An arbitration clause in an English-language sales contract signed by a Spanish-speaking couple buying a minivan from Potamkin Dodge in Hialeah was unenforceable, the Florida Supreme Court ruled Thursday.
In a 5-2 split, the majority said the Third District Court of Appeal failed to employ the proper analysis when it reversed a circuit court order siding with the couple.
“The decision essentially opens up the floodgates to people avoiding arbitration agreements which they sign if they claim not to be fluent in the English language,” said dealership attorney Mark A. Goldstein of Miami. “The decision is contrary to a whole body of Florida law which binds people to contracts they sign even if they do not speak the language.”
He added he is exploring whether to seek U.S. Supreme Court review.
Roberto Basulto and Raquel Gonzalez, who emigrated from Cuba in 1997, purchased a new 2005 Dodge Caravan. When they realized the trade-in allowance was lower than the agreed price, they returned the van after driving seven miles and demanded their old car back. It had already been sold, however, and the couple sued for fraud and deceptive trade practices.
Potamkin sought enforcement of its arbitration provision. Miami-Dade Circuit Judge Thomas Wilson determined from testimony that the provision was never explained to them and found the agreement was invalid.
Writing for the majority, Justice James E.C. Perry said the Miami appellate court erred by not applying the standard established in Seifert v. U.S. Home, a 1999 state Supreme Court decision used to evaluate motions compelling arbitration.
A trial judge should determine whether there is a valid written agreement, whether an arbitrable issue exists, and whether the right to arbitration was waived.
“The record shows that the trial court had legally sufficient grounds under the first prong of the Seifert standard to deny the dealership’s motion to compel arbitration when it found that no arbitration agreements between these parties existed,” Perry said.
The trial judge also found that even if the agreement existed, it was not enforceable due to procedural and substantive unconscionability, he said.
Perry then gave guidance for evaluating unconscionability, which was defined as the absence of meaningful choice that unreasonably favors one party.
He explained the two elements at issue were procedural unconscionability, which relates to the manner in which a contract is entered, and substantive unconscionability based on the actual wording of the contract.
The buyers claimed they shouldn’t have to prove both elements, but Perry said ample case law exists requiring a showing of both.
“However, we conclude that while both elements must be present, they need not be present to the same degree,” he said.
He noted some Florida courts assess each element independently.
“We conclude that the better approach … is the balancing, or sliding scale, approach,” Perry said, adding this approach recognizes the two principles are often intertwined.
Perry remanded the case to the trial court with instructions to determine the proper attorney fees to award the buyers.
Chief Justice Ricky Polston wrote the dissent with concurrence from Justice Charles Canady.
Polston maintained the court did not have jurisdiction because the court took the case to defend the Seifert decision. Polston said Seifert was not on point.
“In Seifert, this court addressed the scope of the arbitration agreement at issue, not whether an agreement to arbitrate was ever concluded,” Polston said. “Unconscionability, which was a primary focus of the Third District’s opinion, was not at issue in any way in Seifert. Accordingly, there is no conflict between the Third District’s opinion and Seifert.”
Timothy C. Blake, the Miami attorney for the buyers, did not respond to a request for comment by deadline.
The case reached the high court in 2009 and took five years to decide. A series of U.S. Supreme Court decisions in recent years have supported arbitration in consumer contracts.