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GMAC COMMERCIAL CREDIT LLC v. SPRINGS INDUSTRIES

April 25, 2001

GMAC COMMERCIAL CREDIT LLC, PLAINTIFF,
V.
SPRINGS INDUSTRIES, INC., DEFENDANT.



The opinion of the court was delivered by: Buchwald, District Judge.

  MEMORANDUM AND ORDER

Plaintiff GMAC Commercial Credit, LLC ("plaintiff" or "GMAC") filed suit against Springs Industries, Inc. ("defendant" or "Springs") in the Supreme Court of the State of New York, County of New York, on April 3, 2000, to recover moneys allegedly owed it on several unpaid invoices. Defendant removed the action to this Court on April 14, 2000, pursuant to 28 U.S.C. § 1441 and 1446. Defendant now moves pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA") and Fed.R.P. 12(b)(1) and 12(b)(6) to stay or dismiss the action and to compel arbitration. For the following reasons, defendant's motion is granted, the complaint is dismissed and the parties are ordered to proceed to arbitration in Charlotte, North Carolina under the terms of the arbitration agreement.

BACKGROUND*fn1

Springs, a textile manufacturer and wholesaler, placed a series of six orders with Rugmakers, Inc. ("Rugmakers") for rug sets between December 1997 and February 1998. We will use the same designations for the orders that the parties did in their papers.

Springs' relationship with Rugmakers began with its "Initial Purchase Order", dated December 19, 1997. Attached to the Initial Purchase Order and incorporated therein was a lengthy "Standard Terms and Conditions of Purchase" prepared by Springs. The "Standard Terms" included an arbitration provision that stated,

"Arbitration: Seller agrees to submit any disputes arising under this Order to binding arbitration in accordance with the rules of the American Arbitration Association. Seller and Springs agree that any arbitration shall be held in the city of Charlotte, North Carolina."

Emerson Aff. Ex. A, Standard Terms and Conditions of Purchase, ¶ 16. Springs placed a second purchase order (referred to in the Complaint as "Purchase Order No. 1") on January 16, 1998. Purchase Order No. 1 explicitly incorporated the same Standard Terms and Conditions of Purchase sheet that was incorporated into the Initial Purchase Order.

The remaining four purchase orders (referred to in the Complaint as "Purchase Orders No. 2, 3, 4, and 5"), were short-form computer-generated and computer-transmitted orders. The front of each short-form order bore the caption: "WE HEREBY ORDER THE MERCHANDISE SPECIFIED HEREIN ON ALL THE TERMS SET FORTH ON THE FACE AND REVERSE SIDES HEREOF, INCLUDING ARBITRATION." Geren Aff. Exs. D, E & F. Springs concedes, for the purposes of this motion, that the backs of the short-form orders were never transmitted.

Prior to any of the purchase orders with Springs, GMAC and Rugmakers entered into a November 8, 1996, Revolving Credit, Term Loan and Security Agreement pursuant to which, inter alia, Rugmakers granted GMAC a security interest in all of its present and future accounts receivable and assigned to GMAC all accounts receivable generated by Rugmakers at any time. The relevant terms of the assignment were as follows:

"[GMAC] shall not, whether by anything herein or in any assignment or otherwise, assume any of [Rugmaker's] obligations under any contract or agreement assigned to [GMAC], and [GMAC] shall not be responsible in any way for the performance by [Rugmakers] of any of the terms and conditions thereof."

Murray Aff., Ex. A, ¶ 4.18. GMAC duly perfected its security interest by filing U.C.C.-1 financing statements with the appropriate authorities. However, neither GMAC nor Rugmakers obtained Springs' consent to the assignment or gave Springs notice thereof.

GMAC has brought this suit against Springs, based on the contracts assigned it by Rugmakers, seeking recovery of unpaid sums on Purchase Orders No. 1-5. Springs contends that GMAC is contractually bound to arbitrate its claims in Charlotte, North Carolina and moves to compel arbitration.

DISCUSSION

I. A finance assignee suing on an assigned contract is subject to the contract's arbitration clause.

The first issue is whether GMAC is exempt from any contractual arbitration provisions by virtue of the fact that it allegedly was a "finance assignee" (or "factor"), assigned ...


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