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Car Dealership Dispute Arbitration Clause Upheld

Monday, August, 25, 2014

A dispute involving export fines and conflicting contracts has been clarified by a state appellate court in West Palm Beach, which ruled that an auto dealer based in Arizona can enforce an arbitration clause in its dispute with Desert Diamond Player Club, a company owned by the Seminole Indian Tribe.


The dispute involves a standard provision in most auto dealer contracts that forbids exporting cars outside of the dealer’s territory.  The clause is routinely included in order to preserve distribution lines and to prevent auto dealers from competing against each other across territories.  Phoenix Motor Company claims that Desert Diamond Player Club exported four new autos they had sold them in violation of this provision.  When Diamond Player Club purchased a fifth car, Phoenix Motor charged export fines against the purchase price.  When Desert Diamond Player Club sued, Phoenix asserted they were bound by the arbitration clause.


However, Desert Diamond countered that this clause was not enforceable because the purchase agreement between the companies contained the arbitration clause, not the export policy, and argued these were separate agreements.  Phoenix argued that they were clearly intended to be read as part of the same contractual agreement.  The court, finding that the purchase agreement (including the arbitration clause) was the “controlling document” in the case, ultimately agreed with this interpretation and ordered that the arbitration take place.


It is not clear if Desert Diamond will pursue the required arbitration in the wake of this decision or not.