A North Plainfield, N.J., dealership can’t force a customer who refinanced her vehicle to arbitrate class-action claims in an F&I-related dispute, the Appellate Division of the state's Superior Court has held.
The problem? The language in the dealership arbitration agreements that Fiorella Rotondi signed was ambiguous and “potentially confusing” to consumers, the court said.
The ruling came in a suit against North Plainfield Nissan, which sold Rotondi a new 2011 Altima and took her 2007 Honda Civic in trade. She was charged for anti-theft etching, guaranteed asset protection, registration/title and doc fees, tire fees and sales tax.
The store arranged a 72-month loan at 12.74 percent interest and told Rotondi she could refinance at better terms within a year.
When she refinanced the following year, she signed a second retail order that showed a different purchase price for the same 2011 Altima and a different trade-in, although no trade was involved in the refinancing. The new retail order included anti-theft etching, registration/title and doc fees and sales tax, but no GAP or tire fees, the court said. It also added $2,060 for a service contract.
The dealership placed the loan with a different third-party lender for 72 months at 8.69 percent.
Both retail orders had identical arbitration provisions, including a waiver of “class action arbitration,” the court said.
Rotondi filed a lawsuit alleging Truth-in-Lending and consumer fraud violations, unjust enrichment and other claims. The suit also sought class-action status.
The dealership denied liability, said defense lawyer Thomas Russomano of Scotch Plains.
Its general manager said in a court filing that it’s common for dealerships to prepare a new sales order when they arrange for refinancing, especially with a different lender because the title transfers from the first to the second lienholder. “The transaction is, in effect, a sale of the vehicle by the buyer back to the dealer and then a resale of the same vehicle to the buyer,” court documents say.
A lower-court judge rejected the dealership’s effort to compel arbitration under the retail orders.
In upholding that decision, the appellate panel found the phrase “class action arbitration” to be potentially confusing to consumers.
The waivers in the retail orders “were not stated with sufficient clarity to constitute a complete abandonment” of litigation “to pursue a class action,” the court said.
Plaintiff’s lawyer, Lessie Hill of Irvington, said no class has been certified yet but estimated the number of members at “in the hundreds if not thousands.”
Hill also said claims against the new lender, TD Auto Finance, were not at issue on the arbitration controversy.
According to dealership lawyer Russomano, the problem could be avoided by correctly drafting such waivers. He added, “It really needed to be a sentence: ‘You waive the right to litigate or arbitrate class actions.’”
The dealership hasn’t decided whether to appeal further, he said.