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)

Judge Hendren, ruling in the Northport case, agreed, saying that “one cannot simultaneously claim the benefits of a contract and avoid its burdens.”

Arbitration Concerns

Schwartz, at the Alliance for Justice, said she doesn’t have a problem with arbitration — just the part that forces people into it. She said that if arbitration is such a fair and attractive system, parties shouldn’t be dragged into it but should be able to choose it after a dispute arises.

When people are online, they are faced with “these click-through contracts” with no place to object if there is a mandatory arbitration clause, she said. “To say that that’s a contract is really outrageous,” Schwartz said.

But Webb said arbitration is better for the consumer than going in front of a judge or jury.

In arbitration, it’s “much less formalistic than going to court,” he said. “It can be done over the phone; it can be done on documents back and forth.”

Schwartz maintains that the arbitration system is tilted toward businesses and against consumers.

But some disagree.

“I don’t think that there’s any data to support that,” said Thomas Liptak, managing partner at Kenney Shelton Liptak Nowak LLP of Buffalo, New York. Liptak is the vice-chair of the Defense Research Institute’s Alternative Dispute Resolution Committee of Chicago.

He said there is no evidence to show that arbitration is more or less fair than going to court.

Schwartz said she’s pushing for more consumer education. Once consumers “learn about forced arbitration, they are outraged.” She said if consumers take a stand as was done in the General Mills case, it could make a difference, possibly leading to removal of the arbitration clauses from consumer contracts.

Webb said consumers are savvy enough to read the contracts and know what they are getting into before they agree to buy the product or service.

“Most companies are moving toward fairly conspicuous arbitration provisions in their consumer contracts,” Webb said. “So that basically takes that red herring argument off the table that the plaintiffs’ bar likes to use.”

Liptak also agreed that consumers know what they are getting into, but he offered this advice: “Before you enter into a contract, with anybody, under any circumstance, you better read the contract.”



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