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the dangers of binding mandatory arbitration (bma) clauses


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bma horror stories


i called this dealership — honda san marcos — before i went, and asked whether a buyer is required to sign a binding arbitration clause. i was told no. i went in and negotiated what i considered to be a pretty good deal on a 2007 honda civic ex. however, when the buyer's order was put in front of me, there was the dispute resolution clause with "binding arbitration" stated at least twice! i told them i would not sign it with that clause, and they did everything they could to make me feel foolish about it. they said i will not find a dealership that does not require this. they sent two people out to "explain" the agreement to me. when i finally said i know what it means — i'm a lawyer — they sent out a lawyer to "explain" it to me! i was told that in 18 years, they had never had someone refuse to sign a buyer's order. i said i wasn't refusing to sign a buyer's order — i was refusing to sign a binding arbitration clause! while i was waiting (and they were getting ready to send out person #3), i called another dealership in town (howdy honda in austin) and asked whether they require a buyer to sign such an agreement. i was told no, but who knows if it's true (that's what they said at honda san marcos when i called, too).


an employee lost a job offer when he refused to agree to arbitrate.

e.e.o.c. v. luce, forward, hamilton & scripps, 345 f.3d 742, 745 (9th cir. 2003).


an employee was bound by an agreement to arbitrate she claimed she never even saw.

tinder v. pinker security, 305 f.3d 728, 730-733 (7th cir. 2002).


one employee faced an arbitration panel selected by a company that had an inherent bias in favor of the employer, because almost half of that company's annual income was the employer's fee.

walker v. ryan's family steak houses, inc., 400 f.3d 370, 386 (6th cir. 2005).*


an employee's choice of arbitrators was limited to those originally picked by the employer.

murray v. united food and commercial workers international union, 289 f.3d 297, 304 (4th cir. 2002).*


an employee was presented with an arbitration agreement that allowed the employer — only — to change the terms of the agreement unilaterally. the employee was not allowed to strike this provision before signing it — the company presented this agreement on a 'take-it-or-leave-it' basis.

ingle v. circuit city stores, inc., 328 f.3d 1165, 1179, 1171-72 (9th cir. 2003).*


an employee, who alleged that her co-worker ogled her breasts, gyrated against her from behind, complimented her on her "onion shaped butt," bragged of his sexual prowess, and asked repeatedly for one-night stands, lost her sexual harassment case in mandatory arbitration. she appealed to a court, but lost there too, because arbitrators' decisions are binding even when, as in this case, the judge agrees that under the law the employee should have won.

holding, "private justice," san francisco chronicle on the web (october 7, 2001), [hereafter "private justice"] (smith case).


an employee had to pay her employer's legal fees for the unsuccessful arbitration of her wrongful discharge claim — to the tune of over $207,000.

california state assembly democratic caucus, "assembly member levine presents employee rights act of 2006" (april 18, 2006).


a company's arbitration clause limited an employee's legal rights in the arbitration of his disability, pension benefits, and age discrimination case at seemingly every possible turn — e.g.:

  • the employee had to pay half the costs of arbitration.
  • the arbitration hearing was limited to one day (unless he could prove good cause and unusual circumstances to extend it to two days
  • he could be reinstated only if he could prove that money damages were "insufficient as a remedy."
  • his rights to injunctive relief, attorneys' fees, and punitive damages were limited.

brooks v. traveler's insurance company, 297 f.3d 167, 168-171 (2d cir. 2002).


ouch. a farmer contracted to grow chickens, and then sued for fraud and wrongful termination of contract.

the contract had an arbitration clause. the farmer said the arbitration clause was unconscionable under georgia law because it would be too expensive for her to arbitrate. specifically, the farmer showed that she and her husband own no land, have no cash savings, are on medicaid, get less than $1,000 per month from social security, and are on food stamps. her share (one-half) of the cost of arbitration would be between $27,500 and $29,000.

one problem: as all first year law students know, the question of unconscionability is based on the situation at the time the contract was made — not later on. and the farmer put on no evidence of her financial situation at the time the contract was made.

result: not unconscionable. ordered to proceed to arbitration.

from ross runkel's arbitration blog

 

 

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