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Arbitration Clause in Sale Contract Does Not Stop Credit Application Claim
By Clayton C. Swears

Folks who rely on arbitration provisions in their sales contracts to cover all stages of the sale or loan process should take note of a recent case out of Louisiana. In that case, the Court of Appeals of Louisiana allowed a buyer to proceed with a suit involving misrepresentation claims related to the credit application despite an arbitration provision in the sale contract.

Mary Lejeune went to Paramount Nissan, LLC, to buy a car. She considered a 2008 Nissan Infiniti M45-VA, but worried that she could not afford the price. The dealer allegedly encouraged her to complete a credit application and then fraudulently misrepresented information in the application. Lejeune was approved for financing from Capital One Auto Finance, allegedly due to the fraudulent information. Lejeune eventually sued Paramount Nissan and others, claiming that she fell behind on her debts, suffered damage to her credit history, and suffered stress and anxiety. The defendants moved to arbitrate the claims based on an arbitration agreement in the purchase contract. The trial court ruled against the defendants, and they appealed.

The Court of Appeals of Louisiana upheld the trial court’s ruling. The appellate court found that the defendants offered no proof that the credit application and financing agreement were part of the purchase contract containing the arbitration agreement.

If you think your current arbitration clause is broad enough to cover all stages of the sale or loan process, it might be time to reconsider the issue.

Lejeune v. Paramount Nissan, LLC, 2012 La. App. LEXIS 882 (La. App. June 20, 2012).

Clayton C. Swears is a partner in the Maryland office of Hudson Cook, LLP. Clay can be reached at 410-865-5419 or by email at cswears@hudco.com.

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