What would you do if you went to buy a car and while you were signing the paperwork there was a contract provision that said you had to give up your 2nd Amendment right to own a gun in order to purchase the car? I know that each and every one of my "gun totin" friends would've had some very choice words to say to the salesman regarding the contract and in which body part it could go.
What if your credit card company said you had to give up your right to vote in the next election just for using their credit card? Would you give up your freedom of speech to have a new pool installed at your house? Would you agree to give up your freedom of religion so your mother could go to a nursing home? Of course you wouldn't and you would be appalled if someone asked you to surrender any one of these rights. But every United States citizen gives up a sacred Constitutional right all the time and most don't even know that they do it. We give up our right to a jury trial.
The Seventh Amendment to the United States Constitution preserves our right to a jury trial.It reads as follows: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." The Mississippi Constitution has a similar provision which is located in Article III Section 32: "The right of trial by jury shall remain inviolate, but the legislature may, by enactment, provide that in all civil suits tried in the circuit and chancery court, nine or more jurors may agree on the verdict and return it as the verdict of the jury."
Despite both the Federal and State Constitutions guaranteeing our right to a jury trial, Big Business, medical providers, and Insurance Companies routinely include an "arbitration agreement" in contracts we sign. An arbitration agreement is a provision in which two parties to a contract agree to waive the right to have any dispute heard by a jury. Instead, the parties agree to allow an arbitrator to hear the dispute and decide what should be done. Arbitration agreements work great for business disputes between two companies. The agreements are usually negotiated by attorneys and the terms are spelled out completely. Both parties understand and consent to the arbitration.
However, such is not the case in an arbitration clause between a business and a consumer. When you buy a vehicle, the company has a pre-printed arbitration clause included in the contract. You have no power to alter the terms. You are required to accept the clause "as is". If you don't agree to sign the contract then the car dealership will not sell you the car. These type of contracts are called "contracts of adhesion". Contracts of adhesion is a contract written by a party who has all the bargaining power and writes a contract which is primarily to their advantage. These type of contracts are legal.
I have refused to sign any arbitration agreements when I purchase a car. When I am presented with one I simply state that I will not agree to give up my right to a jury trial. Each and every time I've done that with a car dealership they eventually fold an allow me to mark through the arbitration agreement.
We recently had some word done at our house. One of the contractors wanted us to sign his contract which included an arbitration clause. I advised him that I would not sign it. He checked with his company to see if they would agree to take it out and the company would not. I simply chose another company.
So why do companies include arbitration clauses in consumer related contracts? To be blunt they want to take away your right to sue them if they do something wrong. You should be aware that in most cases the company retains the right to sue YOU in court should you do something wrong. For instance, if your mortgage includes an arbitration clause take a look at it. If you are late on your payments your mortgage company can sue you in court to recover those payments. They will not have to go through arbitration. However, if you wish to sue your mortgage company you will have to go through the arbitration process.
So what is arbitration? I actually had to arbitrate two mortgage fraud cases about 10 years ago. The mortgage company included an arbitration agreement and my clients signed it. They had no clue what it meant. The mortgage company chose to use the rules of the American Arbitration Association. First, you have to pay a filing fee. The minimum fee is $775 for claims between $0 and $10,000. The filing fee raises incrementally thereafter. If your claim is worth between $75,000 and $150,000 the filing fee is nearly $2,000! Keep in mind that it costs around $120 to file a lawsuit in State Court.
After your claim is filed you have to chose an "arbitrator" from a list. The arbitrator will act as your judge and jury. He will charge for his time, usually around $300 an hour. You will also have to pay the arbitrator's expenses (hotel, food, etc.) The arbitrator's fees and expenses are customarily split by the parties. For a typical 3 day arbitration, the arbitrator's fees and expenses could easily exceed $10,000.
You are allowed to conduct discovery during an arbitration hearing. This means your can take depositions, get documents from the opposing party, etc. Any disputes are ruled on by the Arbitrator (and remember he is charging you for his time).
Arbitration hearings are conducted just like trials. Our hearing was conducted in a conference room. We had to pay for a court reporter (another expense). We were able to compel witnesses to attend via subpoenas. I think our hearing lasted close to five (5) days. At the end of the hearing, the Arbitrator asked us to write a brief summarizing our positions and submit them to him. The Arbitrator subsequently issued his opinion and found that our clients were entitled to $71,476 and $61,364.00 respectively. These amounts were reduced by 30% to make up for the Plaintiffs' failure to read the loan documents before signing them. The Arbitrator also awarded us attorneys fees in the amount of $35,000 and $8,500 in costs and fees because of the mortgage company's fraudulent actions. You can read the opinion arbitration.pdf