(Photo: Getty)

The court ruled the class-action waiver clause, included in every single cellphone contract and many other types of contracts, was "unconscionable," as it denied consumers basic protections. Here's the kill quote from the Opinion: "Courts will not be easily deceived by attempts to unilaterally strip away consumer protections and remedies by efforts to cloak the waiver of important rights under an arbitration clause."

Read full Supreme Court Ruling here.

Court says AT&T can't force arbitration [Seattle Post-Intelligencer] (Thanks to Mark!) (Photo: Todd Kravos)

At issue was whether one of Coffee Beanery's vice presidents, Kevin Shaw, should have been required to disclose his prior conviction for grand larceny to the franchisees, which he didn't do. Under the Maryland Franchise Registration and Disclosure Law, he was required to make this disclosure, presumably to allow potential franchisees the chance to evaluate his franchise sales claims. The Franchise Act was prescient, it turns out, because Shaw did mislead the franchisees involved in the suit, along with several others, and was sanctioned by Maryland's Securities Commissioner.

The franchisees sued Coffee Beanery over these misrepresentations, but were sent to arbitration in accordance with the arbitration clause in their franchise agreement. After the arbitrator found in favor of Coffee Beanery, the franchisees appealed the decision, were denied in district court, and ultimately won in the Sixth Circuit. The court held that the arbitrator's ruling that Shaw was not required to disclose his prior felony, even though Maryland has enacted legislation explicitly stating otherwise, "flies in the face of clearly established legal precedent." The court also reiterated other courts' holdings that an arbitration agreement in a fraudulently induced contract is void.

The Sixth Circuit's opinion was emailed to us, and we couldn't find an easily accessible online version. The case name and number, for those of you with Lexis/Westlaw, is Coffee Beanery v. WW, LLC, No. 07-1830, (6th Cir. 2008).

(Photo: Getty)

For example (emphasis ours):

Congress is taking up legislation this week that will wipe out arbitration provisions in hundreds of millions of consumer contracts — for everything from credit-card agreements to cell phones to health-insurance policies, even a contract for the purchase of a kitchen sink.

Holy sh*t! Not the f*cking kitchen sink! I'm moving to Canada this time, I swear to God!

Anyway, in our august and respected opinion (ha ha ha ha) this WSJ piece was misrepresenting the real issue at hand — whether or not arbitration should be mandatory. The piece of legislation she refers to does not remove your ability to enter into arbitration, a fact that she manages to ignore. She also refutes generalized "anti-arbitration" arguments with studies paid for by the American Arbitration Association — the people who most directly benefit from forcing consumers to use their services.

We could have written a response to the piece, but some kind consumer lawyers sent us one that had been written already and we like it. So, we're just going to link to that and save ourselves some time. In short, however, our point is this: We think the market should be able to decide whether or not arbitration is a better deal for consumers, and in order for it to decide it has to be able to choose.

There's nothing wrong with arbitration, if that's what you want to do, but you should not be forced into it by your employer, your nursing home, or in order to purchase something. Especially a kitchen sink.

Big Business Wants You Out Of The Courtroom [Cranky Greg]
Arbitration Works Better Than Lawsuits [WSJ]

Although there aren't any revelations in the article, it's still nice to see a story critical of arbitration run in a business publication. The volume of the article—BusinessWeek interviews numerous former arbitrators who became disillusioned with the process—makes a pretty compelling case that arbitration is broken, although it doesn't mention any solutions, like passing the Arbitration Fairness Act.

Banks Vs. Consumers (Guess Who Wins) [BusinessWeek]
(Photo: Getty)

Our favorite polling question takes aim at people who support mandatory binding arbitration, but don't quite know what they're supporting:

A majority of those who were initially supportive or unsure of binding arbitration disapprove of arbitration when important information is given about common provisions in consumer contracts. With added information, Americans overwhelmingly disapprove of binding arbitration.

Big shift among binding arbitration supporters. Those who said they approve of, or were not sure about binding arbitration were presented the three following facts:

1. The arbitrator who decides the outcome of the dispute will be selected by the company
2. The consumer may never take legal action against the company over the dispute
3. Binding arbitration applies even in cases where the consumer has been seriously injured by the product or service

When presented with this information, two in three (66%) disapprove of binding arbitration and only one in five (21%) approve. Among those who initially said they were unsure, disapproval is very high (64% disapprove, 6% approve). Disapproval is high even among those who initially approved of arbitration (67% disapprove, 28% approve).

After learning the specifics of contract provisions, Americans overwhelmingly are against binding arbitration. When initial and final disapproval ratings are combined, binding arbitration loses by more than eight to one (81% initial/final disapproval, 10% final approval).

Congress may be unable to do anything about our unpopular President, but 64% of us want them to get off their asses and pass the Arbitration Fairness Act. When they return tomorrow, rested from their holiday break, give 'em a call and tell them to channel our collective hatred of mandatory binding arbitration into action.

New Poll: Americans Say "No Thanks" To Binding Arbitration [Consumer Law & Policy Blog]
Write Your Senator
Write Your Representative
PREVIOUSLY: How To Write To Congress

(Photo: Getty)

[b]eginning before late 1998 or early 1999, Defendants began communicating with each other and their co conspirators concerning the imposition and use of mandatory arbitration clauses.” After preliminary meetings and communications, the banks formed an “Arbitration Coalition” to recruit other credit card issuers into using mandatory arbitration clauses. Over the next four years, the Arbitration Coalition held more meetings, shared plans for the adoption of arbitration clauses, and spun off additional working groups. Ultimately, “Defendants jointly forced unwilling and unaware cardholders to accept arbitration clauses and class action prohibitions on a ‘take-it-or-leave-it basis’ through the joint exercise of immense market power.”

The cardholders argue that the banks’ collusion violated the antitrust laws. According to Plaintiffs-Appellants, the banks conspired in order “to immunize themselves from economic responsibility for antitrust and consumer protection violations, and to reap supra-competitive profits from their cardholders.” The cardholders also contend that the alleged collusion produced several market effects, including the creation of a “non-price trade advantage over cardholders” and the removal of any economic incentive for the banks to comply with antitrust and other laws, thereby shifting the risk and cost of their non-compliance to cardholders. The collusion is also alleged to have resulted in an increase in dispute related costs to individual cardholders (including monitoring the banks’ conduct and seeking relief through costly individual arbitrations), the removal of all non-arbitration credit cards from the market, thereby depriving the cardholders of meaningful choice in the area of credit card services, and a diminution in the overall quality of credit services offered to consumers.

The Complaint sets forth two antitrust claims against the banks. The first claim alleges a conspiracy to impose mandatory arbitration clauses in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The second claim alleges that the banks participated in a group boycott by refusing to issue cards to individuals who did not agree to arbitration, also in violation of Section 1

In 2004, the suit alleges, California resident Elizabeth Marcotte was hit with a $25,0000 award, plus $10,000 in attorneys' fees, in a credit-card collection case. But Ms. Marcotte allegedly wasn't notified about the arbitration, because she was served at an old address, even though she had notified the credit-card company of her new address. The NAF awarded the attorneys' fees without requiring proof that the debt collector actually incurred the fees, according to the suit. Ms. Marcotte wasn't reached for comment.

In another credit-card collection case, the NAF allegedly entered an award against California resident John Sheakley, without responding to his request to appear at a hearing and explain why he didn't owe the purported debt to a bank that was a predecessor of FIA Card Services.

The award issued by an arbitration judge was the first of its kind and prompted Health Net to announce it was scrapping its cancellation practices that are under fire from state regulators, patients and the Los Angeles city attorney.

Arbitrator Sam Cianchetti, a retired Los Angeles County Superior Court judge, found that Health Net violated numerous state laws in canceling Patsy Bates' policy and declared the company's actions "despicable."

Cianchetti also blasted the company for tying employee bonuses to the number of policies canceled and the amount of money saved.

"It's difficult to imagine a policy more reprehensible than tying bonuses to encourage the rescission of health insurance that keeps the public well and alive," he said in a 21-page opinion.

"Bates was contacted by Mr. Robert Torrez, who called regarding health insurance. When advised she already had health insurance, Torrez suggested he might be able to get her a better rate. An appointment was made," reads the arbitration award.

The arbitrator found that HealthNet's agent did not properly explain and review the forms Ms. Bates was required to sign and also changed her weight on the application without her written consent.

"When asked about her weight, she told him her weight on her driver's license was 185lbs. She never told Torrez to change the weight, nor was she aware that the weight had been changed."

After Ms. Bates was diagnosed with breast cancer, HealthNet rescinded her coverage because of the weight change and left her with over $100,000 in unpaid medical bills.

Health Net ordered to pay $9 million after canceling cancer patient's policy [LATimes]
Arbitration Award (PDF) [LA Times]

The 8-1 decision came in a lawsuit by Alex E. Ferrer, a former Florida Circuit Court judge who decides minor civil disputes as a form of TV entertainment.

Ferrer refused to pay a management fee to Arnold Preston after the two men had signed a contract that called for arbitration of any disputes.

Ferrer says Preston is not a licensed talent agent as California law requires.

Preston sought the money by starting a proceeding with the American Arbitration Association in Los Angeles. Ferrer filed a complaint with the California Labor Commissioner, seeking to invalidate the contract for the fees. Ferrer went to court when the labor commissioner said she lacked the power to block the arbitration.

At issue was the reach of the Federal Arbitration Act.

"When parties agree to arbitrate all questions arising under a contract, the FAA supersedes state laws," wrote Justice Ruth Bader Ginsburg.

I looked at him incredulously. "Absolutely!" I responded. "For corporations. The consumer is stripped of their rights and forced into a process that rules against them over 90% of the time."

He counters with decreased legal fees and other selling points, and then hits me with the killer, "If you get an unbiased arbiter, it's the ideal solution."

Do you agree now he's just asking for it?

"There's the issue," I replied. "The consumer doesn't get an unbiased arbiter. The arbiter is chosen by the corporation, and those who don't give the corporation the ruling they want are not chosen again."

He went back to the unbiased point again. He apparently wasn't going to be able to see it from the consumer's side, so I gave up.

But at that point I knew...had it just been me in that dealership, I'd have walked. But my wife has to put up with a lot of my arguments of principle, and this one would have cost her a shiny new vehicle.

(bonus: The first time he made the 'unbiased' argument, he couldn't remember the word 'unbiased'. I had to prompt him.)

- Sean

RELATED:
Said No To The Doctor's Arbitration Agreement
Arbitration Clause Destroys American Dream
Arbitration Firms Are Godless Bloodsuckers
Arbitration Firm Rules Against Consumers 95% Of The Time
9 Reasons To Ban Mandatory Binding Arbitration

Justin says: " I filled out everything the next night (tonight) and got an email right away confirming (Written notice coming in the mail as well.) "

Boo arbitration clauses. Yay, opting out.

Opt Out [H&R Block]

Sex Assault Suit Vs. Halliburton Killed [ABC] (Thanks to Philip!)
RELATED: Mandatory Binding Arbitration Means Alleged Halliburton Rapists Could Go Free

Sorey says when he went in, he told a befuddled cashier that he didn't think that the arbitration notice was enforceable, that anyway he wasn't agreeing to it, and, "I need a taquito and a coffee." He says he sat down, watched some traffic, and ate his taquito. "I didn't choke, I didn't burn myself, and I didn't sue 'em," he reports.

Eat Burger, Waive Right to Sue [Mother Jones]
(Photo: Dan Sorey)

Arbitration Opt Out [Comcast] (Thanks to Stephen!)

Verizon Wireless faces class action over ETFs [RCRWirelessNews] (Thanks to Steve!)

My eyes skimmed over the words... forgo constitutional rights... American Arbitration Association... binding... I thought about all the other arbitration agreements I had signed: cellphones, rental cars, and credit cards—why was it a problem now? I also thought about how I had written post after post about how arbitration strips consumers of their rights... how arbitrators that rule in favor of corporations get most of the work... how I had urged people to support the Arbitration Fairness Act. I signed everything except the arbitration form and slipped it between the papers and handed it back...

I hoped that maybe it would go unnoticed, but the receptionist looked through all the papers and said, "Oh, we need you to sign this one." The acupuncturist arrived and got in the conversation, which went something like this:

ME: I'm sorry, it's nothing against you guys, I have no plans to sue you, I just don't feel comfortable giving up my constitutional rights.
THEM: Well, it's just something we have to have you sign for our malpractice insurance.
ME: Are you going to deny me treatment if I don't sign it?
THEM: We have attorneys come in here all the time and they even say that it wouldn't hold up in a court of law...
ME: Oh, it'll hold up, believe me. Are you going to deny me treatment if I don't sign?

Then they gave in and let me get stabbed with needles without signing an arbitration agreement. I wasn't trying to be a hardass, I just genuinely felt physically distressed when I saw that word staring back at me. ARBITRATION. Consumer Rosa Parks I'm not, but being able to negotiate the contract process, object to what I felt objectionable, and still get the services rendered, felt good.

From the Madison County Record:

Shandie Deaton filed the suit Sept. 18, 2007, one month after she made a purchase on Overstock.com. She alleged her receipt violated FCRA.

The act was passed in 2003 and provides that anyone accepting credit or debit cards may not print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction.

Credit card machines put into use after Jan. 1, 2005, required immediate compliance with FCRA. Machines in use before Jan. 1, 2005, were required to be in compliance by Dec. 4, 2006.

Deaton claimed Overstock.com violated FCRA by printing the expiration date and/or printed more than the last five digits of class members' credit card or debit card numbers on the receipts provided at the point of a sale or transaction between Overstock.com and the class members.

"Overstock.com' violations were not the product of an accident or an isolated oversight," the complaint stated. "Rather, Overstock.com knowingly and intentionally continued to use Devices which were not programmed to, or otherwise did not, comply..."

According to Overstock, customers can freely access their website, however when placing an order, they must agree to the website's terms and conditions before they can continue.

"Any dispute relating in any way to your visit to the Site or to products you purchase through the Site shall be submitted to confidential arbitration in Salt Lake City, Utah," a portion of Overstock's terms and conditions reads.

"To the fullest extent permitted by applicable law, no Arbitration under this agreement shall be joined to an arbitration involving any other party subject to this Agreement, whether through class arbitration proceedings or otherwise."

We took a look at this arbitration clause and noticed that there's an exception to it. If you even "threaten" to violate Overstock.com's intellectual property rights, they reserve the right to haul you into state or federal court in the state of Utah. What a piece of work.

Arbitration, not litigation: Judge dismisses federal class action v. Overstock.com [Madison County Record] (Thanks, Shelley!)
Overstock.com Terms & Conditions

The Quest for a Car, Sans Arbitration Clause [Mother Jones]
PREVIOUSLY: Cars And Binding Mandatory Arbitration
(Photo: Ben Popken)

The power the judge has over the parties is granted by the contract of adhesion they sign to appear. If the defendant loses, the tv product team pays the plaintiff the judgment fee. If the judge finds for the defendant, both parties receive an appearance fee. The judges are not bound by real rules of procedure, evidence, or even behavior. Since it's a contract of adhesion, a decision can only really be successfully appealed if the decision falls outside the scope of what's in the contract.

So while the cases and people may be real, the courts could be held on the bridge of the Starship Enterprise and still have the same effect. It's all just part of the collective hallucination we call television.

The concern is that in making syndi-courts look like real courts, they can warp potential jurors attitudes about how a court case should be conducted. In a survey when asked whether a judge should be aggressive with litigants or express displeasure with testimony, 26.32% of non-frequent viewers said yes, and 63.76% of frequent viewers said yes.

Syndi-Court Justice: Judge Judy and Exploitation of Arbitration (PDF) [ABANET.org]

RELATED: What People On Judge Judy Don't Know

Mandatory arbitration means that all disputes are handled by an extra-judicial arbitration firm whose fees are paid for by the corporations and there's zero appeals. One study found that arbitration firms rule against consumers 95% of the time. Now, this is just a civil case, and with the media attention surrounding her story, there will probably be action by the Justice Department to press criminal charges. Let's hope so because we know arbitration is not going to give her justice.

CNN legal analyst: Alleged Halliburton rapists may go free [Raw Story](Thanks to Tino!)

RELATED
"Halliburton", gang rape, and fear of arbitration: the Jamie Leigh Jones case [Overlawyered]
KBR Statements and memo regarding rape allegations [ABC]

From Mother Jones:

After much hassle, the dealership allowed us to bring home the sales paperwork so we could read it over without the salesman hovering over us. Everything seemed to be above board until we got to the end of the buyer's order and discovered that if we signed the contract, we would waive our rights to sue the dealership in court, before a jury, should any dispute arise after the sale. Instead, as a condition of buying the car, we had to agree to submit to mandatory pre-dispute binding arbitration, handled by the dealership's pre-selected company, the National Arbitration Forum (NAF).

After learning this, we called our sales guy, Carlton Cotton, and told him we wouldn't agree to an arbitration clause, but if they took it out, we'd write a check. "That's not negotiable," he said. Cotton explained that the dealership inserted the clause to make things simpler for everyone. "We think it's fair," he said, and then went on to inform me that we wouldn't be able to buy a car anywhere without agreeing to arbitration. Clauses like this are standard fare in car contracts throughout the region, he told us, so we should just sign the contract or lose the car to another customer.

So we walked. Because there is nothing fair about mandatory arbitration.

Suckers Wanted: How Car Dealers and Other Businesses are Taking Away Your Right to Sue [Mother Jones]
(Photo:smcgee)

If arbitration is so wonderful, why is it mandatory? Are we citizens or subjects?

Are you sure your new home is protected? Are you sure your family, will not join the growing ranks of the homeless? Are you sure you understand arbitration and tort reform? Are you sure that the American Arbitration Association, hasn't stealthily already entered every phase of your life? Do you think you still have the right to a trial by a jury? Do you still think you can sue anyone who wrongs you? Do you still think frivolous lawsuits are those that happen to other people? Do you tire hearing any more about big business flagrantly squashing your rights? Do your eyes glaze over and your mind shut down when you hear all these things? Are you bored by this rhetoric? Is it all just to complicated for you to understand? I understand.

But, please read on. Because you have been majority deluded, confused and overwhelmed ... just so these things will slip right by unnoticed.

If you have a new home, new car, a car lease, a Visa, Master Card, American Express, Discover card, bank account, a cell phone, a storage room, electricity or even an exterminator. YOU have given up your seventh Amendment rights. You have given up your seventh amendment rights, you cannot sue any of these people. Sounds crazy doesn't it? Well, call any of them and ask if you have an arbitration clause in your contract with them ... because you do.

We are bombard daily, with harassing telemarketers, a mailbox full of trash offers and clutter ... our bills are stuffed with slick adds and offers. We don't have time to read all this junk..... And there in lies the problem. Big Business knows you don't. We are the new hurried, fast food, drive by cleaners generation, the multi taskers. ... with more on our plates than we can handle. So big business has used your over burdened life style to their distinct advantage. You are screwed. Those little offers or things you think are privacy propaganda, in your bills, they aren't, they say "if you continue to use our services and do not pay off your account immediately you are now accepted the following terms.....You have now accepted arbitration ... and you didn't even read it.

Not one person in this country, is not bound by an arbitration clause and the shocking part of it ... most don't even know it. But you will, when you become one of the enlightened and destroyed. And believe me you do not want to be.

Ignorance is bliss ... and you can remain blissfully unaware of the dangers lurking, that threaten you, your family, your home and your livelihood. But when it hits you, it will be, a rude awakening ... like a two by four right between the eyes. AM I am trying to scare you? You bet I am. Because many of us do not have the time to watch fear factor, we live it daily. And, you may have just signed on for a guest appearance.

Take your home for instance. You made your down payment. You make your payments on time, you paid your property tax, you have homeowners insurance. Your investment is safe. You are living the American dream. Not so Kimosabie. You have rolled the dice with your future, put all your money on the pass line, and you weren't even aware you were gambling.

Example: You have a lovely new home, all decorated, a manicured lawn, a place for your stuff, and somewhere to come home to. But what happens if you start having problems with that new house? You just call your builder for repairs right? What if he doesn't answer your phone calls, faxes, or emails. What if the problem continues to worsen ... as you try to get him to live up to his moral, and ethical responsibilities. You say well I have a contract. And you do.

Now..... you will take the time to read, all that raft of papers that were shoved at you at closing. Uh oh...earnest money contract, arbitration clause. Closing papers arbitration clause...warranty papers arbitration clause.

Your foundation is cracking, your walls have lines that weren't there before, the carpet is damp and your house is taking on a musty smell. Your children begin to be ill and Fido's' hair falls out. What are you going to do? Your wife is frantic. She is calling neighbors, many experiencing the same sort of problems. Many do not want to admit it and "patch up and dump." Some will get by with it, until the new owner sues them. Yes, the new owner can sue you, just can't sue your big builder. Big business, little business that is how tort reform works.

And yes, you all paid to have your house inspected and had a relator and you called them all. You can start at the governor's office and they will refer you into a vortex of time-consuming, catch 22's that will make you crazy. You will end up lastly at the Heath department. They can try to help you find temporary housing ... soon, or maybe later....if you qualify and of course fill out the paper work.

You have now filled out paper work for every agency in the state. You stay up all night filling out this waste of time. Then bleary eyed drag yourself to your day job. No one understands. They think you are a real putz and offer you their lawyer's phone number...thinking you just are not smart enough to handle your own affairs. Little do they know...yet.

They think they are not in any danger...and that you just do not understand how to hand these things.

You call you insurance company...you know that agency that has you safe in their out stretched hands. That agency you pay those hefty premiums to each month. Guess what, substandard construction and builder defects are not covered items.

You are on the phone with your lawyer, he has looked over your papers, and informs you, YOU cannot sue your builder, you have signed an arbitration clause.

You say, well lets arbitrate ... it is faster and cheaper and my house is deteriorating as we speak, my investment is being destroyed. He really doesn't want the case, but will take it for a substantial upfront fee. He knows neither of you are going to be happy with the outcome, so he gets his upfront. Many of these legal eagles also have arbitration clauses in their own contracts. The contract you must sign to have legal representation. And you have to have a lawyer no matter what AAA arbitration tells you.

Your shower falls out. Black puffy balls are growing out of your carpet. Your windows are leaking, your hardwoods have begun to buckle, the children are sick, their eyes are all red, they have constant sore throats, you are having migraines you think from all the stress, your wife is crying, and her nose is bleeding ...and your cat just died. ( Am I Exaggerating ... No unfortunately, I am not.) I am just reliving part of what happened in our neighborhood, compliments of our greedy, unethical, unscrupulous builder. He sold us our homes after filing a lawsuit against the roofer and subcontractors with no disclosure. Yes, I said, he sued ... the big boys still have the right to sue, this only applies to you and me, the little guys.

Arbitration is great protection for the mass builder. First, most of you can't afford it and second if you can roll out 30 to 100,000 dollars it is still an unfair playing field. The builders team of high priced, sleazy prostitutes can make chopped liver of you in short order. They do this for a living. In our case, one of the builders' law partners, was/is also a AAA arbitrator. You want him to rule on your case?

Why didn't you repair your own house?

First you didn't think that was your responsibility, it was the builders. Second you had no idea the amount of damage and third, when you found out how many thousands of dollars it would cost ... you couldn't afford it.

You hadn't planned on the down payment, the new drapes, the new lawn mower and then repairs? TO A BRAND NEW HOUSE! Did you figure an extra 20 to 150 thousand for that in your budget? Like us, you probably bought a new home so repairs would not be an issue.

Well, guess what else you can't afford? You can't afford arbitration. Nobody tells you what it costs. The American Arbitration Association will not even give you a total cost, but if you can't afford it ... they will be more than happy to send you a form that authorizes them to just charge all their monstrous fees as they occur, on to your credit cards. How ever many it takes. Do I have you attention now? Do you think you have entered the twilight zone. Well, welcome to our world.

Homeless in Houston

Jordan Fogal Please google my name for more information or check out HADD.org or HOBB.org, tort deform

3003 Memorial Court #2407 Houston Texas 77007

713-802-9727

PREVIOUSLY: Tremont Homes Sells Rotten Lemon, Provokes Victimized Homebuyer Into Five-Year Consumer Crusade
Jordan Fogal Responds To Your Comments About The Rotten Lemon Tremont Homes Sold Her

Today's hearing will feature two panels. Four separate law firms will testify, along with the American Arbitration Association and Public Citizen. Join us as we struggle to interpret the Committee's legalese - which may prove just as futile as binding arbitration.
(Photo: xsparrowx)

2:00: Video Link
2:05: Today's commentary is brought to you by both Carey and Meghann in the hope that two pairs of ears will be able to decipher the Committee's legalese.
2:41: FINALLY! The hearing has been called to order.

2:43: The resolution on this feed is terrible. Someone, a Congresswoman - maybe Rep Sanchez (D-CA), is reviewing the history of arbitration.

2:44: Rep Cannon (R-UT) believes that arbitration provides protection for consumers because it's fairer (what?) cheaper, and faster. That's not right. Individual consumers don't have deep pockets, which is why class action waivers are unconscionable.

2:45: Arbitration is so complex and ingrained that this Committee can't possibly handle the topic today. Ok, Congressman, set up a webcam at the Hawk and Dove and we'll meet you there.

2:47: Nobody has proposed banning arbitration - just mandatory arbitration. Consumers would still have the option to forego a trial, but that's a choice they would be empowered to make, a choice they don't currently have.

2:49: Rep. Johnson (D-GA), sponsor of the measure is here, pointing out that people wouldn't voluntarily sign away other constitutional rights.

2:51: Arbitration carries its own anti-consumer charges. The fees to expedite a hearing can cost $500.

2:53: See Cannon, nobody wants to ban arbitration, they merely want to restore consumers' right to a trial.

2:57: One of the panelists is former Georgia Governor Roy Barnes, who is receiving quite the introduction from Rep Johnson - Governor Barnes helped save Georgia from the subprime meltdown and scared the Confederate flag from the Statehouse.

2:59: That was practically a eulogy.

3:01: Onto Laura McCleary of Public Citizen.

3:02: Arbitration allows "rulings that are silly, wacky, or contrary to law..." "They are flawed by design."

3:04: An eight month analysis of 34,000 cases of credit arbitration, data they could access only because California requires disclosure, showed that the 28 arbitrators who handled most cases ruled against consumers 94% of the time.

3:04: Arbitration involving businesses went against the consumer 99% of the time.

3:05: Credit card companies, specifically MBNA, are using mandatory arbitration to circumvent the Fair and Accurate Credit Transaction Act.

3:07: Onto Richard Naimark of the American Arbitration Association (AAA), who wants to find a balanced response to Congress' concerns.

3:08: AAA developed a basic code of conduct that makes arbitration slightly fairer than, say, a Gitmo tribunal. Consumers can have access to counsel, arbitrators must disclose financial interest.

3:10: He's arguing that only 2% of cases go to court, so consumers don't "get their day in court" anyway. The cases don't go to trial because they're settled, not arbitrated, usually because the parties think a jury will rule against them.

3:11: Gov Barnes is branding mandatory binding arbitration as a "contract for a crime." Payday lenders use binding arbitration to circumvent the courts.

3:12: He's challenging Cannon - nobody thinks it's fair to go to arbitration to prove that they are the victim of a crime.

3:13: Arbitration provides a small remedy but does not condemn the criminal action as illegal.

3:14: There are more payday lenders than McDonald's. Frightening.

3:15: Barnes doesn't want people to use arbitration to hide from criminal acts - one of the defenses raised is that if Congress didn't want arbitration used that way, Congress would act.

3:18: Onto nursing homes.

3:19: News to us: Shaving cream softens feces.

3:20: Nursing homes = Abu Ghraib.

3:21: We're struggling to see how this relates to binding arbitration.

3:21: Here we go - families are presented with 50-60 page disclaimers before their loved ones can be admitted.

3:22: Most people don't realize they are waiving their litigation rights to gain admission.

3:23: Because they were offered "the opportunity to sign," courts accept the agreements as valid.

3:23: The costs for arbitrating nursing home issues are significantly higher, as are the rewards.

3:23: Final thought: Mandatory binding arbitration kills grandparents.

3:24: Arbitration dissuades people from pursuing very valid claims. If a credit card company withholds a couple bucks, you won't sue, but if you can't form a class for a class action, the company walks away with oodles.

3:25: Appellate courts have been bench-slapping down such agreements as unconscionable.

3:26: Gov. Barnes: "I got mayhem and murder in the streets." Apparently, no one cares about stopping illegal payday lending in the criminal courts, and arbitration is keeping it out of the civil ones.

3:27: Illegal practices flourish when individual consumers can't pursue their claims as a class.

3:29: Conservatives should be all over this bill. They're all about returning power to the local level, empowering local decision makers. That's what juries are all about.

3:32: Cannon will have another chance to make his point. So far, none of the panelist agree with him. Apparently, soldiers need payday lenders.

3:34: Cannon is picking a fight with McCleary, wondering how much weight to give to her damning study. 'We can't trust any consumer who says "my widget broke"'

3:35: If you arbitrate, you are wrong. "Credit cases are going to against the person who didn't pay their bill."

3:37: McCleary can't convince Cannon because arbitration data isn't readily available - nobody discloses, so Cannon is technically right in saying that her data is narrow, the category is narrow, and the study as a whole is narrow. "The implications are not narrow."

3:38: Maybe if AAA wanted to part with their data, they could produce a story as wide as Cannon.

3:40: Point proven: according to the AAA, 60% of arbitrations are settled before they can reach arbitration - so not every arbitration results in a hearing before an arbitrator. Might as well kick things back to the courts.

3:40: Johnson wants to know how AAA gets their business. (Hint: consumers have no choice!)

3:41: "Unions and businesses primarily" refer to AAA.

3:41: Most arbitrators are lawyers, but not judges. AAA claims that there's no bias in selecting arbitrators, that they look for "senior, respected members of the community."

3:43: There is no court reporter in arbitrations, which means there's no practical way to file an appeal.

3:44: There is a limited right to discovery, as controlled by the arbitrator - the arbitrators who rule against consumers 90% of the time.

3:45: The word right here is fairly creatively used.

3:45: The first panel is excused. Onto the second panel.

3:49: Deborah Williams is 64 and bankrupt thanks to binding mandatory arbitration agreement.

3:49: Her dreams of owning a Coffee Beanery franchise turned to nightmares. The binding agreement required her to purchase all sorts of unnecessary equipment, and a Pepsi contract.

3:51: The average Coffee Beanery lasts three years, and costs $375,000.

3:51: Maryland's AG found that the Coffee Beanery committed fraud - but she was forced to arbitrate.

3:52: The arbitrator had significant financial ties to the Coffee Beanery, and had ruled in their favor repeatedly. The Coffee Beanery's own lawyer doubled as an arbitrator.

3:53: The Coffee Beanery dragged discovery out for over 7 months, because the company knew she couldn't pay the costs, and forced her and her layer to fly to Michigan - 500 miles away - four times for 11 days of hearings.

3:53: The cost of arbitration was over $100,000 - and the arbitrator found that the Maryland AG was wrong, there was no fraud, and that she had to pay penalties to the Coffee Beanery, including their attorney's fees.

3:54: She has lost over $1.5 million to the franchise.

3:55: She is borrowing money from her family just to file for bankruptcy - and even then, she'll need to pay the Coffee Beanery franchise fees over the next 15 years until her contract expires.

3:57: Onto Cathy Ventrell-Monsees of the National Employment Lawyers Association (NELA)

3:57: "Companies from Circuit City to Hooters To Halliburton" use arbitration to limit employee suits.

3:58: Employees are required to sign these agreements despite any laws that prohibit mandatory binding arbitration agreements as a condition of employment.

3:59: Wow, Cathy almost looks like she's going to cry.

3:59: Arbitration is a "modern version of separate and unequal justice for employees."

3:59: "Arbitrators do not need to follow the law. THEY DO NOT EVEN NEED TO KNOW THE LAW."

4:00: Companies continually use the same arbitrators that rule in their favor. As a result, the arbitrators have a direct financial interest in ruling in the companies' favor.

4:00: Pfizer has a 97% success rate.

4:01: Halliburton has an 82% success rate. They need to bum Pfizer's arbitrators. We wonder how Verizon's dinosaur-eating lawyers would fare.

4:02: Onto Peter Rutledge of the The Catholic University of America.

4:04: Arbitration lowers costs for companies, which is passed on in the higher wages, better share prices and lower prices. Thank god.

4:05: "Imagine what the increase in costs would be if arbitration was eliminated altogether." No, no, don't make us imagine the costs! Oh, wait, nobody is saying arbitration should be eliminated! Just that the constitutional right to a trial should be restored.

4:05: "Where are these people going to end up if arbitration is not available?" Court, good professor. They will end up in court, where they belong.

4:06: Rickshaw justice for the many is the alternative? That sounds awesome. That guy was nuts.

4:07: Onto Theodore G. Eppenstein of Eppenstein and Eppenstein - did he really go out to find another Eppenstein? Suspicious.

4:08: He wants to talk about arbitration in securities disputes - something we know absolutely nothing about.

4:09: This guy loves his resume. Enough already.

4:09: "Securities arbitration does not work for the investor."

4:10: The poor guy has been arguing about this for 20 years.

4:11: "The public pool [of investors] isn't pure." Arbitrators are pandering to keep their jobs.

4:12: This guy tells you he's going to say things a lot.
"Let me tell you something."
Ok.
"I'm going to give you examples."
Well, um. Ok.

4:13: He has data. 58% of the time, the customer goes home with nothing except a bill for arbitration.

4:13: Pfizer laughs at the industry's 58% success rate.

4:14: There is a place for arbitration, but it needs to be run independently. Great idea.

4:16: Geekybiker is absolutely right. If you haven't already, tell Congress to support the Arbitration Fairness Act!

4:18: The Chairwoman is sorry for Coffee Beanery woman's experience: Do you feel like you were ripped off? Um, duh.

4:19: Deborah is amazed to hear the professor and the AAA talk about the flaws in arbitration and wants to know: "What are you going to do for me? I lost everything. What are you going to do for me?"

4:21: Chair to the professor: if your data shows that businesses don't prevail, why would they chose to arbitrate?

4:22: According to the prof, a ten-year-old study has useful anecdotes. One corporation spent $1 m winning a case, and legal fees are the root of all evil. Lawyers are such great villains.

4:24: Chairwoman politely says, "You're on crack."

4:24: Consumers' win rate is falling, as is there rate of recovery. Maybe that has something to do with it? Maybe? Bueller?

4:26: The professor is rightly pointing out that some businesses have a higher win rate at trial - but, when they end up in court, the trial is overseen by a judge bound by the law, and both parties have a right to appeal.

4:27: This should be settled with KY wrestling. No one's data is good enough for the other.

4:28: Eppenstein angry. Testimony misrepresented. Rarr, Eppenstein.

4:29: The very threat of arbitration depresses settlement offers.

4:30: Onto Cannon's last stand.

4:30: Cannon wants to know if stockbrokers cheat their investors, won't the investors take their money elsewhere?
Eppenstein: 'If they have any money left!'

4:31: NELA has no issue with a waiver for unions because unions handle arbitration responsibly.

4:32: Not that it's relevant, but we have discovered that Chris Cannon has 8 (eight) kids. EIGHT!
He's never spoken to them at length.
Along with the rest of the planet.
He's like a metronome of bullshit.

4:34: He's now attacking Coffee Beanery woman. It's her fault she got screwed. According to him, "we live in a world of information." If Deborah had only done her homework, she could have kept the $1.5 million now lost forever.

4:35: Buzzers sound in the distance. Floor votes. The end is near.

4:39: Johnson is defending Coffee Beanery woman, implicitly calling Cannon a nut.

4:40: According to Ventrell-Monsees, her story is typical.

4:41: Epperstein says the public never hears about the egregious violations, the systemic raping of justice caused by mandatory binding arbitration.

4:42: Overheard on the video feed from a mystery person: "Unbelievable. I think I'm the only like regular joe blow kinda guy here and I am outraged." @Godai heard a slightly different version.

4:42: We didn't think it possible, but mandatory binding arbitration is even more frighteningly horrific than we knew. God help us all. The hearing is adjourned.

When she received notice of pending arbitration against her, it had no claim attached to it. She didn't even know who was suing her. She sent a letter asking for the case to be dismissed or to be served with an actual claim. She didn't hear from them again until NAF told her they had ruled against her for $46,000. They didn't even respond to her motion.

Takeaway: Scan your monthly credit card statements for any charges you don't remember making and report them as soon as possible. Also, arbitration by companies against consumers is evil. Support the Arbitration Fairness Act.

Stacking the Deck Against Consumers [Yahoo! Finance]

"[T]he bank asks for substantial costs related to the arbitration itself, and those costs are significantly higher than court filing fees. . . . In one case that I handled, the fees alone amounted to $450. Furthermore, the arbitration company sends the arbitrator a judgment form already filled out so that all the arbitrator need do is check the appropriate box... In my case I did not award the bank the litigation-related fees. . . . I never got another case!"

Full article inside...

National Arbitration Forum... weren't those the guys Public Citizen found ruled in favor of companies 95% of the time? Yep, they are.

Mandatory binding arbitration against consumers is a scam. Let's abolish it and keep it where it was designed for, businesses to deal with other businesses.

Sept 2006 [West Virginia Lawyer via Credit Slips
(Photo: Jackass)

The 8-month analysis of 34,000 cases decided by the National Arbitration Forum over a four year period found:

• 188 of the cases were brought before NAF by consumers, 99.6% by corporations
• On one arbitrator's busiest day, assuming an eight-hour workday, he decided a case once every seven minutes. 100% of those were in favor of the business, awarding 100% of the request money.
• 28 NAF arbitrators handled about 9 out of 10 of the cases, ruling for business 95% of the time.
• 120 other arbitrators handled 10% of the cases, ruling for businesses 86% of the time.

"Binding mandatory arbitration is a systematic, privately funded denial of justice for consumers," said Laura MacCleery, director of Public Citizen's Congress Watch division. "It is a get-out-of-jail-free card for corporate hucksters."

The Arbitration Trap: How Credit Card Companies Ensnare Consumers (PDF) [Public Citizen]
Raw data (XLS)
(Photo: Getty)

No doubt Jordan Fogal signed something very similar, if not the same,
before Tremont Homes sold her a self-destructing lemon house. In both cases the arbitration firm is the American Arbitration Association.

DISPUTE RESOLUTION AND CONDITIONAL SALE TO BUILDER AGREEMENT ADDENDUM

SELLER: STANDARD PACIFIC HOMES OF TEXAS, INC.
BUYER'S FULL NAME:
LOT: BLOCK: SUBDIVISION:
SECTION: PLAN NO: JOB NO:
STREET: CITY: FORT WORTH
COUNTY: TARRANT, TEXAS ZIP CODE: 76248

THIS DISPUTE RESOLUTION AND CONDITIONAL SALE TO BUILDER AGREEMENT ADDENDUM TO HOME PURCHASE AGREEMENT ("Dispute Resolution Agreement") constitutes a part of the Contract between Buyer and Seller pertaining to the Property. THIS DISPUTE RESOLUTION AGREEMENT HAS IMPORTANT LEGAL CONSEQUENCES AND SHOULD BE READ THOROUGHLY BEFORE SIGNING. BUYER IS ENCOURAGED TO CONTACT AN ATTORNEY PRIOR TO THE EXECUTION OF THIS DISPUTE RESOLUTION AGREEMENT. Unless otherwise defined herein, all terms used as defined terms in this Dispute Resolution Agreement shall have the meaning given to such terms in the Contract.
1. DEFINITIONS. For purposes of this Dispute Resolution Agreement only: (i) "Seller" means and includes Seller, any director, officer, partner, member, employee, agent, or representative of Seller, any affiliate of Seller (other than affiliated mortgage lender) and any contractor, subcontractor, consultant, design professional, engineer, or supplier who provided labor, services or materials to the Project and who is bound or has agreed to be bound to the following dispute notification and resolution procedures; (ii) "Dispute" means any and all actions or claims by, between or among any Seller party and any Owner, arising out of or in any way relating to the Property, the Project, the Contract, liquidated damages issues under the Contract, the Limited Warranty, and/or any other agreements or duties or liabilities as between any Seller party and an Owner relating to the sale of the Property, or regarding the use or condition of the Property; or the design or construction of or any condition on or affecting the Project, including without limitation construction defects, surveys, soils conditions, grading, specifications, installation of improvements, or disputes which allege strict liability, negligence or breach of implied, express or statutory warranties as to the condition of the Property or other portions of the Project; (iii) "Owner" means Buyer, any individuals or entities comprising Buyer, any representative of Buyer acting with respect to Buyer's rights (including without limitation any class representative or homeowners' association so acting), and any successor or assign of Buyer with respect to the Property, the Contract, the Limited Warranty, or any other agreements or obligations with respect to Seller, the Property, or the Project; (iv) "Project" means the development, construction and marketing of the Property, and the community of which it is a part; and (v) "Limited Warranty" means, when used in the context of a dispute arising prior to the Closing, that certain form of Home Builder's Limited Warranty attached to the Contract as Exhibit A and means, when used in the context of a Dispute arising after the Closing, that certain Home Builder's Limited Warranty issued to Buyer after the Closing substantially in the form of Exhibit A to the Contract.
2. ARBITRATION OF DISPUTES
(a) ARBITRATION UNDER LIMITED WARRANTY. WITH RESPECT TO ALL DISPUTES (WHETHER OR NOT RELATING TO THE LIMITED WARRANTY), SELLER AND OWNER SHALL COMPLY WITH THE DISPUTE RESOLUTION PROCEDURES AND PROVISIONS SPECIFIED IN THE LIMITED WARRANTY. THE LIMITED WARRANTY GENERALLY PROVIDES FOR BINDING ARBITRATION CONDUCTED BY CONSTRUCTION ARBITRATION SERVICES, INC., OR SUCH OTHER REPUTABLE ARBITRATION SERVICE AS PWC (THE ADMINISTRATOR OF THE WARRANTY PROGRAM) SHALL SELECT. THE RULES AND PROCEDURES OF THE DESIGNATED ARBITRATION ORGANIZATION, AS IN EFFECT AT THE TIME THE REQUEST FOR ARBITRATION IS SUBMITTED, WILL BE FOLLOWED. A COPY OF THE APPLICABLE RULES AND PROCEDURES WILL BE DELIVERED TO BUYER UPON REQUEST. BUYER CAN REVIEW THE LIMITED WARRANTY FOR ADDITIONAL DETAILS.
(b) GOOD FAITH NEGOTIATION AND AAA ARBITRATION. IF THE DISPUTE RESOLUTION AND ARBITRATION PROCEDURES AND PROVISIONS SPECIFIED IN THE LIMITED WARRANTY CANNOT BE USED BECAUSE THEY ARE DETERMINED TO BE UNENFORCEABLE OR THE FORUM SPECIFIED IS UNAVAILABLE, SELLER AND BUYER SHALL COMPLY WITH THE DISPUTE RESOLUTION PROCEDURES AND PROVISIONS SET FORTH IN THIS PARAGRAPH 2(b), WHICH PROVIDES FOR GOOD FAITH NEGOTIATION FOLLOWED BY BINDING ARBITRATION WITH THE AMERICAN ARBITRATION ASSOCIATION ("AAA"), IF NECESSARY.
(i) Good Faith Negotiation. In the event of a Dispute, the party asserting the claim shall notify the other party in writing of the Dispute. The writing shall reasonably describe the nature of the claim and any proposed remedy (the "Claim Notice"). Within a reasonable period (not to exceed 60 days) after receipt of the Claim Notice, the parties shall meet and negotiate in good faith, recognizing their mutual interests, in an attempt to reach a just and equitable solution satisfactory to both parties. The provisions of this Paragraph 2(b)(i) shall not apply to a Dispute subject to the provisions of the Texas Residential Construction Liability Act ("RCLA") or the Texas Residential Construction Commission Act ("TRCCA").
(ii) AAA Arbitration. If the parties to the Dispute cannot resolve the claim pursuant to Paragraph 2(b)(i) or Paragraph 2(b)(i) does not apply because the Dispute is covered by the provisions of RCLA or TRCCA, the Dispute shall be submitted for resolution by binding arbitration to the AAA, pursuant to its Supplementary Procedures For Residential Construction Disputes, including the Optional Rules for Pre-Closing Disputes (or any other similar entity offering alternative dispute resolution procedures if the AAA is not available). However, any post-Closing Dispute involving a non-monetary demand or a demand exceeding $200,000 shall be administered and resolved pursuant to the AAA's Procedures for Large, Complex Construction Disputes ("Complex Procedures") by one retired judge selected pursuant to the Complex Procedures from the AAA's Large, Complex Construction Case Panel.
(c) WAIVER OF BUYER LITIGATION RIGHTS. BUYER ACKNOWLEDGES AND AGREES THAT BY AGREEING TO BINDING ARBITRATION AS PROVIDED HEREIN:
(i) BUYER IS GIVING UP ANY RIGHTS BUYER MIGHT POSSESS TO HAVE A DISPUTE LITIGATED IN A COURT OR JURY TRIAL;
(ii) BUYER'S DISCOVERY AND APPEAL RIGHTS WILL BE LIMITED;
(iii) BUYER'S AGREEMENT TO THIS DISPUTE RESOLUTION AGREEMENT IS VOLUNTARY AND BUYER UNDERSTANDS ITS PROVISIONS;
(iv) IF A DISPUTE INVOLVES PROPERTY OR COMMON AREA OWNED OR MANAGED BY OTHERS, INCLUDING A HOMEOWNERS' ASSOCIATION, THE PROCEDURES SET FORTH HEREIN ARE ALSO ACCEPTABLE FOR RESOLVING DISPUTES WITH RESPECT TO SUCH MATTERS AND BUYER WILL TAKE ALL ACTIONS NECESSARY TO SECURE PARTICIPATION BY SUCH OTHER PARTIES IN THE DISPUTE RESOLUTION PROCEDURES SET FORTH HEREIN;
(v) THE HOMEOWNERS' ASSOCIATION FOR THE PROPERTY, IF ANY, AND THE INTEREST OF ALL OWNERS IN THE HOMEOWNERS' ASSOCIATION WILL BE BOUND BY THE DISPUTE RESOLUTION PROCEDURES DESCRIBED HEREIN; AND
(vi) THE FORMAL INITIATION OF BINDING ARBITRATION PURSUANT TO THE TERMS HEREOF SHALL CONSTITUTE THE FILING OF AN ACTION FOR PURPOSES OF INVOKING THE PROVISIONS OF RCLA AND TRCCA. BUYER MUST HAVE COMPLIED WITH SECTIONS 426.005 AND 430.011(b) OF THE TEXAS PROPERTY CODE PRIOR TO INITIATING AN ARBITRATION PROCEEDING AS DESCRIBED HEREIN.
WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT ANY DISPUTES OR CLAIMS OR CONTROVERSIES ARISING OUT OF THE MATTERS INCLUDED WITHIN THESE DISPUTE RESOLUTION PROVISIONS TO BINDING ARBITRATION AS SPECIFIED HEREIN.
BUYER'S INITIAL SELLER'S INITIALS

(d) CHOICE OF LAW AND SCOPE OF ARBITRATOR'S AUTHORITY. All Disputes shall be governed, interpreted and enforced according to the Federal Arbitration Act (9 U.S.C. 1-16), which is designed to encourage use of alternative methods of dispute resolution that avoid costly and potentially lengthy court proceedings. Interpretation and application of these procedures shall conform to Federal court rulings interpreting and applying the Federal Arbitration Act. References to Texas law shall not be construed as a waiver of any rights of the parties under the Federal Arbitration Act or the right of the parties to have the procedures set forth in the Limited Warranty and elsewhere within this Dispute Resolution Agreement interpreted and enforced under the Federal Arbitration Act. However, to the extent necessary, and whenever such laws are not in conflict with other provisions of this Dispute Resolution Agreement or the procedures of any selected alternative dispute resolution service, the arbitrator shall apply the laws of the State of Texas, and the arbitrator's award may be enforced in any court of competent jurisdiction. The arbitrator shall have the authority to try and shall try all issues, whether of fact or law, including without limitation, the validity, scope and enforceability of these dispute resolution provisions, and may issue any remedy or relief that the courts of the State of Texas could issue if presented the same circumstances. In the event of any inconsistency between this Dispute Resolution Agreement and the procedures referenced in Paragraphs 2(a) and 2(b), the terms of this Dispute Resolution Agreement will control.
(e) NO RECOVERY OF ATTORNEYS' FEES OR EXPERT WITNESS FEES. To the fullest extent permitted by law, and except as otherwise set forth herein, Buyer and Seller waive any right to recover attorneys' fees or expert witness fees incurred in any Dispute.
3. WAIVER OF JURY TRIAL. IN THE EVENT THAT THE DISPUTE RESOLUTION PROCEDURES SET FORTH OR REFERENCED HEREIN ARE DETERMINED TO BE INVALID OR UNENFORCEABLE IN WHOLE OR IN PART, SUCH THAT THE DISPUTE PROCEEDS BY WAY OF CIVIL LITIGATION PROCEEDINGS, THE PARTIES NONETHELESS WAIVE ANY AND ALL RIGHTS TO A JURY TRIAL. THE PARTIES MAKE THESE WAIVERS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY.
4. DISPUTES TO BE RESOLVED INDEPENDENTLY. Notwithstanding Paragraph 1(iii), above, Buyer and Seller agree that it is in the best interest of Buyer and Seller that the dispute resolution procedures set forth in this Dispute Resolution Agreement be utilized independently of any actions or dispute resolution procedures involving disputes between Seller and other buyers. Accordingly, Buyer knowingly waives any right to participate in any form of "class," "joint" or "representative" litigation or dispute resolution procedures against Seller. Buyer and Seller make this agreement on the grounds that they wish to assure, in advance, that any disputes, actions or claims by or between Buyer and Seller will not be combined with the disputes, actions or claims by or between Seller and any other buyer. Buyer and Seller include this provision on the additional grounds that: (i) the Property is unique from other properties in the Project, and any potential problems it may suffer will not necessarily be common to other properties; (ii) it may provide Buyer increased ability to control any Dispute involving the Property, (iii) Buyer's interests will not be subordinated to the interests of other parties who might otherwise become involved in these dispute resolution procedures; (iv) this approach is likely to foster faster resolution of most Disputes that may arise; (v) it will help to avoid conflicts of interest among Buyer's and Seller's representatives, and (vi) it is intended to foster better communication between Buyer and Seller focused on resolving the actual issues that may arise in any Dispute between them.
5. DISPUTES UNDER FHA/VA WARRANTY. Notwithstanding the provisions set forth above, this Paragraph 5 shall apply to the extent Buyer is issued a Builder's Limited Warranty Form 107H ("FHA/VA Warranty"). With respect to all Disputes arising out of the FHA/VA warranty ("FHA/VA Warranty Disputes"), Seller and Owner shall comply with the dispute resolution procedures and provisions specified in the FHA/VA Warranty. Specifically, the parties agree that the arbitration of FHA/VA Warranty Disputes shall not be mandatory; provided however, that in the event of an action in a court of law, the waiver of jury trial set forth in Paragraph 3 shall remain effective. All other Disputes shall continue to be governed by the provisions set forth above, including, without limitation, the provisions requiring binding arbitration. However, in the event that Owner files an action in a court of law regarding an FHA/VA Dispute while at the same time pursuing arbitration for other Disputes, Seller may elect to have all Disputes resolved in the court action.
6. CONDITIONAL SALE TO BUILDER
(a) Pursuant to Section 27.0042 of the Texas Property Code, Seller and Buyer agree that if the reasonable cost of repairs necessary to repair a construction defect that is the responsibility of the Seller exceed thirty percent (30%) of the current fair market value of the Property, as determined without reference to the construction defects, then, in an action subject to the RCLA, the Seller may at Seller's sole option (and as an alternative to the damages specified in Section 27.004(g) of the Texas Property Code) elect to purchase the Property for an amount equal to the sum of the following (the "Seller's Purchase Price"): (i) the original Purchase Price of the Property paid by Buyer; (ii) closing costs incurred by the Buyer in connection with the original purchase of the Property; and (iii) the cost of transferring title to the Property to the Seller under this election. Within sixty (60) days after Buyer's receipt from Seller of written notice of Seller's election to purchase the Property in accordance with the terms of this Paragraph 6, and conditioned on the payment by Seller to Buyer of the Seller's Purchase Price, the Buyer shall (i) tender a special warranty deed to the Seller in a form reasonably acceptable to Seller, whereby fee simple title to the Property is conveyed to Seller free of all liens and lien claims as of the date of such conveyance, and (ii) vacate and deliver possession of the Property to Seller, without damage caused by the Buyer, on or before the date of delivery to Seller of such special warranty deed.
(b) In the event of any such election by Seller to purchase the Property under this Paragraph 6, the Buyer may recover, in addition to the Seller's Purchase Price, all of the following:
i. Reasonable and necessary attorney's and expert fees as identified in Section 27.004(g) of the Texas Property Code;
ii. Reimbursement for permanent improvements the Buyer made to the Property after the date the Buyer purchased the Property from the Seller; and
iii. Reasonable costs for the Buyer to move from the Property.
(c) A Seller may not elect to purchase the Property under this Paragraph 6 if:
i. The Home is more than five years old at the time an action is initiated by Buyer under the RCLA; or
ii. The Seller makes such an election later than the 15th day after the date of a final, unappealable determination of a dispute under Subtitle D of the Texas Residential Construction Commission Act, if applicable.
7. SURVIVAL OF PROVISIONS. If any provision to any part of this Dispute Resolution Agreement is for any reason held to be invalid, unenforceable or contrary to any public policy, law, statute and/or ordinance, then the remainder of this Dispute Resolution Agreement shall not be affected thereby and shall remain valid and fully enforceable. Buyer's covenants under this Dispute Resolution Agreement shall survive the Closing.
IN WITNESS WHEREOF, the parties have executed this Dispute Resolution Agreement as of the date of Seller's acceptance below.
ACCEPTED BY:

SELLER:

STANDARD PACIFIC OF TEXAS, INC.

By:

Name: ________________________________________
Title: Seller's Authorized Officer

Date Signed by Seller: ______________ BUYER:

Dated Signed by Buyer:

(Photo: Maulleigh)

High cost: You have to pay a bunch of money, usually at lest $750, just to start a claim.
Biased Arbitrators: Companies are the only repeat customers of arbitration firms so guess who the arbitrators usually find in favor of?
Limited discovery: Good luck getting the necessary evidence in the room.
Prohibition of class actions: Arbitration clauses routinely don't allow you to participate in a class action lawsuit, "only effective remedy for wide-scale scams that rip off individual consumers or farmers in small amounts."
Inconvenient locations: Gas dollars rack up as you trek to their out-of-the way offices.
One-way requirements: The company still gets to sue in a real court if it wants, you however have to go through arbitration monkey court.
No public record: Only businesses requiring arbitration agreements have access to the body of previous arbitration findings — and which firms ruled in their favor.
Limited judicial review: Decisions can only be overturned in cases of fraud or "manifest disregard of the law," very difficult legal positions to establish.
Limited remedies: "Injunctive relief - a court order compelling the offending party to do something, or prohibiting that party from taking some action - cannot be obtained through arbitration. Arbitrators often split the difference between the two sides in awarding damages instead of determining the true costs of injuries. As a result, arbitration awards to consumers and employees are substantially lower than court awards."

And that's nine reasons why you should support the Arbitration Fairness Act.

Ban Mandatory Binding Arbitration [National Association Of Consumer Advocates]
(Photo: Getty)

I'm disappointed that USAA, which is otherwise renown for their customer service and concern for their customer's well-being, would resort to this chicanery. Maybe AMEX is making them do it, I dunno. (update: A reader with a USAA Mastercard writes that he received an arbitration notice as well).

In any event, the notice also says that I have until October 15, 2007, to opt out of the arbitration agreement without penalty simply by signing and mailing in a form, an option I will most certainly be exercising.

If you do not wish to be bound by this arbitration clause, you must notify the Bank in writing within 60 days after receiving a copy of this Agreement. You must send your request to: Arbitration Manager, E*TRADE Bank, Legal Department, 671 North Glebe Road, Arlington, Virginia 22203. Your request must include your account number(s) and a clear statement of your intent, such as "I reject the arbitration clause stated in the Bank's account agreement.

Thank you Ben! Now how do I respond to these comments ... they are the ones I usually get.

First: We did use a licensed realtor.

Two: We did not understand the true ramifications of arbitration, or it's unfairness. No one who has not been caught in this snare does. We did not know that almost always big business wins. We thought it was like, OK kids lets sit down and not argue and fix this situation. We did not know the system was rigged. We did not understand the builders were repeat clients and the arbitrators meal tickets. No one understands arbitration companies are just the middle men. You still have to put on a trial and have all the costs associated: witnesses, subpoenas, expert testimony you even have to pay for the room to hold the arbitration in... We would not have had to pay a judge as we did an arbitrator or room rent or the astronomical fees charged by arbitration companies. Our arbitration fees alone were $9300. dollars. That does not include going to the kangaroo court where the rules of law no longer apply behind close doors. That was nearly $30,000 dollars...

3) We did have an inspector. Without invasive testing, he could not have know what was behind the freshly paint walls. Ask you builder if you can do a little destructive testing before you buy the house and see how far you get. 4) We did get legal advice. We are on our third set of lawyers. One advised us to go into foreclosure and bankruptcy and get on with our lives because in the state of Texas we would never receive any ration of fairness or justice. The builder's lawyers know how to eat up your retainer before your check clears. People make these comments because they still just do not understand. The public cannot accept that this can go on the this county and they have no recourse. The court house doors are blocked. Those who run from trial prove their guilt. If arbitration is so fair why is it mandatory? Thank you for trying to help us all and informing the public. Jordan Fogal

PREVIOUSLY: Tremont Homes Sells Rotten Lemon, Provokes Victimized Homebuyer Into Five-Year Consumer Crusade

My husband Bob and I are senior citizens. Like so many others, we lost our home to foreclosure... not because of sub-prime loans... but because of defective, substandard housing - protected by an arbitration clause. We bought a new house so we wouldn't have to worry about repairs. The first night my husband decided to try out the Jacuzzi tub on the third floor. When he pulled out the stopper, 100 gallons of water crashed though the ceiling. We had been in our new home all of six hours... all I could do was scream as I watched the ceiling fall on our dining room table, water pouring down the walls, filling up the chandelier, and splashing on the new hardwood floors, then finally flooding the garage below..."

After that, we found out we were trapped, as our investment attacked itself and us. All the upstairs lights blew; and when we tried to replace the bulbs, they broke off their rusted bases. The windows were installed upside down, and with the first rains came the leaks. The shower wall fell out, and a disgusting smell permeated our home. Mold grew up out the carpet; and black, spider web tentacles crawled up our walls. We pleaded with our builder for 29 months to please fix our house, but they had taken out insurance against any responsibility - they had inserted an arbitration clause in our earnest money contract. They had also knowingly committed fraud by covering up the defects before they sold to us.

The arbitration clause kept us hostage, since we could not afford over 150,000 dollars to repair our new home. The builders told us that if we continued to complain, their lawyers would take care of us in arbitration. Tremont Homes / Stature Construction, our builder, filed on us with AAA, the American Arbitration Association.

We knew they would not have threatened us with arbitration if it was fair. Come to find out, they had already entered into a contractual agreement with AAA; they were partners. All the burden of proof was on us. We endured 8 months of deadlines and demands while our builder never complied. When we told AAA we couldn't afford the costs, this demented collection agency emailed us blank forms for our credit card information so they could charge the costs as they accrued.

Our case was dismissed from arbitration because the arbitrator was not paid by us, or the builder. After nearly 8 months of torment, I thought that I could now go to court. We filed a suit, charging the builder with fraud. His attorneys dragged us through 10 hearings before the judge ordered us to return to arbitration and sa