Consumers Union Policy on Arbitration and Other ADR Clauses in Standard Form Consumer Contracts
Standard form contracts offered to consumers by commercial parties are increasingly likely to contain clauses requiring the consumer to participate in arbitration or another form of alternative dispute resolution (ADR). These clauses have the potential to prevent consumers from having their claims heard in court. Consumers Union's policy on mandatory arbitration and ADR clauses is designed to promote standards for when these clauses should be permitted to be placed in consumer form contracts, or enforced if found in such contracts, and to promote fair procedures in the implementation of ADR clauses.
ADR, including arbitration, should not be required in consumer form contracts unless the consumer has the option either to decline to engage in the ADR process after the dispute arises or to reject the results of the ADR process. In other words, ADR clauses should be permitted and enforceable in consumer contracts only if the ADR process is: 1) contractually mandated with non-binding results, 2) optional with binding results, or 3) optional with non-binding results.
The ADR process must be fair. The overall fairness of a contractually imposed ADR process should be judged by compliance with the following criteria.
ADR clauses imposed in a consumer form contract must not select an ADR provider if the location of that provider would impose unreasonable travel costs upon the consumer in order to fully participate in the hearing of the claim.
Any consumer contract requiring the consumer to submit to ADR should contain a clear, conspicuous, and understandable disclosure describing the degree to which the consumer gives up any rights he or she otherwise possesses to go to court. Whenever the parties or their agents engage in face-to-face discussions leading to formation of the contract, there should also be a clear oral disclosure.
ADR clauses should not apply to cases where a consumer is seeking injunctive relief, unless, after the dispute arises, the consumer agrees to the ADR process and the ADR decision maker has the power to order injunctive relief.
In order for any ADR provider to be preselected in a consumer form contract, that provider must maintain an index of actions which is open to the public. The index must identify the parties to the disputes it has pending and has resolved in the past five years. The results of its ADR procedures involving individual consumers should also be available, unless the ADR decision maker has found that there is a special need to seal the results of the ADR proceeding.
Whenever the result of ADR will be binding or subject only to limited review, all parties should have access to civil discovery to the degree necessary to the claims and defenses presented. In particular, consumers should always have access to the complete file, if any exists, about their claim or dispute, and to evidence indicating that any problem they allege is part of a larger pattern or practice of the business.
Standard form consumer contract ADR clauses should be invalid if the preselected ADR provider does not require that the officer who presides at the ADR proceeding must swear all the witnesses to tell the truth.
Standard form contract ADR clauses in consumer contracts should be disallowed unless they provide that the consumer may appeal for review of alleged errors.
ADR providers selected in consumer form contracts must provide for waiver of fees and costs for indigent individuals.
ADR clauses in consumer form contracts should be invalid if they select an ADR provider which does not have an effective method of internal review to reduce the risk of selection bias. This is of critical importance. State licensing of ADR providers may also be necessary.
ADR providers selected in consumer form contracts must provide a written statement of the basis for any decision which is binding when issued.
Conflict of interest disclosures should be made by all proposed single ADR decision makers and all who are proposed to serve as a so-called "neutral third." At least the following should be disclosed:
C Names of prior or pending cases involving any party to the ADR agreement or any attorney for any of the parties in which that person is serving or has served as an arbitrator, party or attorney.
C The results of each concluded case involving any of the parties or attorneys for the current case, including the identity of the prevailing party and the date and amount of any award.
After disclosure, the consumer should have the right to reject the proposed decision maker.
ADR should never be used to eliminate or delay a consumer's access to a small claims court action, licensing or other administrative proceeding, or a consumer class action.
JAMS/ENDISPUTE ANNOUNCES MINIMUM STANDARDS OF PROCEDURAL FAIRNESS FOR BINDING ARBITRATIONS OF DISPUTES WITH CONSUMERS
IRVINE, CA, May 12, 1998 -- The leader in Alternative Dispute Resolution (ADR) services is the first in the nation to introduce a policy of Minimum Standards of Procedural Fairness for binding arbitration of disputes with consumers. Accompanying the Minimum Standards of Procedural Fairness, JAMS/Endispute also released its new Financial Services Arbitration Rules and Procedures which apply to both consumer and commercial disputes. JAMS/Endispute=s new Rules and Standards follow on the heels of the introduction of a new national advertising campaign, "Just, People, Just Results" that highlights the importance the firm places in ensuring "Just Results" through a fair and neutral process.
The Rules are specifically designed for binding Arbitrations of disputes or claims that are administered by JAMS/Endispute and in which a claim arises from an agreement for financial services between lending or credit companies and their customers. JAMS/Endispute requires compliance with a minimum set of standards of procedural fairness before accepting an assignment to arbitrate billing, lending, and banking or credit services-related disputes between companies and individual consumers. The new rules comply with the minimum standards.
The new minimum standards ensures consumers in arbitrations of financial disputes before JAMS/Endispute, adequate notice of the arbitration clause, a mutually binding clause, availability of remedies, and the choice to participate in the selection of the neutral arbitrator.
JAMS/Endispute=s new campaign, "Just, People, Just Results." focuses on the dispute resolution process and, ethics, experience, neutrality and competence of its mediators and arbitrators. In setting the standards of procedural fairness for financial services arbitrations, JAMS/Endispute continues to maintain the highest levels of professional conduct, ethics and standards for neutrality as a way of ensuring the integrity of the dispute resolution process.
JAMS/Endispute has more than 28 offices nationwide and resolves approximately 15,000 cases annually. The Company is exclusively served by over 360 neutrals, including former judges, experienced attorneys and other professional mediators and arbitrators. With more than 20 years of experience, JAMS/Endispute offers mediation, arbitration, private jury trials and other programs focused on particular areas of law and special dispute resolution needs, such as employment related disputes.
Arlington, VA, March 26, 1998 -- Voluntary arbitration is quite often a very effective dispute remedy for businesses and consumers. However, dispute settlement procedures that limit a consumer's access to the courts should never be forced on anybody.
That's the message from the Council of Better Business Bureaus, Inc. (CBBB) which today announced its policy regarding pre-dispute, binding arbitration clauses in consumer contracts. Under the policy, adopted by a vote of the CBBB membership, the nation's 135 Better Business Bureaus will only agree to arbitrate such consumer-business disputes when the contract gives fair notice to the consumer of the consequences of agreeing to arbitration and the customer formally acknowledges acceptance of the arbitration clause.
Specifically, the new BBB policy sets a standard, by providing that any contract for the sale of a consumer product or service that requires BBB arbitration to resolve disputes must clearly and conspicuously:
According to Charles Underhill, CBBB's senior vice president responsible for BBB dispute settlement programs, so-called "pre-dispute, binding arbitration clauses" which are agreements to arbitrate that are inserted in sales contracts, have been used historically in contracts involving two business entities or in collective bargaining, where both sides are represented by sophisticated negotiators. In more recent years, however, as the benefits of alternative out-of-court procedures have become more widely recognized, these clauses are appearing more frequently in consumer product and service contracts.
Underhill explained that the BBB believes arbitration often is a very effective remedy for both consumers and businesses. The BBB also believes it is essential that the parties enter these arrangements voluntarily, with a clear understanding of what will be subject to the arbitration agreement, what it will cost, and what rights are given up in return for the opportunity to arbitrate.
Underhill noted that the obligation to arbitrate has frequently been buried in the contract, or very poorly drafted. As a result, he said, “in these cases it is difficult to say that the consumer's agreement to arbitrate is voluntary. Indeed, it is often a complete surprise to consumers when a dispute later arises and they discover the lengthy documents they signed included one of these clauses."
Arbitration has long been encouraged by the BBB as an effective method of resolving marketplace disputes. It still is. However, when businesses use a binding, pre-dispute arbitration clause and name the Better Business Bureau as a provider, they will be required to follow the BBB policy for fair disclosure to consumers and give the BBB notice when they draft such contract provisions.
"We hope other consumer dispute resolution providers will follow our lead," Underhill said.
IN THE STATE COURT OF CARROLL COUNTY
STATE OF GEORGIA
RAY MARLIN CRAWFORD, :
:
Plaintiff, :
:
-vs- : CIVIL ACTION FILE NO. 98 V 641 :
CAVALIER HOMES OF ALABAMA, INC., :
a division of Cavalier Manufacturing, Inc., :
a/k/a CAVALIER HOMES, INC., :
RESULTS ORIENTED, INC. d/b/a :
ASSURED HOUSING, and :
GREEN TREE FINANCIAL SERVICING :
CORPORATION, :
Defendants. :
PLAINTIFF=S SUPPLEMENTAL RESPONSE TO DEFENDANTS= MOTIONS TO STAY AND COMPEL ARBITRATION
Comes now RAY MARLIN CRAWFORD, Plaintiff in the above styled case, and supplements his response to Defendants= Motions To Stay, and shows this court the following:
ARGUMENT AND CITATION OF AUTHORITY
Defendants have argued that the only basis for review of the arbitration clauses in this case by the Court is fraud in the inducement of the arbitration clause itself. Such an argument would forestall the specific language of ' 2 of the FAA which allows courts to give relief where the party opposing arbitration presents "well supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds 'for the revocation of any contract.' " Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 483-84, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (quoting Mitsubishi Motors, 473 U.S. at 627, 105 S.Ct. 3346; 9 U.S.C.A. S 2). Thus, ' 2 "gives States ... method[s] for protecting consumers against unfair pressure to agree to a contract with an unwarranted arbitration provision" both in equity and under principles of contract law. Allied-Bruce Terminix v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995). Generally applicable contract defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration agreements without contravening '2, but courts may not invalidate arbitration agreements under state laws applicable only to arbitration. Doctor's Associates, Inc., et al. v. Casarotto et ux., 517 U.S. 681 (1996)(citations omitted) Doctor=s Associates relied upon by plaintiff, and Prima Paint, relied on by defendants, are not inconsistent; these cases address different issues. Doctor=s Associates interprets Section 2 of the FAA, establishing grounds under which arbitration agreements may be invalidated. Prima Paint interprets Section 4 of the FAA, establishing the jurisdiction of the courts to hear arbitration challenges.
Key to understanding Prima Paint is the ability to view an agreement to arbitrate as one component of a contract. Reading Section 4 of the FAA, the Supreme Court held that in disputes arising from contracts that include an agreement to arbitrate, the courts may only adjudicate challenges that go to the making of the agreement to arbitrate. As a practical matter, some of the factors that would render an arbitration agreement invalid may also demonstrate that the entire contract is invalid; logic also tells us that where an entire agreement is invalid, an arbitration clause contained within is also invalid. Nevertheless, because courts are only authorized to hear challenges to arbitration agreements under the FAA, the pleadings must focus exclusively on the arbitration agreement.
Although fraud in the inducement was the basis of the challenge in Prima Paint, the court did not limit grounds for challenging an arbitration agreement to this one theory. As seen in Doctor=s Associates, a party may challenge an arbitration agreement under any generally applicable contract principles. Georgia case law, including Primerica Financial Services, Inc. v. Wise, 217 Ga.App. 36, 456 S.E.2d 631(1995) cited by the defendants, also holds that the trial court is permitted to consider whether the challenged provisions resulted from the kind of fraud or overwhelming economic power that would provide grounds for the revocation of any contract and that such showing could include, among other things, that enforcement would be unreasonable and unjust.
THE ARBITRATION CLAUSE IN ISSUE IS NOT ENFORCEABLE BECAUSE IT CONFLICTS WITH THE MAGNUSON-MOSS ACT
The Arbitration Clause in issue is not enforceable as against plaintiffs because it is in violation of the Magnuson-Moss Act. A recent Alabama Supreme Court decision confirms that no warrantor as defined by the Magnuson Moss Act may require binding arbitration. Southern Energy Homes v. Lee, 1999 WL 6988 (Ala)(copy provided to Court at hearing) holds that an arbitration clause in a contract with a provider of a written warranty may not be enforced as to any claim against the warrantor wether based upon contract, breach of warranty or fraud.
None of the decisions cited by defendants included a claim that the arbitration clause was in conflict with the Magnuson Moss Act. The Miller v. All Star Carroll Superior Court File No 98-V-01098 case cited by defendants did not raise the issue of the Magnuson Moss Act specifically raised by plaintiff and ruled upon by the Alabama Supreme Court in Southern Energy. Neither did In re: Pate nor Church of Refuge relied upon by defendants involve the Magnuson Moss Act. As shown in the initial response of Plaintiff to the Motions for Stay, the Magnuson Moss Act precludes binding arbitration at a cost to the consumer in the sale of manufactured homes with warranty.
THE ARBITRATION CLAUSES IN ISSUE ARE UNENFORCEABLE BECAUSE THEY ARE UNCONSCIONABLE UNDER GEORGIA LAW
Plaintiff adopts the arguments of the TLPJ Amicus Brief files with the Court as to the unconscionability analysis. The unconscionability cases relied upon by defendants are 60 years old and the more recent pronouncement of Mullis v. Speight Seed Farms are controlling.
A non-inclusive list of some factors courts have considered in determining whether a contract is procedurally unconscionable includes the age, education, intelligence, business acumen and experience of the parties, their relative bargaining power, the conspicuousness and comprehensibility of the contract language, the oppressiveness of the terms, and the presence or absence of a meaningful choice. See, e.g., Fotomat Corp. of Fla. v. Chanda, 464 So.2d 626, 629 (Fla.App. 5 Dist.1985); Wille v. Southwestern Bell Telephone, 219 Kan. 755, 549 P.2d 903, 906-907 (1976) (commercial transaction); Schroeder v. Fageol Motors, 86 Wash.2d 256, 544 P.2d 20, 23 (1975). See also White & Summers, supra, ' 4-3, p. 215, fn. 15. As to the substantive element of unconscionability, courts have focused on matters such as the commercial reasonableness of the contract terms, the purpose and effect of the terms, the allocation of the risks between the parties, and similar public policy concerns. See, e.g., Fotomat Corp. of Fla. v. Chanda, supra, 464 So.2d at 629; A & M Produce Co. v. FMC Corp., supra, 186 Cal.Rptr. at 122 (commercial transaction). See also White & Summers, supra, '' 4-4 through 4-6. We find the procedural-substantive analysis of unconscionability helpful and apply it to the case at bar.
NEC Technologies, Inc. v. Nelson, 267 Ga. 390 (1996)(emphasis supplied).
Recognizing the unfairness and oppressiveness of arbitration provisions, many organizations, including arbitration services such as Consumers Union and JAMS/ENDISPUTE have developed standards for which agreements they will allow. The standards focus on the fairness to the consumer and the notice received by the consumer with respect to the arbitration agreement.
For example:
Consumers Union Policy on Arbitration and Other ADR Clauses in Standard Form Consumer Contracts
Standard form contracts offered to consumers by commercial parties are increasingly likely to contain clauses requiring the consumer to participate in arbitration or another form of alternative dispute resolution (ADR). These clauses have the potential to prevent consumers from having their claims heard in court. Consumers Union's policy on mandatory arbitration and ADR clauses is designed to promote standards for when these clauses should be permitted to be placed in consumer form contracts, or enforced if found in such contracts, and to promote fair procedures in the implementation of ADR clauses.
ADR, including arbitration, should not be required in consumer form contracts unless the consumer has the option either to decline to engage in the ADR process after the dispute arises or to reject the results of the ADR process. In other words, ADR clauses should be permitted and enforceable in consumer contracts only if the ADR process is: 1) contractually mandated with non-binding results, 2) optional with binding results, or 3) optional with non-binding results.
The ADR process must be fair. The overall fairness of a contractually imposed ADR process should be judged by compliance with the following criteria.
ADR clauses imposed in a consumer form contract must not select an ADR provider if the location of that provider would impose unreasonable travel costs upon the consumer in order to fully participate in the hearing of the claim.
Any consumer contract requiring the consumer to submit to ADR should contain a clear, conspicuous, and understandable disclosure describing the degree to which the consumer gives up any rights he or she otherwise possesses to go to court. Whenever the parties or their agents engage in face-to-face discussions leading to formation of the contract, there should also be a clear oral disclosure.
ADR clauses should not apply to cases where a consumer is seeking injunctive relief, unless, after the dispute arises, the consumer agrees to the ADR process and the ADR decision maker has the power to order injunctive relief.
In order for any ADR provider to be preselected in a consumer form contract, that provider must maintain an index of actions which is open to the public. The index must identify the parties to the disputes it has pending and has resolved in the past five years. The results of its ADR procedures involving individual consumers should also be available, unless the ADR decision maker has found that there is a special need to seal the results of the ADR proceeding.
Whenever the result of ADR will be binding or subject only to limited review, all parties should have access to civil discovery to the degree necessary to the claims and defenses presented. In particular, consumers should always have access to the complete file, if any exists, about their claim or dispute, and to evidence indicating that any problem they allege is part of a larger pattern or practice of the business.
Standard form consumer contract ADR clauses should be invalid if the preselected ADR provider does not require that the officer who presides at the ADR proceeding must swear all the witnesses to tell the truth.
Standard form contract ADR clauses in consumer contracts should be disallowed unless they provide that the consumer may appeal for review of alleged errors.
ADR providers selected in consumer form contracts must provide for waiver of fees and costs for indigent individuals.
ADR clauses in consumer form contracts should be invalid if they select an ADR provider which does not have an effective method of internal review to reduce the risk of selection bias. This is of critical importance. State licensing of ADR providers may also be necessary.
ADR providers selected in consumer form contracts must provide a written statement of the basis for any decision which is binding when issued.
Conflict of interest disclosures should be made by all proposed single ADR decision makers and all who are proposed to serve as a so-called "neutral third." At least the following should be disclosed:
C
Names of prior or pending cases involving any party to the ADR agreement or any attorney for any of the parties in which that person is serving or has served as an arbitrator, party or attorney.C
The results of each concluded case involving any of the parties or attorneys for the current case, including the identity of the prevailing party and the date and amount of any award.After disclosure, the consumer should have the right to reject the proposed decision maker.
ADR should never be used to eliminate or delay a consumer's access to a small claims court action, licensing or other administrative proceeding, or a consumer class action. Emphasis Supplied
Also,
JAMS/ENDISPUTE ANNOUNCES MINIMUM STANDARDS OF PROCEDURAL FAIRNESS FOR BINDING ARBITRATIONS OF DISPUTES WITH CONSUMERS
IRVINE, CA, May 12, 1998 -- The leader in Alternative Dispute Resolution (ADR) services is the first in the nation to introduce a policy of Minimum Standards of Procedural Fairness for binding arbitration of disputes with consumers. Accompanying the Minimum Standards of Procedural Fairness, JAMS/Endispute also released its new Financial Services Arbitration Rules and Procedures which apply to both consumer and commercial disputes. JAMS/Endispute=s new Rules and Standards follow on the heels of the introduction of a new national advertising campaign, "Just, People, Just Results" that highlights the importance the firm places in ensuring "Just Results" through a fair and neutral process.
The Rules are specifically designed for binding Arbitrations of disputes or claims that are administered by JAMS/Endispute and in which a claim arises from an agreement for financial services between lending or credit companies and their customers. JAMS/Endispute requires compliance with a minimum set of standards of procedural fairness before accepting an assignment to arbitrate billing, lending, and banking or credit services-related disputes between companies and individual consumers. The new rules comply with the minimum standards.
The new minimum standards ensures consumers in arbitrations of financial disputes before JAMS/Endispute, adequate notice of the arbitration clause, a mutually binding clause, availability of remedies, and the choice to participate in the selection of the neutral arbitrator.
Emphasis supplied
The Council of Better Business Bureaus has the following policy statement regarding Arbitration Agreements referred to them for resolution:
Council of Better Business Bureaus' Policy for Voluntary Consumer/Business Arbitration in Contractual Commitments
The Better Business Bureau system believes that the arbitration of disputes fosters the interests of consumers and the responsible business community best when consumers voluntarily make an informed choice to enter an open and accessible arbitration process offered by an individual business under fair and impartial rules administered by an agency in which the public has confidence. In furtherance of this belief, the Board of Directors of the Council of Better Business Bureaus has adopted the following policy for pre-dispute, binding arbitration (PDBA) clauses which name the Better Business Bureau as an arbitration forum:
THE RIGHT TO BE INFORMED: The Better Business Bureau system believes some information is so critical in making marketplace decisions that it must be provided at the point where purchasing decisions are made. Accordingly, pre-dispute, binding arbitration clauses must clearly and simply:
C Identify the types of disputes that are covered by the arbitration clause, which may not include claims for criminal or statutory violations.
C Identify the arbitration forum and provide a telephone number of the forum that can be used to obtain additional information about the forum.
C Clearly disclose the nature and amount of any fees consumers may have to pay in connection with the filing or administration of their case.
C Identify the standard that will be used as the basis for the arbitrator's decision (e.g. application of law or fairness).
C Advise consumers that the clause affects important legal rights, and that the consumer will not be able to go to court for disputes covered by the clause if the consumer signs the arbitration clause.
REQUIREMENT THAT CONSUMER SEPARATELY SIGN ARBITRATION CLAUSE: In order to ensure that the consumer has knowingly chosen arbitration as the method of resolving disputes covered by the arbitration clause, binding arbitration clauses must contain the following:
C A separate signature line, appearing immediately below the arbitration clause, for the consumer to sign to acknowledge acceptance of the terms of the arbitration clause; and,
C A statement that the consumer will not be bound by the terms of the clause unless the consumer signs on the signature line.
BBB KNOWLEDGE AND CONSENT: The name "Better Business Bureau" is a registered trade mark owned by the Council of Better Business Bureaus, Inc. To ensure the implementation of these protocols and to maintain the public's confidence in the BBB system, any business or organization planning on using a pre-dispute, binding arbitration clause which names the BBB must be submitted to the BBB 30 days prior to any introduction and use in consumer contracts for written BBB consent. In the absence of such submission and consent, the BBB may at its sole discretion decline to administer arbitrations submitted under the clause.
The American Arbitration Association has itself weighed in on arbitration clauses in the consumer context. In the spring of 1997, the American Arbitration Association (AAA) announced the establishment of a National Consumer Disputes Advisory Committee. The stated mission of the Advisory Committee is:
To bring together a broad, diverse, representative national advisory committee to advise the American Arbitration Association in the development of standards and procedures for the equitable resolution of consumer disputes.
The Committee developed a Consumer Due Process Protocol (Protocol).
The Protocol was developed to address the wide range of consumer transactions B those involving the purchase or lease of goods or services for personal, family or household use. These include, among other things, transactions involving: banking, credit cards, home loans and other financial services; health care services; brokerage services; home construction and improvements; insurance; communications; and the purchase and lease of motor vehicles and other personal property. Across this broad spectrum of consumer transactions, the Protocol applies to all possible conflicts B from small claims to complex disputes. In light of these realities, the Advisory Committee sought to develop principles which would establish clear benchmarks for conflict resolution processes involving consumers, while recognizing that a process appropriate in one context may be inappropriate in another. Therefore, the Protocol embodies flexible standards which permit consideration of specific circumstances.
On the issue of pre disclosure of the arbitration provision, the Advisory Committee notes
PRINCIPLE 2. ACCESS TO INFORMATION REGARDING ADR PROGRAM
Providers of goods or services should undertake reasonable measures to provide Consumers with full and accurate information regarding Consumer ADR Programs. At the time the Consumer contracts for goods or services, such measures should include (1) clear and adequate notice regarding the ADR provisions, including a statement indicating whether participation in the ADR Program is mandatory or optional, and (2) reasonable means by which Consumers may obtain additional information regarding the ADR Program. After a dispute arises, Consumers should have access to all information necessary for effective participation in ADR.
Reporter=s Comments
See SPIDR Report on Qualifications at 9 ("Consumers are entitled to know what tasks the neutral...may perform and what tasks they are expected to perform in the course of a particular dispute resolution service.") Cf. SPIDR Principles at 6-7 ("It is the responsibility of...private programs offering dispute resolution services to define clearly the services they provide...[and provide information about the program and Neutrals to the parties.]"); Kaiser Permanente Review and Recommendations 28 (provider of medical services has duty to provide users with "enough information and facts to allow them to understand the actual operation of the arbitration system"); Principles for ADR Provider Organizations 2. At a minimum, Consumers should be provided with (or have prompt access to) written information to explain the process. This should include general information describing each ADR process used and its distinctive features, including:
*the nature and purpose of the process, including the scope of ADR provisions;
*an indication of whether or not the Consumer has a choice regarding use of the process;
*the role of parties and attorneys, if any;
*procedures for selection of Neutrals;
*rules of conduct for Neutrals, and complaint procedures;
*fees and expenses;
*information regarding ADR Program operation, including locations, times of operation, and case processing procedures;
*the availability of special services for non-English speakers, and persons with disabilities; and,
*the availability of alternatives to ADR, including small claims court.
See, e.g., BBB Arbitration Rules (defining arbitration and the roles of various participants; providing "checklist" for Consumers preparing for arbitration; setting forth procedural rules). Cf. Standards for Court-Connected Programs ' 3.2.b. (listing information which courts sponsoring mediation should provide to program users). See also SPIDR Principles at 6-7 (listing information which private programs should offer to parties regarding the program and participating Neutrals). Consumers should also be able to obtain a copy of pertinent rules and procedures. In the case of binding arbitration provisions, there should also be a straightforward explanation of the differences between arbitration and court process. See Principle 11 "Agreements to Arbitrate." Although the Provider of goods or services is charged with the responsibility for making certain that Consumers have access to appropriate information regarding ADR, the Independent ADR Institution has an important role in this area. The Independent ADR Institution must be prepared to communicate to the parties all information necessary for effective use of the ADR process(es), particularly after a dispute arises.
All materials should be prepared in plain straightforward language. As a rule, such information should be in the same language as the principal contract for goods or services. See, e.g., N.Y. Pers. Prop. Law ' 427 (McKinney 1997). See also Standards for Court-Connected Programs ' 3.2.b., Commentary, at 3-4 (If a significant percentage of the population served is monolingual in a particular language, the material should be available in that language.)
Practical Suggestions
An example of a creative approach to providing information about Consumer ADR is provided by a major university medical center=s Health Care Dispute Resolution Program. The medical center provides prospective patients with a written explanation of mediation and arbitration procedures for resolution of health care-related disputes one month before they visit the center to complete the remaining paperwork. As the written materials explain, the program is voluntary; patients are not required to opt for the procedures as a condition to receiving treatment. Patients may contact the center for additional information regarding the processes.
For purposes of allowing Consumers access to information about dispute resolution programs, the AAA makes available an 800 customer service telephone number. In addition, the AAA, like some other Independent ADR Institutions, also has a World Wide Web site; it posts its rules and an explanation of its mediation and arbitration procedures on the Web site.
A panel proposing reforms to a major HMO-sponsored arbitration system recommended the creation of an "ombudsperson program to assist members in navigating the system of dispute resolution." Kaiser Permanente Review and Recommendations 2.43.
SPECIAL PROVISIONS RELATING TO BINDING ARBITRATION
PRINCIPLE 11. AGREEMENTS TO ARBITRATE
Consumers should be given:
clear and adequate notice of the arbitration provision and its consequences, including a statement of its mandatory or optional character;
reasonable access to information regarding the arbitration process, including basic distinctions between arbitration and court proceedings, related costs, and advice as to where they may obtain more complete information regarding arbitration procedures and arbitrator rosters;
notice of the option to make use of applicable small claims court procedures as an alternative to binding arbitration in appropriate cases; and,
a clear statement of the means by which the Consumer may exercise the option (if any) to submit disputes to arbitration or to court process.
Reporter=s Comments
In convening the Advisory Committee which developed this Protocol, the AAA requested that the Committee focus its attention upon due process standards for the conduct of Consumer ADR processes and not directly address the process of forming an agreement to mediate or to arbitrate. Committee deliberations revealed a range of opinions regarding the use of pre-dispute binding arbitration agreements in Consumer contracts. Without taking a position on the appropriateness of such agreements, the Committee developed Principle 11 with the intended purpose of providing guidance to the AAA and similar Independent ADR Institutions in the development of specific arbitration programs within the context of existing law enforcing pre-dispute arbitration agreements. Within this context, Principle 11 emphasizes the importance of knowing, informed assent to arbitration agreements.
Practical Suggestions
Consumers should have clear and adequate notice of the arbitration provision and basic information regarding the process at the time of assent. The appropriate method of giving notice and providing essential information will vary with the circumstances. For example, electronic transactions involving software licensure agreements require different notice procedures than face-to-face negotiations or paper transactions. In all cases, however, there should be some form of conspicuous notice of the agreement to arbitrate and its basic consequences (including comparison to court process, cost information, etc.). In addition, the Consumer should be given the opportunity to acquire additional information regarding the arbitration process. The latter might be obtainable through a mail or Web site address, an 800 number or other means for Consumers to obtain additional information regarding arbitration rules and procedures (such as a brochure available on request).
The following is an example of a possible notice. Ideally, the "notice box" would be sufficiently prominent in the contract document or electronic record so that a Consumer would readily notice it.
NOTICE OF ARBITRATION AGREEMENT: |
This agreement provides that all disputes between you and [PROVIDER] will be resolved by BINDING ARBITRATION. You thus GIVE UP YOUR RIGHT TO GO TO COURT to assert or defend your rights under this contract (EXCEPT for matters that may be taken to SMALL CLAIMS COURT). |