Dozier v. Credit Acceptance Corp.

[Cite as Dozier v. Credit Acceptance Corp., 2019-Ohio-4354.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
MICHAEL DOZIER, JR., :
Plaintiff-Appellee, :
No. 108069
v. :
CREDIT ACCEPTANCE :
CORPORATION,
:
Defendant-Appellant.
:
JOURNAL ENTRY AND OPINION
JUDGMENT: REVERSED AND REMANDED
RELEASED AND JOURNALIZED: October 24, 2019
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-18-902691
Appearances:
McGlinchey Stafford, P.L.L.C., and James W. Sandy, for
appellant.
EILEEN T. GALLAGHER, J.:
Defendant-appellant, Credit Acceptance Corporation (“Credit
Acceptance”), appeals the denial of its motion to compel arbitration, or in the
alternative, to stay the case pending arbitration and claims the following error:
The trial court erred when it denied Credit Acceptance’s motion to
compel arbitration, dismiss case, or alternatively, stay proceedings
pending arbitration because the plaintiff’s claims were subject to
binding arbitration, the plaintiff never alleged, much less put forth any
evidence, to establish that the arbitration clause was either
procedurally or substantively unconscionable, and in order to negate
an arbitration clause, a party must establish both procedural and
substantive unconscionability.
We find merit to the appeal, and reverse the trial court’s judgment.
I. Facts and Procedural History
Plaintiff-appellee, Michael Dozier, executed a retail installment
contract (“the contract”) with Buckeye Motor Group Ltd. (“Buckeye”) for the
purchase of a 2010 Ford Taurus. As part of the transaction, Dozier also executed a
declaration acknowledging electronic signature,1 whereby he acknowledged that he
(1) read, understood, and agreed to use an electronic signature to sign all documents
pertaining to the retail installment transaction, including the contract, (2) was given
an opportunity to review a paper version of the contract prior to executing it, and
(3) had “physical control of the keyboard, mouse or other device when he executed
the contract.” The contract was simultaneously assigned to Credit Acceptance when
Dozier signed it.
The fifth page of the contract contains an arbitration clause that
requires the arbitration of all “disputes” between the parties. The arbitration clause
states, in relevant part:
This Arbitration Clause describes how a Dispute (defined below) may
be arbitrated. * * *
1 Copies of the retail installment contract and declaration acknowledging electronic
signature were authenticated by affidavit.
* * *
A “Dispute” is any controversy or claim between You [the buyer] and
US [the seller] arising out of or in any way related to the contract,
including but not limited to, * * * the purchase, sale, delivery, set-up,
quality of the Vehicle, advertising for the Vehicle or its financing, or any
product or service included in this Contract. “Dispute” shall have the
broadest meaning possible and includes contract claims, and claims
based on tort, violations of laws, statutes, ordinances, or regulations or
any other legal or equitable theories.
Additionally, the contract provides a notice of arbitration on the first
page, which states:
ARBITRATION: The Contract contains an Arbitration Clause that
states You [the buyer] and WE [the seller] may elect to resolve any
dispute by arbitration and not by court action. See the Arbitration
Clause on Page 5 of this Contract for the full terms and conditions of
the agreement to arbitrate. By initialing below, you confirm that you
have read, understand, and agree to the terms and conditions in the
Arbitration Clause.
Dozier initialed below the notice of arbitration on the first page and initialed below
the entire arbitration clause on the fifth page of the contract. The arbitration
agreement also provides that either party can initiate arbitration at any time, even
after a lawsuit has started.
Dozier executed the retail installment agreement in June 2017. In
August 2018, he filed a pro se complaint against Credit Acceptance alleging multiple
violations of the Consumer Sales Practices Act, R.C. 1345.03. After filing a timely
answer to the complaint, Credit Acceptance filed a motion to compel arbitration,
dismiss the case, or alternatively, to stay the case pending arbitration. Dozier, still
pro se, opposed the motion in two separate documents titled, “Motion to Vacate
Arbitration,” in which Dozier reiterated the alleged violations of the Consumer Sales
Practices Act. He made no arguments relative to the binding arbitration provision
in his contract. Yet, the trial court denied Credit Acceptance’s motion to compel
arbitration on grounds that it was unconscionable. Credit Acceptance now appeals
the trial court’s judgment.
II. Law and Analysis
A. Standard of Review
“The appropriate standard of review on judgments pertaining to the
enforceability of an arbitration agreement depends on the questions raised in
challenging the applicability of the arbitration provision.” Javorsky v. Javorsky,
2017-Ohio-285, 81 N.E.3d 971, ¶ 7 (8th Dist.), citing McCaskey v. Sanford-Brown
College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543.
In this case, the trial court determined that the arbitration clause was
unconscionable. Whether an arbitration provision is unconscionable is a question
of law, which we review de novo. Brownlee v. Cleveland Clinic Found., 8th Dist.
Cuyahoga No. 97707, 2012-Ohio-2212, ¶ 8. “Under a de novo standard of review,
we give no deference to a trial court’s decision.” Id. at ¶ 9.
B. Ohio Arbitration Act
Ohio public policy favors enforcement of arbitration provisions.
Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-2054, 908 N.E.2d 408,
¶ 15. The General Assembly codified Ohio’s policy of encouraging arbitration
through enactment of the Ohio Arbitration Act, R.C. Chapter 2711. Goodwin v.
Ganley, Inc., 8th Dist. Cuyahoga No. 89732, 2007-Ohio-6327, ¶ 8. R.C. 2711.01(A)
provides that an arbitration agreement in a written contract “shall be valid,
irrevocable, and enforceable, except upon grounds that exist in law or equity for the
revocation of any contract.”
R.C. 2711.02(B), which governs the stay of litigation pending
arbitration, states, in relevant part:
If any action is brought upon any issue referable to arbitration under
an agreement in writing for arbitration, the court in which the action is
pending, upon being satisfied that the issue involved in the action is
referable to arbitration under an agreement in writing for arbitration,
shall on application of one of the parties stay the trial of the action until
the arbitration of the issue has been had in accordance with the
agreement, provided the applicant for the stay is not in default in
proceeding with arbitration.
Thus, R.C. 2711.02 requires a court to stay the trial of an action on application of one
of the parties if (1) the action involves an issue referable to arbitration under a
written arbitration agreement, (2) the court is satisfied the issue is referable to
arbitration under the agreement, and (3) the party seeking the stay is not in default
in proceeding with arbitration. Eaton Corp. v. Allstate Ins. Co., 8th Dist. Cuyahoga
No. 101654, 2015-Ohio-2034, ¶ 17.
Thus, a presumption favoring arbitration arises when the claim in
dispute falls within the arbitration provision. Williams v. Aetna Fin. Co., 83 Ohio
St.3d 464, 471, 700 N.E.2d 859 (1998). Any doubts regarding arbitration should be
resolved in favor of arbitration. Ignazio v. Clear Channel Broadcasting, Inc., 113
Ohio St. 3d 276, 2007-Ohio-1947, 865 N.E.2d 18, ¶ 18.
C. Unconscionability
In the sole assignment of error, Credit Acceptance argues the trial
court erred in finding that the arbitration clause in the parties’ contract was
unconscionable. It contends the agreement is neither procedurally nor
substantively unconscionable.
An arbitration agreement is unenforceable if it is unconscionable.
Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, 884
N.E.2d 12, ¶ 33. Unconscionability includes both the absence of meaningful choice
on the part of one of the parties to a contract and contract terms that are
unreasonably favorable to the other party. Collins v. Click Camera & Video, Inc., 86
Ohio App. 3d 826, 834, 621 N.E.2d 1294 (2d Dist.1993). It incorporates two distinct
concepts (1) unfair and unreasonable contract terms, i.e., substantive
unconscionability; and (2) unequal bargaining power such that the other party lacks
a “meaningful choice” to enter into the contract, i.e., procedural unconscionability.
Taylor at ¶ 33.
Substantive unconscionability pertains solely to the terms of the
contract and whether they are commercially reasonable in the context of the
transaction. Pulte Homes of Ohio, L.L.C. v. Wilson, 8th Dist. Cuyahoga No. 102212,
2015-Ohio-2407, ¶ 17. For example, a contract is substantively unconscionable
where “the clauses involved are so one-sided as to oppress or unfairly surprise” a
party. Neubrander v. Dean Witter Reynolds, Inc., 81 Ohio App. 3d 308, 311-312,
610 N.E.2d 1089 (9th Dist.1992). In determining whether a contract is substantively
unconscionable, “courts have considered factors such as: ‘the fairness of the terms,
the charge for the service rendered, the standard in the industry, and the ability to
accurately predict the extent of future liability.’” DeVito v. Autos Direct Online, Inc.,
8th Dist. Cuyahoga No. 100831, 2015-Ohio-3336, ¶ 17, quoting Collins at 834.
While substantive unconscionability pertains to the contract itself,
procedural unconscionability refers to the circumstances surrounding the
transaction. Procedural unconscionability considers
“factors bearing on the relative bargaining position of the contracting
parties, such as age, education, intelligence, business acumen and
experience, relative bargaining power, who drafted the contract,
whether the terms were explained to the weaker party, whether
alterations in the printed terms were possible, and whether there were
alternative sources of supply for the goods in question.”
Wallace v. Ganley Auto Group, 8th Dist. Cuyahoga No. 95081, 2011-Ohio-2909,
quoting Collins at 834. “The crucial question is whether a party, considering his
education or lack of it, had a reasonable opportunity to understand the terms of the
contract, or were the important terms hidden in a maze of fine print.” DeVito at ¶
19.
The party seeking to void a contract due to unconscionability “bears
the burden of proving that the agreement is both procedurally and substantively
unconscionable.” Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, 884 N.E.2d 12, at
¶ 33.
Although the trial court concluded that the arbitration clause in the
parties’ retail installment contract was unconscionable, Dozier never argued, much
less presented evidence to establish, unconscionability. Dozier presented no
evidence to establish that the parties had unequal bargaining power or that he lacked
intelligence, education, or business acumen such that the arbitration agreement was
incomprehensible to him. Nor did he present any evidence that either Buckeye or
Credit Acceptance defrauded him or that he lacked an opportunity to read the
agreement. He, therefore, failed to establish that the parties’ agreement was
procedurally unconscionable, and our analysis could end here since the party
seeking to void an arbitration agreement must establish that the agreement is both
procedurally and substantively unconscionable. Id.
Nevertheless, there is also nothing to suggest that the arbitration
agreement is substantively unconscionable. The fact that there is an arbitration
agreement embedded within the contract is communicated in a notice on the first
page of the retail installment. The word “ARBITRATION” is written in capital letters
in order to attract the reader’s attention. The notice informs the reader that the full
text of the arbitration clause appears on the fifth page of the contract, and Dozier’s
initials appear below both the notice of arbitration and the actual arbitration clause.
The arbitration clause itself occupies the entire fifth page of the agreement and is
identified by the words “ARBITRATION CLAUSE,” which appear underlined in all
capital letters.
The terms of the arbitration agreement, which are not ambiguous and
written in plain English, are fair and apply equally to both parties. Both parties are
required to resolve their disputes in arbitration. It is not as if Credit Acceptance has
the option of litigating disputes in the common pleas court but Dozier does not. This
is not the case.
Moreover, the arbitration agreement gave Dozier the right to reject
the arbitration clause by mailing a written rejection to the address provided in the
arbitration clause within 30 days of signing the agreement. The second paragraph
of the arbitration clause provides, in relevant part:
Your Right to Reject: If you don’t want this Arbitration Clause to apply,
You may reject it by mailing Us at P.O. Box 5070, Southfield, Michigan
48086-5070 a written rejection notice that describes the Contract and
tell Us that You are rejecting this Arbitration Clause. A rejection notice
is only effective if it is signed by all buyers, co-buyers and cosigners and
the envelope that the rejection notice is sent in has a post mark of 30
days or less after the date of this Contract. If you reject the Arbitration
Clause, that will not affect any other provision of this Contract or the
statute of Your Contract. If you don’t reject this Arbitration Clause, it
will be effective as of the date of this Contract.
There is nothing confusing about this provision. Dozier had the right to reject
arbitration, but there is no evidence that he exercised that right before the 30-day
time period for rejection expired. Therefore, we finding nothing unconscionable
about the arbitration clause, particularly since it afforded Dozier the right to reject
it.
The trial court nevertheless found the parties’ arbitration agreement
was unconscionable pursuant to Schwartz v. Alltel Corp., 8th Dist. Cuyahoga No.
86810, 2006-Ohio-3353. In Schwartz, we affirmed a trial court judgment finding
an arbitration agreement was substantively and procedurally unconscionable, in
part, because it eliminated a consumer’s right to proceed through a class action and
thus circumvented the purposes of the Ohio Consumer Sales Practices Act. Id. at
¶ 25-26, 30.
However, since Schwartz, we have held that a ban on class actions
does not necessarily void an arbitration agreement. In reaching this conclusion, we
stated that even if the Consumer Sales Practices Act “contains a policy favoring class
action * * *, this court may not apply that policy in a way that disfavors arbitration.”
Wallace v. Ganley Auto Group, 8th Dist. Cuyahoga No. 95081, 2011-Ohio-2909,
¶ 19. The fact that an arbitration provision precludes the filing of class actions does
not, by itself, render an otherwise valid arbitration agreement unconscionable. See,
e.g., Ranazzi v. Amazon.com, Inc., 6th Dist. Lucas No. L-14-1217, 2015-Ohio-4411;
Alexander v. Wells Fargo Fin. Ohio 1, Inc., 8th Dist. Cuyahoga No. 89277,
2009-Ohio-4873, ¶ 18.
The court in Schwartz did not void the arbitration agreement solely
because it contained a ban on class actions. The Schwartz court also concluded that
the agreement was procedurally unconscionable because it was “adhesive in nature.”
Schwartz at ¶ 35. The contract was presented on a “take-it-or-leave-it basis,” and
the arbitration agreement was hidden in “small, hard-to-read print * * * at the very
bottom of the back side of the agreement.” Under these circumstances, it is
reasonable to conclude that the consumer would be unaware that he or she was
waiving the right to participate in class actions by signing the contract.
Unlike the contract at issue in Schwartz, which buried the arbitration
clause in fine print, a notice regarding the arbitration clause in this case is
conspicuous on the first page of the contract. Moreover, the arbitration clause
afforded Dozier the right to reject it, but he failed to exercise that right. We find
nothing procedurally or substantively unconscionable about the arbitration
agreement presented in this case, despite the ban on class actions. Therefore, the
arbitration clause in this case is distinguishable from the one at issue in Schwartz,
and the trial court erred in finding they were the same.
The sole assignment of error is sustained.
Judgment reversed, and case remanded to the trial court to stay
litigation pending arbitration.2
It is ordered that appellee recover from appellant share costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to the common pleas court to carry
this judgment into execution.
2 As previously stated, R.C. 2711.02(B) requires the trial court stay the litigation
pending arbitration when the arbitration clause is binding and enforceable.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27
of the Rules of Appellate Procedure.
EILEEN T. GALLAGHER, JUDGE
MICHELLE J. SHEEHAN, J., CONCURS;
MARY EILEEN KILBANE, A.J., DISSENTS WITH SEPARATE ATTACHED
OPINION
MARY EILEEN KILBANE, A.J., DISSENTING:
I respectfully dissent. I would affirm the trial court’s denial of Credit
Acceptance’s motion to compel arbitration, or in the alternative, stay the case
pending arbitration.
The majority states that an arbitration agreement is unenforceable if
it is unconscionable. An arbitration agreement is also unenforceable when the
arbitration clause is against public policy. As this court stated in Hedeen v. Autos
Direct Online, Inc., 2014-Ohio-4200, 19 N.E.3d 957 (8th Dist.):
A court may refuse to enforce a contract when it violates public policy.
Marsh v. Lampert, 129 Ohio App. 3d 685, 687, 718 N.E.2d 997 (12th
Dist.1998), citing Garretson v. S.D. Myers, Inc., 72 Ohio App. 3d 785,
788, 596 N.E.2d 512 (9th Dist.1991). The court in Eagle [v. Fred
Martin Motor Co.], 157 Ohio App. 3d 150, 2004-Ohio-829, 809 N.E.2d
1161, explained:
A refusal to enforce a contract on the grounds of public
policy may be distinguished from a finding of
unconscionability. Rather than focus on the relationship
between the parties and the effect of the agreement upon
them, public policy analysis requires the court to consider
the impact of such arrangements upon society as a whole.
Id. at ¶ 63.
Moreover, a contract injurious to the interests of the state will not be
enforced. King v. King, 63 Ohio St. 363, 372, 59 N.E. 111 (1900). 17
Ohio Jurisprudence 3d, Contracts, Section 94, at 528 (1980), states:
Public policy is the community common sense and
common conscience, extended and applied throughout
the state to matters of public morals, health, safety,
welfare, and the like. Again, public policy is that principle
of law which holds that no one can lawfully do that which
has a tendency to be injurious to the public or against the
public good. Accordingly, contracts which bring about
results which the law seeks to prevent are unenforceable
as against public policy. Moreover, actual injury is never
required to be shown; it is the tendency to the prejudice of
the public’s good which vitiates contractual relations.
(Footnotes omitted.)
Id. at ¶ 44-45.
While the Ohio CSPA does not expressly preclude arbitration clauses
in consumer sales contracts, limitations on a consumer’s rights should not be
allowed by a private arbitration forum. Vincent v. Neyer, 139 Ohio App. 3d 848, 852,
745 N.E.2d 1127 (10th Dist.2000); Eagle at ¶ 67. Indeed, “[w]hen an arbitration
clause vanquishes the remedial purpose of a statute by limiting consumer[’]s rights
and preventing actions from being brought by consumers, the arbitration clause
should be held unenforceable.” Eagle at ¶ 68, citing Randolph v. Green Tree Fin.
Corp., 178 F.3d 1149 (11th Cir.1999), citing Gilmer v. Interstate/Johnson Lane
Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991).
The arbitration clause in the instant case limits the consumer’s right
to proceed through a class action. It states, in relevant part: “if You or We elect to
arbitrate a dispute, (a) neither You nor We may participate in a class action in court
or in a class-wide arbitration, either as a plaintiff, defendant or class member[.] * * *
In the event that the Class Action Waiver is determined to be invalid or
unenforceable, then, subject to the right to appeal such a ruling, this entire
Arbitration Clause (except for this sentence) shall be null and void.”
By prohibiting Dozier from filing suit as a class, Credit Acceptance
eliminates the right to proceed through a class action and hinders the policy
considerations of the CSPA, which I find renders the arbitration clause
unenforceable. The plain language of the contract contemplates this by
acknowledging that the entire arbitration clause shall be null and void if the class
action waiver is found to be unenforceable. When the arbitration clause vanquishes
the remedial purpose of the CSPA, and is injurious to the interests of the state and
against public policy, it cannot be enforced. Eagle at ¶ 74, citing King, 63 Ohio St.
363, 372, 59 N.E. 111.
For these reasons, I would affirm the trial court’s ruling.