Sharon Brooks Hodge Apr. 7, 2016, 6:14pm

ROSEVILLE – The director of a California association for auto dealers says resolving customer disputes through arbitration instead of litigation can be a triumph for both sides.

Earlier this year, a three-judge appeals panel ruled that El Cajon Mitsubishi was entitled to arbitrate rather than litigate claims related to financing, extended warranty, guaranteed asset protection and failure to disclose that a customer’s vehicle had been used as a rental. The Jan. 12 decision, which reversed the court’s previous position on when arbitration provisions can be deemed unenforceable, has been considered a win for dealerships.

“A victory for dealerships does not necessarily mean that consumers lose,” Independent Automobile Dealers Association of California Executive Director Larry Laskowski told the Northern California Record. “If anyone loses as a result of arbitration, it would be consumer attorneys, who have a vested interest in going to trial. In civil action, often times, only the lawyers win.”

The recent ruling on arbitration clauses in sales contracts resulted from the California Supreme Court remanding the El Cajon Mitsubishi case back to the 4th District Court of Appeals. That decision was based on the U.S. Supreme Court opinion in AT&T Mobility LLC v. Concepcion, which had the effect of changing state law applicable to arbitration provisions that contain class-action waivers.

"This is a huge loss for consumers," Hal Rosner, the attorney who filed the complaint against El Cajon Mitsubishi, told the Northern California Record. "Their constitutional right to go to court and have a jury trial has been stolen by print on the back of a contract." 

On May 16, 2010, William Goodridge allegedly attended a tent sale at El Cajon Mitisubishi and signed a retail installment sale contract to purchase a 2008 Hyundai Elantra. During the sales process, Goodridge was purportedly presented with a stack of forms and was told by an employee where to sign or initial each document.

The sales contract allegedly included a provision that either the dealership or the customer could choose to have any dispute decided by arbitration and not in court by a jury trial. It also allegedly stipulated that if arbitration was pursued, the customer was not entitled to seek class-action status.

Six months after purchasing the Hyundai, Goodridge retained Rosner and filed a complaint against the dealership claiming it had violated the Consumers Legal Remedies Act and the Automobile Sales Finance Act. The complaint also alleged unlawful business practices, fraudulent misrepresentation and negligent misrepresentation. Rosner had requested a jury trial, but El Cajon Mitsubishi sought arbitration instead.

"The documents (including the purchase contract) were given to me and I was just told 'sign here' in various places. There was no question of choice on my part or of our being able to ‘negotiate' anything,” Goodridge said in the complaint.

He also said he had no reason to suspect that hidden on the back of the contract, which told him how much the vehicle cost and how much monthly payments would be, was a section that prohibited him from being able to sue in court if he had a problem.

Rosner argued that the arbitration provision should not be enforced because it was on the back of the contract, no one told Goodridge about it, and he did not agree to it. However, the appellate court determined that just because a customer did not read or understand a provision within a contract does not justify a reason for the court not to enforce it.

“In arbitration, there is still someone representing both sides,” Laskowski said. “But you don’t have to drag in 12 people for a jury and invest countless hours in court, which could last as long as three years. How does that benefit consumers?”

The association director’s assertion mirrors the opinion of the appellate court.

“Federal and state law reflect a strong public policy favoring arbitration as a speedy and relatively inexpensive means of dispute resolution,” the appellate opinion said.

Arbitrators are attorneys or retired judges who apply governing applicable law in making an award. Under the terms of the arbitration provisions in the sales contract in question, Goodridge had the ability to choose someone from the National Arbitration Forum, the American Arbitration Association or any other organization subject to the dealership’s approval.

“I think consumers are interested in a resolution. Shortening the amount of time and expense necessary to reach that resolution is a good thing,” Laskowski said.

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Organizations in this Story

Independent Automobile Dealers Association of California
PO Box 343 Roseville, CA 95661

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