Hathaway v. Eckerle
2011 Ky. LEXIS 21
| Ky. | 2011Background
- Purchases a used 2007 Dodge Charger from Commonwealth Dodge in 2009; alleged dealer misrepresented repair history.
- Arbitration clause in vehicle purchase agreement states disputes will be settled by FAA and AAA rules, with venue in dealership's county.
- Hathaway discovers multiple repairs; seeks rescission; Commonwealth Dodge refuses.
- Hathaway sues in Jefferson Circuit Court for fraud, conversion, Truth in Lending, usury, warranty, and consumer-protection claims.
- Dodge moves to compel arbitration; circuit court orders arbitration; Hathaway petitions for writ of prohibition in Court of Appeals; petition denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does FAA govern and confer jurisdiction for arbitration | Hathaway argues Kentucky Act governs; lacks FAA consent | Dodge argues FAA governs due to clause | FAA governs; jurisdiction exists |
| Does arbitration clause satisfy KRS 417.200’s in-state arbitration | Clause fails to specify Kentucky venue; unenforceable | Clause designates venue as county where dealership is located; complies | FAA governs; clause satisfies in-state arbitration under Kentucky analysis in context of FAA |
| Is the arbitration clause unconscionable under FAA principles | Clause is adhesion, one-sided, deprives costs and jury/right to appeal | Clause not unconscionable; substantial protections exist; no concealment or fraud shown | Arbitration clause not unconscionable and enforceable |
| Scope of arbitration clause covers plaintiff’s claims; intermediate relief appropriate | Clause does not cover all claims in complaint; relief warranted | Clause is broad and covers disputes arising from sale and negotiations | Clause broadly covers all related claims; no intermediate relief warranted |
Key Cases Cited
- Ally Cat, LLC v. Chauvin, 274 S.W.3d 451 (Ky. 2009) (arbitration in this state required by statute; Gateway issue to FAA context)
- Conseco Finance Servicing Corp. v. Wilder, 47 S.W.3d 335 (Ky.App. 2001) (arbitration clauses not unconscionable due to unilateral rights; mutuality not required)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (U.S. 2006) (general contract principles govern arbitrability; fundamental standard for revoking arbitration clauses)
- Ernst & Young, LLP v. Clark, 323 S.W.3d 682 (Ky. 2010) (when arbitration explicitly invokes FAA, Kentucky Act is not applied; FAA governs)
- Clark v. Brewer, 329 S.W.2d 384 (Ky. 1959) (signatories bound by contract terms; signing implies knowledge of contents)