Arbitration? Better Tell Them First

Arbitration (a private process by which people settle disputes outside of court) has become increasingly popular with big business, which sees it as a way to avoid being made to answer at the courthouse. Indeed, it is hard to find any large company that does not force its customers to arbitrate disputes. However, a recent decision by a court in Illinois might signal a shift in this trend.

The case involved a dispute between a satellite TV company and a subscriber. The subscriber sued, claiming that the company's late fees violated state law. The company tried to force the subscriber to arbitration, but the court refused to send her because it found the arbitration agreement to be procedurally unconscionable. It noted that the customer did not receive a copy of the agreement until after she had signed up for the service and paid for the equipment, and that the agreement was contained in minuscule type in a long pamphlet included in her first bill. The court may also have been influenced by the fact that the subscriber had no bargaining power, i.e., it was a "take-it-or-leave-it" deal.

Because the only way for the consumer to avoid the arbitration provision was to cancel her service (which would have meant losing the amount she had spent on equipment and incurring a deactivation fee), the court accepted the argument that she had no meaningful option in deciding whether or not to agree to arbitrate her claims. The court went on to find that this lack of a meaningful choice meant that the agreement was so unfair that it could not be enforced.

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