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Dealership's Arbitration Agreement Ruled Unenforceable

January 3, 2005

A Florida dealership's arbitration provision was ruled unenforceable by the state Court of Appeals after the dealer attempted to use it to arbitrate a customer's fraud and unfair trade practices claims.

The court cited the “exceptionally small size of the type” and the arbitration provision's location on the back of the sales contract where dealership employees did not direct their customers' attention as reasons to rule it unenforceable, reported Automotive News.

Roxanne Jeffries has filed a civil suit against Palm Beach Motor Cars Limited Inc. of West Palm Beach, Fla., for punitive and compensatory damages. She paid $64,000 for a used 2001 Jaguar XK8 that she was told had never been damaged, said her lawyer, Raymond Ingalsbe of Palm Beach Gardens.

Jeffries later found out that the car had been “seriously wrecked and repaired,” which reduced its value by about $30,000, her lawyer added.

According to Automotive News, after Jeffries sued, Palm Beach Motors asked for an order compelling her to arbitrate. She said she hadn't realized there was a back to the contract, no one had brought the arbitration requirement to her attention and she hadn't initialed the provision.

The dealership's argument was rejected by a lower-court judge as well as the three-judge Court of Appeals. The court criticized the language of the provision, which required arbitration for customer claims, but exempted the dealership from having to arbitrate its own collection and repossession disputes.

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