LEGAL FILE

BMW store settles protection plan suit

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A New Jersey BMW dealership and a customer have reached a confidential settlement in a dispute over a protection plan for a leased vehicle.

The settlement was negotiated while the Appellate Division of New Jersey Superior Court was still considering whether to order arbitration, said plaintiff lawyer Gregory Pasquale of Bernardsville, N.J., and dealership lawyer Paul Endler of Edison, N.J.

Craig Rezac leased a new BMW from JMK BMW in Springfield Township, N.J., in 2008, the court said. He also bought an "ultimate protection plan," offered by Safe-Guard Products, because, according to the court, a JMK employee said he wouldn't have to pay excess wear and use charges for dings and scratches at the end of the lease.

Although the purchase order included an arbitration clause, the retail sales contract did not.

At the end of the lease, JMK charged $400 for dings and scratches and $600 for windshield damage. When Rezac submitted those claims to Safe-Guard, however, he learned that the dealership had paid for a more limited extended plan that didn't cover his claims.

JMK refused to accept responsibility, so Rezac sued for fraud, breach of contract and unjust enrichment.

A lower-court judge ruled that some of the claims were subject to arbitration.

But the Appellate Division disagreed, ruling May 9 that the lease, which didn't have an arbitration provision, superseded the purchase order.

Pasquale said the case reflects two competing legal concepts: One, courts encourage arbitration. Two, if a party such as a dealership drafts a document that is not specific, it gets interpreted against that party.

He said the court's lesson for dealerships is that they must look carefully at all the paperwork in a transaction. "If the lease says it supersedes all prior agreements, you can't rely on the retail sale order for the arbitration provision," he said.

The dealership did not file a brief in the appeal.

You can reach Eric Freedman at freedma5@msu.edu.

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