CALIFORNIA – The California Supreme Court ruled, July 3, in the Ford Motor Warranty Cases that the company cannot force car buyers to arbitrate lemon law claims using dealership contract clauses.
According to the court document, five plaintiffs purchased either a Ford Focus or Fiesta from various dealerships, between 2013 and 2014.
Each signed a sales contract with the dealership outlining sales and financing terms. Ford, the manufacturer, was not a party to the sales contract.
The dealer said they don’t offer a warranty, but the contract explained that the car might still be covered by the manufacturer’s warranty.
The sales contract included an arbitration clause stating: “Either you or we may choose to have any dispute between us decided by arbitration instead of in court or by jury trial.”
Ford argued it could use dealerships’ arbitration clause
After experiencing transmission problems with their cars, the plaintiffs sued Ford.
They claim Ford marketed defective Fiesta and Focus transmissions that caused accidents and hid the issues from the public.
The complaints alleged Ford never disclosed the defects and publicly downplayed any danger.
The plaintiffs said they were misled into buying the cars by Ford’s ads, brochures and window stickers.
All five plaintiffs sued Ford for violating the Song-Beverly Consumer Warranty Act – citing issues with express and implied warranties. Four also claimed Ford misled them by hiding known safety defects.
Ford argued it could use the dealership’s arbitration clauses to avoid court, even though it didn’t sign those contracts, by relying on a legal idea of estoppel from past cases like Metalclad.
Court rejected Ford’s request to use arbitration clause
The justices rejected this argument, stating that the lawsuit focused on Ford’s own conduct of alleged concealment of defects, and not on any obligations of the dealership contract.
They ruled that since the buyers’ claims weren’t based on the contract itself, and Ford wasn’t a party to it, Ford had no right to enforce the arbitration clause.
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