Taylor v. Butler

Sharon Taylor (plaintiff) purchased a car from City Auto Sales (City Auto) (defendant). Taylor and City Auto signed a sales agreement obligating Taylor to make a down payment of $1,310 and finance the remainder of the car’s cost. The sales agreement contained an arbitration clause, which required Taylor to submit her claims to arbitration but allowed City Auto to pursue certain claims in state court. Taylor signed a promissory note agreeing to pay the remainder of the car’s cost over three months. Upon delivery, Taylor signed a separate delivery agreement, which provided that City Auto was giving Taylor possession of the car pending the purchase of the sales agreement by the financing institution. The delivery agreement also gave City Auto the right to rescind the sale and take immediate possession of the car if financing could not be obtained. A week after the sale, Taylor was notified that her application for financing had not been approved. City Auto repossessed the car, along with Taylor’s possessions, and retained the down payment. Taylor filed suit against City Auto, alleging violations of the Tennessee Consumer Protection Act. Taylor maintained that she had been told by City Auto that the delivery agreement was just a formality and that she had already been approved for financing. A trial court granted City Auto’s motion to dismiss the complaint, citing the arbitration clause in the sales agreement. The court of appeals reversed, holding that Taylor could not be bound by the arbitration clause, because the sales agreement was fraudulently induced. City Auto filed an appeal. On appeal, Taylor raised the additional issue of unconscionability.