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Rockel v. Cherry Hill Dodge

368 N.J. Super. 577, 847 A.2d 621 (App. Div. 2004)

CONSUMER FRAUD ACT; ARBITRATION—Placing separate, conflicting arbitration provisions in two related contracts of adhesion and making one or both of them less than prominent may permit consumers to pursue court action on their Consumer Fraud Act claims.

A number of car buyers sued a dealership, claiming that it engaged in unconscionable sales practices, in violation of the Consumer Fraud Act (CFA). In response, the dealership moved to dismiss the claim based on the parties’ agreement to arbitrate. A consumer’s claim that a contract was the product of unconscionable practices in violation of the CFA does not necessarily prohibit the enforcement of an arbitration clause. Accordingly, the lower court granted the dealership’s motion to dismiss.

On Appeal, the Appellate Division held that the uncertain content of the parties’ agreement to arbitrate, the contracts’ conflicting descriptions of the procedure that would govern any arbitration proceedings, the absence of a definitive waiver of the buyers’ statutory claims, and the obscure appearance and location of the arbitration provisions militated against requiring arbitration. Specifically, the Court found the arbitration agreement to be highly ambiguous because each transaction used two documents, each with a separate and somewhat disparate arbitration clause. The first, a “Motor Vehicle Retail Order Agreement,” in a shaded box near the line on which the purchaser was expected the sign, contained a statement stating that any controversy arising out of the agreement was to be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

The front side of the second document, a “Retail Installment Contract,” warned, in type no larger than other unrelated provisions, that before a buyer signed the contract, the buyer should read it, including the important arbitration disclosures on the back side of the contract. On the reverse side, among other unrelated provisions, was the following: “IMPORTANT ARBITRATION DISCLOSURES.” It went on to say that the rest of the statement should be read before signing the contract. In smaller type, the statement set forth the specifics of the arbitration agreement. The Retail Installment Contract next described the scope of arbitration, specifically that any claim between the parties was to be resolved by neutral, binding arbitration and not by a court action. This arbitration clause was far more expansive than what was contained in the Retail Order Agreement. It expanded upon the scope of the clause by saying that the arbitration agreement extended to persons not parties to the agreement, and that the right to elect arbitration could be exercised even by non-parties.

The Court concluded that the dealership’s inclusion of two conflicting arbitration provisions in the contract documents confounded any clear understanding of the parties’ undertaking and tilted the balance between the policies underlying arbitration and the CFA in the buyers’ favor. A clause stating only that any controversy arising from an agreement or its breach shall be settled by arbitration is ineffective because it fails to list specific examples of statutory claims to be covered by the arbitration. According to the Court, the Retail Order Agreement’s provision, standing alone, was an insufficient foundation for an order compelling arbitration. Although the Retail Installment Contract’s arbitration clause was more specific, the Court found that its location and appearance precluded the Court from compelling arbitration. A contract provision’s print and size location has great relevance to any determination to compel arbitration, particularly when dealing with a contract of adhesion. The Court, having found that the arbitration provision was difficult to locate and, once found, was onerous to read, denied the dealership’s claim that arbitration was the exclusive remedy available to the buyers.

Therefore, the Appellate Division reversed the lower court’s decision and held that the buyers were not bound by the arbitration agreement and could proceed with their suit.

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