South-Western Legal Studies in Business

Class Action Not Allowed Against Retailer Who Had Valid Arbitration Clause
Description Plaintiff asserted that a retailer charged numerous consumers $45 more in fees than allowed by state law and sought class action status to sue the retailer. Appeals court held that since the sales contract contained a valid arbitration clause, the complaints must go to arbitration and the class certification was not proper.
Topic Alternate Dispute Resolution
Key Words Arbitration; Class Action
C A S E   S U M M A R Y
Facts AutoNation ran a chain of used-car lots. Its “Purchase Agreements,” or sales contracts, contained a general arbitration clause requiring all disputes to go to the American Arbitration Association. Customers who financed their vehicles also signed a “Retail Installment Contract.” It did not have an arbitration provision. The Purchase Agreements noted that AutoNation charged a documentary fee of $50, the highest amount allowed under Texas law. For two months, due to a computer error, AutoNation had a $95 documentary fee on the Retail Installment Contract. Leroy, suing on behalf of herself and all other members of a proposed class of buyers who paid $95, sought class action status. AutoNation opposed the class certification and moved to compel the arbitration clause. The district court held that the Retail Installment Contract did not have an arbitration clause, so allowed the litigation, and certified the class. AutoNation appealed.

Reversed. The arbitration clause is valid and will be enforced. The Retail Installment Contract, while it did not have an arbitration clause, falls under the clause in the Purchase Agreement since the Installment Contract came into effect only if there was a Purchase Agreement. The arbitration clause was not unconscionable either in its substance or the manner in which it appeared in the contract—it was not inconspicuous. The certification of the class action was an abuse of discretion by the trial court since the arbitration clause is enforceable.

Citation AutoNation USA Corp. v. Leroy, --- S.W.2d --- (2003 WL 1884889, Ct. App., Tex., 2003)

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