arbitration. At an arbitration hearing in June 2015, an arbitration award was rendered in favor of 3A for roughly $14,500, consisting mostly of attorney’s fees.

The Rileys moved to correct error, asking for the award to be vacated because the arbitrator had “applied a Federal standard to a State case and committed reversible error.” The trial court denied the couple’s motion, so they subsequently appealed.

The Indiana Court of Appeals sided with the Rileys in a Thursday opinion, noting that “it does not appear that arbitration was ordered based upon the failed sales contract; rather, it appears to have arisen in alternative dispute resolution.”

“Even assuming a proper arbitration order, without an agreement, we cannot definitely discern whether the arbitrator exceeded his authority as to substantive provisions,” Indiana Court of Appeals Judge Mark Bailey wrote for the unanimous panel. “However, the lack of impartial and fair proceedings is evident.

“There is no evidence of an arbitration agreement in the record and, hence, no evidence that there was a meeting of the minds concerning the scope and terms of the arbitration,” Bailey continued. “Thus, the arbitration proceedings were for naught, and the judgment on the arbitration award must be vacated.”



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