Insights

Over the years, the number of reported cases we see in the consumer finance space has decreased. Like the stock market, however, some categories rise while the general trend is downward.

One of the categories of litigation that has defied the general trend is arbitration, specifically cases in which the consumer challenges the enforcement of the dealer’s or finance company’s arbitration agreement. Here’s one such case.

Bruce Baldwin obtained vehicle financing from Regions Financial Corporation. The arbitration provision in the financing documents contained a class action waiver.

Baldwin brought a class action lawsuit against Regions, alleging that it violated Section 559.72(16) of the Florida Consumer Collection Practices Act by sending written communications to him that had the words “Consumer Collections” printed on the outside of the envelopes. Regions moved to compel arbitration or, in the alternative, to dismiss.

In opposing Regions’s motion, Baldwin argued that the arbitration provision was void because enforcement of it would prevent him from seeking an express statutory remedy under Section 559.77(2) of the FCCPA. Specifically, he argued that Section 559.77(2) caps statutory damages for individual actions at $1,000, but statutory damages for class actions are capped at $2,000 for each named plaintiff and class member.

The trial court granted Regions’s motion to compel arbitration. Unhappy with that result, Baldwin appealed. The Court of Appeal of Florida found that Baldwin’s interpretation of the remedial provision of Section 559.77(2) was incorrect. The court reasoned that Section 559.77(2) does not allow for greater statutory damages if the claim is brought as a class action. The court noted that Section 559.77(2) provides that if the action is filed on an individual basis, a prevailing plaintiff may recover “additional statutory damages” not exceeding $1,000. If the action is filed as a class action and the class prevails, the named plaintiff may receive “additional statutory damages of up to $1,000,” and all remaining class members may receive “an aggregate award of additional statutory damages up to the lesser of $500,000 or 1 percent of the defendant’s net worth,” but “the aggregate award may not provide an individual class member with additional damages in excess of $1,000.” Therefore, “additional statutory damages” are capped at $1,000 regardless of whether the action is brought on an individual or class basis.

Accordingly, the appellate court concluded that enforcement of the arbitration provision, including the class action waiver, would not defeat the remedial purpose of the FCCPA and affirmed the trial court’s decision.

Over the years, lenders, dealers and sales finance companies have won many more of these challenges than they have lost. The steady string of wins has created a body of case law supporting the industry’s position, with courts refusing to buy any number of arguments that consumers have raised in support of their efforts to defeat arbitration clauses. Consumer lawyers have responded by becoming more and more creative. This case is a good illustration of how creative their arguments can become.

Creative or not, however, this court wasn’t convinced.

Baldwin v. Regions Financial Corporation, 2012 Fla. App. LEXIS 15557 (Fla. App. September 19, 2012).

Catherine C. Worthington is a Managing Editor of CARLAW, HouseLaw, and PrivacyLaw and is a lawyer in the Maryland office of Hudson Cook, LLP. She can be reached at 410-782-2349 or by email at cworthington@hudco.com.