Reynolds & Reynolds v. King Automobile

Citation: Reynolds & Reynolds, Inc. v. King Automobile, Inc., 689 So. 2d 1 (Ala. 1996).

Factual Background
In the spring of 1993, Defendant, Reynolds & Reynolds, Inc. (“Reynolds”), met with the president of King Automobile, Inc. (“King”) to discuss purchasing the ERA 24000 computer system (the “System”).

King believed the System would help his business increase its productivity and, on August 23, 1993, entered into negotiations with Reynolds for the purchase of the System. That day, the two parties executed a standard “Reynolds & Reynolds Master Equipment Sales, License and Services Agreement”. The agreement provided, in part, that Reynolds would deliver a “ ‘reconditioned’ processor with 28 ‘user ports’” to be used with peripheral devices. However, the portion of the agreement that read “28” was crossed out and the number “24” was written next to it. Both parties acknowledged this change by placing their initials next to the handwritten number. The agreement also included an arbitration clause that stated, in pertinent part: “All disputes between [King] and Reynolds, except those involving A) Reynolds’ ownership of and title to the Licensed Software and materials and B) [King’s] failure to pay any amount due to Reynolds, arising from or related to this Agreement or the Exhibits, shall be settled by Arbitration.

On the same day the Agreement was executed, Reynolds also issued a handwritten document to King that listed the items purchased. The items on the handwritten document were the same as those referred to in the master Agreement; however, the handwritten document did not list the prices of the items, the in-dealership training or the cable installation necessary for the system. On March 7, 1994, the fully executed documents were delivered to King’s place of business. The documents stated that the computer processor King purchased was “reconditioned and included only 24 ports. At that time, King did not contact Reynolds or voice any displeasure regarding the transaction.

In November 1994, a Reynolds representative arrived at King’s place of business to install the computer system. As part of the installation process, the Reynolds representative went over all the equipment ordered by King. At that point, King objected to the fact that he received a reconditioned processor rather than a new one. The Reynolds representative then provided King with a copy of the master Agreement, which showed on the first page that King had bought a reconditioned processor. King, believing that he had purchased a new processor, then filed suit against Reynolds for breach of contract, negligence and fraud. Reynolds motioned to compel arbitration to compel arbitration and stay the proceedings pursuant to the master Agreement.

Trial Court Proceedings
At trial, the circuit court denied Reynolds’s motions to compel arbitration and to stay proceedings. As a result of the trial court’s ruling, Reynolds appealed.

Supreme Court Proceedings
The Supreme Court held that the trial court erred in denying the motions to compel arbitration and to stay proceedings pending arbitration. In arriving at this conclusion, the Supreme Court of Alabama reanalyzed King’s argument that the handwritten document, not the master Agreement, governed his rights and obligations for the purchase of the System. In reviewing King’s argument, the court found the assertion to be meritless.

The court determined that the master agreement and handwritten notation were all executed on the same day and all documents were related to the same purchase. Therefore, the handwritten document could not stand on its own as an enforceable contract upon which King could base a breach of contract claim. The document was characterized as being, “merely a list of all the items purchased, without naming price of illustrating any consideration flowing from Kings to Reynolds”. Since all documents flowed from the single transaction and all related to and arose under the master agreement, the arbitration clause contained in the master Agreement had to be enforced. Consequently, the case was reversed and remanded to the circuit court.