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Arbitrator had no power to end class action, appeals court rules

A recent opinion of the Missouri Supreme Court has doomed an arbitrator’s award in favor of a car dealership, subjecting it once gain to a class-action lawsuit.

The Court of Appeals Western District ruled Aug. 24 that Car Credit Inc.’s arbitration of Cathy Pitts’ claims was invalid. Pitts had purchased a car from Car Credit in 2011, but it was repossessed in 2015, and the company alleged in a lawsuit filed in Jackson County that Pitts still owed about $4,900.

Pitts filed a counterclaim, asserting a consumer class action challenging the company’s collection, enforcement and repossession practices. Circuit Judge Jennifer M. Phillips certified the class, but then agreed with Car Credit’s request to compel arbitration of the claims.

When she bought the vehicle, Pitts had signed an arbitration agreement calling for any disputes to be resolved through the National Arbitration Forum, which shut down after a 2009 lawsuit by the state of Minnesota that challenged the group’s marketing practices. Because the defunct forum was no longer available, the judge sent the case to be arbitrated through the American Arbitration Association.

That arbitrator said the class claims were not subject to arbitration and ruled against Pitts on her individual claims. Phillips confirmed the award last year.

At one point, the Western District might have agreed with that outcome. In a split panel ruling in 2017, the appellate court held that an AAA arbitrator could be substituted for one under the NAF since that forum was no longer available.

But the Supreme Court took transfer of the case and reached the opposite conclusion the following year. In A-1 Premium Acceptance v. Hunter, the high court held that nothing in the Federal Arbitration Act “authorizes (let alone requires) a court to compel a party to arbitrate beyond the limits of the agreement it made.”

The Supreme Court’s Hunter opinion came down in 2018 after the trial judge sent the case to arbitration but before the arbitrator rendered its award. The Western District said the Supreme Court’s ruling controlled the outcome of Pitts’ case. Because the agreement between Pitts and Car Credit showed “their unequivocal intent to arbitrate before — and only before — NAF,” the arbitrator had no power over the dispute, Judge Edward R. Ardini Jr. wrote. Judges Mark D. Pfeiffer and W. Douglas Thomson concurred.

Martin L. Daesch of OnderLaw in St. Louis, an attorney for Pitts, said the Western District’s ruling appears to return the case to where it was before, with a certified class of former customers of Car Credit pending in Jackson County Circuit Court.

“It’s got a lot of procedural history to it, that’s for sure,” he said.

An attorney for Car Credit, Benjamin S. McIntosh of Brown & James in St. Louis, declined to comment on the ruling.

The case is Car Credit Inc. v. Pitts, WD84054.

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