The appellate court held that it is the intention of the parties as expressed in the documents that controls, not the after-the-fact testimony of the parties.
While this is a nice final result for the dealer, it came at the cost of a lawsuit and an appeal. The legal bill for those proceedings was probably stiff. Perhaps the dealer could have avoided this scenario by spending an equivalent amount on better training of the sales personnel and tighter documentation.
Bill Heard Chevrolet Corp., Orlando v. Wilson, 877 So.2d 15 (Fla. App. May 7, 2004)
Dealer Entitled to Hearing on Motion to Compel Arbitration. State legal procedural rules vary. In some states, judges can decide motions, including motions to compel arbitration, without holding a hearing. In Ohio, as this case demonstrates, judges must hold a hearing.
Kimberly Benson sued Spitzer Management, Inc., alleging claims arising from her purchase of a 2000 Dodge Intrepid. She claimed that before she bought the car it had been “car-jacked” from a Spitzer employee, damaged, and repaired. She also claimed, among other things, that the repairs were such that they should have been disclosed to her.
Spitzer moved to stay the proceedings and compel arbitration based on two arbitration agreements – one in Benson’s retail installment sales agreement and the other in her buyer’s order. The trial court denied Spitzer’s motion without a hearing or opinion.
Spitzer appealed. The Ohio Court of Appeals reversed and remanded for further proceedings on the ground that the trial court failed to hold a hearing to determine whether there was a legitimate challenge to the validity of the arbitration clauses. Keep in mind that this result – like many you’ll see us report – may well vary from state to state, but if you’ve received a bad decision on your motion to compel arbitration, it’s one more possibility for your lawyer to check on.
Benson v. Spitzer Management, Inc., 2004 WL 2002503 (Ohio App. September 9, 2004)
Pigs Get Rich, Hogs Get Slaughtered. If we’ve said it once, we’ve said it a million times, the more one-sided an arbitration agreement is, the less likely a court will be to enforce it. There’s always someone who doesn’t get the word, as this case illustrates.
Sharon Taylor bought a car from City Auto Sales, in the process signing a buyer’s order containing an arbitration agreement. She also signed a spot delivery agreement. Unable to find financing for Taylor, City Auto unwound the deal and when Taylor did not return the car as required by the terms of the spot delivery agreement, repossessed the car.
Taylor sued, asserting several state law claims, and City Auto moved to dismiss the case and compel arbitration. The trial court granted City Auto’s motion, and Taylor appealed. The intermediate appellate court reversed the trial court’s decision, holding that a party cannot be compelled to arbitrate a claim pursuant to an arbitration provision that was fraudulently induced.
On further appeal to the Supreme Court of Tennessee, Taylor also raised the issue of whether the arbitration agreement was unconscionable because it reserved to City Auto the right to pursue judicial remedies while limiting all of her claims to arbitration. The Tennessee high court held that Taylor’s claim of fraudulent inducement was appropriate for the arbitrator to decide (even though Tennessee law prohibits arbitration of fraudulent inducement claims) because the Federal Arbitration Act governed in this case.
The high court might have refused to address the merits of Taylor’s unconscionability claim, on the ground that she did not raise it before the trial court. The dealer’s luck had run out by this point, however, because the high court went on to hold that the one-sided arbitration agreement in this case was unconscionable and, therefore, void. One judge dissented in part, finding that Taylor waived the issue of unconscionability because she failed to raise it in the pleadings, or before the trial court or intermediate appellate court.
The lesson: use an arbitration agreement that is at least balanced, and preferably one that is even biased toward the consumer. That is, if you want one you can enforce.
Taylor v. Butler, 2004 WL 1925423 (Tenn. August 31, 2004)