In the Kentucky dispute, Velessa Hathaway contends that Commonwealth Dodge in Louisville misrepresented that the 2007 Dodge Charger she bought used in 2009 had no history of repairs, although she said she later learned that Commonwealth had fixed it several times.
After unsuccessfully attempting to rescind the deal and get back her trade-in, she sued for fraud, usury, violations of the Truth in Lending Act and the state's installment sales contract law, plus related claims, including punitive damages. A lower court agreed with Commonwealth that the case must be arbitrated.
In its unanimous decision, the Kentucky Supreme Court upheld the order that all Hathaway's claims go to arbitration based on the language in her purchase contract. The court said there was no proof that Commonwealth tried to deceive Hathaway, hide the arbitration clause or fraudulently induce her to sign the contract.
Commonwealth's lawyer, M. Thurman Senn of Louisville, said dealers need to assess whether it's better to arbitrate or litigate a particular dispute.
"It's a business decision that's going to motivate every dealer differently, depending of their perception of the fairness and costs of the courts they come before," he said.
Hathaway's lawyer, David Mour of Louisville, called the decision "a bad omen for consumers," saying most don't realize that they give up the right to a jury trial when they sign a purchase agreement requiring arbitration.
Mour also said that it's more difficult to win punitive damages from an arbitrator than from a jury, but Senn said arbitrators have awarded punitive damages to consumers.