When you find your perfect new car, you probably aren’t thinking about heading to court any time soon. But if you don’t take the time to carefully read your purchase agreement you could not even have the chance. Find out the risks behind arbitration clauses and why you should add them to your new car buyer watch list.
What You Need to Know About Arbitration Agreements
It’s a basic fact of American life – when an agreement goes awry you have the right to take the matter to court. Lawsuits are filed every day for everything from defective vehicles to unpaid car loans. But increasingly, dealerships are keeping complaints against them out of court, and out of the public eye by adding arbitration agreements to their purchase agreements.
An arbitration agreement says that when a dispute arises related to the contract, either party can insist that the matter be taken to a private decisionmaker – called an arbitrator – instead of to court. As originally conceived, arbitration was designed to give parties more control over the process, resolve disputes quickly and less expensively, and keep sensitive matters private. However, over time, arbitration agreements have become a tool against consumer protection and class action lawsuits.
What Happens if You Sign a Mandatory Arbitration Agreement
By signing arbitration agreements contained in new and used care purchase agreements, customers unknowingly cut off their rights to certain consumer protection methods. Consumers facing poorly manufactured vehicles or misleading advertising practices often join together in class action or mass tort lawsuits. These actions combine hundreds, or sometime thousands of consumer claims into one legal action based on similarities between the cases. Plaintiffs share the attorney fees and expert witness costs, making it affordable to get the relief they deserve.
But mandatory arbitration agreements require each person’s claim to be submitted to individual dispute resolution before a privately paid decision-maker: one plaintiff, one case. Dealerships and auto manufacturers are able to use a mandatory arbitration agreement to dismiss consumers’ mass tort lawsuits and break apart class action lawsuits. The costs associated with individually arbitrating each lemon law claim can cut consumers off from recovery when the cost of bringing the case is more than the potential recovery.
Dealerships Cut Off Consumers’ Access to Court
To take advantage of this, local dealerships incorporate mandatory arbitration provisions into their new and used car purchase agreements. At The Liblang Law Firm, PC, we have seen an increasing number of cases be dismissed or removed from court because of mandatory arbitration language buried in dealerships’ purchase agreements. To protect your access to court watch for language like this:
“Any dispute arising out of or relating to the purchase or lease of the vehicle against the dealer by the Buyer shall be finally settled by arbitration in accordance with the American Arbitration Association Commercial Arbitration Rules by a sole arbitrator. The arbitration shall be governed by the United States Arbitration Act, 9 USC Section 1–16, and judgment upon the award rendered by the Arbitrator(s) may be entered by any court having jurisdiction thereof. The arbitrator(s) are not empowered to award damages in excess of compensatory damages and each party hereby irrevocably waives any damages in excess of compensatory damages.”
What to Do If You See an Arbitration Agreement
When it comes time to sign on a new or used vehicle, make sure you’ve read the purchase agreement carefully, paying special attention for a mandatory arbitration agreement. If it is included in your agreement, strike it out and sign your initials next to the line. This shows you do not agree to arbitrate your disputes.
Many dealers will be willing to enter into a purchase agreement even without the arbitration clause. They value the sale more than the benefits of arbitration. If they won’t let you buy the car without the arbitration clause, you have a choice to make: (1) accept the car along with the knowledge any dispute could be so expensive it isn’t worth it or (2) go somewhere else to buy your vehicle. The hassle of extra shopping could be worth it in the long run if you end up with a lemon.
Dani K. Liblang is a lemon law attorney at The Liblang Law Firm, PC, in Birmingham, Michigan. She represents new and used car buyers in arbitration and in court. If you have had problems with your dealership, contact The Liblang Law Firm, PC, for a free consultation.