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Arbitration Agreements in Consumer Contracts: Do I have to Arbitrate my Claims?

Almost all consumer contracts contain arbitration agreements. If you look carefully they are there, in force: cars, boats, TV's, software and credit cards are but a few places where you can find these agreements. The arbitration agreement usually provides the choice of AAA (American Arbitration Association), NAF (National Arbitration Forum) or JAMS (Judicial Arbitration and Mediation Service).

The rules are very different than those of the Court and can be very expensive, depending on the situation. Certain agreements might be unenforceable, depending on the wording. There are very specific rules pertaining to the validity of these agreements.

List of issues:

Can I fight the agreement?
How do I file for an arbitration?
Do I pick the consumer arbitration or the commercial arbitration rules?
How do I present my case at the arbitration?
Can I challenge the arbitrator's decision?
What if I win, and how do I get paid?

P.S. - There are consumer arbitration agreements in almost every contract to purchase a car which are placed by the automobile dealerships. There is pending legislation at the Federal level to prohibit the agreements in consumer contracts. It is ironic that the automobile dealers lobbied Congress to prohibit arbitration agreements in their relationships with the manufacturers, such as Ford, General Motors and Chrysler.

If you’re reading this you already know that an arbitration clause in a consumer contract is a commonplace existence. Arbitration clauses are also common in lawyer, employee contracts. Both the New Jersey Supreme Court and the US Supreme Court have ruled over and over again that these clauses are proper in written agreements between parties. The New Jersey Supreme Court and the US Supreme Court have also decided that the limitations provided arbitration clause reason so long as they or reasonable.

Once in a while a court will address problems that exist in arbitration agreements and refuse to enforce agreements. Federal and State Courts have determined the appropriate way to analyze an arbitration clause is based on contract principles. This means that if it is not clear pursuant to the terms of the contract claims are contained in the arbitration agreement will claims are not contained in the arbitration agreement that there will be no arbitration.

Courts have looked at the contract to determine what claims that arbitration will cover and not cover. Courts have held that parties are free to agree what claims can be arbitrated what claims need arbitrate. This record, it must be very clear, and apparent that by looking at the contract , where there are multiple, contracts that the party drafting the agreement intended to arbitration. This is not simple.

It was a case recently decided by the Appellate Division, published, refusing to enforce arbitration clause by the class action claim. In short, the court held that since it was not clear which claims were to be arbitrated in which claims were not the arbitrated the court would refuse to enforce arbitration agreement.

The following was the arbitration clause

The parties also agree to (i) waive any right to pursue any claims arising under this agreement, including statutory, state or federal claims, as a class action arbitration, or (ii) to have an arbitration under this agreement consolidated with any other arbitration or proceeding.

The court held the following:

Similarly in this case, we agree with the trial judge that the reference in the arbitration clauses to "class action arbitration" is potentially confusing. On the one hand, the arbitration clauses state that the parties to the contract agree to arbitrate all claims. On the other hand, "class action arbitration" is waived. Since the agreement seems to preserve other types of claims, only subject to arbitration, and since it does not state explicitly that the consumer may not pursue any class action whatsoever, one might infer that a class action must be brought in the courts.