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Supreme Court weighs denial of arbitration

The Missouri Supreme Court is considering whether a group of former car owners are bound by an agreement to arbitrate their claims against a loan servicer that is simultaneously suing them for the amounts they still owe on their cars.

In what was effectively an hour-long argument, the court on Feb. 23 heard a pair of cases involving two cars that were repossessed after the owners allegedly failed to make multiple payments. Kelly Donaldson and Robert Haulcy had bought a 2008 Chevrolet Equinox for $600 down in 2017, and Christopher Jones purchased 2009 Cadillac CTS with a $1,300 initial payment.

Bridgecrest Acceptance Corporation, which was assigned the cars’ contracts after the sales, filed claims against the buyers in the associate division of St. Louis County Circuit Court, alleging that more than half of the value of the vehicle remained after they were resold. The defendants filed counterclaims, alleging violations of consumer-protection laws and seeking class-action status.

Bridgecrest then sought to force the consumer’s claims into arbitration, citing an agreement they allegedly signed at the same time they entered into the sales contracts for their vehicles. Associate Circuit Judge Mondonna Ghasedi declined to enforce the agreements. Last June, the Court of Appeals Eastern District affirmed those rulings.

Although the Eastern District’s opinions were unpublished, they jolted business and lending groups and prompted a flurry of amicus briefs in the Supreme Court. Declining Bridgecrest’s invitation to read the sales and arbitration agreements as a single contract, the Eastern District found that the arbitration agreement was “illusory,” as Bridgecrest could repossess the cars and seek to recover the deficiency without waiving its right to compel arbitration of claims against it.

“The arbitration agreement functionally does not require Bridgecrest to arbitrate its primary claims while maintaining the ability to force [the car buyer] to arbitrate any meaningful claims he may have,” the appeals court wrote.

David Helms of GM Law, an attorney for Bridgecrest, told the Supreme Court that the ruling “has created great uncertainty and concern on a local and even a national level for not only lenders but all parties relying on the enforceability of arbitration agreements in their business dealings in Missouri.”

Technically, the concerns with the Eastern District opinions already have been addressed, as they were automatically vacated as soon as the cases were transferred to the Supreme Court. But in oral arguments, the high court didn’t give a clear indication of how the law ultimately will be settled.

Jesse Rochman of OnderLaw, an attorney for the consumers, argued that the sales contracts were separate from the arbitration agreements, and that the benefits of the former couldn’t be used to justify the terms of the latter. In other words, he urged the court to find that the arbitration agreements were standalone contracts that had to meet the normal requirements for a valid contract — including that they offer “consideration” by binding both parties to the requirement to arbitrate.

Rochman noted that Bridgecrest’s deficiency suit initially included only the sales contract. The arbitration agreement wasn’t provided to the trial court until the company sought to force the counterclaims into arbitration, and he argued that the company never complied with court rules to properly put the document into the record.

“Perhaps they didn’t attach it because it would be inconsistent with the right to arbitration to be suing for a deficiency judgment,” he said.

Helms said the arbitration agreements should not be read in isolation from the consumers’ overall agreement to buy the cars. But, with a reference to the 2000 movie “Castaway,” he also argued it could stand on its own.

“If you shipwreck this thing, rip it from the contract and toss it on an island — like Tom Hanks looking for his volleyball, Wilson — even then the agreement still is valid,” he said.

Supporting Bridgecrest were the U.S. and Missouri Chambers of Commerce, the American Financial Services Association, the Missouri Bankers Association, the Missouri Installment Lenders Association and Heartland Credit Union Association. In amicus briefs, the groups urged the court to settle the “significant uncertainty” the underlying case had created.

But the Missouri Association of Trial Attorneys and the American Association for Justice submitted a brief in support of the car buyers, arguing that loan servicer wanted to “unilaterally declare a buyer is in default; repossess and sell the vehicle; file a lawsuit seeking a deficiency judgment; but force arbitration if the buyer has the temerity to fight back.”

The cases are Bridgecrest Acceptance Corporation v. Donaldson, SC99269, and Bridgecrest Acceptance Corporation v. Jones, SC99270.