Page 39 - GIADA Nov-Dec 2020

Agencies Seek to Codify Statement Protection Act, breach of contract, that the buyer's failure to read the DRC
on Role of Supervisory Guidance. On negligence, and intentional infliction clause was no defense against establishing
October 29, the CFPB, OCC, FRB, FDIC, of emotional distress. The dealership such duty. The dealership was "under a
and NCUA issued a proposed rule that moved to compel arbitration based on duty to say nothing or to tell the whole
would codify the Interagency Statement the DRC. The plaintiffs responded, truth," and disclosing some facts while
Clarifying the Role of Supervisory arguing that the RIC contained a merger concealing others was fraud.
Guidance issued by the agencies in clause that provided it represented the
September 2018. The 2018 interagency entire contract between the parties and The high court attempted to limit the
statement clarified that, unlike a law or did not contain an arbitration provision. effect of its holding by stating that the
regulation, supervisory guidance does not They also argued that the buyer's alleged duty to disclose in this case is not a duty
have the force and effect of law and the agreement to the DRC was fraudulently to read an entire contract; it is the duty
agencies do not take enforcement actions induced and that the DRC's provisions to disclose enough information that will
or issue supervisory criticisms based were unconscionable. clear the false impression created, which,
on non-compliance with supervisory under the circumstances, only concerned
guidance. By codifying the 2018 The trial court denied the motion to the DRC. See Sutton v. David Stanley
interagency statement, the proposed rule compel arbitration, but the appellate Chevrolet, Inc., 2020 Okla. LEXIS 94
is intended to confirm that the agencies court reversed and sent the case back (Okla. October 13, 2020).
will continue to follow and respect the to the trial court. The plaintiffs filed
©
limits of administrative law in carrying a petition to the Supreme Court of CARLAWYER COMPLIANCE TIP
out their supervisory responsibilities. Oklahoma, which was granted. Dealers should pay particular attention
Comments are due within 60 days after to the Case of the Month above. If your
the proposed rule’s publication in the The Oklahoma high court concluded closer or finance manager creates a
Federal Register. that, under the circumstances of the case, false impression that the only purpose
a duty arose to inform the buyer of the of the buyer's signature on a purchase
CASE OF THE MONTH DRC in the purchase agreement due to agreement or RIC with a DRC or
the false impression created by both the arbitration clause is to verify information,
Dealership's Finance Manager Had dealership's finance manager and the then the closer or finance manager may
Duty to Inform Buyer of Inconspicuous structure of the purchase agreement. The have a duty to disclose the existence
Arbitration Clause in Purchase state high court vacated the appellate of the DRC or arbitration clause. Also,
Agreement Due to False Impression court’s decision, affirmed the trial court's you should consider how your DRC or
that Buyer's Signature Was Only to decision, and remanded the case to the arbitration clause is structured in your
Verify Information: The buyer and a trial court. purchase agreement or RIC. For instance,
dealership signed a purchase agreement is the DRC located in the middle of the
containing a dispute resolution clause The state high court based its decision purchase agreement, in a smaller font and
("DRC"). The DRC, in the middle of on the finance manager telling the requires the buyer(s) to pay one-half of
the purchase agreement, was the only buyer that the purpose of the purchase the arbitrator fee? If so, you should call
provision in red ink, was in a smaller font agreement was to verify his personal your lawyer and discuss.
and called for the buyer to pay one-half of information, information on both
the arbitrator’s fee. The heading "Dispute vehicles, and how much he would pay So, there’s this month’s article. See you
Resolution Clause" was in all capital for his purchase The high court reasoned next month! n
letters. The buyer left the dealership with that the representations of the finance
the purchased truck and left his trade-in manager combined with the structure of Eric (ejohnson@hudco.com) is a Partner
at the dealership. the purchase agreement, including that in the law firm of Hudson Cook, LLP,
the unrelated DRC provision was tucked- Editor in Chief of CounselorLibrary.com’s
A few months later, the lienholder on in right before the apparent signature Spot Delivery®, a monthly legal newsletter
his trade-in contacted him claiming he line for the trade-in vehicle section, for auto dealers and a contributing
owed late payments. The buyer was later created a false impression that the only author to the F&I Legal Desk Book. Tom
notified by the dealership that his trade- purpose of the buyer's signature was to (thudson@hudco.com) is Of Counsel to
in had been stolen and the payments were verify information concerning his trade- the firm, has written several books and is
not the dealership's responsibility since it in vehicle. The DRC, which provided a frequent writer for Spot Delivery®. He is
did not own the trade-in. The dealership for arbitration, was a material provision the Senior Editor of CARLAW® and Spot
took back the truck. of the purchase agreement. Because of Delivery®. For information, visit www.
the creation of the false impression that counselorlibrary.com. ©CounselorLibrary.
The buyer and his wife sued the shrouded the existence of the DRC, the com 2020, all rights reserved. Single
dealership for fraud in the inducement high court concluded that the finance publication rights only, to the Association.
to purchase the truck, conversion, manager was under a duty to disclose HC/HC# 4846-5620-7312
violations of the Oklahoma Consumer this material provision to the buyer and

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