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Arbitration Is Not Customer Friendly

arbitration-is-not-customer-friendlyA lot of companies these days are slipping arbitration clauses into their service contracts. That means internet providers, phone companies, and more are adding a paragraph or two to their massive contracts that say the customer agrees to go through an arbitration board rather than the civil courts in case of a legal dispute or a personal injury. Even employment contracts are getting in on the action. But not only are companies adding these clauses for their own benefit rather than the customer’s or the employee’s, the clause itself is not entirely legal.

Boards V. Courts


A civil court case takes place before a judge employed by the government and (usually) a small jury composed of people chosen at random. The way a case proceeds is very strictly laid out and time-consuming, but that means it’s also very thorough.

An arbitration takes place before a set of arbitrators paid by the parties involved, which means they’re usually connected to the corporate side of the industry and tend to see things through a pro-business lens. Arbitrations can be legally binding because they’re basically an out-of-court settlement facilitated by an independent third party. If both sides agree to the settlement, that’s the end of that, and like more traditional settlements it’s much cheaper than going all the way to court.


Contracts V. Consumers


Not every contract is enforceable. Even if both parties read the whole thing from end to end and sign it at the bottom, that doesn’t override other considerations like legality. If two thieves sign an agreement to split the money they stole from a bank, the first thief can’t sue the second thief if he runs away with all the loot. Instead, the police will arrest both thieves and confiscate the money, and the contract will mean nothing.

Courts across the United States are finding forced arbitration clauses to be unenforceable for this reason. The Seventh Amendment of the U.S. Constitution guarantees a right to civil trials with a jury, and most state constitutions say something similar. And while you can waive that right to a trial to get an out-of-court settlement or a decision from an arbitration board, it’s not much of a choice if you have to waive your right to a trial in order to get a job or get a bank account, especially if every competitor has the same clause in their contracts.

There’s also the fact that contract law accounts for sneaky fine print. For instance, a Florida statute requires that insurance policies meet a certain standard of readability, which means an average person should be able to understand what the policy does and doesn’t cover.

So if you have cause to file a personal injury lawsuit but you signed a contract that forces you to seek arbitration instead, you may be able to dispute that clause in court, especially if the company tries to sneak the clause past you in a contract revision. An illegal contract is unenforceable even if you sign it, so make sure you know your rights before you let an arbitration board decide your case.

Attorney M David Shapiro

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