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LEGAL FILE

Top Ohio court ruling sends arbitration case back to trial court

More than 14 years after Ganley Chevrolet in Cleveland spot-delivered a used Chevy Blazer to Jeffrey and Stacy Felix, it’s still arguing with them in court over the arbitration provision contained in their purchase documents.

The latest decision in the case, rendered last month by the Ohio Supreme Court, tossed out class certification as well as a class award and whittled the case once again to the Felixes’ complaints against the dealership.

The Felixes bought the 2000 Blazer in March 2001. They claim the dealership first promised them 0 percent financing through GMAC and when that fell through next promised them financing at 1.9 percent, which they agreed to but GMAC rejected. The dealership finally told them they had bank financing at 9.44 percent interest. The Felixes refused that deal but kept the Blazer, allegedly putting payment funds into escrow.

The Felixes sued the dealership in 2001, claiming unfair consumer practices. In May 2003, they amended their suit to request a class-action, contending the arbitration provision in the purchase contracts of Ganley Chevrolet and two dozen other stores in the Ganley Management Co. dealership group was unconscionable and violated Ohio’s consumer protection law.

The defendants (collectively, Ganley) unsuccessfully tried to force the dispute into arbitration.

‘Based on a fiction’

A Cuyahoga County judge certified a class action on behalf of thousands of customers whose contracts had a similar arbitration provision, dating back to 1999 and continuing to 2004, when the arbitration provision was revised. The judge also ordered Ganley to pay each of those customers $200, a decision upheld by the Ohio Court of Appeals.

But now a divided Ohio Supreme Court has tossed out the class certification and the $200-a-customer award. The decision leaves intact, however, a finding that the arbitration provision under dispute was invalid and unenforceable.

The court said the case can’t proceed as a class action under the consumer protection law because the Felixes offered no evidence that every customer was injured by the invalid arbitration provision,

In an opinion written by Chief Justice Maureen O’Connor, the court said: “There is absolutely no showing that all of the consumers who purchased vehicles through a contract with the offensive arbitration provision were injured by it or suffered any damages.”

The court characterized the $200 awards -- the minimum under the consumer protection law -- as “based on a fiction” because damages are available only by showing a member of the class “was injured and sustained damages as a result of the defendants’ conduct.”

Back to trial court

Dealership lawyer Steven Dever of Cleveland said the case now returns to the trial court to determine whether Ganley is liable to the Felixes and, if so, how much the couple may collect.

Other Ganley customers “never had a dispute and never intended to use the arbitration provision,” Dever said. He added: “There was no demonstration whatsoever” that any other customers were harmed. “The case involved a single consumer complaint,” he said, and the decision “confirms that only consumers who truly were damaged can bring a class-action lawsuit.”

Still, the Felixes’ lawyer, Lewis Zipkin, said he will try to prove to the trial court that every member of the class was, in fact, injured because their document fees were used to pay to prepare contracts with the illegal arbitration provision.

“The members [of the proposed class] did suffer damages,” said Zipkin, of Beachwood, Ohio. “The argument is: Did they pay for documents that were illegal or for documents that were illegally prepared?”

Defense lawyer Dever said that if there’s a trial, Ganley will seek damages from the Felixes because they’ve had use of the Blazer for 14 years without making any payments.

You can reach Eric Freedman at freedma5@msu.edu

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