One way that companies prevent consumers from enforcing their rights against fraud and defective products is through arbitration. Forced arbitration clauses are hidden in the small print of many standard consumer contracts. These clauses prevent people from taking companies to court for violating the law. Arbitration is a private process that can be expensive, with little opportunity to discover the facts and documents from the other side, no jury, no judge and no right of appeal. Statistics show that consumers win only a small percent of the time.
Some courts have thrown out such arbitration clauses as unconscionable, in part because consumers have no choice but to agree to the provision when they sign the contracts and have no idea what they are getting themselves into. To avoid having the courts throw out the arbitration clause, some companies are beginning to offer consumers the right to opt-out of arbitration. Most people don’t notice the opt-out clause or don’t understand it, so they ignore it. If the opt-out clause allows you that choice, just say "no" as soon as you buy the product, because once a dispute arises, it may be too late.
Unfortunately, not all arbitration clauses give consumers the right to opt out. In that case, the arbitration clause must be challenged in court. If the clause clear and meets other criteria established by case law, the arbitration agreement is often enforced.
On the other hand, some arbitration clauses are complete gibberish. When arbitration clauses are unconscionable or unintelligible, they may be deemed unenforceable, allowing consumers to retain their right to bring their claims in court. Last week, in a case called Davis v Car Capital Financial, et al, Kemnitzer, Barron & Krieg challenged just such a clause in a car title case and won. The trial court found that there was procedural unconscionability in the preprinted "adhesion" contract, and there was substantive unconscionability in that the bank had already taken advantage of its out-of-court remedy when it repossessed the plaintiff's car. Moreover, the AAA and BBB arbitration clauses were inconsistent and unfair. In its order denying Car Capital's motion to compel arbitration, the court noted, "Not only do BBB's discovery limits impair preparation for the hearing, the arbitrator has sole discretion to deny a party a continuance to respond to an ambush of harmful evidence presented at the hearing." Associate Kristin Kemnitzer successfully argued the motion.