Is There a Way to Defeat a Mandatory Arbitration Agreement?

Posted on: 12 January 2016

Most companies are wise to the fact that if they make a mistake that causes injuries or losses to other people, they could be on the hook for thousands or even millions of dollars in damages. In an effort to minimize the cost of litigation, more and more companies are requiring customers and employees to agree to arbitration clauses that essentially eliminates a person's right to file a lawsuit against the company. Here's more information about this issue and a few ideas on how you can get around this restriction.

Why Companies Prefer Arbitration

Arbitration is a type of dispute resolution similar to mediation. A neutral third party listens to both sides of the issue and makes a ruling. Unlike mediation, in which each party retains the right to sue if they don't like the outcome, the decisions made in arbitration are binding. This means that if you obtain an unfavorable outcome, you may be barred from appealing the decision. However, this depends on the language in the contract you signed agreeing to arbitration.

Companies like arbitration because, in high-dollar cases that may require hundreds of hours of an attorney's time, it's generally cheaper than going to court. In low-dollar cases, however, an arbitration clause may have a chilling effect. It can cost up to $750 just to initiate a case with an arbitrator and $200 to $300 per hour afterwards. If the arbitration clause requires the plaintiff to absorb this cost, the person may decline to proceed because the expense exceeds the amount of recovery.

Another reason why companies like mandatory arbitration agreements is that there is, unfortunately, a chance the company will get a biased arbitrator who will decide in its favor regardless of the facts on the table. This is particularly a concern when the company is allowed to pick the professional. While it is possible to request an arbiter be removed from the proceedings, a plaintiff may not realize the person is biased until it's too late and the case has been decided.

Ways to Defeat a Mandatory Arbitration Agreement

Mandatory arbitration clauses can be tough to defeat, especially since judges favor them because these agreements help reduce the number of case that make their way through the court system (thus reducing their workload). However, there are a couple of ways you can nullify the agreement or clause so you can file a lawsuit instead.

One way is to determine if the agreement violates contract law. If it does, then you can have it thrown out. For instance, if you can prove you signed the agreement under duress (e.g., your employer threatened to fire you if you didn't sign), then the contract would be voided. Other things that can void a mandatory arbitration contract include the following:

  • fraud (e.g., someone forged your signature)
  • the agreement is severely one-sided in favor of the defendant
  • one party wasn't competent or of legal age when the contract was signed
  • one person tricked the other into signing the agreement against his or her will
  • the contract goes against the public good (e.g., involves something illegal)

Once you have evidence that the arbitration agreement violates contract law, then you can petition the court to have it nullified.

Another way you can get a mandatory arbitration agreement voided is to show that the clause limits your ability to recover damages to an unfair extent. For instance, if the agreement states you can only recover up to $100 if the arbitrator decides in your favor, the courts may deem this unfair since the amount doesn't even cover the cost of litigation, let alone your losses and damages.

Along those same lines, you could probably also get the clause thrown out if it sets unreasonable deadlines or timetables. The company requires you to file a claim for damages within 24 hours of being injured, for example. The court may find this to be unrealistic and therefore not enforceable.

There are a few other ways you can get around a mandatory arbitration clause so you can receive a personal injury settlement from someone who injured you. Contact an attorney for more ideas about and assistance with this issue.


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During a long road trip, we made an emergency stop at a motel that I wasn't completely comfortable with. Unfortunately, that was the only motel in the area, and we couldn't drive any further safely. While leaving the motel in the morning, the handrail on the steps broke, and my son and husband tumbled down the stairs and got hurt. They were taken by ambulance to a hospital where we spent the next four days. While there, I contacted a few personal injury lawyers to find out what I should do. Find out what you should do in a situation such as this.

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