The Ohio Court of Appeals has upheld class certification in a suit alleging that the arbitration clause in a Cleveland-area dealership group's sales agreement was unconscionable and unenforceable.
The 2-1 ruling against Ganley Chevrolet and Ganley Automotive Stores came in a spot delivery-related dispute that began in March 2001, after Jeffrey and Stacy Felix purchased a 2000 Chevy Blazer.
Ganley has asked the appellate court for reconsideration and, if that's unsuccessful, may seek state Supreme Court review, says dealership lawyer Steven Dever of Lakewood, Ohio.
The plaintiffs contend that Ganley told them they were approved for 0 percent financing and let them take home the Blazer. But a few days later, Ganley told them GMAC would approve only 1.9 percent financing, which they accepted. More than a month later, they were told GMAC had rejected them.
The dealership then found a bank that would provide a 9.4 percent loan, but the Felixes refused to sign a new agreement at that rate, the decision said.
The suit alleges "bait-and-switch tactics," violation of the state Consumer Sales Practices Act, misrepresentation, and emotional distress. It includes individual and class-action claims and challenges the validity of the arbitration provision in the sales agreement.
A lower-court judge rejected Ganley's request for arbitration and approved class-action status on behalf of all consumers whose sales agreement with any Ganley store had the same provision. Ganley Automotive Stores has 34 franchises in northern Ohio, according to its Web site.
The judge found the provision ambiguous and misleading and awarded $200 in damages to each of the "thousands of members" of the class. It covers customers who signed such agreements from two years before the lawsuit was filed in June 2001 until the company changed the provision in 2007, said plaintiffs' lawyer Mark Schlachet of Cleveland Heights, Ohio.
However, only a "handful" of those customers went to arbitration, Dever said. He added: "How can you quantify the harm when people had no complaint? The analysis is fundamentally flawed."
The appeals court held that class-action status was appropriate under the consumer protection law. In the majority opinion, Appeals Judge Mary Kilbane said the trial judge, who handled the case for 11 years, had "conducted a rigorous analysis into whether the prerequisites for class certification have been satisfied.
The dissenting judge said Ganley's use of the arbitration provision might be an "unfair or deceptive practice" that would justify individual lawsuits but that the plaintiffs failed to meet the requirements for class-action status.
Schlachet said Ganley couldn't appeal the damage award yet because it isn't final.
The Felixes' individual claims are still pending, both lawyers said.