Arbitration: The Best Thing Since the Invention of Penicillin?
Arbitration. It’s a word not too many bring up in everyday conversation, but it’s a word that is an integral part of most everyone’s life. It is often included in the fine print that few, if any, read. When signing for a credit card, cell phone, or even the purchase of a home, it is the legalese that is often skipped before signing on the dotted line. The small print, that even the most eagle eyes needs bifocals to read, is known as the arbitration clause—aka—forfeiting the right to sue in court.
With arbitration, the case is tried before an arbitrator, someone who need not be a lawyer or a judge and someone who has no need to worry about following the law—it’s not a requirement.
The brilliant minds that came up with this notion to force consumers into binding arbitration make the argument that it’s the cheaper alternative to court. The question remains: cheaper for whom?
As we reported July 30, one California resident was forced to pay $19,569 in arbitration costs and $89,265 in attorney fees, billed at the market rate of $350 per hour. The resident had purchased a condominium at Palms Place in Las Vegas and believed he had been scammed, as did others who had purchased the upscale condos. The resident lost the arbitration and came out with bills totaling over $108,000, hardly a cheaper alternative to court.
Arbitration was also intended to be the fix-all to clogged courts. In reality, it’s more like taping a piece of gauze over a dam. Just peruse the Internet and it’s gushing with a plethora of cases against both arbitrators and the firms they work for.
As for bringing a class action suit, you can forget that as well. Most binding arbitration clauses require a waiver for a class action.
A recent case in the United States District Court for the Northern District of California, Samsung Telecommunications America LLC customer Daniel Norcia is seeking to represent a class of California customers who he claims were duped by Samsung’s alleged practice of programming its Galaxy S4 smartphones to run at higher than normal speeds during tests in an attempt to boost sales.
Norcia had signed a binding arbitration clause and a class action waiver when he purchased the phone. Among the arguments are that Norcia had bought the phone at a Verizon store and he assumed the arbitration clause was between himself and Verizon. There was no mention of Samsung, according to the court documents. Another argument is that Samsung did not advise Verizon employees that customers had 30 days to opt out of the agreement, hence, the information wasn’t passed to Norcia. It’s definitely a case worth following.
Why are companies so hell bent on arbitration rather than settling differences in court? The answer to that question remains to be seen, but with the number of lawsuits and complaints filed, it would seem consumers don’t feel they get a fair shake before an arbitrator.
And unlike court, where one can appeal until the cows come home, arbitration is binding to both the plaintiff– and his wallet.