I work for a global corporation where a couple of years back, I was forced to sign an arbitration agreement. Recently, we purchased a house from a builder and the documentation had an arbitration agreement too.
My questions are:
1> Are arbitration agreements becoming pervasive to all contracts ? Can I expect to see an arbitration agreement on the back of my McDonald’s receipt soon ?
2> Whats the legal precedence for someone who decides that the agreement was restrictive or coerced and sues anyways ?
3> Does the agreement cover civil infractions or criminal infractions too ?
An arbitration clause is fairly common in some large transactions, such as real estate transactions. I don’t see it happening for minor transactions.
By keeping these legal actions out of the courts they can theoretically save time and money.
I had an issue with a lot I purchased that went through mediation and then arbitration. I finally won, but I ended up paying over $150,000 in legal fees. I was deposed and it felt like I was in court, but I wasn’t.
I don’t think I really had the option to not agree to this term of the sales contract. Of course I didn’t have to sign the contract.
As for #2, the Supreme Court ruled last year that if you signed the contract, you’re required to go along with the arbitration agreement, no matter how onerous it is to you or advantageous to the company. Often the company determines the arbitrator without any input from the customer, and can legally pick someone who will carry out their interests. This is the main reason why it’s becoming more prevalent.
You could ask the clause to be removed from the contract, but you won’t get that.
It only applies to contracts. Civil or criminal infractions are not covered.
Sometimes I think the Roberts court misses the gilded age and all its trappings. That ruling spurred General Mills to put an extraordinary arbitration clause into everything having to do with the company:
General Mills has since pulled the clause in the face of furor. But similar clauses are all over the place, and it won’t be long until another major company tries–probably successfully–something like this again.
Just because a company puts a ridiculous arbitration clause in their contracts doesn’t mean that all disputes arising thereunder will go to that arbitration forum. Courts can and have found certain arbitration agreements unconscionable.
I was responding to RealityChuck’s post. A recent Supreme Court decision severely tightened the leeway courts had to find an arbitration clause unconscionable. Not necessarily as draconian and some would make it out to be, but repugnant nonetheless. Kind of spits the face of what your post took as the baseline.
Why in the ever-loving world would any courts anywhere ever have agreed to that? Any such court that does so, only cuts itself out of the loop.
It was a fundamental tenet of our three-branch government that each branch would jealously work to maintain and preserve its own powers and prerogatives, thus it would be assured that each branch would serve as a check on the other branches; and likewise, having multiple political “factions” (parties) would prevent any one faction from gaining a monoply on power. (Federalist Papers, #51 by “Publius”, actually James Madison.)
Okay, that wasn’t directly discussing contract law as it applies to private parties. But the logic is still there. Arbitration agreements, by definition, explicitly cut courts out of the adjudication process. I find it hard to understand why any court would agree to tolerate that.
(And similarly, some of the idiotic laws one sometimes reads about State legislatures passing, that contain explicit language barring the law from review by the courts.)
Many judges see their primary responsbilty to be clearing their docket and getting rid of cases. Why people who think like this wanted to be judges in the first place remains a mystery.
The Constitutionexplicitly states that Congress may limit the jurisdiction of the Supreme Court (“In all the other Cases before mentioned, the supreme Court shall have appellate Jurisdiction, both as to Law and Fact, with such Exceptions, and under such Regulations as the Congress shall make.”) And since the lower courts are a creation of Congress (“To constitute Tribunals inferior to the supreme Court”), Congress’s powers to create and abolish such courts has been held to imply that Congress may limit the jurisdiction of such courts. For example, Bankruptcy Court may only hear bankruptcy matters, Tax Court may only hear tax cases, etc.
I’m not sure about the constitutionality of such issues, but i’d like to see Congress tackle the proliferation of arbitration clauses, and maybe legislate to set a clearer standard for the enforcement and the mechanisms of such clauses.
It’s one thing to say that you can avoid arbitration by not signing the contract in the first place, but when so many companies are enforcing binding arbitration, when those companies claim the exclusive rights to choose the arbitrator, and when those companies collectively provide a large and increasing percentage of necessary goods and services, i think we’ve arrived at the stage where the collective shift to arbitration effectively removes some of our rights as consumers and citizens.
My cable company requires binding arbitration, but it’s not like i can shop around for a company without such a clause, because the cable companies themselves have been allowed to monopolize their local markets to such an extent that most American consumers have only a single choice when it comes to services like high-speed internet.