We all know that arbitration clauses are used to screw working people who have been done wrong by big businesses. They keep you from getting your case before real judges and juries and force you into secretive, private proceedings where your rights are severely limited and you have no appeal if you lose, no mater how legitimate your case may be. And for that reason, arbitration provisions are everywhere. Big corporations love them.
But arbitration isn’t the end of the world. In some cases, it works out just fine for the consumer. Sure, I’ve lost in arbitration before, but I’ve also won in arbitration, too. The key is knowing how the system works, so you can use it in the right cases to your advantage. And despite its inherent unfairness, there are a few things about arbitration that you can use to your advantage.
First, there’s the cost. Arbitration is expensive. Unlike real courts, which are paid for by court fees and taxpayer dollars, arbitration must be paid for by the parties. Arbitrators don’t work for free. They charge thousands of dollars per case. And in consumer cases, one of the few limits the Supreme Court has upheld in arbitration is that the business can’t foist the entire bill on the consumer. The fees for consumers and employees are required to be similar to the costs of real court – which is a few hundred bucks, typically. Nothing to laugh at, but a fraction of the entire cost of arbitration.
So for instance, the American Arbitration Association currently caps consumer filing fees at $200. But the total cost of initiating arbitration is about $3,000. Whew! And if you start an AAA arbitration case against a business who has looped you into a forced arbitration clause, you have to pay your $200 filing fee, and the business gets a bill from the AAA for about $3,000. This is the first thing about arbitration that businesses hate, and they really don’t want you to know about it. Because guess what happens if they refuse to pay that fee? The AAA can close the case and you can take them to real court. Which, if you have a legitimate case, is terrifying to the corporations.
Use this to your advantage. If a corporation has ripped you off by, for instance, selling you a car with a falsified Carfax report or charging you illegal fees, you can start an arbitration case against them and hit them with an immediate bill for a few thousand bucks. Remember, they have to pay their own lawyers as well, so by the mere filing of the arbitration demand, they are faced with a tough and potentially costly decision. Sometimes, they’re willing to settle with you rather than fork out all that money.
The second thing that businesses dislike about arbitration is that there is no appeal. Sure, that aspect of arbitration has been used to legally screw many a consumer, but what’s good for the goose is good for the gander. If you win in arbitration, there’s nothing they can do about it. In real court, if you win a big judgment against a corporation, you can be almost certain that they’re going to appeal it. And if you live in a state like Alabama with very conservative appellate courts, you’re looking at a very real possibility of having your judgment reversed or at least reduced. Not so in arbitration. If the arbitrator gives you a big award, there isn’t much the business can do about it.
The third thing corporations don’t want you to know about arbitration is that you can use it to compel a business’ case against you out of court. Take, for instance, a credit card lawsuit. If fell behind on your bills with Capital One, they’re eventually going to sue you for the money. But all you have to do is find that credit card agreement and move the court to compel arbitration. Then instead of Capital One getting to use that cheap public justice system, they have to fork out thousands of dollars to bring their case against you in arbitration. They may decide not to bother with it if the amount of money involved doesn’t justify it. And even if they do decide to go through with the arbitration, the arbitration process will take a few months to resolve, which gives you time to either save up money for a settlement or possibly file bankruptcy. Or maybe they’ll decide to work out a reasonable settlement offer with you instead of paying $3,000 to an arbitrator.
Finally, some individual cases are actually good for arbitration. If, for instance, you have a case involving a violation of a consumer rights statute that gives a mandatory damages amount and requires them to pay your lawyer’s fees, then arbitration is not necessarily worse than real court. The classic example here is the Telephone Consumer Protection Act. The TCPA prohibits robocalls, and mandates a statutory penalty of $500 per phone call – $1,500 per phone call if the calls were made knowingly and without your prior express consent. If the arbitrator is following the law (and most of them try to), a legitimate TCPA case is just a math problem. If they robodialed you 20 times, then you’re entitled to $10,000 or $30,000 if the calls were made willfully. Most arbitrators get that, and aren’t going to be shy about awarding such damages. Or if you have an odometer disclosure statement violation, which mandates a penalty of $10,000 plus attorneys’ fees, that can be a good case for arbitration. Arbitrators are lawyers, too, and while they may not be as fair to a complaining consumer as a judge or jury, they aren’t going to totally screw your lawyer. It is very possible to get a good award of attorneys’ fees in arbitration, which ultimately helps you be reducing the amount of money that you owe your lawyer.
At Judson E. Crump, PC, we’re not afraid of arbitration. We’ve successfully taken cases to arbitration and won fair awards for consumers. We know how it works, and we use it to help our clients when we can. If you or someone you know needs help handling a consumer arbitration in Alabama, feel free to call us at 251.272.9148.
Wojciech W. says
Very good arbitration information.
Wish I had known this when manufacturer denied my warranty on a new car years ago.
Will definitely know what to do next time this happens.
Attorney Judson E Crump says
Thanks for your kind words, Mr. Wojciech.
Actually, a manufacturer’s warranty case may not be bound by arbitration, as many arbitration agreements only cover disputes between you and the dealer, not the manufacturer. But if it happens again, feel free to call our office.