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April 1, 2026 Get Citation Alerts Download PDF Add Note

Godon v. Bend-CDJR, LLC

Court of Appeals of Oregon

• Citations: 348 Or. App. 61
• Docket Number: A184256
• Judges: Shorr

• Disposition: Vacated and remanded.

• Opinion

• Authorities (16)

• Cited By (0)

• Summaries (0)

• Similar Cases (47K)

• PDF

Disposition

Vacated and remanded.

Combined Opinion

No. 232 April 1, 2026 61

IN THE COURT OF APPEALS OF THE
STATE OF OREGON

Gary GODON,
Plaintiff-Respondent,
v.
Bend-CDJR, LLC,
dba Lithia Chrysler Dodge Jeep Ram of Bend,
and Travelers Casualty and Surety Company of America,
Defendants-Appellants.
Multnomah County Circuit Court
23CV33092; A184256

Adrian L. Brown, Judge.
Argued and submitted November 19, 2025.
Alexandra P. Hilsher argued the cause for appellants.
Also on the briefs was Hershner Hunter, LLP. Also on the
opening brief was Elizabeth M. Stubbs.
Young Walgenkim argued the cause for respondents.
Also on the brief was Hanson & Walgenkim, LLC.
Emily Teplin Fox filed the brief amicus curiae for Oregon
Trial Lawyers Association.
Before Shorr, Presiding Judge, Powers, Judge, and
O’Connor, Judge.
SHORR, P. J.
Vacated and remanded.
62 Godon v. Bend-CDJR, LLC

SHORR, P. J.
Defendants Bend-CDJR, LLC dba Lithia Chrysler
Dodge Jeep Ram of Bend (Lithia) and Travelers Casualty
and Surety Company of America (Travelers) appeal from an
interlocutory order denying defendants’ motion to compel
arbitration of plaintiff Gary Godon’s claims arising out of
plaintiff’s purchase of a vehicle from defendant Lithia.1 On
appeal, defendant assigns error to the trial court’s denial
of the motion to compel arbitration. We conclude that the
trial court applied an incorrect legal analysis and the record
is insufficient to affirm on the alternative basis presented
below. Therefore, we vacate and remand.
BACKGROUND
In 2023, plaintiff filed a complaint in circuit court
alleging that defendant failed to disclose that the used vehi-
cle plaintiff purchased from defendant had been underwa-
ter at some point in the past. Defendant provided plaintiff
notice of intent to enforce the arbitration agreement between
the parties if plaintiff did not voluntarily dismiss his suit in
court. The parties did not agree to proceed to arbitration
and defendant then filed a motion to compel arbitration.
As part of the vehicle purchase, the parties signed a
delivery agreement that contained an arbitration agreement
between the parties. The arbitration agreement was made
“pursuant to the Federal Arbitration Act,” and provided that
all claims arising out of or relating to the vehicle purchase
would be “settled by binding arbitration in accordance with
the rules of the American Arbitration Association.” The
agreement also contained certain discovery limitations and
a delegation provision providing that “[a]ny dispute as to
the validity, existence, scope, jurisdiction, or applicability of
this arbitration agreement shall be arbitrated and decided
by the arbitrator.”
In the trial court, plaintiff opposed arbitration on
various grounds including arguing that the arbitration
agreement was not formed because it contains an illusory
1
Defendant Travelers’ only role in the litigation is as Lithia’s bond company.
All references hereafter to defendant are to defendant Lithia, and for conve-
nience, we refer to defendant in the singular.
Cite as 348 Or App 61 (2026) 63

promise, or even if formed, that it is unconscionable. Plaintiff
also argued that the delegation clause itself is unconscion-
able. After considering the parties’ written and oral argu-
ments, the trial court denied defendant’s motion to compel
arbitration. The court explicitly “[did] not make any find-
ings as to whether the delegation clause in the Agreement
is itself unconscionable.” Instead, the court determined that
the agreement as a whole was unconscionable and denied
the motion to compel on those grounds.2
On appeal, the parties appear to agree that by con-
sidering the unconscionability of the arbitration agreement
as a whole—before first considering formation defects and
specific challenges to the delegation clause—the trial court
did not follow the correct framework in deciding the motion
to compel arbitration. As we explain further below, we agree
that the trial court followed the incorrect framework by first
considering the validity of the entire agreement before con-
sidering issues of formation and challenges to the delegation
clause. Plaintiff asserts that we can nevertheless affirm the
trial court’s decision either because the arbitration agreement
was not properly formed or, if it was properly formed, because
the delegation provision is unconscionable. Defendant con-
tends that the parties formed an agreement to arbitrate and
the delegation clause is not unconscionable, and therefore,
an arbitrator must determine the validity of the arbitration
agreement as a whole. We review the denial of a motion to
compel arbitration for legal error. Citigroup Smith Barney v.
Henderson, 241 Or App 65, 69, 250 P3d 926 (2011).
LEGAL FRAMEWORK
Section 2 of the Federal Arbitration Act (FAA)
provides:
“A written provision in * * * a contract evidencing a trans-
action involving commerce to settle by arbitration a contro-
versy thereafter arising out of such contract or transaction
* * * shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation
of any contract.”

2
The trial court concluded that the arbitration agreement was unconscion-
able because of the discovery limitations, the requirement that the parties bear
their own attorney fees at arbitration, and its nonmutuality.
64 Godon v. Bend-CDJR, LLC

9 USC § 2. That section “creates a body of federal sub-
stantive law of arbitrability, which applies even in the con-
text of state-law claims brought in state courts.” Lumm v.
CC Services, Inc., 290 Or App 39, 44, 414 P3d 454 (2018)
(internal quotation marks omitted). Under the FAA, arbi-
tration is fundamentally “a matter of contract,” and accord-
ingly, “a matter of consent.” Coinbase, Inc. v. Suski, 602
US 143, 147-48, 144 S Ct 1186, 218 L Ed 2d 615 (2024).
When the parties dispute the formation of an agreement,
the court, and not an arbitrator, must decide that threshold
question. Cornelio v. Premere Rehab, LLC, 342 Or App 399,
404-05, 577 P3d 847, rev den, 374 Or 616 (2025); see also
Granite Rock Co. v. International Broth. of Teamsters, 561
US 287, 296, 130 S Ct 2847, 177 L Ed 2d 567 (2010) (“[W]
here the dispute at issue concerns contract formation, the
dispute is generally for courts to decide.”).
The issue of contract formation is different than
the issue of a contract’s validity. Rent-a-Center, West,
Inc. v. Jackson, 561 US 63, 70 n 2, 130 S Ct 2772, 177 L
Ed 2d 403 (2010); see also Buckeye Check Cashing, Inc. v.
Cardegna, 546 US 440, 444 n 1, 126 S Ct 1204, 163 L Ed
2d 1038 (2006) (suggesting that contract formation argu-
ments include “whether the alleged obligor ever signed the
contract, whether the signor lacked authority to commit the
alleged principal, and whether the signor lacked the men-
tal capacity to assent” (citations omitted)). Determining con-
tract formation is always an issue for the court, even in the
presence of a delegation provision. Coinbase, 602 US at 145;
see also Johnson v. Continental Finance Company, LLC, 131
F4th 169, 175 (4th Cir 2025) (“It would put the cart before the
horse to enforce any provision of [an arbitration] agreement,
including the delegation clause, before deciding whether the
agreement itself was ever formed.”). But if an agreement has
been formed, the parties can agree to delegate the issue of
contract validity to an arbitrator. Coinbase, 602 US at 148.
Such a delegation provision is simply an additional, anteced-
ent agreement to arbitrate threshold issues that is subject to
the FAA like any other arbitration agreement. Rent-a-Center,
561 US at 68-70. Thus, if the parties formed an arbitration
agreement and it contains a provision delegating issues of
contract validity to the arbitrator, a court must enforce that
Cite as 348 Or App 61 (2026) 65

provision unless the party opposing arbitration successfully
challenges the validity of the delegation provision itself. Id.
In light of the foregoing legal principles, we conclude
that the trial court, by denying the motion to compel arbi-
tration based on the unconscionability of the agreement as a
whole, erred when it applied the incorrect framework. As the
issue was presented here, the trial court should have first
considered whether an agreement to arbitrate was formed
between the parties. If an agreement was formed, it should
have next considered any challenges to the delegation pro-
vision specifically. Finally, only if the delegation provision
is invalid should the trial court have considered challenges
to the validity of the arbitration agreement as a whole.
Otherwise, if the delegation provision was valid, challenges
to the validity of the arbitration agreement are left to the
arbitrator. As we discuss further below, we remand to the
trial court to return to the first step and consider whether
the parties reached an agreement to arbitrate, which, in
light of the particular arguments presented, raises some
factual issues for the trial court to resolve first.
ANALYSIS
As noted, both parties agree on appeal that the trial
court erred by skipping steps in the analysis. On appeal,
plaintiff argues that we should nevertheless affirm on the
alternative basis that the analysis fails at the formation step
either because the arbitration agreement was fraudulently
induced or because it is an illusory contract. Plaintiff encour-
ages us to resolve those issues now. Defendant contends that
those are more properly understood as issues of validity rather
than formation and therefore should not be addressed at this
step of the analysis.3 As defendant also points out, plaintiff
never raised the fraudulent inducement argument in the trial
court, and therefore we do not discuss it further here, except
to note that the United States Supreme Court has at least
suggested that fraud in the inducement is an issue of validity
that may be delegated to an arbitrator under a delegation
3
The line between validity and formation has not been clearly defined. We
have previously addressed a more obvious formation defect where a nonsignatory
third party sought to enforce an arbitration agreement and we concluded that
the plaintiff had never formed an agreement to arbitrate with that third party.
Cornelio, 342 Or App at 405-06.
66 Godon v. Bend-CDJR, LLC

provision. See Rent-a-Center, 561 US at 71 (discussing fraud
in the inducement in the context of contract validity).
We turn now to plaintiff’s argument that the agree-
ment to arbitrate was illusory. Because at this step we may
only address whether an agreement was formed, we must
first determine whether an illusoriness challenge pertains
to contract formation or validity.4 Plaintiff contends that
it is a formation issue because the formation of a contract
requires consideration, and an illusory promise cannot
serve as consideration. In response, defendant asserts that,
although plaintiff frames his argument in terms of contract
formation, he fundamentally argues that the agreement is
one-sided, which is an issue of validity.
Under Oregon law, the formation of a contract
requires consideration. Homestyle Direct, LLC v. DHS, 354
Or 253, 262, 311 P3d 487 (2013). “An exchange of promises
is consideration that will support a contract.” Shea v. Begley,
94 Or App 554, 558, 766 P2d 418 (1988), rev den, 307 Or 514
(1989); Restatement (Second) of Contracts § 71 (1981) (defining
“consideration” as a performance or return promise “sought
by the promisor in exchange for his promise” and “given
by the promisee in exchange for that promise”). Where one
party has unlimited discretion to avoid its obligations, that
party’s promise is illusory. Furrer v. Southwestern Oregon
Community College, 196 Or App 374, 380, 103 P3d 118 (2004);
see also Restatement § 77 comment a (“Where the apparent
assurance of performance is illusory, it is not consideration
for a return promise.”); 3 Williston on Contracts § 7:11 (4th
ed) (“Where no consideration exists, and is required, * * * a
4
The federal circuits are split on this issue, with most circuits concluding
that illusoriness pertains to formation. See Johnson v. Continental Finance
Company, 131 F4th 169, 178 (4th Cir 2025) (explaining that illusoriness chal-
lenges pertain to formation because an agreement consisting of illusory promises
lacks consideration); Reichert v. Rapid Investments, Inc., 56 F4th 1220, 1227 (9th
Cir 2022) (explaining that a challenge to an agreement for lack of consideration
is a formation question for the court); Doctor’s Associates, Inc. v. Alemayehu, 934
F3d 245, 252 (2d Cir 2019) (concluding that because consideration is fundamental
to contract formation, it is an issue reserved for the court); National Federation
of the Blind v. The Container Store, 904 F3d 70, 86 (1st Cir 2018) (explaining that
an illusory contract is never formed because it lacks the necessary consideration);
but see Arnold v. Homeaway, Incorporated, 890 F3d 546, 550-51 (5th Cir 2018)
(where the parties do not dispute the existence of an agreement but rather argue
that there is an illusory promise that renders the agreement unenforceable, that
is more properly understood as “in the nature of a validity challenge”).
Cite as 348 Or App 61 (2026) 67

lack of consideration results in no contract being formed.”);
Johnson, 131 F4th at 178 (“It is rudimentary contract law
that an agreement lacks consideration, and is therefore
never formed, when it consists entirely of illusory prom-
ises.”). As the foregoing legal principles explain, consider-
ation is required to create a binding contract. A contract
based on an illusory promise lacks consideration, a funda-
mental element of contract formation. Therefore, illusori-
ness is a formation issue that is reserved for the court.
We turn next to whether the arbitration agreement
was illusory in this case. In Furrer, we favorably quoted the
following definition of an illusory agreement:
“ ‘Words of promise which by their terms make perfor-
mance entirely optional with the “promisor” whatever may
happen, or whatever course of conduct in other respects he
may pursue, do not constitute a promise. Although such
words are often referred to as forming an illusory promise,
they do not fall within the present definition of promise.
They may not even manifest any intention on the part of
the promisor. Even if a present intention is manifested, the
reservation of an option to change that intention means
that there can be no promisee who is justified in an expec-
tation of performance.’ ”
196 Or App at 380 n 1 (quoting Restatement § 2 comment e).
As we understand plaintiff’s argument, defendant’s promise
to arbitrate was illusory because defendant either knew at
the time that it could not be enforced—or perhaps should
have known—and it had the option to evade arbitration at
will. In other words, plaintiff contends that there was no
manifest intent on the part of the promisor, defendant, to fol-
low through on its promise to arbitrate. Plaintiff points out
that in 2015, the American Arbitration Association (AAA)
had declined to administer a case under an identical arbi-
tration agreement involving another Lithia dealership in
Oregon because the discovery limitations in the agreement
did not meet AAA’s consumer due process protocol. Before
declining the case, AAA asked that dealership to waive
the discovery limitations, which it refused to do. Plaintiff
asserts that, because of the other Lithia dealership’s prior
history with AAA, defendant either knew or should have
known it could avoid arbitration with a consumer at will by
68 Godon v. Bend-CDJR, LLC

refusing to waive the discovery limitations, rendering any
agreement to arbitrate illusory.
Plaintiff’s formation argument turns on defendant’s
knowledge of its arbitration agreement’s deficiencies.5 To
agree with plaintiff that the agreement was illusory would
require us to assume that defendant knew its arbitration
agreement would be rejected by AAA. Here, as noted, the
trial court erred in its legal analysis and failed to find crit-
ical facts regarding the formation of the agreement nec-
essary to resolve the question of illusoriness. The court’s
factual findings are limited to finding that the arbitration
agreement at issue in this case is a standard form used by
“Lithia Bend/Lithia Motors,” that has been in use since at
least 2015, and that it had been previously rejected by AAA
in a case litigated by plaintiff’s counsel’s firm and involving
a Lithia dealership in Eugene. The trial court did not find
that defendant knew of that prior rejection that involved
the other Lithia dealership. Moreover, we have reviewed the
record on appeal and conclude that, although plaintiff pre-
sented certain facts regarding Lithia’s corporate structure
and AAA’s dealings with other Lithia entities, it is at least
not clear from the record whether defendant knew that its
arbitration agreement would be rejected by AAA. “When a
party argues an alternative basis to affirm that was raised
but not resolved in the trial court, and factual findings are
necessary to decide the legal question, we will ordinarily
remand to the trial court to determine potentially dispos-
itive questions of fact in the first instance.” State v. Derby,
301 Or App 134, 141, 455 P3d 1009 (2019) (internal quota-
tion marks omitted); see also State v. Castillo, 295 Or App
5
Plaintiff asserts that defendant, as a subsidiary acting on behalf of its par-
ent company, “should have known that the arbitration agreement did not meet
AAA’s minimum standards of due process when it required [plaintiff] to sign it.”
First, it is not clear to us whether the fact that defendant “should have known”
about AAA’s issues with a standard form Lithia arbitration agreement is suffi-
cient to make defendant’s promise to arbitrate illusory. Defendant’s arguments
are not well-developed. Even assuming for argument that it is sufficient, to the
extent that plaintiff argues that defendant “should have known” of AAA’s prior
rejection by virtue of the corporate structure or agency law, those arguments are
also not well-developed, and we are unpersuaded that the facts in the record are
sufficient to allow us to make that determination. See, e.g., Cerner Middle East
Ltd. v. Belbadi Enterprises LLC, 305 Or App 413, 419 n 7, 472 P3d 299, rev den,
367 Or 257 (2020) (referencing the “general rule that a subsidiary and the parent
are separate entities”).
Cite as 348 Or App 61 (2026) 69

121, 132-33, 433 P3d 467 (2018), rev den, 364 Or 749 (2019)
(remanding for trial court to determine an issue that had
been raised but not resolved in the trial court, that was
presented on appeal as an alternative basis to affirm, but
required factual findings to resolve).
Accordingly, we vacate and remand for the trial
court to apply the correct legal analysis and make the
required factual findings in the first instance.
Vacated and remanded.