Contract Clauses Keeping Cases Out of Court Loved by Companies, Not by Customers

by Mark Friedman  on Monday, Jun. 9, 2014 12:00 am  

Attorney David Couch of Little Rock said the number of lawsuits forced into arbitration is on the rise. | (Photo of Couch by Jason Burt; Fayetteville Health and Rehab Center courtesy Google Street View)

Laurel Johnson had no idea when she signed the papers admitting her 89-year-old father into the Fayetteville Health & Rehabilitation Center that she had also agreed to settle any disputes with the nursing home in arbitration rather than in court.

Cases such as Johnson’s are becoming more common as companies eagerly add language to contracts and terms of agreements that require any disputes that arise to be handled in arbitration. Once there, the complaint is decided by an arbitrator rather than in the courts with a judge or jury deciding the case, a procedure that one proponent described as “simpler, fairer, faster.”

“It’s a horrible, horrible problem,” said attorney David Couch of Little Rock, who represents Johnson.

After Johnson’s father, Joseph Johnson, died less than six months after admission, she accused the nursing home of medical malpractice and filed a lawsuit in Washington County Circuit Court.

As that case was winding its way through the state court system, Northport Health Services of Arkansas LLC, the legal name for the nursing home, filed its own lawsuit in federal court in Fayetteville to have her case sent to arbitration.

The nursing home argued that tucked in the stack of more than 30 pages of the admission agreement papers Laurel Johnson signed was a section dealing with disputes. The admission papers said that instead of going to court with a complaint, Johnson agreed to go through arbitration, according to Northport’s complaint.

U.S. District Court Judge Jimm Hendren agreed with the nursing home on Sept. 20 and ordered Johnson’s allegations to be settled in arbitration. The arbitration is set for October and will be handled by the mediation and arbitration company JAMS of Irvine, California.

Couch said Johnson’s case is not uncommon and the number of cases that are forced into arbitration is on the rise, but it’s difficult to know exactly how many because arbitration proceedings aren’t public.

And arbitration agreements are being inserted in everything from cellphone contracts to credit card documents.

“Almost everything that you can buy as a consumer is going to end up with a consumer forced arbitration clause,” said Scott Poynter, an attorney at the Little Rock office of Emerson Poynter LLP who represents plaintiffs in class-action cases. “Consumers are buried in a morass of legalese that they have no idea what they’re giving up. They don’t know that they’re giving up rights to a jury.”

Poynter is one of the attorneys representing consumers in a class-action case against Alltel Corp. of Little Rock, which was sold in 2009 to Verizon Wireless for $28.1 billion.

In Poynter’s case, Alltel is trying to compel arbitration for some of the class members and has appealed to the Arkansas Supreme Court, which heard arguments on May 29. A ruling is expected soon, Poynter said.



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