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Florida: Appellate Court Holds Identity Theft Not Within Arbitration Clause (Web)

King Motor Company of Fort Lauderdale v. Judith Jones (May 18, 2005).  The District Court of Appeal of Florida, Fourth District, affirmed the denial of a motion to compel arbitration, holding that the use of a credit report by a dealer’s salesman to commit identity theft did not have a sufficient relationship to the parties’ auto sales contract to fall within the contract’s broad arbitration provision.

Jones purchased a car from King Motor Company and a salesman used her credit report to steal her identity by making fraudulent purchases and unauthorized bank account withdrawals.  Jones complained of negligence, gross negligence, unfair and deceptive trade practices, and violations of the Credit Services Organization Act.  King claimed the complaints fell under their broad, but valid arbitration provision and hence, should be arbitrated, not litigated.  The District Court of Appeal of Florida, Fourth District, disagreed and denied the petition to compel arbitration. 

The pertinent language of the arbitration provision states:  “…Buyer/lessee and dealer agree that all claims, demands, disputes or controversies of every kind or nature between them arising from, concerning or relating to any of the negotiations involved in the sale/lease or financing of the vehicle, the terms and provision of the sale, lease, or financing arrangements, the arrangements for financing, …or any other aspects of the vehicle and its sale lease or financing, shall be settled by binding arbitration…[I]t is the intention of the buyer/lessee and the dealer to resolve by binding arbitration all disputes between them concerning the vehicle, its sale, lease or financing, and its condition,…the terms and meaning of any of the documents signed or given in connection with the sale, lease or financing of the vehicle…” King Motor Co., (2005 WL 1163005 (Fla.App. 4 Dist.)).

King argued that the causes of action “arise out of, or relate to, the sales contract and, particularly, the financing associated with the vehicle sale.” (2005 WL 1163005 (Fla.App. 4 Dist.)  King asserted that but for the sale, there would be no cause of action.  The court stated that the “but for” relationship was insufficient by itself to place a cause of action into the category of arising under or relating to the sale. 

The court adopted the analysis used in Dusold v. Porta-John Corp, holding that in order for a claim to arise under a contract, the contract must have created the duty not otherwise imposed by law.  In these circumstances, arbitration provisions govern the claim.  If, however, the duty is imposed by law in recognition of public policy, and is owed to everyone, not just the contracting parties, then the claim does not arise under the contract. Consequently, the arbitration provisions do not govern the claim. 167 Ariz. 358, 807 P.2d 526 (Ct.App.1990). 

The Court stated that Jones’ claims were based on tort, not the auto sales contract.  The duty to conceal private information was owed to everyone, not just the parties to the contract.  Because the cause was based on tort and “unrelated to the rights and obligations of the contract, it does not have a sufficient relationship to the agreement as to fall within the arbitration provision.” King Motor Co. v. Jones, 2005 WL 1163005 (Fla.App. 4 Dist.)
The Opinion can be found at: