Dealer Loses 2nd Bid To Arbitrate Used Car Class Suit

Law360, New York (December 15, 2015, 5:54 PM ET) — A California appellate court on Monday again refused to send to arbitration a proposed class action alleging that car dealer Import Motors Inc. sold used cars as new, saying on remand from the state’s high court that the dealer didn’t prove an arbitration agreement existed.
The unanimous three-judge panel said it had already affirmed a trial court order denying arbitration as unconscionable, but that the California Supreme Court ordered it to take another look at the case in light of Sanchez v. Valencia Holding Co. LLC. In that case, the high court ruled that the standard for unconscionability must be as rigorous when applied to arbitration clauses as for any contract clause.

“Although Sanchez undermines the reasoning of our prior decision, we again affirm the trial court’s denial of the petition for arbitration, now on the basis that appellant failed to prove the existence of an arbitration agreement,” Justice Mark B. Simons wrote in an unpublished opinion.

Car buyer Gabriel Natalini launched the suit in November 2010, alleging Import Motors knowingly misrepresented customers’ used trade-in cars as new in violation of the Rees-Levering Motor Vehicle Sales and Finance Act, according to court records.

Import Motors’ motion to compel arbitration was first dismissed in 2011, when San Mateo Superior Court Judge Joseph C. Scott found the purported arbitration agreement wasn’t properly explained to Natalini upon signing.

The dealer appealed, and in January 2013 a three-judge panel agreed that Import Motors’ arbitration agreement with Natalini was fundamentally unfair and systematically favored the dealer.

The California Supreme Court later agreed to review the case and ordered the appellate court in September to take a second look in light of the Sanchez decision.

While the reasoning from the appellate court’s initial decision is undermined by Sanchez, the appellate court said Monday it’s still affirming the decision to deny arbitration.

The panel said Import Motors doesn’t argue that it presented admissible evidence of an arbitration agreement or argue that the trial court abused its discretion when refusing to consider a supplemental declaration from Import Motors’ custodian of records.

“Although respondent attached a contract with an arbitration provision to the complaint, appellant denied the allegations of the complaint in its answer and appellant does not argue respondent is estopped from disputing the existence of an arbitration agreement,” the panel said. “Appellant has not shown the trial court erred in denying appellant’s petition on the basis that appellant failed to prove the existence of an agreement to arbitrate.”

The panel vacated its earlier opinion and affirmed the trial court order based on its new reasoning.

Thomas Crowell, an attorney for Import Motors, told Law360 in a Tuesday email that he was surprised by the decision.

“We are at this time reviewing the decision and considering our options, which may include a petition for rehearing,” Crowell said.

Representatives for Natalini didn’t immediately respond Tuesday to a request for comment.

Justices Mark B. Simons, Barbara J.R. Jones and Henry E. Needham Jr. sat on the panel for the First Appellate District.

Natalini is represented by John William Hanson of The Hanson Law Firm and Ian Otto of Otto & Guillen.

Import Motors is represented by Thomas Martin Crowell and David Robert Sidran of Toschi Sidran Collins & Doyle.

The case is Natalini v. Import Motors Inc., case number A133236, in the Court of Appeals of the State of California, First Appellate District.

— Additional reporting by David McAfee. Editing by Ben Guilfoy.

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