FOR AUTOMOBILE DEALERSHIPS – DO YOUR FORM DOCUMENTS COORDINATE WITH OR CONTRADICT EACH OTHER IN REGARD TO MANDATORY ARBITRATION PROVISIONS?

When a car dealership sells a vehicle, unless the transaction is paid for in full in cash at the time of delivery, a lease agreement or installment sales contract is executed simultaneously with the Retail Buyers Order. Arbitration clauses in a Retail Buyers Order are common and have been the subject of interpretation and enforcement by New Jersey courts including an unpublished decision on Thursday May 9, 2013 in Rezac v. JMK Auto Sales, Inc., A-0931-11T1. Rezac should be read in combination with Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515 (App Div. 2011) in which a broad form of arbitration clause was enforced and NAACP of Camden Cnty. East v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 410, 24 A.3d 777, 781 (App. Div. 2011) appeal dismissed, 213 N.J. 47, 59 A.3d 1083 (2013) where the Appellate Division concluded that that the disparate arbitration provisions in the Retail Buyer’s Order, the finance agreements, and a GAP addendum contract were too confusing, too vague, and too inconsistent to be enforced, and reversed the trial court’s dismissal of the complaint directing the parties to binding arbitration. In Griffin, Craig, Annin & Baxter’s Jeffrey Craig successfully asserted the arbitration clause in the Retail Buyers Order as a basis for dismissing Griffin’s complaint asserting common law claims for false arrest, false imprisonment, malicious prosecution, abuse of process, invasion of privacy, and intentional infliction of emotional distress and a statutory claim under the New Jersey Civil Rights Act of 2004, N.J.S.A. 10:6-1 to -2. Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 517, 988 A.2d 101, 102 (App. Div. 2010). The retail order form signed by Griffin included an expansive form of arbitration clause under which he agreed “to arbitrate any claim, dispute, or controversy … that may arise out of or relating to the purchase … identified in the Motor Vehicle Retail Order and the financing thereof.” Griffin, 411 N.J. Super. at 519. In NAACP, Jeffrey Craig shared the representation of Foulke Management with Laura D. Ruccolo of Capehart and Scatchard. When purchasing an automobile from one of Foulke Management’s dealerships a consumer would sign numerous form documents, including: (1) a retail installment contract (the “RIC”); (2) a so-called GAP addendum (the “Addendum”); (3) a separate arbitration document (the “SAD”); (4) a general consumer notice (the “consumer notice”); (5) a motor vehicle retail order agreement (the “MVROA”); (6) a document containing certain waivers by the purchaser (the “waiver document”); and (7) a spot delivery agreement (the “spot delivery agreement”). The first three of these documents contained arbitration provisions, NAACP 421 N.J. Super. at 411. The RIC included an arbitration clause that provided either party may bring a dispute to arbitration, the Addendum a mandatory arbitration clause, and the SAD a mandatory arbitration clause. The multiple documents with varying provisions about arbitration lead to the Appellate Division holding arbitration was not required. The dealership sought review of the Appellate Division’s ruling by Petition for Certification granted by the New Jersey Supreme Court. The underlying litigation, however, was settled before the matter was fully briefed for Supreme Court review. Rezac also deals with multiple documents and their coordination with each other. The MVROA contains a broad form mandatory arbitration agreement of the type endorsed by the Court in Griffin but the lease agreement did not contain an arbitration clause. Instead, the lease contained a “supersession” clause which provided that the Lease agreement describes all the agreements between the parties and that all prior agreements, whether oral or in writing were superseded. Rezac at *2-3. The trial court enforced the arbitration agreement when a dispute arose about whether the “Ultimate Protection Plan” the consumer purchased protected him against excess wear and tear charges at lease end for “any dings, scratches, and small cracks in the windshield” and whether JMK purchased the coverage the consumer signed for and paid for. Because the lease agreement did not contain an arbitration clause, contained a clause that it superseded all other agreements, and did not incorporate by reference the MVROA and its arbitration clause the Appellate Division ruled there was no basis for concluding the consumer agreed to submit to arbitration disputes that arose out of the lease agreement or the protection plan sold in association with the lease agreement. JMK did not submit a timely answering brief, was barred by the Appellate Division from filing a brief, and did not participate in argument. By default, JMK did not dispute the proposition that the motor vehicle lease agreement superseded the retail order and represented all agreements between JMK and the consumer. The Appellate Division reversed the trial court’s unexplained conclusion that the parties’ disputes were subject to the arbitration clause and remanded the matter to the trial court for further proceedings. Rezac at *10-11. In combination NAACP and Rezac drive home the importance of looking at the multiple documents that make up a financed sale or lease transaction as a whole and making sure that they fit together rather than diverge and by diverging abandon the protection granted to arbitration agreements in Griffin.

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