Just in time for the Halloween season, the Oklahoma Supreme Court gives us a scary tale about buying a new car.  In Sutton v. David Stanley Chevrolet, Inc., 2020 OK 87, ¶ 1 the Court finds that an arbitration clause in a consumer contract was induced by fraud because the structure of the transaction was misleading.


No, seriously.  It is a little scary, at least for any businesses that use form contracts.

Without too many spoilers, I think of the impact of this case in terms of a quote the Court uses:

The law is not designed to protect the vigilant, or tolerably vigilant, alone, although it rather favors them, but is intended as a protection to even the foolishly credulous, as against the machinations of the designedly wicked.

Adhesive contracting, the Court comes very, very, very close to saying amounts to “the machinations of the designedly wicked.”


Act I: Background

The relevant background is eerily familiar for those of us who’ve recently gone car shopping.  The plaintiff traded one car and purchased another.  Eighty-six pages later, he’d signed a bunch of times including four times on a two-page purchase agreement, which contained an arbitration clause.

Surprise, surprise, he didn’t read anything!  But I get ahead of myself.

Confusion and shenanigans ensued.  I won’t belabor you with the facts inciting the lawsuit, as honestly, they don’t make a lick of sense to me.  But basically, the trade-in car was never appropriately paid off, then it was stolen, plaintiff had to keep making payments on the stolen car, and eventually the plaintiff returned the new car that he’d purchased.  It all sounds very intense and messy.

Plaintiff sued and the dealership moved to compel arbitration.

Cue the creepy organ music!

Act II: The Fraud

According to the plaintiff, the arbitration agreement was induced by fraud.  There was no delegation provision. So, the separability doctrine wasn’t a problem because the plaintiff concentrated his allegations on the arbitration clause itself rather than the container contract.

What, you might ask, were the nefarious misdeeds of the dealership?  Well, the dealership didn’t outright lie to the plaintiff.  Moreover, the plaintiff conceded that all the signatures on the relevant documents were his and “he was not forced into executing [the purchase agreement].” And, the plaintiff admitted that he didn’t read the purchase agreement.

The creepy music crescendos!

The plaintiff maintained that the conduct of dealership’s finance manager combined with the very structure of the transaction created a false impression.

The creepy music abruptly ends with a kazoo noise.

Well, what did the finance manager do?  According to the plaintiff, he stated that a purpose of the purchase agreement was for verifying the plaintiff’s personal information, the vehicle information on both vehicles, and how much plaintiff would be paying.  He then pointed out the four places where the plaintiff was to sign: under a section entitled “vehicle purchased description,” under a section entitled “purchase price disclosure,” under a section entitled “security agreement,” and after two sections entitled “trade-in vehicle” and “dispute resolution clause.”  That’s it.

The arbitration agreement was in the dispute resolution clause.  It’s also worth noting that the dispute resolution clause was called out in red font, though the majority describes it as being “small.”  The dissents describe the provision a little differently.  One of them says that it was “the only provision in red ink, and it was located in the middle of the agreement.  The heading in all capital letters stated ‘DISPUTE RESOLUTION CLAUSE.’”

In any event, based on these facts, the Oklahoma Supreme Court sided with plaintiff.  It found that, in combination, the finance manager’s conduct and the structure of the transaction “created a false impression that the purpose of [plaintiff’s] signature was to only verify information concerning his trade-in vehicle. He surely was not under the impression he was agreeing to waive his right to a jury trial and obligating himself to pay a share of the costs of arbitration when he signed underneath the trade-in vehicle section of the purchase agreement.”

It was no defense, the Court said, that plaintiff didn’t read the purchase agreement.  “Every man or woman, even though illiterate, is presumed to know the contents of a written instrument signed by him; but no presumption of knowledge will stand in the way of a charge of fraud made in regard to the contents of the writing.”

Act III: The Significance of the Case

Holly wow!  I mean.  Seriously.  Wow.  All joking aside, this is a game-changer, at least in Oklahoma.  If other states borrow this sort of reasoning, it could revolutionize our approach to adhesive contracting.

Just to recap and generalize: a business presented a two-page, pre-printed form contract containing a variety of provisions, including an arbitration clause.  The business representative focused the customer on a few salient transactional provisions.  The business representative did not misrepresent any other provisions of the two-page document, but he also didn’t call out any other provisions.  The customer didn’t read the document but signed it in four different places.  Under these circumstances, the court found that the business had misled the customer.

If the Court is right, then pretty much every provision in a consumer transaction that a business representative does not specifically point out is vulnerable.

The Court tries to suggest that its ruling is narrower than all that.  But I don’t believe the Court.

It’s worth thinking about how the Court distinguished the security agreement.  Like the dispute resolution clause, the security agreement wasn’t discussed by the finance manager.  So, under the plaintiff’s logic, as the Court of Appeals below had noted, the security agreement could also be invalidated on the basis of fraud.

The Court brushed this point aside with two quick answers.  First, it said that the plaintiffs weren’t contending that the security agreement was induced by fraud.  That strikes me as a weak-sauce retort.  While true, in this case, it doesn’t change the fact that, if the plaintiffs had had some sort of reason to want to avoid the security agreement, they could have relied on the precise same logic.

Second, the Court says that the security agreement section had its own, stand-alone, signature line, which distinguished it from the dispute resolution clause.  The dispute resolution clause  shared a signature line with the trade-in car description.

So, does that mean that, if everything else was the same, the dispute resolution clause would have been enforceable if only it had its own stand-alone signature line?  Maybe, I suppose.  But that outcome seems pretty arbitrary.

How and why is a stand-alone signature line any better than the red-ink call out of the dispute resolution clause?  Both mechanisms are designed to focus the consumer’s attention on relevant details.  And neither mechanism actually worked.  The consumer didn’t read the signature lined sections that he signed.  He also didn’t read the only red-inked section.  He didn’t read anything.  So why make fine-grained distinctions between mechanisms that equally failed to call attention to a relevant provision?

Ultimately, this case is a spooky cautionary tale for lawyers creating standard form contracts for their business clients.