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.

Deceptive auto and RV dealer practices threaten to defraud or swindle millions of vehicle purchasers each year. Methods of auto and RV dealer fraud range from misinformation about pricing to negative trade-in equity to dealer financing fraud. At National Consumer Rights, we are dedicated to assisting victims of fraud and stopping predatory company practices, including auto dealer fraud. Centrally located in the Midwest (Chicago, Illinois, and Oak Brook, Illinois), our auto fraud attorneys can assist consumers throughout the country (from New York to Los Angeles) who have been financially injured because of auto dealer fraud.

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