Credit Acceptance Corporation v. Beard
What’s at Stake
The issue before the Ohio Supreme Court in this case is whether the Federal Arbitration Act (FAA) preempts Ohio law that gives people the right to immediately appeal a court order that grants a motion to compel arbitration and stays court proceedings.
The U.S. Supreme Court’s decision in Smith v. Spizzirri entrenched a lopsided interpretation of the FAA on how motions to compel arbitration can be appealed in federal court. Under Spizzirri, when motions to compel arbitration are denied by a federal district court, the order is considered final and is immediately appealable under the FAA. But when motions to compel arbitration are granted, the federal district court must stay the proceedings, instead of dismiss, if any party requests a stay. An order to stay the proceedings is not appealable but an order to dismiss is, and defendants who are granted arbitration almost always request a stay. The result is corporate defendants who lose their first attempt to move the case into arbitration immediately get a chance to try again with an appeal, but the consumers and workers who are resisting arbitration do not.
However, this procedural unfairness does not necessarily apply in state court. Ohio and a handful of other states give parties resisting arbitration the right to immediately appeal orders granting arbitration and staying proceedings. This case is about whether the corporate defendant-friendly procedures in federal court (especially as interpreted in Spizzirri) can preempt and erase these rights in state courts.
Summary
In 2022, Gloria and Jasmine Beard purchased a 2008 GMC Acadia. To finance the purchase, they entered into a Retail Installment Sales Contract (RISC) with the dealer. The RISC was a non-negotiable boilerplate contract that included an arbitration agreement. The RISC was subsequently assigned to Credit Acceptance Corporation (CAC). The Beards allege that they quickly learned the Acadia was defective, and they returned the car to the dealer within a week of the purchase. CAC sold the Acadia at auction for less than what the Beards still purportedly owed. CAC then sued the Beards in state court to collect the difference.
After finding legal representation, the Beards asserted counterclaims against CAC. Following discovery, additional third-party claims, and failed settlement discussions, CAC moved to compel arbitration. The Beards objected, arguing that by engaging in several court proceedings, CAC waived its right to compel arbitration. This was an important point because parties who do not act in accordance with a contract do not automatically retain the right to enforce the terms of the contract. In this case, CAC had already initiated and participated in court proceedings before finally invoking the arbitration clause in the RISC. However, the trial court granted CAC’s motion to compel arbitration and stayed court proceedings. The Beards appealed, as Ohio state law permits. The court of appeals dismissed their appeal on the basis that there was no final, appealable order, as if it were federal court. It reasoned that the FAA—not Ohio law—controlled whether the Beards could appeal.
After unsuccessfully seeking en banc review at the court of appeals, the Beards petitioned the Ohio Supreme Court. The Ohio Supreme Court granted their petition, and it will consider the question of whether the FAA or Ohio law applies to their appeal of the trial court’s decision to grant CAC’s motion and stay the case.
Core Legal Problem
Our amicus brief urges the Ohio Supreme Court to hold that Ohio procedural law applies to the question of whether an immediate appeal is available after arbitration is compelled.
We argue (1) that the text of the FAA makes clear that its procedural provisions apply only in federal court; (2) constitutional principles of federalism prohibit federal law from controlling state-court procedures; and (3) CAC was already not acting in accordance with the terms of its contract when it chose to proceed in court by suing to collect the debt, so it waived its right to arbitrate.