Chicago Business Litigation Lawyer BlogArticles Posted in Consumer Protection Laws
Car Fraud, Arbitration Clauses and Unconscionability – Tolbert v. Coast to Coast Dealer Services, Inc.
Solid evidence and strong legal arguments are all well and good, but in order to successfully sue a car dealer for fraud, you first have to bring the action in the right venue. In Tolbert v. Coast to Coast Dealer Services, Inc., the Northern District of Ohio explains that it will enforce an arbitration clause requiring a dispute to be resolved via arbitration unless the provision is “unconscionable.”
Plaintiffs Leah Tolbert and Diana Barker bought a 2004 Jeep Sports Liberty Truck from Defendant Coast to Coast Dealer Services, Inc. (Coast to Coast), a used car dealership. Plaintiffs made a $3,500 down payment and agreed to pay the remaining purchase price ($4,400) in $300 monthly payments. They also purchased a Vehicle Service Agreement (VSA), under which Defendant agreed to service and repair the car. The VSA included an arbitration clause providing that “any and all claims, disputes, or controversies of any nature whatsoever” between the parties is subject to arbitration, a dispute resolution format in which parties submit the matter to one or more private arbitrators.
Plaintiffs allegedly began having trouble with the car shortly after driving it off of the lot. The “check engine” light allegedly went on within a day of the purchase, the first of what would be a long string of alleged issues related to the car. According to the court, Plaintiffs “had to bring the vehicle back to [the dealership] over ten different times for various problems, including the engine light, engine smoke, fan relay system, and replacement of the water pump and thermostat.” Plaintiffs stopped making the monthly payments on the car when it allegedly became inoperable due to an engine problem and Coast to Coast repossessed the vehicle after performing repairs on it.
Plaintiffs filed the lawsuit, alleging that Defendant committed fraud by selling the car without disclosing various mechanical defects and by offering the VSA with no intent of honoring it. Whether or not this was the case, however, will be decided elsewhere. The court granted Defendant’s motion to compel arbitration, finding that the VSA’s arbitration clause is valid and requires that Plaintiffs’ claims be resolved by an arbitrator.
While Plaintiffs argued that the arbitration clause was “unconscionable” – because it forces them to give up their right to be awarded attorneys’ fees and punitive damages and arbitration proceedings will result in significantly higher costs – and therefore unenforceable, the court disagreed. “An unconscionable contract is one in which there is an absence of meaningful choice on the part of one of the parties to a contract, combined with contract terms that are unreasonably favorable to the other party,” the court stated. In an arbitration proceeding, the court found that Plaintiffs retained the full slate of remedies available under Ohio law and noted that the arbitration clause includes a provision requiring Defendant to advance Plaintiffs’ arbitration costs if they are unable to pay them. As a result, the arbitration clause was not unconscionable.
Class Certification Order Affirmed By Appellate Court
We recently had a win in the Illinois Appellate Court in S37 v. Advanced Refrigeration. The Appellate Court affirmed the trial court’s decision to certifiy a class action regarding the claims in that. Advanced sells appliances to various businesses and added a charge on its invoices called government processing requirment. This fee was not required to be paid by the government and was not a government mandated fee. Advanced created the fee to recover costs it allegedly incurrs in complying with government requirements. The Class-Action Complaint alleged that the fee was deceptive in that it allegedly made a profit generating fee appear as if it were a government required fee. Advanced denied these allegations and opposed class-certification. The trial court denied Advanced’s motion to dismiss and then certified the case as a class-action.
The Appellate Court granted leave for an appeal of the class-certification decision. Advanced argued that it disclosed the true nature of the fee to all customers and that such alleged disclosure gave rise to individual issues blocking class certification. The Class argued that this defense did not create invididual issues barring class-certification as the defense of full disclosure was common the entire class given Advanced’s claim that it told all customers that the fee wasn’t a government mandated fee or tax as the fee’s name allegedly suggested it was.
The Appellate Court rejected Advanced’s arguments and found that the trial court properly exercised its discretion in certifying the class-action.
The Appellate Court held:
We agree with the plaintiff that this case fits the pattern of cases routinely certified as
class actions by Illinois courts. See Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 643
N.E.2d 734 (1994) (resolved as a class action, the court held the commodity option contracts
broker’s disclosure statement was misleading, in violation of the Illinois Consumer Fraud Act,
because the “foreign service fee” to be charged investors was a commission from which it would receive compensation); Harrison Sheet Steel Co. v. Lyons, 15 Ill. 2d 532, 155 N.E.2d 595 (1959)(class action was proper where the defendant refused to refund illegal occupation taxes collected from its customers); P.J.’s Concrete Pumping Service, Inc. v. Nextel West Corp., 345 Ill. App. 3d 992, 1003, 803 N.E.2d 1020 (2004) (“The primary factual issue in this case is a uniform billing practice that allegedly violated the Consumer Fraud Act in the same manner as to all class members. The propriety of such a uniform practice is amendable to being resolved in a class action.”).
The Appelalte Court also noted that the brief of the National Association of Consumer Advocates (which filed a friend of the court submission) stated that class-actions provided a way for small claims like this to proceed to court and to obtain justice when small alleged wrongs in the aggregate allegedly harm many consumers:
“ ‘The policy at the very core of the class action mechanism
is to overcome the problem that small recoveries do not provide the
incentive for any individual to bring a solo action prosecuting his or
her rights. A class action solves this problem by aggregating the
relatively paltry potential recoveries into something worth
someone’s (usually an attorney’s) labor.’ ” Amchem Products, Inc. v. Windsor, 521
U.S. 591, 617 (1997), quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997).
You can view the full opinion of the Appellate Court by clicking here.
Appellate Court Holds Mechanics Lien Pursuant to an Oral Contract Valid Under Home Repair and Remodeling Act
Many of us have had work done to our homes at some point, and sometimes difficulties arise during the course of such projects. Lubin Austermuehle is familiar with the legal issues that arise in such cases, and our lawyers are always concerned about protecting the rights of consumers. Universal Structures LTD v. Buchman is a case about a home improvement construction deal gone bad.
In Universal Structures LTD v. Buchman, Defendants contracted with Plaintiff to perform a series of demolition and remodeling projects at their home in Northfield, Illinois. The work was eventually completed and Defendants paid most of the amount billed by Plaintiff, but the payment left an outstanding balance of over $100,000. Plaintiff then recorded a mechanic’s lien for the unpaid amount and eventually filed a lawsuit to foreclose on the lien. Defendants successfully moved to dismiss the lawsuit because Plaintiff failed to present them with a written contract or work order to be signed and also did not present Defendants with a consumer rights brochure. The trial court dismissed Plaintiff’s suit because each of those failures constituted a violation of the Home Repair and Remodeling Act.
On appeal, the Court reviewed whether Plaintiff was “precluded from asserting a mechanic’s lien upon defendant’s property . . . when there was no signed contract or work orders and no delivery by plaintiff of the consumer rights brochure” as required by the Act. The Court found that Plaintiff had entered into a valid oral contract with Defendants and had tendered written, itemized work orders for approval before performing any work, which created a right to a mechanic’s lien. Furthermore, there is no language in the Act that that invalidates an oral agreement in the absence of a signed contract or failure to provide the consumer rights brochure. The Court pointed out that a contract is unenforceable under that Act only when the subject matter or purpose of the contract violated the law. As such, the Court reversed the lower court’s ruling and remanded the case for further proceedings.