A federal judge has tossed out a truth-in-lending and equal credit opportunity suit against a Bedford, Ohio, dealership, ruling that the customer signed a valid arbitration agreement.
The agreement precludes court litigation on claims arising from a spot delivery transaction in which Darius Muhammad failed to qualify for financing, U.S. District Judge Patricia Gaughan said.
Defense lawyer Harry Tipping of Akron said the decision will be a useful precedent for other dealerships in Ohio.
The case began in October 2010 when Muhammad bought a 2007 BMW 3 series from Bedford Nissan Inc. for a total sale price of $34,179, including a $1,000 down payment, according to court documents. The conditional delivery agreement gave both parties the right to cancel the transaction if Muhammad couldn't obtain third-party financing or if the store couldn't assign the contract within 15 days.
At the time, Muhammad told the store that he had pre-approved credit, court documents say. The proposed lender rejected the contract assignment, saying Muhammad fraudulently misrepresented his income.
The dealership told Muhammad there was a problem with his credit and that he would have to put more money down in order to keep the vehicle.
When Muhammad declined to make a larger down payment, Bedford Nissan demanded the car's return. He failed to return the vehicle for almost a month, court documents say.
The suit, which also included state consumer law claims, alleged that Bedford Nissan wrongfully refused to refund the down payment and forged Muhammad's signature on a document stating that the down payment was not refundable.
It also claims that "well over 1,000" other customers were damaged by the store's financing procedure during a four-year period, an assertion Bedford Nissan denies.
In dismissing the suit, which contains a request for class-action status, Gaughan said all the allegations fall within the scope of the arbitration provision in the vehicle sales contract.
She rejected Muhammad's argument that language in two of the documents he signed contradicted each other, thus making the sales contract void.
Plaintiff's lawyer Raymond Ingalsbe of Palm Beach Gardens, Fla., said the judge's reasoning was wrong and that he has recommended that Muhammad appeal.
Ingalsbe also said it's not true that Muhammad fraudulently misrepresented his income.
Defense lawyer Tipping disagreed, saying the dealership unsuccessfully tried to find an alternative lender but that Muhammad "wasn't financeable."