Goree v. Northland Auto Enterprises, Inc., CV 11 758061

CourtCourt of Common Pleas of Ohio
Writing for the CourtJOHN P. O'DONNELL, JUDGE.
PartiesSHANELL GOREE, Plaintiff, v. NORTHLAND AUTO ENTERPRISES INC, et al., Defendants
Decision Date30 January 2014
Docket NumberCV 11 758061

SHANELL GOREE, Plaintiff,
v.

NORTHLAND AUTO ENTERPRISES INC, et al., Defendants

No. CV 11 758061

Court of Common Pleas of Ohio, Cuyahoga

January 30, 2014


JOURNAL ENTRY DENYING THE NON-SIGNATORY DEFENDANTS' MOTION TO COMPEL ARBITRATION AND REQUIRING A HEARING ON UNCONSCIONABILITY

JOHN P. O'DONNELL, JUDGE.

STATEMENT OF THE CASE

This class action lawsuit was filed by plaintiff Shanell Goree for herself and all Ohioans who, from June 21, 2007, through the filing of the lawsuit, bought or leased a car from any Ohio dealer using defendant Northland Auto Enterprises, Inc.'s Ren'T'Own sales and financing program and where 1) the cash price of the car included charges for goods and services in addition to the vehicle's cost, or 2) the amount charged for title transfer and license fees exceeded the amounts of those fees actually paid to the state, or 3) more than $250 was charged for an origination fee.

Goree has asserted causes of action for: violations of the Ohio consumer sales practices act at Ohio Revised Code sections 1345.02 and 1345.03; fraud; civil conspiracy; and violations of sections 643.02 of the Codified Ordinances of Cleveland, Ohio.[1]

Defendants Northland, North Coast Auto Sales, Inc., Joe Zawatski, Al Lentsch and LTO Financial, LLC[2] filed an answer generally denying the allegations of the first amended complaint and asserting as an affirmative defense that the plaintiff's claims must be arbitrated pursuant to her contract with defendant North Coast.[3]

On the same date as their amended answer, but by a separate motion, the defendants moved to stay this lawsuit and compel the arbitration of Goree's individual claims. That motion is now fully briefed[4] and this entry follows.

THE PLAINTIFF'S COMPLAINT

Goree leases a Dodge Intrepid from North Coast

On July 23, 2009, Goree and defendant North Coast entered into a two-page consumer lease agreement for a 1999 Dodge Intrepid. Numbered paragraph 2 of the lease shows the " cash price" of the car as $12, 790.36, and paragraph 3 calls for 82 payments, every two weeks, of $155.98.[5] Paragraphs 6 and 7 of the agreement include the following list of additional charges: an origination fee of $975.00 for " processing the Lease transaction, " $1, 066.82 for sales tax, $15.00 for title transfer, and $55.00 for licensing.

At the same time as the lease, the plaintiff " was also required" [6] to buy a 2 year/30, 000 mile warranty for $399.00, [7] and she signed an addendum to the lease that allowed North Coast to install a global positioning system device on the car.[8] If Goree defaulted on her payments, the GPS device let North Coast disable the starting system and track the vehicle's location for repossession. According to the addendum, the GPS was " required as a condition of approving our extension of credit to you" but " is not being sold with the Vehicle."

The addendum takes up a full single-spaced page of type that appears to be 8-point or smaller. It includes six numbered paragraphs. Paragraph 5 reads as follows:

5. Arbitration. Any claim or dispute arising out of or related to the contract, or any breach of the Contract, shall be received by binding arbitration, administered by the American Arbitration Association under its Commercial Arbitration rules and judgment on the reward rendered by the arbitrator may be entered in any court having jurisdiction. THE PARTIES EXPRESSLY AGREE TO WAIVE AND FOREGO ANY RIGHT TO TRIAL BY A JUDGE AND/OR JURY IN FAVOR OF FINAL, BINDING, AND EXCLUSIVE ARBITRATION. You may obtain a copy of the Commercial Arbitration rules from the American Arbitration Association at 323 East Osborn Road, Phoenix, Arizona 85012, telephone number (602) 234-0950, or at www.ADR.org/rules/commercial/AAA235 -- 0900.htm.
(All spelling, capitalization and grammar sic .)

Apparently to keep to a minimum the amount of money Goree needed to get possession of the car, North Coast financed $488.63 of the $1, 288.63 " total due at signing." [9] She executed a promissory note requiring her to pay an extra $81.44[10] per payment for her first six payments. Goree also borrowed money for the total sales tax (at $12.09 per payment) and was charged $10.78 per month for insurance that would cover a rental if the Intrepid broke down. These charges added $22.86 to each scheduled payment, so that her actual scheduled payments were $178.84 each[11], not the $155.98 described on the lease agreement.

North Coast's lease agreement and its addendum are on forms created by Northland for its Ren'T'Own program. According to Goree, that program was developed by Northland and marketed to used car dealers " to allow them to enter into rent-to-own and lease-to-own agreements with their customers." [12] As described in the first amended complaint:

Northland's Ren'T'Own program guidelines and sample transactions also instruct their dealers to include the cost of an extended warranty and GPS tracking system in the cash price of the vehicle, but Northland's " Lease Agreement" is designed to ( sic ) so as not to disclose these costs to the consumer.[13]

Goree's causes of action

Goree alleges that North Coast, utilizing Northland's Ren'T'Own program, included the costs of the warranty, the GPS device and the rental insurance in the sales price of the Dodge Intrepid without disclosing them to her. For her first cause of action she claims that this conduct violates section 109:4-3-16(B)(21) of the Ohio Administrative Code. That section provides that a dealer commits a deceptive and unfair act in connection with the sale of a motor vehicle when the dealer advertises a price for a car that does not include all costs to the consumer. She goes on to allege that by violating this section of the O.A.C., North Coast engaged in unfair, deceptive and unconscionable acts under R.C. 1345.02 and 1345.03.

Her fourth cause of action is similar to the first but alleges a violation of Cleveland's municipal ordinance equivalent of Ohio's consumer sales protection act.

For her second cause of action, she alleges that the same conduct -- including various items in the cash price " without disclosing them to [the p]laintiff" [14] -- amounts to a false representation that she relied on to her detriment in deciding to enter into the contract.

The last cause of action is for civil conspiracy. Here, Goree alleges that:

[t]he combination of the tools provided by Al Lentsch, Northland, and LTO Financial, LLC and the marketing, sales, and customer acquisition capabilities of North Coast and other Ohio auto dealers operating under Ren'T'Own, allowed all Defendants to earn excessive and unconscionable levels of profit, at the expense of unsophisticated, vulnerable and less well off consumers, that could not have been accomplished if Defendants did not act in concert.[15]
(All capitalization and grammar sic .)

THE MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

Relying on the arbitration agreement in the addendum, the defendants have moved pursuant to R.C. 2711.02 and 2711.03 to stay this lawsuit and compel Goree to arbitrate her claims against all of the defendants. The defendants argue that the agreement to arbitrate " any claim or dispute arising out of or related to the contract" encompasses all of the claims in the first amended complaint and is otherwise valid and enforceable, even by the defendants Northland, Zawatski, Lentsch and LTO Financial, who were not parties to the contract.

Goree raises several reasons why the motion should be denied. First, she argues that the arbitration agreement cannot be enforced because it is unconscionable. Second, she claims that even if it is enforceable it cannot be invoked by the defendants who did not sign it, i.e . all but North Coast. Last, and as an alternative, she asserts that if her first amended complaint is subject to arbitration then it should be " with no limitations on class arbitration" and the " decision as to whether to proceed in arbitration on a classwide (sic) basis should be left to [the] arbitrator." [16]

LAW AND ANALYSIS

Arbitration agreements generally

Section 2711.01 of the Ohio Revised Code provides, in pertinent part, as follows:

Provision in contract for arbitration of controversies valid -- exceptions.
(A) A provision in any written contract, except as provided in division (B) of this section, to settle by arbitration a controversy that subsequently arises out of the contract, or out of the refusal to perform the whole or any part of the contract, . . . shall be valid, irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation of any contract.

The first question here is whether the causes of action in the first amended complaint present issues referable to arbitration under an agreement between Goree and North Coast. The arbitration clause is on a form captioned " ADDENDUM To Consumer Rental/Lease Agreement." The addendum refers to the lease agreement as the " Contract" and provides that it is incorporated into and made a part of the lease agreement. By the addendum, the parties agreed that " any claim or dispute arising out of or related to the contract, or any breach of the Contract, shall be received by binding arbitration." [17]

Ordinarily, in deciding whether the claims in a lawsuit fall within the scope of an arbitration clause, a court must classify the particular clause as either broad or narrow. Academy of Medicine of Cincinnati v. Aetna Health, Inc ., 108 Ohio St.3d 185, 2006-Ohio-657, at ¶ 18, 842 N.E.2d 488. An arbitration clause that contains the phrase " any claim or controversy arising out of or relating to the agreement" is considered the paradigm of a broad clause. Id. Since the arbitration provision here covers any " any claim or dispute arising out of or related to the contract" it is a broad clause. Therefore, if the addendum here is an agreement to submit disputes to an arbitrator then it applies to...

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