California dealerships that use standardized arbitration provisions in their retail installment sales contracts have another reason to believe that state courts will order arbitration rather than litigation in customer disputes.
That reassurance came as the state Court of Appeal reversed a past ruling about the validity of those provisions.
Following the mandate of the California Supreme Court, a three-judge appeals panel on Jan. 12 said El Cajon Mitsubishi in El Cajon is entitled to arbitrate rather than litigate claims related to financing, extended warranty, guaranteed asset protection and failure to disclosure that the customer’s vehicle had been used as a rental.
The same court had previously found the arbitration provision to be unenforceable.
The case at hand was brought by William Goodridge, who bought a 2008 Hyundai Elantra on May 16, 2010, at the dealership’s tent sale, according to court documents.
About a week later, Goodridge returned to the store with “concerns about the documents” and was told to sign a rewritten contract that was backdated to May 16, the suit claims.
Goodridge asserted that a store employee didn’t give him time to read “a stack of preprinted form documents,” didn’t ask whether he was willing to arbitrate all disputes and didn’t inform him about the arbitration provision on the back of the retail installment sales contract, the decision said.
His suit, which sought class-action status, alleged violations of California’s vehicle sales finance, business and consumer laws, as well as misrepresentation. In part, it contended that backdating of the contract failed to accurately disclose the annual percentage rate and finance charges, and it accused El Cajon Mitsubishi of improperly disclosing deferred down payments.
The dealership initially defended the case in court but six months later asked for an order to force arbitration. A San Diego County Superior Court judge held that the arbitration provision was “unconscionable” -- and thus unenforceable, as did the Court of Appeal on its initial review.
Then last August, the state Supreme Court held in another case that a virtually identical arbitration provision was valid and enforceable. It returned Goodridge’s case to the Court of Appeal for a second review.
In the new decision by Justice Alex McDonald, the appeals panel unanimously ordered arbitration.
The challenged arbitration provision is not “overly harsh or one-sided or unduly oppressive,” the court said.
Goodridge also argued unsuccessfully that the provision is invalid because it waives his right to bring class actions and that El Cajon Mitsubishi waited too long to demand arbitration.
Dealership lawyer Thomas Crowell of Pleasanton, Calif., said the case has been settled.
Plaintiff’s lawyer Hal Rosner of San Diego said the recent line of count decisions ordering arbitration is leading to fights about which arbitration organization will handle such disputes.
“The new battlefield is all over who will arbitrate,” Rosner said. He said dealerships favor the American Arbitration Association because it rules “96.5 percent of the time against consumers,” while plaintiffs prefer dispute resolution provider JAMS because they have a better chance of prevailing.