In a recent case, the Maryland Court of Appeals, Maryland’s highest court, held that an automobile dealer could rely on the terms of its buyer’s order to compel its customer to arbitrate, even if the installment sales contract (i.e. the financing instrument) did not contain its own arbitration provision, when the two documents showed an intention that they be read together. Ford v. Antwerpen Motorcars Ltd., No. 68, September Term 2014 (filed June 29, 2015). The case resolves an issue that has been hotly contested in Maryland state and federal courts.
The case arose out of the purchase and finance of a car from Antwerpen Motorcars Ltd. The customers claimed that the dealer had failed to disclose the car’s history including that it had been in a collision and used as a short-term rental. The customers filed suit in the Circuit Court for Baltimore City and the dealer responded by filing a motion to compel arbitration on the basis of an arbitration provision in the buyer’s order. The customers opposed the motion by relying on a Maryland regulation that requires that every vehicle sales contract be “evinced by an instrument in writing containing all of the agreements of the parties.” As the installment sales contract did not contain an arbitration provision, the customers argued that the arbitration provision in the buyer’s order was unenforceable. The Circuit Court disagreed and ordered arbitration and the customers appealed to the Court of Special Appeals, Maryland’s intermediate appellate court. Before any proceedings in that court, the Maryland Court of Appeals accepted review to answer the question: “Under Maryland contract law, is an arbitration provision not contained in a vehicle sales contract, but found in a Buyer’s Order executed on the same day, enforceable where the applicable Maryland regulations require vehicle sales contracts to ‘contain all agreements of the parties?”
The Court of Appeals held that arbitration could be compelled. The Court concluded that the buyer’s order and installment contract should be construed together as constituting the entire agreement of the parties so that enforcement of the arbitration provision was not barred by the regulation. In so ruling, the Court expressly rejected the customers’ argument that under the regulation, which the customers called the “single document rule,” a vehicle sales contract had to be a single document and, in this sale, that document was the installment contract which did not contain arbitration language. The Court noted that the customers had signed the buyer’s order and installment contract at the same time and that the installment contract did not have an integration clause (i.e. a statement that it was the full and final agreement) but, instead, incorporated the buyer’s order by reference by providing that “‘[t]his contract along with all other documents signed by you in connection with the purchase of this vehicle, comprise the entire agreement.” (Emphasis in original).
The Court of Appeals noted that, as the customers argued, other courts had decided to the contrary, but stated not only that those decisions were not binding on it, but also that those cases had already been called into question by the Fourth Circuit (a Federal appeals court) in Rota-McClarty v. Santander Consumer USA, Inc., 700 F. 3d 690 (4th Cir. 2012). There, a customer signed a buyer’s order—which contained an agreement to arbitrate—and an installment contract which did not, and the Fourth Circuit Court held that the dealer could compel arbitration even where the installment contract contained an integration clause. The Fourth Circuit stated that no authority existed to support the customer’s contention that the Maryland regulation on vehicle sales contracts should supplant an entire body of Maryland common law governing contract interpretation that allows multiple documents to be read together.
The case resolves an important question as to when an auto dealer can enforce an arbitration agreement with a customer. It is often a good idea to perform regular maintenance on a dealership’s contracts, and it would be prudent to have an attorney review them to be sure they provide all of the protections you expect from them, including the right to compel arbitration.
This information has been prepared by Tydings for informational purposes only and does not constitute legal advice.