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Arbitration Agreements

Arbitration agreements are very common. More than likely, you have signed an arbitration agreement at some point in your life. Whether it was a requirement after accepting an employment offer or included in your contract with your cell phone or cable provider. Many people overlook arbitration agreements because they are contained in lengthy contracts and/ or in small print. It is very common for people to glance over arbitration agreements but, it is a good practice to read everything before you sign it. An arbitration agreement is a contract that provides that a party agrees to bring legal claims to arbitration, rather than filing a lawsuit. Arbitration occurs before an arbitrator, who is a neutral party who decides who wins, as opposed to a judge or jury in a court of law.

Arbitration may be binding or non-binding. If the arbitration agreement states that the arbitration is binding, the arbitrator’s decision is final and it may not be appealed, unless the appealing party can show that the arbitrator was biased, fraudulent or any other extreme circumstances. Non-binding arbitration may be appealed if either party disagrees with the arbitrator’s decision. If an arbitration decision is appealed, the matter will likely result in a lawsuit and trial. The usual purpose of an arbitration agreement is to reduce cost, avoid publicity and to keep the dispute private to avoid reputational damage.

There is a large number of well-known companies who have faced challenges from employees in an attempt to invalidate arbitration agreements. Such companies include: Citi Bank, Bank of America and Jack in the Box, Inc.

In 2015, the Supreme Court ruled that customers could not bring a class action lawsuit against DirecTV, but that they instead had to pursue individual arbitration with DirecTV. The Supreme Court decision stemmed from a 2008 lawsuit where two consumers disagreed with DirecTV’s early termination fees. Despite the 6-to-3 vote, Justice Ginsburg wrote a dissent that stated: “these decisions have predictably resulted in the deprivation of consumers rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer protection laws.”

Recently, this past January, the United States Supreme Court agreed to decide whether or not companies may force their employees to sign arbitration agreements as opposed to suing them for work related legal claims as a group. The appeal is a result of three lower court rulings that involved the legality of agreements signed by employees which required them to arbitrate employer disputes as opposed to bringing class-action law suits with fellow co-workers. The Supreme Court will review decisions from the 9th Circuit, the 7th Circuit and the 5th Circuit collectively.

Forcing patrons and employees to arbitrate claims instead of being able to initiate class action lawsuits is very unfair to the aggrieved parties. If you are a business owner, you may oppose this opinion, but the cheapest route is not always the best route. Although businesses are trying to save money, they should still consider a less biased approach to resolve legal issues with customers and/ or employees. In doing so, it could in fact be less reputational damage. For example, it is more likely that a company who has been sued to have more damage done to their reputation if it becomes known that the aggrieved party had to jump through hoops and was bound to an arbitration agreement versus a company who attempts to resolve legal issues in a smooth and non-dominant manner. It will likely make customers less likely to want to do business with the company or to work with the employer.

So, what can you do if you have signed an arbitration agreement, but want to go around the arbitration language? Unfortunately, it is likely that you will be bound by the arbitration agreement. However, there may be a legal reason to get out of the arbitration agreement, such as fraud, duress, undue influence, etc. I highly recommend speaking with an attorney, especially if you were placed under any type of duress, coercion or were forced to sign the agreement against your free will. It is very well possible that the Supreme Court may decide that arbitration agreements are unconstitutional, but in the meantime, you should comply with any contract that you have signed. If you have any concerns regarding the validity and/or enforceability of an arbitration agreement that you are bound by, you should contact an attorney. To speak with one of our highly skilled attorneys regarding your rights, please call our office at (704) 714-1450.

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