By Kathryn Honecker, Chair of Rose Law Group Class Action Department, and Clark Wu, Law Clerk
Phoenix, Arizona | January 11, 2018
Perhaps. But you’re not alone. Many consumers are quick to accept a retailer’s terms of service after only a quick scan through the fine print or without even opening the terms of service, altogether. Next time you click “I agree” at checkout or sign another contract, it would be worth your while to scan the terms for the word “arbitration,” because you may be signing away some very important rights.
Terms of service are generally onerous documents with many of the important terms buried beneath much legalese. If you’re being asked to accept terms of service (also referred to as terms and conditions or other similar language), you may be able to utilize one of our favorite keyboard shortcuts: Ctrl+F (or Command+F on a Mac). Ctrl+F activates your computer’s “Find” command and allows you to run an electronic text search through most electronic documents. If your search for “arbitration” yields zero results, you’re lucky; but it’s always wise to verify those results by also searching for a word you can see in the document, to make sure the computer is able to read it properly. If arbitration was found in your terms, you need to read that section of the agreement carefully to know what you’re agreeing to and if you have options.
Unnoticed Arbitration Provisions are Everywhere
Arbitration is a term with which many Americans are becoming more familiar. But even if you have never heard of an arbitration provision, you may already be subject to their conditions. That’s because they are already found in millions of consumer contracts, and even some employment agreements. Arbitration agreements are now commonly found in the terms governing online purchases, car leases, banking and credit card user agreements, student loans, service agreements, mobile phone contracts, customer reward programs, and much more.
Some companies even claim that anyone who just visits their website has agreed to arbitrate any future disputes with them—even though the customer was never given a choice to agree to any such terms. With arbitration provisions now so commonplace, it is important to understand what they are and how they may impact you.
So, what is arbitration?
Arbitration is a dispute resolution method that takes place outside our official judicial system. A binding arbitration provision generally requires you, the consumer, to arbitrate any potential legal claims against the company whose products you may have purchased or services you may have used.
The scope of what is arbitrable is governed by the terms of service, which often attempt to be inclusive of any claims you may ever have against the company, including claims for breach of contract, fraud, consumer fraud, misrepresentation, breach of warranty, negligence, and even personal injury and death claims. State laws may affect what claims can be subject to an arbitration provision, so don’t necessarily assume it applies to a claim without speaking with an attorney.
Why wouldn’t I want to use arbitration?
If your future claim is bound by an arbitration provision, this means you lose your right to bring a lawsuit in a court of law, and may only have your complaints heard by a private arbitrator instead of a judge. Often the arbitrator’s fees are paid by the company, which theoretically may create a conflict of interest leading the arbitrator to be more inclined to find in the company’s favor.
When you are forced into arbitration, many of the rights and opportunities that were previously available to you are now at risk. For example, when forced to arbitrate, you may lose:
Your right to have your claims heard by a judge or jury:
Your right to bringing certain types of claims:
Your right to remedies not available in arbitration, such as changes to the company’s practices;
Your right to choose your preferred course of action;
Your ability to appeal the arbitrator’s decision if you don’t agree (decisions are final);
Your ability to join in with other consumers who were harmed and pursue a class action against the company to level the playing field (referred to as a “class action waiver”);
Your ability to tell other consumers the outcome of your complaint against the company (arbitration decisions are confidential); and
Your ability to secure legal counsel to represent you in your claim (given the amount at issue is generally small in relation to the cost of hiring an attorney).
With so much at risk, it is of growing importance to avoid being unknowingly trapped by arbitration provisions, whenever possible.
What can I do to avoid being forced into Arbitration?
Fortunately, some contracts containing arbitration provisions also provide time for consumers to notify the company that they do not want the provision to apply. However, this time to “opt-out” is generally short (e.g., 30 days from the purchase), so you must make this decision before you know that you may have a future claim against the company. This is why it is so important for you to review the terms of service before you check the “I accept the terms of service” box. The arbitration provision should provide instructions regarding how to opt-out, but for more guidance, check out our next article, “How do I opt-out of an arbitration provision?”