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A magnifying glass comes in handy at a used-car lot -- it's good for examining the fine print in those contracts. If a buyer is at Daniel Schmitt & Co. Classic Car Gallery, the magnifying glass should hover over paragraph number eight, the one stating that the "exclusive remedy" of any dispute about the contract "shall be arbitration pursuant to the Federal Arbitration Act."
Sounds benign enough -- arbitration is supposed to cut down on legal costs. So what's wrong with paragraph eight? Nothing, if you're the dealer, with an attorney on retainer. But if you're the consumer, you don't stand on even ground with the dealer, and chances are that you'll come up short. Andrew Jones knows this, and he has company.
Jones was thinking about buying a used 320SL Mercedes Benz from the dealer on North Lindbergh Boulevard, but he wanted to have the car inspected first. The sales crew at Schmitt & Co. told Jones he could take the car off the lot, but he had to leave a $1,000 check as a deposit. Jones took the Mercedes to a mechanic for a once-over, returned the car to Schmitt and went back to the mechanic to get the diagnosis: The car had an oil leak and had been in at least one collision. Jones didn't want the car, but by the time he went to the dealer late that Friday, it was closed.
The trouble came -- you guessed it -- when he tried to get his check back on Monday morning. Jones says he was told he wouldn't be getting his deposit back. Later that week, he says he spoke with Daniel Schmitt by phone. "I told him I wanted to come out and discuss this, that I didn't think that was fair. He told me, with a lot of profane language, that if I showed up at his place he'd call the police on me."
That was back in July 1999. Jones tried to settle the matter in small-claims court but was bumped from that option by a motion filed by Schmitt's lawyer. "They pointed to the arbitration clause, saying it was the wrong venue to try the case and that it went beyond the six-month expiration date," says Jones. "So the judge had to rule in his favor."
Not only did the arbitration clause, when cited, prevent the judge from hearing the case, it also had a six-month window for the filing of any complaint. Jones had been unaware of any of these limitations. He only thought that because he didn't buy the car, he would get his deposit returned. When that didn't happen, a legal remedy seemed logical.
"One of Schmitt's statements to me was, 'Sue me. Take me to court. Get your lawyer and sue me.' My lawyer wrote him a letter, and he brushed him off as well," Jones says. "I did not know anything about the arbitration. I didn't look at that small writing, didn't look at it all."
Repeated efforts by Short Cuts to get Schmitt's side of the story were unsuccessful. And it turns out Jones was not alone in his plight.
Sheryl Logue of Alexandria, Va., put $500 down on a Lexus RX300 she never bought and has spent the last four months trying to get the money back from Schmitt & Co. Darren Bradburn of Wichita, Kan., has been trying for nine months to get a $1,000 deposit returned for a Porsche he never bought. Sharon Jenkins of Florissant has been fighting for two years to get back a $2,000 deposit her younger brother put down on a '95 Chrysler LeBaron convertible. She says Schmitt also has threatened her with calling the police if she comes back.
Over the last three years, there have been 30 complaints lodged about Daniel Schmitt Classic Car Gallery with the Better Business Bureau of Eastern Missouri and Southern Illinois. Nine complaints have been classified as "resolved," and 21 complaints have been closed after being classified as "disputed." Kenneth Murdock, the BBB's consumer-relations director, says the complaints center on "improper sales tactics, difficulty in obtaining back deposits paid and selling defective vehicles."
"We have communicated with the company that we are concerned about that complaint pattern," Murdock says. "We're concerned about the number of complaints."
When it comes to contracts, what works on a contract between Microsoft and IBM doesn't necessarily work between a car buyer and a dealer. Robert Swearingen, a lawyer for the United Auto Workers, was assisting a union member about a deposit dispute when he ran across merchants using the arbitration clause in sales contracts. Because the UAW member was entitled to legal representation by virtue of his union membership, Swearingen represented him knowing his compensation didn't rely on the outcome of the arbitration.
"This isn't two parties just getting together to decide together in an informed manner that they want to avoid the cost of litigation," Swearingen says. "What it is, it's one party saying, 'I'm going to stick this in here so I can basically steal small amounts of money from you and you won't be able to afford to come and get it or do anything about it.'"
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