Plaintiff Tracey Perez disregarded a clear arbitration provision in a contract with defendant Leonard Automotive Enterprises, to his own eventual detriment. In Perez v. Leonard Automotive Enterprises, plaintiff purchased a vehicle with a LoJack Stolen Vehicle System from Toyota. As part of the purchase, plaintiff signed a Retail Installment Sales Contract which contained a privision, to wit, disputes between the parties would be resolved through arbitration.

Sometime after the purchase, the vehicle was stolen and totaled after being involved in a fire. Plaintiff filed a complaint against defendant alleging that it failed to install and activate the LoJack Stolen Vehicle System. Defendant filed a motion to dismiss the complaint seeking to enforce the binding arbitration provision within the contract. Plaintiff opposed the motion with allegations that the arbitration provision was invalid.

The Court determined that the arbitration provision was enforceable and will “pass muster when phrased in plain language that is understandable to the reasonable consumer.” The court pointed out that the arbitration provision was immediately above the signature block on the first page of the contract and would be impossible to miss. Additionally, the court found that the arbitration provision was prefaced with a large warning in bold, capital letters that stated: PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL RIGHTS.

The arbitration provision was not buried within an obscure document, but clearly and conspicuously set apart from the rest of the contract on its own page with specific directions right above the signature page.  The court found that the consumer should have read the full provision carefully before signing the document. As such, the court dismissed plaintiff’s complaint with prejudice and granted defendant’s motion to compel arbitration. Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.