When a customer is dissatisfied with a service (such as a bank, credit card, cable or internet provider, car dealer, AC repair service, or even nursing home), and efforts at resolving the dispute with customer service get nowhere, the customer may decide to contact a lawyer to determine his or her options. Unfortunately, they are often surprised to learn that those options are severely limited due to mandatory arbitration clauses in the contract they signed when signing up with the service or purchasing a product. Mandatory arbitration clauses can be found in almost any consumer services contract today, and they generally limit the right of a customer to take legal action and present their case to a jury as otherwise guaranteed by the United States and Georgia Constitutions. Arbitration clauses can even be found in employment contracts, and in some cases have been used to deny workers the right to pursue sexual harassment claims in court. In most cases, if properly written, arbitration clauses have been upheld in Georgia.
A recent Houston Chronicle article examined the development and widespread use of arbitration clauses. For example, Wells Fargo recently invoked the arbitration clause it requires its customers to agree to in connection with claims it opened millions of fake accounts in order to boost its bottom line. Arbitration clauses are often hidden in fine print that customers rarely read. While corporations claim that arbitration is a less expensive method of pursuing claims, it is widely believed that arbitrators significantly favor the corporate party, largely because those corporations are frequently before the same arbitrators and have the power to send more (and continuous) business to those arbitrators from whom they receive favorable results. According to the Consumer Financial Protection Bureau, consumers only win 9% of arbitrations brought against financial companies.
Arbitration clauses do not apply only to financial claims. In Georgia, the Georgia Supreme Court recently held that claims against a nursing home for mistreatment of a resident could be subject to mandatory arbitration if the resident signed an agreement before his or her death. Of course, in such cases, the resident is rarely aware of what they are signing, or of the implications of doing so. Although courts can review the results of an arbitration proceeding, state and federal arbitration rules make it highly unlikely that an arbitration ruling will be overturned by the courts.
Arbitration clauses restrict the right to trial by jury and are generally far more favorable to corporate defendants. Whenever possible, it is probably in a customer's best interest to avoid signing contracts that require mandatory binding arbitration. Unfortunately, it is often impossible to do so since individual customers have little to no bargaining power when it comes to the terms of a pre-printed contract. As noted in the Houston Chronicle article, however, some companies are retreating from their use of such clauses because of the costs involved. And there is discussion, both at the state and federal level, or limiting the ability of companies to use binding arbitration clauses, at least in certain cases.