How often have you been asked to agree to a contract with so many pages that you just clicked the "Agree" button on your computer or signed the contract, having never read what you agreed to?

The contracts you did not read, very often permit the business to sue you, but prohibits you from taking them to court, there is a waiver for your jury trial rights, and an arbitration clause that requires any claim you have to be decided by an arbitration group which the business choses.  The arbitrator they choose knows that if they rule against the business (or dealership) they will receiver little future income from it.

On September 12, 2013, the Virginia Supreme Court, in Schulling v. Harris, held that a housekeeper who alleged she was severly beaten by her boss for accepting a witness summons for him, had no right to a jury trial since she had signed an arbitration agreement.  In this case, it is alleged that the live-in housekeeper had left her housekeeping business in Michigan and moved to Virginia to work for her boss, relying on his promise of a job "for life" or until retirement.  A year later the boss, an owner of car dealerships, required her to sign one of his dealership's arbitration contracts, or forfeit her job.  The contract identified The National Arbitration Forum (NAF) as the "exclusive" arbitrator.

Instead of permitting this case to go to a jury, since the discredited NAF was out of business, the VA Supreme Court determined that, due to other legalese in the contract, the NAF was not the "exclusive" arbitrator and that some other arbitrator, who was never agreed to by either party, could be substituted.

This case makes me sick.  Not only did the boss avoid a civil trial for allegedly beating up Ms. Harris, but a unanimous Virginia Supreme Court reversed a lower court to allow him to do so.  It is unfair that an individual homeowner can force a live-in housekeeper to sign an agreement that is presumably about money, that waives her right to a jury under the threat of unemployment, with important provisions she does not understand, and which is eventually used to avoid a jury trial for the damages he caused by his assault.

I do not have a problem with people legally contracting for anything they want to, but if a contract contains a waiver of our constitutional right to a jury trial, safe guards should be in place to make sure the waiver is knowing and not the result of unequal bargaining power.  Such safeguards are virtually impossible to create in consumer contracts.  

With increasing frequency businesses are using arbitration agreements in their consumer contracts to avoid jury trials, contracts that consumers have little power to negotiate.  In car sales, the salesman often keeps control of the contracts by holding them so it is difficult for the buyer to read them without being pushy.  He will then only explain parts of the contracts, conveniently not explaing that only the dealer can sue in court, or the waiver of a jury, or that the dealer designates who the arbitration group is.  These form contracts are presented on a take it or leave it basis, the consumer is given little time to read all of the provisions, which they probably would not understand the implications of even if given the time.

Businesses know binding arbitration agreements can be unfair.  In 2001, the car dealers as a group ran to Congress to get protection from mandatory arbitration in their disputes with manufacturers.  They did not want to go through the process they hypocritically are now making their own customers go through.  Consequently, Congress passed a law that exempts car dealers from the Federal Arbitration Act in disputes with the manufactures.

We cannot permit businesses to evade accountability for breaking the law by avoiding jury trials through the use of binding arbitration.  Without a change, sharp practices with consuers will increase and our free market system, the succes of which should be the result of a better product or a better price, rather than deceitful tactics, will be threatened, with the prospect of governement regulations intervening to protect consumers.  

Legislation is now before Congress to prevent arbitration clauses in consumer contracts, but the power of the car dealer lobby will be difficult to overcome.  Call your representatives and ask them to support the Arbitration Fairness Act of 2013.  Senate Bill 878.


John Cole Gayle, Jr.
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Consumer Law Pioneer and Co-Author of Virginia's Lemon Law
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