arbitration-mandatory arbitration
When arbitration costs more than the amount of claim
March 24, 2015  //  By:   //  Arbitration, Consumer News  //  No Comment

by Carol Thompson

Dan Murphy never imagined that losing an arbitration hearing could cost him more than the amount of his claim. The Minnesota resident had attempted to take a car dealer to court, only to learn he had signed a forced arbitration clause.

Murphy had purchased a used car and was guaranteed the car had only one previous owner. Because of the condition of the vehicle, Murphy accepted what the salesman had told him at face value.

Murphy said the car began having problems within the first week. He repeatedly returned it to the dealer for repair. One day, about three months after the original purchase, Murphy said he chatted with the dealer’s mechanic as he waited for yet another repair to be completed. “That’s when the mechanic made a comment that the car had been a rental,” he said. “I asked him what he meant and he said that the dealer had purchased the car from an auction and that it had previously been a rental.”

Murphy said he then went to speak with the salesman who sold him the car. The salesman denied it was a rental vehicle.

The next day, Murphy obtained a copy of the car’s history and learned that it had indeed been perviously owned by a car rental company. He hire an attorney and filed a lawsuit.

The judge ruled that because of the forced arbitration clause Murphy had signed that he needed to pursue arbitration if he desired to pursue his claim against the dealer.

After researching the arbitration company, Murphy assumed it was a good deal. The cost was relatively low, only a few hundred dollars, so Murphy decided to go ahead and see if he could get his $10,000 back based on the allegation of a fraudulent sale.

“I had a hearing that I had to travel 200 miles to get to,” he said. “I barely got to speak.” Murphy said the arbitrator asked him why he didn’t question the car’s history at the time of the purchase. He answered that he had believed the salesman.

Since he liked the car enough to buy it without researching its history, the arbitrator ruled against him for that reason. Not only did Murphy lose the case- he was ordered to pay $13,575 in legal fees for the dealer- $3,575 more than he paid for the car.

“I never in my life expected to be hit with legal costs,” Murphy said.

Therein lies one of the differences between arbitration and court. Judges rarely allow the opposing parties legal fees. Arbitrators, however, often award them, sometimes leaving consumers financially strapped.

Murphy said he will never take another dispute to arbitration and instead would suck up any loss he had in an agreement gone bad.

“I learned a lesson. There’s no justice in arbitration,” he said.

About the Author :

Carol Thompson is a veteran investigative reporter residing in central New York. She spent 23 years with a local newspaper, The Valley News, before leaving for the Syracuse New Times, and now, VNN. Thompson has won dozens of first-place awards for investigative reporting and was the 2006 recipient of the Syracuse Press Club’s prestigious Selwyn Kershaw Professional Standards Award. Thompson’s reporting has resulted in the arrest of public officials and has prompted policy changes. She uncovered two money laundering schemes that traveled the globe and resulted in the indictments of several developers.