Houston Independent Automobile Dealers Association December Issue: Tax Selling Season is Soon Upon Us | Page 12
Case of the Month
Brittany White and Steven Hefter bought a new car from Charlie, Inc., d/b/a Serra Hyundai. They signed
a retail buyers order, a retail installment contract, and a delivery receipt. The buyers order included an
arbitration provision and a spot delivery disclosure. The RIC stated that any dispute resolution
agreement the buyers signed along with the RIC also applied to the RIC. The delivery receipt included a
spot delivery disclosure and stated that it was a part of the buyers order and the RIC.
Serra Hyundai could not sell the contract and asked the buyers to return the car. The buyers sued Serra
Hyundai for violating the Truth in Lending Act and the Equal Credit Opportunity Act, and asserted
several state law claims. The buyers asked the court to rule that the contract between the buyers and
Serra Hyundai entitled the buyers to keep the car.
Serra Hyundai moved to compel arbitration. The court granted Serra Hyundai’s motion, concluding that
the arbitration provision was valid and enforceable. The buyers argued that financing approval was a
condition precedent to the existence of a binding contract. The buyers claimed that because Serra
Hyundai did not sell the RIC, the agreement between the buyers and Serra Hyundai, including the
arbitration provision, was void.
The court disagreed for two reasons. First, the court explained that, under the Federal Arbitration Act,
an arbitration agreement is severable from the rest of a contract. As a result, even if the rest of the
contract was void, the arbitration provision would be enforceable because the buyers did not challenge
it. Second, the court noted that the arbitration provision was part of the buyers order. By its terms, the
buyers order and the arbitration provision took effect when Serra Hyundai delivered the car to the
buyers along with the TILA disclosures. Because the RIC and the delivery receipt incorporated the
arbitration provision, the arbitration agreement applied to all the buyers’ claims.
Hefter v. Charlie, Inc., 2017 U.S. Dist. LEXIS 151764 (N.D. Ala. September 19, 2017)
So, there’s this month’s roundup! Stay legal, and we’ll see you next month.
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Tom ([email protected]) is Of Counsel and Nikki ([email protected]) is a Partner in the law firm of Hudson Cook, LLP. Tom has written
several books and is the publisher of Spot Delivery®, a monthly legal newsletter for auto dealers. He is the CEO of CounselorLibrary.com, LLC
and the Editor in Chief of CARLAW®, a monthly report of legal developments for the auto finance and leasing industry. Nikki is a contributing
author to the F&I Legal Desk Book and frequently writes for Spot Delivery. For information, visit www.counselorlibrary.com. ©
CounselorLibrary.com 2017, all rights reserved. Single publication rights only, to the Association. (11/17). HC/4815-6992-3155