Tortoriello v. Gerald Nissan of North Aurora

SUPREME COURT CASES

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State: Illinois

Court: 2nd District Appellate

Docket No: 2-07-0322 Rel

Case Date: 01/11/2008

Preview:No. 2--07--0322 Filed: 1-11-08 ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS SECOND DISTRICT ______________________________________________________________________________ NICOLE TORTORIELLO, ) Appeal from the Circuit Court ) of Kane County. Plaintiff-Appellee, ) ) v. ) No. 06--L--304 ) GERALD NISSAN OF NORTH AURORA, ) INC., and J.P. MORGAN CHASE BANK, ) Honorable ) Judith M. Brawka, Defendants-Appellants. ) Judge, Presiding. ______________________________________________________________________________ JUSTICE O'MALLEY delivered the opinion of the court: Defendants, Gerald Nissan of North Aurora (Gerald Nissan) and J.P. Morgan Chase Bank (J.P. Morgan), appeal the judgment of the trial court denying their motions to stay court proceedings and compel arbitration pursuant to an arbitration clause in an automobile purchase agreement signed by Gerald Nissan and plaintiff, Nicole Tortoriello. The trial court denied defendants' motions because it found the arbitration clause unconscionable. We view the clause differently and so reverse and remand for further proceedings. In June 2006, plaintiff sued defendants, seeking to rescind her purchase of a preowned Nissan automobile from Gerald Nissan, a transaction financed by J.P. Morgan. Plaintiff alleged common-law fraud and violations of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 2004)). Plaintiff attached to her complaint two documents, each entitled "Used Car Retail Buyers Order" and signed by plaintiff and Gerald Nissan. Both documents

No. 2--07--0322 consist of the same two-sided preprinted form but contain different figures in the spaces provided for the contract terms. One document is dated October 22, 2005 (First Buyers Order), and the other October 28, 2005 (Second Buyers Order). Plaintiff alleged that, several days after she signed the First Buyers Order, Gerald Nissan informed her that her financing for the purchase was not approved. According to plaintiff, Gerald Nissan "falsely misrepresented that [she] had no option" but to sign a second contract, the Second Buyers Order, whose terms were less favorable to her than the First Buyers Order. Both defendants filed motions to stay court proceedings and compel arbitration. They relied on an arbitration clause that appears on the reverse side of the Second Buyers Order. At the top of the reverse side is the heading "Terms and Conditions," followed by a series of single-spaced paragraphs written in very fine print. The density of text is relieved somewhat by a single blank line that separates each paragraph. The paragraphs are numbered and each is prefaced with an underlined subject description. The final paragraph, number 17, contains the arbitration provision. We reproduce it here in actual size and in context, to give an impression of the overall appearance of the page:
"TERMS AND CONDITIONS 1. Changes in Price Manufacturer has reserved the right to change the price to Dealer of new motor vehicles without notice, in the event the price to Dealer of new vehicles of the series and body type ordered in this contract is changed by the Manufacturer prior to delivery of the new motor vehicle ordered under this contract. Dealer reserves the right to change the cash delivered price of such motor vehicle to Buyer accordingly. If such cash delivered price is increased by Dealer, Buyer may, if dissatisfied with the change in price, cancel this order, in which event the used motor vehicle, if any, that has been traded in as part of the consideration of such new motor vehicle, shall be returned to Buyer upon payment of a reasonable charge for storage and repairs (if any) or, if such used motor vehicle has previously been sold by Dealer, the amount received therefrom, less a selling commission of 15% and any expense incurred in storing, insuring, conditioning, or advertising said used motor vehicle for sale shall be returned to Buyer. 2. Changes in Design Manufacturer has reserved the right to change the design of any new motor vehicle, chassis, accessories or parts thereof at any time without notice and without obligation to make the same or any similar change upon any motor vehicle chassis, accessory or parts previously purchased by or shipped to Dealer, or being manufactured or sold in accordance with Dealer's orders. In the event of any such change by Manufacturer, Dealer shall have no obligation to Buyer to make the same or similar changes in any motor vehicle, chassis, accessories or parts thereof covered by this contract either before or subsequent to delivery of the new moto r vehicle to Buyer. *** 15. Severability If any term, covenant or condition of this contract or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this contract or the application of such term, covenant or provision, to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and each term, covenant or provision of this contract shall be valid and be enforced to the fullest extent permitted by law. 16. Limitation of Dealer's Liability Dealer's entire liability to Buyer, if any, for any claim, demands or causes of action, whether in tort, contract, consumer fraud, fraud or otherwise, is limited solely to the amount set forth as the purchase price of this contract. Notwithstanding the foregoing limitation, if a disp ute, claim or cause of action arises as a result of the purchase of the vehicle or any breach or alleged breach of this contract, wh ether in tort, contract, consumer fraud, fraud or otherwise, Dealer, at its sole option, may elect to repurchase the vehicle sold hereunder and refund the purchase price of the vehicle to Buyer, less any reasonable costs to Dealer associated with the repurchase. At Dealer's sole discretion, such repurchase would be the sole remedy available to Buyer in the event of a breach of this contract by Dealer. The limitation set forth herein does not affect any disclaimer or other provision of this contract and creates no sub stantive rights of action against Dealer. 17. Arbitration Any controversy, claim, cause of action, or other dispute arising out of or relating to this contract, or the breach, termination or invalidity thereof, whether in tort, contract, consumer fraud or otherwise, except a cause of action or claim by Dealer to recover full payment of the purchase price, or claim involving the breach of any retail installment contract

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No. 2--07--0322
as set forth below, shall be resolved by binding arbitration before a sole arbitrator in DuPage County, Illinois in accordance with the Commercial Rules of the American Arbitration Association, and judgment upon any award rendered by the arbitrato r may be entered in any court of competent jurisdiction. The arbitrator shall determine the rights and obligations of the parties according to the substantive laws of the State of Illinois and the express terms of this contract. The official lan guage of the arbitration shall be English. The arbitrator shall not be empowered to grant exemplary, punitive, or consequential damages or any damages in excess of those damages permitted under the express terms of this contract. The party prevailing on substantially all of its claims shall be entitled to recover its costs, including attorney's fees, for the arbitration proceedings, as well as any ancillary proceeding, including a proceeding to compel or enjoin arbitration, to request interim measures or to confirm or set aside an award. Claims, causes of action and other disputes against Buyer arising out of or related to the breach by Buyer of any retail installment contract executed in connection with this contract are not subject to arbitration under this paragraph."

Enlarged for better readability, the arbitration provision states: "17. Arbitration Any controversy, claim, cause of action, or other dispute arising out of or relating to this contract, or the breach, termination or invalidity thereof, whether in tort, contract, consumer fraud or otherwise, except a cause of action or claim by Dealer to recover full payment of the purchase price, or claim involving the breach of any retail installment contract as set forth below, shall be resolved by binding arbitration before a sole arbitrator in DuPage County, Illinois in accordance with the Commercial Rules of the American Arbitration Association, and judgment upon any award rendered by the arbitrator may be entered in any court of competent jurisdiction. The arbitrator shall determine the rights and obligations of the parties according to the substantive laws of the State of Illinois and the express terms of this contract. The official language of the arbitration shall be English. The arbitrator shall not be empowered to grant exemplary, punitive, or consequential damages or any damages in excess of those damages permitted under the express terms of this contract. The party prevailing on substantially all of its claims shall be entitled to recover its costs, including attorney's fees, for the arbitration proceedings, as well as any ancillary proceeding, including a proceeding to compel or enjoin arbitration, to request interim measures or to confirm or set aside an award. Claims, causes of action and other disputes against Buyer arising out of or related to the breach by Buyer of any retail installment contract executed in connection with this contract are not subject to arbitration under this paragraph." Paragraph 16, which is also implicated in this appeal, reads in relevant part:

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No. 2--07--0322 "16. Limitation of Dealer's Liability Dealer's entire liability to Buyer, if any, for any claim, demands or causes of action, whether in tort, contract, consumer fraud, fraud or otherwise, is limited solely to the amount set forth as the purchase price of this contract." The top two-thirds of the front side of the Second Buyers Order contains a series of blanks for such terms as the make, model, and year of the purchased car, as well as the selling price, sales tax, and fees. This section of the front side also contains several paragraphs of preprinted terms, including a paragraph entitled "Warranty Disclaimer," which reads in relevant part (not in actual size): "Dealer expressly disclaims any liability to buyer for any consequential damages, damages for loss of use, loss of profits or income, loss of time or inconvenience, or any other incidental or consequential damages arising out of this contract or the operation of the vehicle purchased hereunder." The bottom third of the page is set off by a solid line, immediately below which is a heading that is bolded and centered on the page. The heading reads in actual size:
"SUBJECT TO TERMS & CONDITIONS ON REVERSE SIDE AND THIRD PARTY FINANCE APPROVAL"

The font for the immediately surrounding lines is considerably smaller and not bolded. The font for the heading is, in fact, the largest on the page but for the main page title, which reads: "USED CAR RETAIL BUYERS ORDER." At the very bottom of the front side of the Second Buyers Order are spaces for the buyer's personal information and signature. In her response to the motions to compel arbitration, plaintiff argued that the arbitration clause was both procedurally and substantively unconscionable. Plaintiff asserted that she "never saw the [arbitration clause], [she] was not told to read the [clause]," and "no one never [sic] referred to

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No. 2--07--0322 the [clause]." Plaintiff also argued that the clause was "one-sided, without consideration[,] and inconspicious." The trial court held a hearing on defendants' motions. Plaintiff testified on her own behalf. She stated that, on October 22, 2005, she purchased a preowned Nissan at Gerald Nissan and traded in her Chevrolet Monte Carlo. The terms of the agreement were contained in the First Buyers Order, which plaintiff signed in the presence of a financing employee whom she did not name. Plaintiff testified that she had no objection to the terms of the First Buyers Order as she understood them. Plaintiff acknowledged that the reverse side of the First Buyers Order contains an arbitration clause identical to the provision in the Second Buyers Order. Plaintiff testified that when she signed it she was unaware of the arbitration clause in the First Buyers Order. Plaintiff explained that no one at Gerald Nissan advised her to read the back of the document or informed her that there were any terms on the back. Plaintiff did not read the back of the First Buyers Order on her own initiative before she signed the contract, because she "didn't get an opportunity." Plaintiff testified that Gerald Nissan gave her copies of the First Buyers Order and the related paperwork she signed on October 22. When asked if she read the back of the First Buyers Order between October 22 and October 28, the day she returned to Gerald Nissan, plaintiff said: "Everything was a done deal at that point, so I didn't feel that I had to sit down and analyze the contracts that were already provided to me the first time." Plaintiff testified that, on October 26, 2005, she received a phone call from Tamer Shams, Gerald Nissan's finance manager. In that conversation, Shams asked plaintiff to return to Gerald Nissan to discuss "two options" with him. Shams also stated that plaintiff needed to re-sign her paperwork. When plaintiff told Shams that she did not wish to sign any more paperwork, Shams

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No. 2--07--0322 replied that she was required "by law" to do so and that her credit could be negatively affected if she refused. Plaintiff testified that she went to Gerald Nissan on October 28 and met with Shams, who presented plaintiff with the Second Buyers Order. Plaintiff testified that Shams said nothing about her financing for the sale reflected in the First Buyers Order and that he did not allude to any problem with the transaction. Plaintiff noticed that the Second Buyers Order reflected the purchase of the same preowned Nissan shown in the First Buyers Order but indicated an increase of $1,700 for her service contract. Plaintiff told Shams that she did not want to sign the Second Buyers Order and asked that Gerald Nissan return her trade-in. Shams refused and said that Gerald Nissan would sue plaintiff if she did not sign the document. Plaintiff, believing that she had "no option to walk away," signed the Second Buyers Order and the related paperwork. Plaintiff testified that neither Shams nor anyone else at Gerald Nissan informed her that day of an arbitration clause in the Second Buyers Order. Plaintiff did not read the back of Second Buyers Order on her own initiative before she signed it, because she was "rushed" through the process. Plaintiff admitted, however, that she never requested time to read the contract in full before she signed it. She also did not read the back of the Second Buyers Order before leaving Gerald Nissan that day, because the document was "taken away as soon as she signed [it]." Plaintiff testified that she was given a copy of the signed Second Buyers Order when she left Gerald Nissan that day. When asked if she had "read anything on the reverse side since then," plaintiff replied in the negative. Plaintiff testified that she signed the Second Buyers Order involuntarily and under "duress." She testified that no one at Gerald Nissan physically threatened her but that she signed the Second Buyers Order to preserve her credit, which Shams claimed would be damaged if she did not sign the

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No. 2--07--0322 agreement. Plaintiff admitted that she never asked to speak to anyone other than Shams at Gerald Nissan on October 28. Shams was defendants' sole witness. He testified that the transaction reflected in the First Buyers Order failed because plaintiff's financing was rejected. Shams explained that "there is a certain advance you would need from the bank to get the deal approved" and that plaintiff's advance "was coming up short" because she owed more on her trade-in, the Monte Carlo, than the car was worth. Shams testified that he later secured financing for plaintiff from J.P. Morgan. Shams acknowledged that the "deal had changed" but he did not elaborate. Shams testified that, once he obtained financing, he phoned plaintiff and said: "[T]here is some paperwork that I need to go over with you and *** I need you to come in and re-sign some paperwork." Plaintiff met with Shams at Gerald Nissan and told him she desired a car with a sunroof, which was lacking in the Nissan she had originally agreed to purchase. After Shams showed her a model with a sunroof, plaintiff decided to purchase the Nissan she had earlier selected. Plaintiff then signed the Second Buyers Order and the related paperwork. Shams testified that plaintiff did not "ask [for] more time to read the documents." Shams testified that plaintiff "could have decided not to purchase any cars from [Gerald Nissan]" but that she never expressed such a desire to Shams. The trial court issued a written order denying defendants' motions to stay proceedings and compel arbitration. The trial court found the arbitration clause both procedurally and substantively unconscionable based on the following factors, no single one of which, the trial court cautioned, was dispositive: "a. the arbitration provision in Section 17 is not conspicuous when the document is viewed as a whole, nor on the back page;

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No. 2--07--0322 b. the arbitration provision in Section 17 is indistinguishable in the fine print but for the title; c. the arbitration provision in Section 17 is not specifically referenced or referred to on the front page; d. the arbitration provision in Section 17 is not the result of a prior course of meaningful dealings or trade usage between the parties; e. the arbitration provision in Section 17 was not bargained for between the parties but rather is one provision in a contract of adhesion where there existed a disparity of bargaining power between the drafter of the contract and the party claiming unconscionability; f. the arbitration provision in Section 17 was not brought specifically to the plaintiff purchaser's attention; g. the arbitration provision in Section 17 is at the bottom of a full page of fine print filled from margin to margin with text; h. the arbitration provision in Section 17 is written in 'legalese' without clear notice to the purchaser that dispute resolution is significantly limited (e.g. the first sentence of the section is as long or longer than eight of the other sixteen paragraphs, and is so complicated, it is nearly unintelligible); i. the one-sided nature of the issues to be arbitrated in Section 17 excludes all matters dealing with the purchaser's financial obligations irrespective of other findings regarding the dealer by the arbitrator; j. the inclusion of a provision within Section 17 in violation of the Illinois Consumer Fraud Act excluding any consideration of punitive damages."

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No. 2--07--0322 Immediately following these findings, the trial court noted in parentheses: "contrast: the arbitration section at issue in [Kinkel v. Cingular Wireless LLC, 223 Ill. 2d 1 (2006)]." The trial court concluded that plaintiff "cannot be fairly said to have been aware of what she was agreeing to in Section 17 which is inordinately one-sided in the drafter's favor." Defendants filed this timely appeal under Supreme Court Rule 307(a)(1). 188 Ill. 2d R. 307(a)(1). I. PLAINTIFF'S MOTION TO STRIKE Before we consider the merits of this appeal, we address plaintiff's motion to strike portions of defendants' opening brief. Plaintiff takes issue with three aspects of defendants' statement of facts. First, plaintiff asserts that defendants' citations that appear in the form, "RP Plaintiff's [or Defendant's] Ex. __," are improper because the source "simply can not [sic] be located." The point of this objection eludes us. "RP," as defendants explain, quite obviously designates the report of

proceedings for the hearing on defendants' motions to compel arbitration, the only proceeding transcribed in the record. It is equally apparent that the designation "Ex." refers to an exhibit admitted at that hearing. These citations are entirely appropriate. Second, plaintiff argues that defendants' quotation of the arbitration provision, bolded in part unlike the original, "make[s] it appear as if the arbitration provisions were conspicuous and easily found." Defendants bolded the essential parts of the arbitration provision for emphasis. We do not reproach them for this. We can properly assess the conspicuousness of the arbitration clause from the copy of the Second Buyers Order that is included in the record. Plaintiff's third complaint with defendants' statement of facts is that defendants have misrepresented the record. Plaintiff singles out the following statements from page 10 of defendants' brief:

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No. 2--07--0322 "Plaintiff claims that she never read [the arbitration] clause before signing either Agreement. (RP 000066, RP 000119-20). She did not, in fact, choose to read anything on the reverse side of the Agreements. (Id.)" The relevant testimony on the pages defendants cite is: "Q. Did you, at the time you were at the dealership on the 28th [of October 2005], read anything on the reverse side of that document [the Second Buyers Order]? A. No. At the time. Q. Now, if you'll flip to the second page, obviously, this is a photo copy, but--well, first of all, have you read anything on the reverse side since then? A. No. *** Q. You read the front of every document that you were handed on October 22nd and October 28th? A. On the 28th, I did not. On the 22nd, the documents that were provided in front of me, I read the front. They took them after I signed, so the 22nd was a car I actually wanted. I mean, I wanted that deal. I signed for it, so I read the front of it, didn't get an opportunity to read the back part." Plaintiff claims that defendants' statement that she "did not, in fact, choose to read anything on the reverse side of the Agreements" (emphasis added) misrepresents the actual meaning of the testimony. While plaintiff's testimony implies that she freely chose not to read the back side of either Buyers Order after she signed it, she expressly testified that she "didn't get an opportunity to read the back part" of the First Buyers Order before she signed it on October 22 and that she was "rushed" through

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No. 2--07--0322 the process on October 28 and so she also did not read the reverse side of the Second Buyers Order before signing it. If the above-quoted statements from defendants suggest that plaintiff freely chose not to read the reverse side of either Buyers Order before signing it, then their claims do not accurately reflect the record. In our view, however, defendants' assertion that plaintiff "did not, in fact, choose to read anything on the reverse side of the Agreements" is ambiguous and may refer to plaintiff's conduct before or after she signed each Buyers Order. While we believe that defendants should have clarified their statements, the record does not clearly confute them, and we refuse to strike them. Plaintiff also takes issue with the argument section of defendants' opening brief. She asks that we strike all citations to federal district court decisions as well as the arguments based on those citations. Plaintiff cites admonitions from the Seventh Circuit Court of Appeals as to the precedential value of federal district court cases. Plaintiff claims that these cases hold that the decisions of the lower federal courts "are not to be cited for any purpose." (Emphasis added.) This is an indefensible overstatement. For instance, Anderson v. Romero, 72 F.3d 518, 525 (7th Cir.1995), states that "[d]istrict court decisions have no weight as precedents" and "no authority" but may be cited as "evidence of the state of the law." Plaintiff's argument has a more fundamental affliction, however. On the question of what is proper practice in state courts, she cites prescriptions by federal appellate courts for practice in federal courts. She claims that these federal prescriptions also bind state court practice by virtue of the federal supremacy clause (U.S. Const., art. VI), but the sole case she cites, Weiss v. Village of Downers Grove, 225 Ill. App. 3d 466 (1992), speaks to the entirely distinct question of what substantive law--state or federal--governs federal claims brought in state courts. See Weiss, 225 Ill. App. 3d at 469 ("Where, as here, a State court considers a Federal claim under

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No. 2--07--0322 the supremacy clause of the United States Constitution (U.S. Const., art. VI), the State court must apply Federal law to the claim"). The more relevant guidepost is our recent statement in Lamar Whiteco Outdoor Corp. v. City of West Chicago, 355 Ill. App. 3d 352, 360 (2005), that "[a]lthough this court is not bound to follow federal district court decisions [citation], such decisions can provide guidance and serve as persuasive authority [citation]." Defendants' citation to federal district courts is not improper per se. We will give these authorities no greater deference than they are due. For the reasons stated above, we deny plaintiff's motion to strike portions of defendants' brief. II. UNCONSCIONABILITY We now turn to the substance of this appeal. Defendants attack the trial court's finding that the arbitration clause in the Second Buyers Order is both procedurally and substantively unconscionable. The threshold question is what law applies. There are two contenders: section 1 of the Uniform Arbitration Act (Arbitration Act) (710 ILCS 5/1 (West 2004) ("[a] written agreement to submit any existing controversy to arbitration or a provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable save upon such grounds as exist for the revocation of any contract")) and section 2 of the Federal Arbitration Act (FAA) (9 U.S.C.

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