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)

U.S. Sen. Al Franken, D-Minnesota, introduced legislation that would eliminate the ability to have forced arbitration in cases involving consumer, antitrust and labor issues. The Arbitration Fairness Act is currently in committee, where it will have powerful opposition.

“It’s really a pro-trial lawyer piece of legislation that will do little of anything to actually help consumers,” said Webb of the U.S. Chamber Institute for Legal Reform.

A Customer Backlash

Meanwhile, companies are continuing to use the “fine print of the contract to opt out of civil rights, anti-trust and workplace safety laws,” said Michelle Schwartz, director of Justice Programs for the Alliance for Justice of Washington, a national association of more than 100 organizations and which works for open federal courts.

Consumers, though, are starting to fight back.

In a high-profile case earlier this year, General Mills, the manufacturer of Cheerios and other foods, revised its legal terms to add mandatory arbitration agreements for consumers — even for those who downloaded coupons for its cereals. General Mills quickly reversed itself after consumers objected to the change.

“Those terms — and our intentions — were widely misread, causing concern among customers,” Kristie Foster, director of external communications for General Mills, said in an April 19 message posted on the company’s website. “We rarely have disputes with consumers — and arbitration would have simply streamlined how complaints are handled. Many companies do the same, and we felt it would be helpful.”

Nursing Homes

Couch, the plaintiff’s attorney who is involved in the nursing home case, said he’s seen more nursing homes add mandatory arbitration agreements to admission papers. And the nursing home requires the signature “in order for your loved one to get admitted to the facility,” he said.

Then if a patient is injured and tries to sue, the nursing home will push to get the case moved into arbitration, he said. “And you’re faced with trying to beat [the admission papers] because it’s considered a contract,” Couch said.

That’s usually an uphill battle, but there are a few defenses — for example, if the person who signed the papers didn’t have power of attorney.

Failing to read every word in a document because of its length is not a defense. “We’re all assumed to have read and understood our contracts when we sign them,” said Brian Brooks, a plaintiff’s attorney in Greenbrier. “That’s a legal principle that exists. … In most cases, it makes sense. You don’t want people to be able to run away from your contracts.”



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