Channel 4 recently posted an article on it’s website regarding the right to sue and how people are giving up their constitutional right without any idea that they are doing it. This is an issue we deal with on a daily basis at our firm. Majority of time, this issue comes up with our nursing home cases but we are starting to see it in our other practice areas.
When you buy a product or service and something goes terribly wrong, you may think, “I can always sue.” But Consumer Reports warns that people often unknowingly give up their right to sue by agreeing in advance to submit any dispute to binding arbitration. And that can be a bad deal. The article, originally written for Consumer Reports, featured an individual who came out on the wrong side of an arbitration fight. Jon Perz bought a used car, but it has hardly ever left the garage. There was an engine problem the dealer first failed and then refused to fix, and that made the car unsafe. The dealer also refused to return Perz’s original $10,000 payment. Then Perz found to his dismay that he had agreed to binding arbitration and couldn’t sue. Instead of being heard by a judge or jury, the dispute was sent to an arbitration firm selected by the car dealership. Jon Perz wishes he never signed that contract. Still, just a few weeks ago, after a seven-year ordeal, the dealership was ordered by another arbitration firm to pay him $20,000 in damages.
You might ask, what is arbitration and how did this evolve? Well, mandatory binding arbitration was originally intended for disputes between corporations. As of now, it is being pushed onto consumers in many contracts, including those for credit cards, cell-phone service, home building, insurance, and nursing homes. Arbitration agreements stop consumers from suing over negligence and defective products. To shield against harassment and discrimination complaints, employers may require employees to sign one as a condition of employment.
Once you sign the agreement, the deck is stacked against you as the consumer. Companies choose the arbitration firms and can reward them with repeat business for favorable results. There’s no judge, jury, or public record, and courts cannot set aside a decision just because it’s capricious. Companies can delay or hold the arbitration anywhere in the country they have a presence. So consumers are locked into a privatized justice system with no accountability or transparency.
Consumers Union advocates for consumers and believes that consumers should not be forced to sign away their day in court as a condition of doing business. Proposed federal legislation would ban mandatory binding arbitration in consumer, employment, and franchise contracts. CU supports the bill, which hasn’t yet had a hearing; it lets consumers and companies that have a dispute agree to resolve problems through arbitration or mediation, while preserving consumers’ right to hold companies accountable in court.
Companies say that binding arbitration can make it easier and less costly for both sides to settle disputes. But there are concerns that giving up the right to sue can deprive consumers of an important legal protection. Consumer Reports advises, if you don’t want to agree to binding arbitration, try crossing it out and requesting a new agreement. Or if you have already signed, there might be an opt-out period.