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An Arkansas Court of Appeals has upheld the enforcement of an explicit exception in an arbitration agreement for protection of security interests through a replevin action.
In Hamilton v. Ford Motor Credit Co., No. CA 06-0838, 2007 WL 1490786 (Ark. Ct. App. May 23, 2007), Hamilton had financed the purchased a new Lincoln Navigator with Ford Motor Credit, Co. (FMC). The contract contained an arbitration provision.
Two years into the five-year repayment plan, Hamilton began missing payments, and FMC filed a replevin action seeking return of the vehicle. Hamilton sought to enforce the arbitration agreement.
In rejecting Hamilton's attempt to compel arbitration, the Court found that the agreement "specifically, and unambiguously, provides that FMC does not give up the right to enforce [its] security interest" in a court of law, including replevin actions.
Though arbitration is a favored form of dispute resolution, and ambiguous contracts should be construed against the drafter (here, FMC), there was no ambiguity about this issue in the contract.
The Court also rejected Hamilton's claim that the limiting term was void due to a "lack of mutuality." Noting that the arbitration provision gave each party the "unbridled right" to arbitrate certain issues, while preserving the right for either party to litigate certain issues, the Court found the "carve-out" provision to be valid and enforceable.
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