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GMAC v. Pittella

A-3876-08T3 (N.J. Super. App. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT; ARBITRATION — When an arbitration agreement does not clearly or ambiguously demonstrate that a customer intended to waive his or her right to litigate under the Consumer Fraud Act, requiring arbitration would not be fair or equitable.

A consumer purchased a used car from a dealership by way of a retail installment sale contract. On the same day, she signed an arbitration agreement that prohibited her from filing suit for any claim arising out of the financing or acquisition of the car. The consumer failed to make her payments and the company that financed her purchase repossessed the car and filed suit. In defending the action, the consumer sued the dealership, alleging that she paid an unconscionable and grossly excessive amount for an extended warranty in violation of the New Jersey Consumer Fraud Act (CFA) and the Uniform Commercial Code (UCC). The consumer paid nearly ten percent of the car’s purchase price for an extended warranty, and was not told by the dealership that a significant portion of that amount was payable to the dealership, and not the warranty company.

The dealership moved for summary judgment seeking to compel arbitration under the signed agreement and to dismiss the complaint. The consumer alleged that she could not recall signing the arbitration agreement and that it was not explained to her. She did not believe she was given the opportunity to review the documents properly, and that she was rushed through the entire process. The lower court granted the motion to move the consumer’s claims to arbitration. The consumer appealed this ruling after resolving her dispute with the finance company.

The consumer appealed, and the Appellate Division reversed, holding that there was no reason not to have a CFA claim adjudicated in arbitration so long as a waiver of statutory rights was clear and explicit in the arbitration document and sufficiently broad to encompass the claimant’s statutory causes of action. Language that simply makes reference to a waiver of any claim is inadequate. Here, the Court held the dealership failed to clearly and unmistakably inform the consumer that by signing the agreement she was waiving her statutory CFA claims and agreeing to arbitrate them. It found that the consumer could not resist the dealership’s unilateral request to arbitrate under its terms if she was to purchase the car, and that it was questionable whether the CFA claim related to the financing, leasing or acquisition of the car.

The Court also held the arbitration agreement was not sufficiently clear and unambiguous so as to demonstrate the consumer intended to waive any of her rights under the CFA. As such, the Court was not convinced that compelling arbitration would be fair and equitable.

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