A federal appeals court unanimously rejected an attempt to get class-action certification in a suit filed by two customers against CarNow Acceptance Corp. and the operator of three J.D. Byrider franchises in Ohio.
The court also upheld an order requiring them to arbitrate their individual claims of truth-in-lending and consumer fraud violations against Docherty Motors Inc., which holds the J.D. Byrider franchises, and against T&J Acceptance Corp., which does business as CarNow.
The plaintiffs had been videotaped signing their financing documents, which included an agreement to arbitrate disputes, the 6th U.S. Circuit Court of Appeals in Cincinnati noted.
The decision 'reaffirms the policy of the courts that arbitration can be a way to quickly and inexpensively resolve problems between buyers and sellers of vehicles,' said defense lawyer Gary Johnson of Cleveland.
The unanimous ruling should encourage arbitration and deter litigation, he added.
But the plaintiffs' lawyer, Sylvia Antalis of Sandusky, said the court failed to address a key issue: 'Can a contract force a consumer to give up constitutional protections or the right to a jury trial?' Her clients probably will proceed to arbitration but probably also will ask the U.S. Supreme Court to add their case to a similar one now under review.
In 1998, James Stout bought a 1992 Chevrolet Camaro and Shirley Brown bought a 1991 Ford Fiesta at a J.D. Byrider store in Sandusky. The company's stores, the appeals court said, advertised that they provide financing to customers with imperfect credit records. The company offered that financing through CarNow, which operates franchises at all three locations, the decision said.
Stout and Brown sued for alleged fraud, truth-in-lending and consumer protection violations, contending that their cars had undisclosed damage and that they were defrauded into buying expensive service agreements.
Stout's contract included a provision requiring arbitration through the American Arbitration Association, while Brown's required arbitration through the Better Business Bureau. Both their transactions were videotaped. Johnson said CarNow tapes such transactions for 'quality control' and to 'help identify a problem if something goes wrong.' Signs are posted advising customers of the taping, he said.
As for the lawsuit, Johnson said, 'Early in the proceedings, we offered to give them a refund and buy back the cars.'
U.S. District Judge James Gwin denied a request for class-action certification and ordered Brown and Stout to arbitrate their individual disputes.
The appeals court upheld that decision. It found no grounds to certify a class of consumers who bought vehicles from the three stores from 1993 until the present, saying there was no showing that common factual or legal issues are predominant.
The court also said there was no basis to conclude that the arbitration agreements were unconscionable and shouldn't be enforced.
You can e-mail Eric Freedman at [email protected]