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  Find out how a mandatory arbitration clause can affect your warranty claim
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Mandatory Binding Arbitration Clauses

There has been much litigation regarding mandatory binding arbitration in consumer warranty claims recently. Manufacturers, dealers and finance companies are continuing to insert mandatory binding arbitration clauses in their contracts. These clauses are especially egregious because they impose a cost to the consumer for the arbitration and they are rarely explained to the consumer prior to the signing of the contract. Several courts, notably Alabama (Southern Energy) have struck these clauses down as violative of the Magnuson Moss Warranty Law.

Click here for a summary of recent Arbitration decisions prepared by Georgia State University Law professor Mark Budnitz.

I always suggest that consumers attempt to avoid mandatory binding arbitration of their consumer warranty claims. Recent articles in Consumer Reports and US World News (No Suits for You!) have outlined the pitfalls of mandatory binding arbitration. Fee issues are most important.

Pay-to-Play Requirement Dooms Mandatory Arbitration Agreements

For an example of a case in which the trial court struck down a mandatory binding arbitration clause in a consumer warranty case, see Crawford v. Cavalier Homes and Greentree. For sample briefs see Opposing Mandatory Binding Arbitration Briefs.

Recently, several of the national arbitration forums have recognized the unfairness of mandatory binding arbitration in the consumer context. They have enacted Consumer Protocols for use in determining whether such a clause is enforceable. Most automobile manufacturers agree that their informal dispute mechanism fails to comply with applicable FTC regulations on the program and therefore they do not insist on entry to this program as a prerequisite to filing legal action.

Arbitration Links

• American Arbitration Association
• JAMS
• Canadian Motor Vehicle Arbitration Plan

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