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First Atlantic Federal Credit Union v. Pine Belt Automotive

February 19, 2010

FIRST ATLANTIC FEDERAL CREDIT UNION, A FEDERALLY CHARTERED CORPORATION, PLAINTIFF-RESPONDENT,
v.
PINE BELT AUTOMOTIVE, INC., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANT-APPELLANT,
v.
ALLIED SOLUTIONS, L.L.C., THIRD-PARTY DEFENDANT.



On appeal from Superior Court of New Jersey, Law Division, Monmouth County, No. L-830-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 17, 2009

Before Judges Wefing, Grall and LeWinn.

Defendant Pine Belt Automotive, Inc. appeals from a trial court order denying its motion to dismiss plaintiff's complaint and to compel arbitration. After reviewing the record in light of the contentions advanced on appeal, we affirm.

Defendant is an automobile dealer, in the business of selling new and used vehicles. Plaintiff First Atlantic Federal Credit Union is a federally-chartered credit union, which provides consumer loans to members. In October 2003, Pine Belt and First Atlantic executed a Dealer Agreement, setting forth the terms under which First Atlantic would provide non-recourse financing for Pine Belt customers. Pine Belt would prepare retail installment contracts for potential customers and submit the credit applications to a third-party processor for its review. The third-party processor would review the application and perform an underwriting analysis, including a review of the individual's credit history and a verification of employment and residence, to determine if the customer qualified for credit. If the processor was satisfied as to the credit-worthiness of the applicant, it would forward the package to First Atlantic, which conducted its own review. If First Atlantic was satisfied everything was in order, it would approve the transaction and purchase the loan from Pine Belt.

Under the terms of the Dealer Agreement, Pine Belt would not be liable for repayment "if the reason for non-payment relates solely to the creditworthiness of any maker, co-maker or grantor who is party" to the loan. Pine Belt also made a representation and warranted that "[t]o the knowledge of [Pine Belt], all of the statements contained in the purchaser's credit application submitted are true and correct in all respects, and the Dealer has no knowledge of any matters not disclosed that may impair the credit of the purchaser of the vehicle."

The Dealer Agreement also included an arbitration clause.

Any controversy, dispute, or claim of whatsoever nature arising out of, or in connection with, or in relation to the interpretation, performance or breach of this Agreement, including any claim based on contract, tort or statu[t]e, shall be resolved by final and binding arbitration conducted in Eatontown[,] New Jersey. The arbitrator shall determine which is the prevailing party and shall include the award of the costs and reasonable attorney's fees of the party's attorneys. The American Arbitration Association ("AAA") shall serve, and the rules of practice and procedure of the AAA will apply. All arbitration hearings shall be commenced within ninety (90) days after the demand for arbitration.

In addition, the Dealer Agreement provided that it "supersede[d] all prior agreements among the parties with respect to the subject matter hereof and constitutes along with the Loan Document Package a complete and exclusive statement of the terms of the agreement among the parties with respect to its subject matter."

First Atlantic had another program, instituted in September 2003, known as the Instant Approval Program, under which it would provide financing for Pine Belt customers. First Atlantic used this program to expedite the credit approval process for customers deemed most qualified. First Atlantic set specific criteria for participation in the Instant Approval Program. These included: the individual had to possess a credit score of no less than 600; have a minimum of five trade-lines, one of which had been open for at least five years; have a stable employment history; and a prior satisfactory auto loan. Individuals who had gone through a bankruptcy proceeding or repossession were not eligible; nor were those who proposed to have someone else co-sign on the loan. In addition, the application had to be fully completed and executed.

In February 2008, First Atlantic filed suit, alleging that Pine Belt had misused the Instant Approval Program, submitting inaccurate credit reports and Instant Approval Forms to obtain financing for more 1,000 customers who would otherwise not have qualified. A significant number of those defaulted on their loans. It demanded that Pine Belt make it whole for the losses it had experienced as a result.

In lieu of filing an answer, Pine Belt filed a motion to dismiss the complaint and demanding arbitration, citing the provision in the Dealer Agreement set forth above. First Atlantic responded to this motion by filing a cross-motion for summary judgment, supported by a certification of E. John Culp, II, the president and chief executive officer of First Atlantic. In that certification, Culp set forth the procedures to be used under the Dealer Agreement and contrasted them with the procedures applicable to the Instant Approval Program. He described the Instant Approval Program as a "specialized" one that was "separate and distinct from any Dealer Agreements." He noted that because it was targeted for the "most qualified buyers," it did not utilize third-party processors but permitted a dealer to obtain and pass upon the credit report of a potential buyer. He noted that when First Atlantic received a loan package with a credit report and a completed Instant Approval Form indicating that the customer satisfied the criteria for the Instant Approval Program, First Atlantic would purchase the loan. He also noted that transactions under the Instant Approval Program were "processed separately and in addition to the ordinary flow of contracts offered under the Dealer Agreements."

First Atlantic filed its motion and supporting certification on April 9, 2009. The trial court heard the matter on April 17, 2009. Pine Belt did not submit any responding papers in the interim. After hearing oral argument, the trial court gave its oral opinion, setting forth its reasons for denying Pine Belt's motion. ...


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