Opposition Brief — Stout v. Byrider

No. 00-964

In the

Supreme Court of the Ani

JAMES D. STOUT and SHIRLEY A. BROWN,

Petitioners ,

Vv.

J.D. BYRIDER a/k/a DOCHERTY MOTORS, INC.;

T&J ACCEPTANCE CORPORATION,

d/b/a CARNOW ACCEPTANCE COMPANY,

Respondents.

On Petition For Writ OF CERTIORARI

To Tue UNitep States Court OF APPEALS

For Tue SrxtH Circuit

RESPONDENTS' BRIEF IN OPPOSITION

Louis PaisLey (0017498)

Counsel of Record

Gary W. Jounson (0017482)

WESTON HurD FALLON PAISLEY

& How .ey L.L.P.

2500 TERMINAL TOWER

50 PusLic SQUARE

CLEVELAND, OH 44113-2241

(216) 241-6602

(216) 621-8369 fax

Counsel for Petitioners

BECKER GALLAGHER LEGAL PUBLISHING, INC.,

CINCINNATI, OHIO 800-890-5001 P Nn

RESPONDENTS' STATEMENT

OF THE QUESTIONS PRESENTED

Did the district court properly compel

arbitration under the Federal Arbitration Act

("FAA"), and correctly determine that that

FAA, not Ohio substantive law, governs the

enforceability of the written arbitration

agreements pursuant to the Supremacy Clause?

Did the district court properly compel

arbitration with neutral, unbiased, and

respected third-party tribunals when plaintiffs

failed to produce any evidence that the

arbitration agreements were unconscionable,

and failed to present any evidence concerning

the applicable rules of arbitration or fees?

Did the district court properly compel

arbitration where the record evidence

demonstrated a clear and unambiguous written

agreement to arbitrate?

Did the district court properly exercise its

discretion by refusing to certify a class

comprised of all defendants' customers from

the date of opening when: (a) the claims of the

putative class lack commonality as each

consumer complaint turns upon the evaluation

of individual evidence; (b) plaintiffs’ claims

are not typical of other putative class

members; and (c) plaintiffs are not adequate

representatives of the putative class?

CORPORATE DISCLOSURE STATEMENT OF

DOCHERTY MOTORS, INC., dba J.D. BYRIDER

AND T&J ACCEPTANCE COMPANY,

dba CARNOW ACCEPTANCE COMPANY

Pursuant to Rule 29(6) of the Rules of the Supreme

Court of the United States, Docherty Motors, Inc., dba J.D.

Byrider and T&J Acceptance Company, dba CarNow

Acceptance Company, by and through their attorneys, submit

their Corporate Disclosure Statement.

Docherty Motors, Inc., and T&J Acceptance Company

are Ohio corporations. There are no parent corporations for

Docherty Motors, Inc., or T&J Acceptance Company. No

publicly held corporations own 10% or more of the stock of

Docherty Motors, Inc., or T&J Acceptance Company.

ii

TABLE OF CONTENTS

Page

RESPONDENTS' STATEMENT OF

THE QUESTIONS PRESENTED ................ i

CORPORATE DISCLOSURE STATEMENT OF

DOCHERTY MOTORS, INC., dba J.D. BYRIDER

AND T&J ACCEPTANCE COMPANY,

dba CARNOW ACCEPTANCE COMPANY ........ ii

ee eee ee iii

TABLE OF CITED AUTHORITIES ............ Vii

PUI oie bes wc aw dedde cegcnn. xii

eg eo a «Oe ee en ae xii

STATUTORY PROVISIONS INVOLVED ........ Xiii

STATEMENT OF THE awe oe he ye l

I. Nature Of The Case .............. l

II. Course Of Proceedings And

Disposition Below ............... 2

Il. Statement Of The Facts ........... 4

iii

ll V vi

Fi for Wh

t vi

Repairs for Their Customers. ........ 4

B. During the Closing of the Vehicle

Purchase,, T&J Presents the

Transactional Documents Individually

to Each Customer for His/Her Review,

Reading, and Questioning. .......... 6

C. Plaintiffs Had an Opportunity to

Individually Read and Review the

Arbitration Agreements and Had an

rtunity to Ask An estions

About the Agreements. ............ 8

D. T&J's Extension of Credit Is Not

Conditioned Upon a _ Customer's

ee

Decision to Purchase (or Not Purchase)

an Extended Service Agreement. ...... y

E. Each Used Vehicle Purchase at

Docherty Motors Is a Separate and

Se ec cecac 10

SUMMARY OF THE ARGUMENT ............. 12

LAW AND ARGUMENT 06 isc chet cic cies 31

I. | THEDISTRICT COURT PROPERLY

B. Plaintiffs' Arbitration Agreements Are

Enforceable Under the FAA. ........ 13

1. The District rt_Properl

Concluded That the Parties

Entered a Written Agreement to

ee ig a eg ee 15

F 2. The District Court Correctly

Held That, Pursuant to the

FAA ngress Intended

Plaintiffs to Arbitrate the

Claims Raised Against

Se ens eae ee 16

3. Plaintiffs' Arbitration

Agreements Are Conscionable,

and Are Not Subject to Ohio's

Substantive Law on_ the

Enforceability of Arbitration

pO Pee ee re ee 19

II. THE DISTRICT COURT PROPERLY

EXERCISED ITS DISCRETION BY

DENYING PLAINTIFFS' MOTION

FOR CLASS CERTIFICATION. ..... 22

Vv

CUINUE AMIENS 0 0000 due eebane ene 30

TABLE OF CITED AUTHORITIES

Cases

Page

Alexander Grant & Co. v. McAlister,

116 F.R.D. 583, 589 (S.D. Ohio 1987). ...... 26

Allied-Bruce Terminix Cos. v. Dobson,

513 U.S. 265, 270, 280 (1995) ...... 14, 18, 20

Andrews v. American Tel. & Tel. Co.,

95 F.3d 1014, 1023-25, reh'g denied,

104 F.3d 373 (11th Cir. 1996) ............ 28

Asper v. Shearson American Express, Inc.,

768 F.2d 106 (6th Cir. 1985). ............ 17

Black v. Cosentino,

117 Ohio App.3d 40, 44 (1996) ........... 28

Burr v. Board of County Comm'rs of Stark County,

23 Gad SABE GD, TS (IGG 2 ccc ccccncess 28

Castano v. American Tobacco Co..,

84 F.3d 734, 745 (Sth Cir. 1996) .......... 28

Compuserve, Inc. v. Vigny Int'l Finance, Lid.,

760 F. Supp. 1273 (S.D. Ohio 1990) ........ 14

Daisy Mfg. Co. v. NCR Corp.,

29 F.3d 389 (8th Cir. 1994) (RICO) ........ 17

Dean Witter Reynolds, Inc. v. McCoy,

995 F.2d 649 (6th Cir. 1993) ...........-.. 17

Vii

Doctor's Associates, Inc. v. Casarotto,

yee & 7; are 20

Dorsey v. H.C.P. Sales, Inc.,

46 F. Supp.2d 804, 808, n.5

| Er er 17

Ferro Corp. v. Garrison Industries,

142 F.3d 926, 931 (6th Cir. 1998). ... 13, 14, 19

General Tel. Co. of the Southwest v. Falcon,

457 U.S. 147, 161 (1982) ......... 23, 24, 28

Goodwin v. Ford Motor Credit Company,

970 F. Supp. 1007 (M.D. Ala. 1997) (TILA) 17, 18

Green Tree Financial Corp. Alabama, et al. v. Randolph,

2000 WL 1803919 at *1

CES se = Peer Trae ET 21, 22, 30

H & M Charters, Inc. v. Reed,

757 F. Supp. 859, 864 (S.D. Ohio 1991) ..... 14

Hiatt v. County of Adams, Ohio,

155 F.R.D. 605, 609 (S.D. Ohio 1994) ...... 20

Hill v. Gateway 2000, Inc..,

105 F.3d 1147 (7th Cir. 1997) (RICO) . 17, 18, 21

In re American Med. Sys., Inc.,

75 F.3d 1069, 1079 (6th Cir. 1996) ... 23, 26, 28

Jackshaw Pontiac, Inc. v. Cleveland Press Pub. Co.,

102 F.R.D. 183, 196 (S.D. Ohio 1984) ... 23, 26

Viii

Kropfelder v. Snap-On Tools Corp.,

859 F. Supp. 952 (D.Md. 1994) (ERISA) ..... 17

Kutschbach v. Davies,

885 F. Supp. 1079 (S.D. Ohio 1995) ........ 23

Mack v. GMAC,

169 F.R.D. 671, 680 (M.D. Ala. 1996) ...... 28

Mastrobuono v. Shearson Lehman Hutton, Inc.,

re Me a: 14

Matthews v. Rollins Hudig Hall Co.,

72 F.3d 50 (7th Cir. 1995) (ADEA) ........ 17

Mitsubishi Motors v. Soler Chrysler-Plymouth, Inc..,

Gis UB. G14, GOB TSRD) og ek ie kes 18

Moses H. Cone Memorial Hospital v.

Mercury Construction Corp.,

460 U.S. 1, 246-25 (9963) ww ce se 16, 20

Peters v. Cars to Go, Inc.,

184 F.R.D. 270 (W.D. Mich. 1998) ..... 25, 29

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395, 403-04 (1967) ............. 19

Randolph v. Green Tree Financial Corp.,

178 F.3d 1149 (11th Cir. 1999),

aff'd in part, rev'd in part, 2000 WL 1803919

Se CS sie Sy ea ede Be dees xii, 18

iX

Shearson/American Express, Inc. v. McMahon,

ie a eG a SS eRe es 14, 17

Southland Corp. v. Keating,

> U.S. 5; Pe Ce 0 ka se eaws 14, 17, 19, 20

Sprague v. General Motors Corp.,

133 F.3d 388, 397 (6th Cir.),

cert. denied, 118 S.Ct. 2312 (1998) ...... 23, 24

Sterling v. Velsicol Chemical Corp. ,

855 F.2d 1188, 1198 (6th Cir. 1988) ........ 22

Sutton v. Cleveland Bd. of Educ.,

958 F.2d 1339 (6th Cir. 1992) ............ 17

Volt v. Information Sciences, Inc. v.

Bd. of Trustees of Leland Stanford Junior Univ.

ae te ee 8 a REN eee 14

Wedding v. University of Toledo,

884 F. Supp. 253 (N.D. Ohio 1995) ........ 14

Williams v. Aetna Financial Company,

83 Ohio St.3d 464 (1998) ............ 20, 21

Statutes:

io eae © Oe, OO a ea ee eee xiii, 1

Pes CCM ee eee esa eee ea re xiii

he 2 Se ie aare Banus yee os Gee 14

PU ee OO 5 ee 8 es 5 ae eC OES 14

Ohio Rev. Code § 1345.01 et seq. ........... xiii, 1

Rules:

ae Se | SEs Pe ee ree ey are 23

eee oe es isa. Sawn s 23

Pa GM EE 6 he ks een oes dae 5 23, 24

PO Se ead pda dee eee es ae 26

xi

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Sixth Circuit is published at 228 F.3d 709. A copy of the

opinion is included in Petitioners’ Appendix A at la-14a.

The opinion of the District Court for the Northern

District of Ohio concerning the arbitration issue is published

at 50 F. Supp.2d 733. A copy of the opinion is included in

Petitioners’ Appendix B at 15a-31a.

The opinion of the District Court for the Northern

District of Ohio concerning class certification is unpublished.

A copy of the opinion is included as Petitioners’ Appendix C

at 32a-44a.

JURISDICTION

Rule 10 of the Rules of the Supreme Court of the

United States provides that this Court may grant a petition for

certiorari only for compelling reasons. The character of the

issues presented for review by Petitioners does not fit within

the examples set forth in Rule 10. The Sixth Circuit's

decision in the instant case is not in conflict with another

United States Court of Appeals on a particular matter, and

does not conflict with a decision from a state court of last

resort on an important federal question. Additionally, the

Sixth Circuit has not departed from the accepted and usual

course of judicial proceedings as to call for this Court's

supervisory power.

Petitioners' sole basis for invoking this Court's

discretionary jurisdiction is a perceived conflict with the

Eleventh Circuit's decision in Randolph v. Green Tree

Financial Corp., 178 F.3d 1149 (11th Cir. 1999), aff'd in

Xii

part, rev'd in part, 2000 WL 1803919 (Dec. 11, 2000).

Since the filing of Petitioners' writ for certiorari, this Court's

reversed the Eleventh Circuit's refusal to compel arbitration

of the consumer's claim.

In sum, Petitioners have not set forth a justifiable basis

for invoking this Court's jurisdiction. For these reasons, and

those explained below, there were no errors in the lower

courts, and there is no basis for extending jurisdiction.

STATUTORY PROVISIONS INVOLVED

Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, ef seq.

Ohio’s Consumer Sales Practices Act (“OCSPA”),

Ohio Rev. Code § 1345.01, et seq.

Truth-in-Lending Act (“TILA”), 15 U.S.C. § 1601, ef seq.

xiii

STATEMENT OF THE CASE

I. Nature Of The Case

Petitioners, James D. Stout ("Stout") and Shirley A.

Brown ("Brown"), sued Respondents, J.D. Byrider a.k.a.

Docherty Motors, Inc. ("Docherty Motors"), and T&J

Acceptance Corporation d.b.a. CarNow Acceptance

Corporation ("T&J"), for declaratory judgment, fraud,

violations of Ohio's Consumer Sales Practices Act

("OCSPA"), Ohio Rev. Code § 345.01, et seq., and violations

of the Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1601, ef

seq., arising from their individual purchase of used motor

vehicles in 1998. Petitioners also sought to certify a nebulous

and over-reaching class, which would have included every

customer who ever purchased a vehicle at Docherty Motors

since the company began business in 1995.

Respondents asserted that Petitioners' claims,

regardless of merit, were subject to binding arbitration

pursuant to the written contracts between the parties, and

moved the district court to enforce the agreements and refer

the matter to arbitration. Respondents also asserted that class

certification was inappropriate as: (1) insufficient

commonality existed among the putative class members; (2)

Petitioners’ claims are not typical of the putative class; and (3)

Petitioners were not adequate representatives for the putative

Class.

After reviewing the extensive briefs submitted by the

parties, and a videotape of Petitiioners' transactions, the

district court correctly denied Petitioners’ motion for class

certification, and properly granted Respondents’ motion to

compel arbitration. The Sixth Circuit correctly affirmed the

district court's rulings.

II. Course Of Proceedings And Disposition Below

Petitioners filed suit due to alleged problems they have

experienced with used motor vehicles purchased at Docherty

Motors. Plaintiffs alleged the following claims in their

original complaint: (1) declaratory judgment under the

Federal Arbitration Act ("FAA"); (2) violations of the

OCSPA; and (3) fraud.’ Plaintiffs also.sought to certify a

class described as:

All consumers who purchased an automobile

from the defendant, J.D. Byrider a.k.a.

Docherty Motors, that was financed through

the defendant, T&J Acceptance Corporation

d.b.a. CarNow Acceptance Company, in the

State of Ohio at any time from 1993 through

the present. [R. 1, Complaint, at {25

(emphasis added)].

In their original complaint, Petitioners’ only purported basis

for federal jurisdiction was their request for declaratory

judgment under the FAA.

On February 16, 1999, Respondents moved to dismiss

Petitioners’ complaint for lack of subject matter jurisdiction.

Recognizing the jurisdictional deficiencies, on March 4, 1999,

Petitioners filed an amended complaint purporting to set forth

a TILA claim in an improper attempt to invoke federal

jurisdiction. Petitioners' amended complaint did not modify

the proposed class for certification.

On February 16, 1999, Respondents moved to stay

proceedings and compel arbitration, asking the Court to

enforce the arbitration agreements entered into by Petitioners.

On March 9, 1999, Petitioners opposed Respondents’ motion

' In October, 1998, Stout filed a similar complaint

(without TILA or class action allegations) in state court, which he

later dismissed without prejudice.

2

——

to compel arbitration, but did not request a hearing. On April

22, 1999, Respondents filed a reply brief.

Finally, on February 16, 1999, Respondents moved to

strike the class action allegations contained in the original

complaint. On April 5, 1999, Petitioners moved to certify the

proposed class, but did not request a hearing on their motion.

Respondents opposed class certification, but requested a

hearing, if necessary.

On June 7, 1999, the district court properly denied

Petitioners' motion for class certification, and held that

Petitioners’ claims were not typical of the putative class, that

insufficient commonality existed amongst the putative class

members, and that Petitioners were inadequate representatives

for the putative class.

On June 8, 1999, Respondents moved for summary

judgment on all of Petitioners’ claims. On that same day,

Petitioners moved for partial summary judgment on their

TILA claim. In subsequently dismissing Petitioners’

amended complaint, the district court did not rule upon the

parties’ respective motions for summary judgment.”

On June 9, 1999, the district court denied

Respondents’ motion to stay the proceedings, but correctly

granted Respondents’ motion to compel arbitration. After

reviewing the extensive record, including the videotape of

Petitioners’ transactions, the district court held that the

arbitration agreements were enforceable under Ohio and

federal law. Accordingly, the district court dismissed

plaintiffs' amended complaint "without prejudice to

reinstatement should further proceedings be needed after

arbitration." [R. 50].

2

The district court also did not rule upon defendants’

motion to dismiss plaintiffs’ amended complaint for lack of subject

matter jurisdiction.

Prior to the district court's rulings, Petitioners had

ample opportunity to conduct written and deposition

discovery. Respondents answered extensive written requests

for production of documents. Petitioners deposed eight (8) of

the individuals and corporate representatives.

Petitioners refused to submit their individual claims to

binding arbitration, and filed this appeal. Petitioners asked

the district court to stay enforcement of its order compelling

arbitration, but the district court has not granted the requested

relief. | Respondents stand ready to speedily resolve

Petitioners’ claims through arbitration as set forth in the

individual agreements, and as ordered by the district court.

III. Statement Of The Facts’

A. Docherty Motors and T&J Are Small, Closely-Held

Ohio Corporations That Sell Motor Vehicl

Provide Financing for Those Pur Wh

Opt, and Offer Servicing and Repairs for Their

Customers.

Docherty Motors is a small, family owned, and

closely-held Ohio corporation with only four shareholders,

and has been in the business of selling used motor vehicles

since 1995. Only one shareholder is a non-family member.

At the time of this lawsuit, Docherty Motors owned three

J.D. Byrider franchises in northern Ohio, located in

3 Not only do plaintiffs mischaracterize deposition

testimony, but they also cited deposition testimony in their briefs

before the Sixth Circuit that is not part of the record. [See

Appellant's Brief, at 4-7]. Pages 28, 43, 55-56, 64, 78, and 107

of Tom Docherty's transcript, and pages 20, 28, 36, and 71 of Jim

Smith's transcript are not part of the record as cited by plaintiffs.

4

Sandusky, Medina, and Akron, and maintains a corporate

office in Amherst, Ohio.

Contrary to Petitioners' representation, each used

motor vehicle offered for sale by Docherty Motors is not

"priced at $7,000.00." [Petitioners' Brief, at 2]. Rather,

Docherty Motors seeks to purchase and resell used motor

vehicles that fall within a certain resale value range.

Docherty Motors generally does not purchase and resell

vehicles that fall substantially above or below this acceptable

range.

While customers have made cash purchases of used

motor vehicles from Docherty Motors, and have also obtained

financing from traditional third-party sources such as banks

and credit unions, Docherty Motors does offer financing

through T&J to those individuals who may not qualify for

traditional financing. T&J finances transactions involving

individuals with unfavorable credit records, but also finances

transactions for customers with favorable credit records. For

those sales financed internally, Docherty Motors assigns the

retail installment contracts to T&J. [R. 49, Exhibits A, B, rs

D, and E}.

T&J is also a small, family-owned, and Closely-held

Ohio corporation, but with only two shareholders. Both

shareholders are family members. T&J owns three CarNow

Acceptance Corporation ("CNAC") franchises. A CNAC

franchise is located at each Docherty Motors’ dealership. [R.

28, Exhibits 2; R. 49, Exhibits A, B, C, D, and E].

Docherty Motors maintains a service department at

each dealership, which performs repairs only on vehicles

purchased at Docherty Motors. It generally purchases its

vehicles from a limited group of wholesalers, against which

it has full recourse to return the vehicle if it is defective. By

dealing with the same wholesalers, Docherty Motors seeks to

purchase higher quality used vehicles within its pricing

criteria. [R. 49, Exhibits A, C, F, G, and O].

5

Before sale, each vehicle is inspected by a Docherty

Motors’ buyer and salesman. All vehicles sold are “safety

checked." A customer may bring the vehicle into the service

department for a safety check and free repairs on certain,

specified items pursuant to a "We Owe" agreement if the

repairs were not“done before sale. The Buyer's Guide,

affixed on a window in every vehicle, urges customers to take

vehicles for a pre-purchase inspection at a mechanic of their

choice. [R. 28, Exhibit 2, at 91; R. 49, Exhibits A, F, G,

and H].

B. During the Closing of the Vehicle Purchase, T&J

A trained CNAC representative handles the "closing"

on each customer's purchase, which includes the individual

presentation of a number of documents for the customer's

review and signature. The documents presented include: a

power of attorney for vehicle registration and license, federal

odometer statement, Ohio temporary registration application,

Best Extended Service Agreement (if applicable), Buyer's

Order, Retail Installment Contract and Security Agreement,

insurance responsibility form, Buyer's Guide, check list, and

customer survey questionnaire. [R. 49, Exhibits D, at 42-43,

and M]}.

At the Sandusky dealership, the CNAC representative

handling the closing on plaintiffs’ transactions was Wendell

Gaddie (hereinafter, “Gaddie”). Since opening in 1995, the

Sandusky dealership has had other CNAC representatives

beside Gaddie. Closings at the Sandusky dealership are

videotaped for training and quality assurance purposes with

the customer's knowledge. [R. 49, Exhibit D]. The camera

is mounted on the wall of the office and a sign is on the table.

6

Plaintiffs allege that defendants follow a deliberate,

standardized procedure in each vehicle purchase. While each

transaction is a separate and unique event (as determined by

the purchaser, vehicle, and salesman), a standard procedure

is utilized to provide customers with an Opportunity to read,

review, and question the transactional documents before

signing them. This is amply demonstrated in the videotape of

plaintiffs’ own, individual transactions, and videotapes of

other putative class members. [R. 8, Exhibit C; R. 31; R. 41,

Exhibit M].

As shown in the videotapes, Gaddie provided a brief

explanation of each document upon presentation, advised

plaintiffs to ask questions concerning the documents presented

for their review and signature, and individually presented

each document for plaintiffs’ review and signature.‘ Plaintiffs

had an opportunity to fully review and read each document

before signing, could ask questions about the documents

before signing, and were not the subject of pressure tactics to

induce their signatures. [R. 8, Exhibit C].

Gaddie-attempts to answer customers’ questions if he

is able. If a customer asks a question that is outside his

knowledge or expertise, he attempts to obtain an answer from

someone more knowledgeable. The videotape reveals that

Gaddie answered each and every question raised by plaintiffs,

and spent between twenty and thirty minutes with each

plaintiff in reviewing their documentation. [R. 8, Exhibit C].

Plaintiffs’ complaints alleged that defendants "fan"

documents in front of customers with only the signature lines

exposed so as to prevent document review. [R. 1, at 4415-16; R.

17, at 4415-16]. There is no mention of this allegation in

plaintiffs’ brief. As demonstrated by the record, including the

videotapes, there was never any evidence to support plaintiffs’

"fanning" allegation. [R. 8, Exhibit C: R. 41, Exhibits B, D, and

M].

C. Plaintiffs Had an Opportunity to Individually Read

and Review the Arbitration Agreements and Had

an Opportunity to Ask Any Questions About the

Agreements.

As shown in the videotapes, Gaddie individually

presented a separate, written arbitration agreement to

plaintiffs for their review, questioning, and signature.* The

arbitration agreements were in writing, set forth on pages

separate from the other documentation, were in normal and

bold-faced type, and were not buried in small print in the

other transactional documentation. [R. 1, Exhibits 3 and 4;

R. 17, Exhibits 3 and 4]. Docherty Motors did not begin

utilizing written arbitration agreements until late 1997.

At the time of presenting the arbitration agreement to

Stout, Gaddie provided a hypothetical, but practical, example

of how the agreement could be invoked. He did not describe

the arbitration agreement as a "free benefit." Gaddie did not

utilize a hypothetical example in his explanation of the

agreement to Brown. [R. 8, Exhibit C].

As evidenced by the videotape, plaintiffs read and

signed the agreements, and had an opportunity to ask Gaddie

any questions about the agreements. In particular, the

videotape reveals that, of the various documents in her

transaction, Brown spent the longest time reviewing the

arbitration agreement before signing. [R. 8, Exhibit C].

5

Not all customers at Docherty Motors from 1993 to

1998 were presented with arbitration agreements for signature. In

fact, some deal jackets lack an executed arbitration agreement by

the parties. [R. 28, Exhibit 5, Affidavit of Terry Hall; R. 49,

Exhibit M].

The written arbitration agreements in plaintiffs'

transactions differ in their language® and in the neutral,

unbiased third-party facilitating the arbitration.’ However,

both agreements require arbitration of plaintiffs’ current

disputes.

D. T&J' i redi ition n

a_ Customer's Decision to_ Purchase (or Not

Pu n E ice A nt.

As clearly set forth in the Buyer's Guide, vehicles

purchased at Docherty Motors come with a limited warranty,

covering Certain items, which lasts for three months or 3,000

miles, whichever comes first. As indicated on the Buyer's

Guide, customers may purchase an extended service

agreement, which covers the same items as the limited

warranty, but lasts for a longer term. The duration and price

of the extended service agreement have fluctuated over the

years. [R. 49, Exhibits H, I, and K].

The extension of credit is not conditioned upon a

customer's decision to purchase the extended service

agreement. Customers need not purchase the extended

service agreement. Customers have purchased vehicles from

Under Brown's agreement, the only dispute not subject

to arbitration is a claim by defendants that she failed to make

payments on a timely basis in compliance with the contracts.

Under Stout's agreement, the only claims not subject to arbitration

were claims under $10,000, and claims relating to repossession and

replevin of the vehicle.

Under Brown's agreement, any arbitration is to be

conducted through the Better Business Bureau ("BBB"). Under

Stout's agreement, any arbitration is to be conducted through the

American Arbitration Association ("AAA").

9

SS ee ee ee dt

Docherty Motors, and financed their purchase through T&J,

without the purchasing the extended service agreement.

There is no financial incentive for defendants' employees if a

customer purchases an extended service agreement. [R. 49,

Exhibits A, B, D, H, and J].

The written extended service agreement (if selected by

the customer) is presented to each customer for his/her review

and signature. The customer also acknowledges purchasing

the extended service agreement on a number of transactional

documents, including the Buyer's Guide, Buyer's Order, and

Retail Installment Contract and Security Agreement. These

documents clearly set forth in the terms and purchase price of

the extended service agreement. [R. 8, Exhibit C; R. 49,

Exhibits D, J, K, L, and M].

Plaintiffs each purchased an extended service

agreement, lasting eighteen months or 18,000 miles, for $895.

In their transactions, plaintiffs acknowledged purchasing the

extended service agreement on the Buyer's Guide, Buyer's

Order, and Retail Installment Contract, and understood that

they were paying an additional amount for the service

agreement. A number of customers have utilized the extended

service agreement for repairs, including Brown, who received

a complete engine replacement. [R. 41, Exhibits C, D, E,

and H; R. 49, Exhibits N, O, P, Q, R, and S].

E. Each Used Vehicle Purchase at Docherty Motors Is

a Separate and Unique Transaction.

In an attempt to extort a class settlement that is

disproportionate to the value of their actual claims, plaintiffs

seek to characterize each and every vehicle purchase at

Docherty Motors as a carbon copy of every customer's

experience. As part of their boilerplate allegations, plaintiffs

maintain that every purchaser of a used vehicle from Docherty

Motors since the date of its operation has "had to have their

10

vehicle repaired at a great cost and inconvenience to them."

[R. 17, at [26]. This is untrue and unproven in the record.

Leaving aside the sheer improbability of such an

allegation, not all purported class members have had their

vehicles repaired "at a great cost" to them. Their problems,

if any, have been as divergent as the makes and models of the

vehicles that they purchased. Some have paid for their repairs

out-of-pocket. Others have had Significant repairs, such as

complete engine replacement, made by Docherty Motors at no

cost to them, minus the deductible. Others have had no

problems at all. Some customers are still driving their

vehicles. Others are not. [R. 41, Exhibits A, B, C, D, E, H,

and L]. More than 35% of Docherty Motors' customers are

repeat or referred buyers.

While defendants may utilize certain "form"

documents in each transaction, one cannot broadly generalize

about what transpired in every transaction conducted at

Docherty Motors since its inception in 1995. Each vehicle

purchase is a separate, unique transaction due to: (1) the

vehicle purchased, including its make, model, mileage, year,

and purchase price; (2) the driver of the vehicle; (3) the

purchaser's preferences; (4) the salesmen involved; and (5)

the documents involved. [R. 41, Exhibits A, B, C, D, E, H,

and L].

Each customer has specific needs and different

concerns when purchasing a used vehicle. Some want

additional protection against possible repairs. Some do not.

Accordingly, plaintiffs (as well as Prospective class members)

asked their respective salesmen different questions (if any)

about the vehicles, transactional documents, warranties, and

the extended service agreement. Some customers, including

plaintiffs, had previously purchased service contracts in

association with prior consumer transactions, including the

purchase of motor vehicles. [R. 41, Exhibits A, B, C, D, E,

H, and L].

11

SUMMARY OF THE ARGUMENT

Plaintiffs' appeal arises from two separate orders

entered by the district court. The first order compels

plaintiffs to submit their individual claims to binding

arbitration as freely agreed by the parties. The district court

correctly determined that the FAA, not Ohio substantive law,

governs the enforceability of the written arbitration

agreement, and properly granted defendants' motion to

compel arbitration.

There is no evidence in the record that the arbitration

agreements constitute unenforceable "adhesion" contracts.

Rather, the record clearly reflects that: (1) plaintiffs had an

opportunity to read and review their individual written

arbitration agreement; (2) each plaintiff read their individual

arbitration agreement; (3) each plaintiff had an opportunity to

ask questions concerning their individual arbitration

agreement; and (4) each plaintiff signed the arbitration

agreement. The evidence supports the district court's

conclusion that the parties agreed to arbitrate the disputes

before this Court.

Additionally, Plaintiffs presented no evidence to the

district court as to the alleged unconscionability of these

agreements, presented no evidence as to the actual arbitration

rules for the Better Business Bureau or American Arbitration

Association, and presented no evidence as to the actual

arbitration fees for each organization.

Finally, the arbitration agreements do not defeat the

purposes of CSPA or TILA, and do not leave plaintiffs

without a legal remedy. An arbitrator still has the power to

award plaintiffs relief under CSPA, TILA, and common-law

fraud. An arbitrator could apply the applicable law, assess

plaintiffs’ claims, and award plaintiffs compensatory

damages, statutory damages, attorney's fees, or punitive

damages, if the underlying facts so warranted.

12

The second order addressed the propriety of class

certification. The district court properly exercised its

discretion by denying plaintiffs’ motion for class certification

for a number of reasons. First, the district court properly

concluded that each purported class member's claim arises out

of an individual and unique consumer transaction, rooted in

individual proof of injury, the particular cause of each injury,

and individual aspects of each consumer transaction. Second,

the district court properly concluded that plaintiffs’ claims are

not typical of the purported class members. Third, the district

court properly concluded that plaintiffs are not adequate

representatives of the proposed class.

Plaintiffs are asking this Court to ignore individual

negotiations and gloss over individual details of each

transaction that warrant against class certification. Each

transaction dealt with different cars, different warranties,

different distinct repairs, if any, some under warranty and

some not under warranty. The individual issues of alleged

fraud, signatures, documents, witnesses, and videotapes

cannot all be generalized.

LAW AND ARGUMENT

I. THE DISTRICT COURT PROPERLY GRANTED

DEFENDANTS' MOTION TO COMPEL

ARBITRATION.

A. Standard of Review

This Court reviews a district court's ruling on a

motion to compel arbitration de novo. See Ferro Corp. v.

Garrison Industries, 142 F.3d 926, 931 (6th Cir. 1998).

B. Plaintiffs' Arbitration

m Are Enforceable

Under the FAA

13

The parties agree that the arbitration agreements are

governed by the FAA. Section 2 of the FAA provides that

written agreements to arbitrate in a contract involving

transactions in interstate commerce "shall be valid,

irrevocable, and enforceable, save upon such grounds as exist

at law or in equity for the revocation of any contract." 9

U.S.C. §2. Section 4 gives district courts authority to compel

arbitration when a party neglects or refused to comply with an

arbitration agreement. 9 U.S.C. §4.

The FAA establishes a federal policy favoring

arbitration, and requires district courts to rigorously enforce

arbitration agreements. The FAA was designed to override the

judiciary's long-standing refusal to enforce arbitration

agreements, and to place such agreements on the same footing

as other contracts. The purpose of the FAA was to relieve

court congestion and provide parties with a speedier and less

costly alternative to litigation. Allied-Bruce Terminix Cos. v.

Dobson, 513 U.S. 265, 270, 280 (1995); Mastrobuono v.

Shearson Lehman Hutton, Inc., 514 U.S. 52, 52-54 (1995);

Volt v. Information Sciences, Inc. v. Bd. of Trustees of Leland

Stanford Junior Univ., 489 U.S. 468 (1989);

Shearson/American Express, Inc. v. McMahon, 482 U.S. 282

(1987); Southland Corp. v. Keating, 465 U.S. 1, 10 (1984);

Ferro Corp., 142 F.3d at 932, 938.

Upon a party's request to compel arbitration, a district

court has four tasks: (1) to determine whether the parties

agreed to arbitrate the dispute; (2) determine the scope of the

agreement; (3) if federal claims are asserted, to determine

whether Congress intended the claims to be subject to

arbitration; and (4) if some, but not all of the claims are

arbitrable, to determine whether to stay the proceedings

pending arbitration. Wedding v. University of Toledo, 884 F.

Supp. 253 (N.D. Ohio 1995); H & M Charters, Inc. v. Reed,

757 F. Supp. 859, 864 (S.D. Ohio 1991);Compuserve, Inc. v.

Vigny Int'l Finance, Ltd., 760 F. Supp. 1273 (S.D. Ohio

i4

1990). Plaintiffs do not find fault with the district court's

findings and conclusions on the second and fourth issues. The

district court reviewed all four issues, and correctly resolved

each issue in favor of arbitration.

1. The District Court Properly Concluded That the

Parties Entered a Written Agreement to Arbitrate.

Plaintiffs incorrectly contend that the district court

erred in compelling arbitration because there was no

"agreement" between the parties to arbitrate their disputes.

[Appellants' Brief, at 12]. The record, especially the

videotapes, demonstrate that the parties did agree to arbitrate

their disputes. Plaintiffs were knowledgeable consumers, and

had each previously purchased used vehicles. Plaintiffs each

engaged in lengthy discussions with Gaddie, in which he

individually sat and presented the transactional documents for

their review and questions before execution. Gaddie

encouraged plaintiffs to ask questions if they did not

understand any of the transactional documents. [R. 8, Exhibit

C].

Gaddie also provided plaintiffs a brief explanation of

each document upon presentation. If plaintiffs asked a

question about the transaction, Gaddie answered the inquiry

and provided further explanation. If he could not answer a

particular question, he would have sought out a more

knowledgeable source for the information. [R. 8, Exhibit C].

When Gaddie presented the arbitration agreement to

Stout, in an attempt to explain the document, he provided a

real-world scenario of how the agreement could be invoked.

He did not provide a pragmatic example to Brown. While

plaintiffs try to characterize this as a "misleading"

explanation, Gaddie had no affirmative duty to explain the

legal effect of an arbitration agreement. Additionally, parties

can still be bound by a written arbitration agreement, even if

15

neither party fully understanding the ramifications.

Nonetheless, if plaintiffs had asked questions about the

agreement outside of Gaddie's knowledge, he would have

sought an answer from a more knowledgeable source. [R. 8,

Exhibit C].

The record also reveals that: (1) the arbitration

agreements were set forth in separate documents, in regular

and bold-print type, and were not buried in small print in the

transactional documents; (2) plaintiffs read and reviewed the

arbitration agreements; (3) plaintiffs had an opportunity to ask

Gaddie questions about the agreements; (4) plaintiffs did not

ask Gaddie any questions about the agreements; and (5)

plaintiffs signed the agreements, thus representing that they

understood the agreements. The agreements expressly and

clearly state that the parties agree to resolve their disputes

through binding arbitration through a neutral, unbiased, and

respected third-party.

Accordingly, the district court properly concluded that

the parties agreed to arbitrate their disputes in accordance

with the terms of the written arbitration agreements.

2. The District Court Co That, Pursuant

to the FAA, Congress Intended Plaintiffs to

Arbitrate the Clai i f ;

A district court should not deny a request for

arbitration unless the it may say with positive assurance that

the arbitration clause is not susceptible to an interpretation

that covers the dispute. Any doubt regarding the applicability

of an arbitration clause is to be resolved in favor of

arbitration. Moses H. Cone Memorial Hospital v. Mercury

Construction Corp., 460 U.S. 1, 24-25 (1983); Ferro Corp,

142 F.3d at 932.

16

The arbitrability of a dispute is determined on the basis

of the contract entered into by the parties. If a contract

evidences an intent to refer any disagreements to arbitration,

a party cannot unilaterally decide to seek redress in the courts

at the last minute. Parties are required to arbitrate their

disputes absent the most extenuating of circumstances.

Southland Corp., 465 U.S. at 24:Dean Witter Reynolds, Inc.

v. McCoy, 995 F.2d 649 (6th Cir. 1993); Sutton v. Cleveland

Bd. of Educ., 958 F.2d 1339 (6th Cir. 1992). Asper v.

Shearson American Express, Inc., 768 F.2d 106 (6th Cir.

1985).

The district court correctly held that plaintiffs’ claims

were subject to arbitration under the FAA. Under both

version of their complaints, plaintiffs affirmatively sought

declaratory relief under the FAA. Further, the arbitration

agreements require plaintiffs to arbitrate all disputes arising

“under the terms of the ‘Contracts.'" Plaintiffs’ claims for

fraud, violations of CSPA, and TILA relate to the purchase of

their vehicles and arise under their contracts with defendants.

Finally, these claims address whether the entire contract was

fraudulently induced. Accordingly, these claims fall within

the scope of the FAA.

A district court's duty to enforce an arbitration

agreement under the FAA is not diminished when a party

bound by the agreement raises claims founded on Statutory

rights. McMahon, supra. (RICO);Daisy Mfg. Co. v. NCR

Corp. , 29 F.3d 389 (8th Cir. 1994) (RICO);Hill v. Gateway

2000, Inc., 105 F.3d 1147 (7th Cir. 1997) (RICO): Matthews

v. Rollins Hudig Hall Co., 72 F.3d 50 (7th Cir. 1995)

(ADEA); Kropfelder v. Snap-On Tools Corp., 859 F. Supp.

952 (D.Md. 1994) (ERISA);Dorsey v. H.C.P. Sales, Inc., 46

F. Supp.2d 804, 808, n.5 (N.D. Ill. 1999) (TILA) (cited on

page 13 of Appellants' Brief); Goodwin v. Ford Motor Credit

Company, 970 F. Supp. 1007 (M.D. Ala. 1997) (TILA).

Nothing in the FAA for implies a presumption against

17

arbitration of statutory claims, including those protecting

consumer interests. Plaintiffs’ TILA claims also

presumptively involve interstate commerce, thus placing these

claims within the scope of the FAA. Mitsubishi Motors v.

Soler Chrysler-plymouth, Inc., 473 U.S. 614, 626 (1995).

Federal courts, including the United States Supreme

Court, have also routinely held that the FAA applies to

consumer complaints, especially those made under TILA.

Dobson, 513 U.S. at 280 (residential termite extermination

contract);Dorsey, 46 F. Supp.2d at 808, n.5 (home

improvement services); Hill, 105 F.3d at 1147 (personal

computer); Goodwin, 970 F. Supp. at 1007 (motor vehicles).

In response, plaintiffs only cite one federal court opinion that

rejects application of arbitration agreements in TILA dispute,

which is easily distinguishable from the case at bar, as

plaintiffs have presented no evidence that: (1) the arbitration

provided in plaintiffs' agreements are an ineffective and

inaccessible forum; or (2) the arbitration fees or procedures

are substantively unfair. Additionally, plaintiffs' arbitration

agreements specify which organization's rules will govern the

arbitration, i.e., AAA or BBB. [Appellants' Brief, at 18-19,

citing Randolph v. Green Tree Financial Corp., 178 F.3d

1149, 1157-58 (11th Cir. 1999)].*

Accordingly, the district court properly held that the

FAA required arbitration of plaintiffs’ claims.

: Notably, in Randolph, the Eleventh Circuit refused to

"decide whether the TILA precludes all arbitration agreements."

Randolph, 178 F.3d at 1149. Implicit in this statement is that the

FAA permits arbitration of some TILA disputes, depending upon

the agreement.

18

San ARRON NIE GET MRT RD Watt

Substantive Law on the Enforceability of

Arbitration Agreements.

Plaintiffs contend that the enforceability of the

arbitration agreements is governed by Ohio case law, and that

their agreements are unenforceable as against Ohio public

policy. While a district court may look to State law to

determine if an arbitration agreement was actually formed, the

FAA does not permit a district court to utilize substantive

State law to determine the conscionability of the agreement

itself.

The Sixth Circuit has recognized only two limitations

on the enforceability of arbitration agreements subject to the

FAA: (1) they must be part of either a maritime contract or

a contract dealing with interstate commerce; and (2)

arbitration agreements may be revoked "upon grounds as exist

at law or in equity for the revocation of any contract."

Further, the Supreme Court sees "nothing in the act indicated

that the broad principle of enforceability is subject to any

additional limitations of [S]tate law." Ferro Corp., 142 F.3d

at 932, citing Southland Corp., 465 U.S. at 10-11.

Where an agreement to arbitrate has not been

fraudulently induced, all other issues falling within that

agreement are to be sent to arbitration. Only claims for

fraudulent inducement of the arbitration clause itself may be

heard by the district court. Plaintiffs’ allegations of

fraudulent inducement in the entire contracts are to be decided

through arbitration. Prima Paint Corp.v. Flood & Conklin

Mfg. Co. , 388 U.S. 403-04 (1967); Ferro Corp., 142 F.3d at

933, 935.

The Supremacy Clause does not permit Ohio to

mandate judicial resolution of disputes when the parties agree

to arbitration under the FAA. The FAA withdraws power

19

from the States to require a judicial forum for resolution of

claims which the contracting parties agreed to arbitrate. For

cases under the FAA, this statute governs all aspects of

arbitration procedure and preempts inconsistent State law.

See Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 688

(1996); Moses H. Cone, 460 U.S. at 24; see Dobson, 513

U.S. at 270-71; Southland Corp., 465 U.S. at 10.

Plaintiffs contend that their arbitration agreements are

unenforceable adhesion contracts, and rely upon the Ohio

Supreme Court's decision in Williams v. Aetna Financial

Company, 83 Ohio St.3d 464 (1998), cert. denied, 119 S.Ct.

1357 (1999). The Williams decision is not dispositive of the

issues raised in this litigation. In Williams, the Ohio Supreme

Court construed its obligation to compel arbitration under

R.C. 2711.01, et seg., Ohio's Arbitration Act. This

obligation is not present in the instant case.

However, even under the articulated principles of

unconscionability set forth in Williams, the district court

correctly compelled arbitration. In Ohio, a party sufficiently

states a claim that an arbitration agreement is unconscionable

or takes the form of an adhesion contract by showing that: (1)

the contract terms are one-sided or unreasonably unfavorable

to the other party; (2) that disparity between the parties’

bargaining power denies the less advantaged party meaningful

choice in accepting the terms of the contract; and (3) the less

advantaged party cannot obtain their "desired product or

services except by acquiescing in form contract." Williams,

83 Ohio St.3d at 482.

The district court correctly held that the arbitration

agreements were not unconscionable or adhesion contracts

under this standard. Both agreements required submission to

legitimate arbitration panels. Plaintiffs presented no evidence

that AAA or BBB would not be able to fairly adjudicate their

claims, presented no evidence as to the applicable rules for

each organization, and presented no evidence as to the fees

20

SN ae LS LRT” NE NEES YI GY EN OD” YD A mm hee

associated with arbitration before either organization. Unlike

Williams, without the applicable rules and fees, there is

insufficient evidence to allow plaintiffs | to avoid their

agreement to arbitrate.

However, even if plaintiffs did present such evidence,

the FAA does not authorize federal courts to evaluation

plaintiffs’ arbitration costs on a case-by-case basis when

determining whether to compel arbitration. "Whatever may be

said pro and con about the cost and efficiency of arbitration .

. is for Congress and the contracting parties to consider." A

consumer may not escape his or her contractual obligation to

arbitrate her disputes by later complaining about the cost.

Dorsey, 46 F. Supp.2d at 807-08;Hill, 105 F.3d at

1151;Green Tree Financial Corp. Alabama, et al. v.

Randolph, 2000 WL 1803919 at *1 (U.S. Dec. 1, 2000).

Additionally, plaintiffs presented no evidence that

defendants would have refused to sell the vehicles had they

refused to sign the arbitration agreements. Plaintiffs also

presented no evidence that they were only able to purchase

similar vehicles at Docherty Motors, and that they could only

purchase similar vehicles by agreeing to the arbitration

agreements.”

Plaintiffs also contend that the arbitration agreements

unjustly abrogate their rights under the CSPA and other

statutes. [Appellants' Brief, at 16]. Plaintiffs also allege that

the arbitration agreements attempt to eliminate any and all

legal causes of action the consumer may have for any

violations of state or federal consumer protective or lending

laws against the defendants. These allegations lack support in

- fact, Brown repeatedly emphasizes that she purchased

and financed her vehicle at Docherty Motors due to the weekly

payment schedule for her daughter, and not because she was unable

to obtain financing from a traditional third-party. [R. 18, at 3].

21

the record. As under the CSPA, an arbitrator can still award

compensatory damages, treble damages, statutory damages,

punitive damages, costs, attorney's fees, and other relief

accorded under the statutes through which plaintiffs seek

relief. Neither arbitration agreement precludes the same relief

to which plaintiffs would be entitled to in a judicial forum.

The arbitration agreements merely provide for the appropriate

forum for resolving any disputes, which is consistent with the

purpose and intent of the FAA. Notably, plaintiffs did not

present any evidence concerning the rules or costs governing

their arbitrations. Green Tree Financial Corp. Alabama, et

al. v. Randolph, 2000 WL 1803919 at *1 (U.S. Dec. 1,

2000).

Il. THE DISTRICT COURT PROPERLY

EXERCISED ITS DISCRETION BY DENYING

PLAINTIFFS' MOTION FOR CLASS

CERTIFICATION.

A. Standard of Review

This Court reviews a district court's ruling on class

certification to see if an abuse of discretion occurred. The

district court retains broad discretion in determining wheiher

an action should be certified as a class action, and its

decision, based upon the particular facts of the case, should

not be overturned absent a showing of abuse of discretion.

Sterling v. Velsicol Chemical Corp., 855 F.2d 1188, 1198

(6th Cir. 1988).

B Th Distr rt rl

ised Its Di ae :

Exercised Its Discretion By Denying ; ; f ,

Certification.

22

Plaintiffs sought to certify a class comprising of all

Docherty Motors from the beginning of its operation.

Plaintiffs alleged that defendants had defrauded every

member of this class by selling them a used vehicle with

concealed damage, and that every member had incurred

substantial repairs to remedy the damage. [R. 1, at 448-34;

R. 17, at 448-34]. :

Rule 23 of the Federal Rules of Civil Procedure

governs class action lawsuits. Fed.R.Civ.P.23. A district

court may certify a class if all the procedural requirements of

Rule 23(a) are met, and if certification is appropriate under

Rule 23(b)(1), (b)(2), or (b)(3). Rule 23(a) sets forth the

following four prerequisites to class certification: (1) the

class must be so numerous that "joinder of all members is

impracticable"; (2) there must be "questions of law or fact

common to the class"; (3) the claims of the representative

party must be "typical" of those of the class; and (4) the

representative party must "fairly and adequately protect the

interests of the class." Fed. R. Civ. P. 23(a).

The party seeking class certification bears the burden

of proof. General Tel. Co. of the Southwest v. Falcon. 457

U.S. 147, 161 (1982); In re American Med. Sys., Inc., 75

F.3d 1069, 1079 (6th Cir. 1996). District courts must

conduct a rigorous analysis into whether the prerequisites are

met before certifying a class. Sprague v. General Motors

Corp., 133 F.3d 388, 397 (6th Cir.), cert. denied, 118 S.Ct.

2312 (1998); In re American Med. Sys., Inc., 75 F.3d at

1078-79;Kutschbach v. Davies, 885 F. Supp. 1079 (S.D.

Ohio 1995); Jackshaw Pontiac, Inc. v. Cleveland Press Pub.

Co., 102 F.R.D. 183, 196 (S.D. Ohio 1984). Under this

standard, the district court properly exercised its discretion by

denying plaintiffs’ motion for class certification.

23

1. The District ourt Properly Exercised Its

Discretion By Finding That Plaintiffs' Claims Were

Not Typical of the Proposed Class.

Under Fed. R. Civ. P. 23(a)(3), a party seeking class

certification must show that his or her claims are typical of

other potential class members. Fed. R. Civ. P. 23(a)(3).

Rule 23(a)(3) exists to ensure that the claims of the

representative party are similar enough to the claims of the

class so that the representative will adequately represent all

members of the class. Fed. R. Civ. P. 23(a)(3). Any

inquiry into typicality under Rule 23(a)(3) requires a

comparison of the claims or defenses of the representative

with the claims or defenses of the class. See Hiatt v. County

of Adams, Ohio, 155 F.R.D. 605, 609 (S.D. Ohio 1994).

"[A] class representative must be part of the class and

“possess the same interest and suffer the same injury’ as-the

class members." Falcon, 457 U.S. at 156. This Court has

described the typicality requirement as follows:

Typicality determines whether a sufficient

relationship exists between the injury to the

named plaintiff and the conduct affecting the

class, so that the court may properly attribute

a collective nature to the challenged conduct .

Sprague, 133 F.3d at 399. This Court has also summarized

this legal standard simply: "[a]s goes the claim of the named

plaintiff, so go the claims of the class." /d. :

The district court properly exercised its discretion by

finding that plaintiffs failed to show a sufficient relationship

between their experiences and the diversity of experiences of

putative class members. Plaintiffs’ claims are tied to specific

facts about warranties, each vehicle's condition at the time of

sale, each buyer's knowledge at the time of sale, and repairs

and whether those repairs are defendants' responsibility.

24

Plaintiffs and the putative class members purchased different

vehicles, from different salesman, for different prices and

reasons. Each vehicle had different prior owners and an

unique history of use and care.

Plaintiffs and putative class members purchased their

respective vehicles under different circumstances. Plaintiffs

had different financing and lending needs. Some putative

class members kept their financing obligation, others did not.

Stout financed his vehicle through T&J due to a poor credit

record; whereas, Brown did so because of the weekly

payment schedule for her daughter

Plaintiffs both purchased service contracts in prior

consumer transactions, including motor vehicles; whereas,

some putative class members had never purchased a motor

vehicle or service contract before. Some putative class

members chose to purchase vehicles without the extended

Service agreement. As noted by another district court in the

Sixth Circuit, under similar facts, a customer's individual

decision to purchase (or not purchase) an extended service

agreement militates against class treatment. Peters v. Cars to

Go, Inc., 184 F.R.D. 270 (W.D. Mich. 1998).

Plaintiffs have had differing difficulties with their

vehicles, and have received different responses to their

requests for repairs. Stout's alleged problems with his

Camaro do not affect its performance, and have not

necessitated repairs; whereas, Brown's alleged problems have

necessitated repairs, including a complete engine replacement

covered under Docherty Motors' extended service agreement.

Accordingly, the adequate remedy for each putative class

member will differ. Some putative class members do not

claim any problems with their vehicles, while others may

simply require repairs to be satisfied.

In sum, simply because Plaintiffs may be able to prove

that s/he was injured, it does not necessarily follow that all

Docherty Motors customers from the beginning of time will

25

be able to prove their case. The substantial differences among

putative class members described above militate against a

finding of typicality. Accordingly, the district court properly

held that plaintiffs had failed to satisfy the typicality

requirement.

2. The District Court Properly Exercised Its

Discretion By Finding That Plaintiffs Were Not

Adequate Representatives for the Class.

Under Rule 23(a)(4), a plaintiff seeking to represent a

class must show that s/he will fairly and adequately represent

and protect the interests of the class. Fed.R.Civ.P.23(a)(4).

This requirement is "essential to due process, because a final

judgment in a class action is binding on all class members."

Adequacy of representation is measured by two standards.

First, class counsel must be qualified, experienced, and

generally able to conduct the litigation. Second, class

members must not have interests that are antagonistic to one

another. Jn re American Med. Sys., 75 F.3d at 1083;

Jackshaw Pontiac, 102 F.R.D. at 191.

The district court correctly held that the named

plaintiffs have interests that are antagonistic to the proposed

class members. Interests are antagonistic when there is

evidence that the representative plaintiffs appear unable to

"vigorously prosecute the interests of the class." Jn re

American Med. Sys., 75 F.3d at 1083. Inability to prosecute

the class’ interest may arise due to a conflict of interest with

other members of the class. /d. A representative plaintiff

also should have a stake in the outcome of the litigation and

should be familiar with the facts of the case. Alexander Grant

& Co. v. McAlister, 116 F.R.D. 583, 589 (S.D. Ohio 1987).

Some of the putative class members, including Brown,

have obtained repairs and treatment that have differed from

other class members. Plaintiffs assume that the district

26

court's corollary finding was based upon settlement

discussions;'” however this is not the case. Brown has

received a complete engine replacement and other repairs

under the extended service agreement. Despite falling

extremely behind in his payments, Stout has been able to

arrange for alternative schedules from T&J without an

explanation. Despite these arrangements, Stout has been

deficient in his payments, and defendants have still not

repossessed his vehicle. Not all putative class members have

received such treatment. Because defenses and mitigation

may be utilized against plaintiffs, they are not adequate

representatives of the class.

Finally, because plaintiffs' claims arise from different

transactions and injury, absent class members, who allege

greater or lesser harm, may lose the benefit of having the

facts of their separate cases adequately presented. For

example, the proper statute of limitations will be a heavily

contested issue in any trial of putative class member claims. ''

Plaintiffs, unlike some putative class members, appear to have

0 ‘There is no evidence on the record to support plaintiffs’

reference to settlement discussions at the district court on May 27,

1999. Plaintiffs’ characterization of the district court's handling of

the settlement conference is erroneous, and irrelevant to the issues

at bar. Defendants acknowledge that, at the settlement conference,

they reiterated their longstanding offer to refund plaintiffs' money

and accept the vehicles back, or to make necessary repairs.

'! Plaintiffs seek to represent a class of customers dating

back to 1993. The applicable statute of limitations for a TILA

claim is one year, and the applicable statute of limitations for a

fraud claim under Ohio law is four years. Any "tolling" of these

Statutes of limitations would involve presentation of evidence of

each individual transaction, what each customer knew or should

have known, and at what time s/he gained this knowledge.

27

filed their claims within the applicable statute of limitations

for their claims. However, given their quest for a class

action, plaintiffs have little incentive to emphasize the

individual facts in each case that may allow putative class

members to preserve their claims.

3. The District Court Properly Held That a Class

The principal purpose of a class action is to achieve

real efficiency and judicial economy. Falcon, 457 U.S. at

159. The requirement that "common" issues predominate

over individual issues assures that the goal of judicial

economy is served in fact, not just in theory. /n re American

Med. Sys., 75 F.3d at 1085.

As plaintiffs’ claims sound overwhelming in fraud, a

core, factual issue in this litigation is whether each individual

putative class member relied upon representations or failures

to disclose and, if so, what damages proximately resulted.

Burr v. Board of County Comm'rs of Stark County, 23 Ohio

St.3d 69, 73 (1986); Black v. Cosentino, 117 Ohio App.3d

40, 44 (1996). Issues of knowledge and reliance require

individual proofs which limit class-wide treatment of fraud-

based claims. Because reliance permeates plaintiffs’ claims,

- individual issues predominate over common issues, thus

rendering class certification inappropriate. Andrews v.

American Tel. & Tel. Co., 95 F.3d 1014, 1023-25, reh'g

denied, 104 F.3d 373 (11th Cir. 1996); Castano v. American

Tobacco Co., 84 F.3d 734, 745 (Sth Cir. 1996); Mack v.

GMAC, 169 F.R.D. 671, 680 (M.D. Ala. 1996).

28

To the extent that plaintiffs’ TILA claims raise any

additional issues,'? the district court also correctly determined

that individual issues predominate over common issues, thus

rendering class certification inappropriate. As a Michigan

district court observed in denying class certification under

similar circumstances:

The nature of the VSC [vehicle service

contract] present a major obstacle to the

commonality requirement because unlike other

types of charges, such as a "non-filing fee". .

. which borrowers incur only because they are

imposed by creditors, some purchasers may

actually choose to purchase a VSC in order to

minimize used car repair costs. For this

reason, it does not automatically follow that a

person who purchased a vehicle and a VSC

from Cars on credit was required to purchase

the VSC. In fact, the evidence submitted by

Cars shows that in 1997, it sold 100 vehicles

without service contracts.

Peters, supra, (cited at R. 45, at 11, n.6).

Any resolution of the putative class' TILA claims

involve individual determinations as to: (1) what documents

the customer reviewed: (2) the manner in which the

documents were presented; (3) representations made to each

individual customer; and (4) whether the customer selected

” Plaintiffs' TILA claims are based upon defendants’

alleged inclusion of the price of the extended service agreement into

the finance charge without notifying customers that purchase of the

extended service agreement was allegedly required for an extension

of credit. Such claims, by their nature, involve similar issues to

their fraud claims, i.e., misrepresentations, reliance, and

accompanying damages.

29

the extended service agreement or, as plaintiffs allege, was

"tricked" into accepting the extended service agreement.

Accordingly, the district court properly held that class

treatment was inappropriate as individual issues predominate

over Common issues among the putative class.

~ CONCLUSION

For the foregoing reasons, defendants-appellees, J.D.

Byrider a.k.a. Docherty Motors, and T&J Acceptance

Corporation d.b.a. CarNow Acceptance Corporation,

respectfully urge this Court to affirm the rulings entered by

the district court: (1) compelling arbitration of plaintiffs’

claims; and (2) denying class certification pursuant to this

Court’s recent decision in Green Tree Financial Corp.

Alabama, et al. v. Randolph, 2000 WL 1803919 at *1 (U.S.

Dec. 1, 2000).

Respectfully submitted,

LOUIS PAISLEY (0017498)

GARY W. JOHNSON (0017482)

Weston Hurd Fallon Paisley & Howley, L.L.P.

2500 Terminal Tower

50 Public Square

Cleveland, OH 44113-2241

Telephone: (216) 241-6602

Facsimile: (216) 621-8369

Attorneys for Defendants-Appellees

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