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Automobile Dealers Push to Arbitrate 

Buyer Would Give Up Right to File Lawsuit

By CHRISTOPHER JENSEN
Newhouse News Service: Times-Picayune
Sunday, August 11, 2002; Page 8

Photo of 2002 Land Rover Discovery 2002 Land Rover Discovery. Photo courtesy of Land Rover.

When Robert Gibson of Bath, Ohio, bought a Land Rover Discovery last fall in Akron, he got a four-wheel-drive but lost the grip on his legal rights.

Gibson says he didn't read the back of the sales contract and wound up forfeiting his right to sue the dealer if something went wrong.

"It is terrible. They point out all the good points, but not that clause," Gibson said.

An increasing number of car dealers nationwide are trying to get their customers to surrender their day in court in favor of arbitration, in which an arbitrator -- not a judge or jury -- makes the decision, said Paul Bland, a senior staff lawyer with the Trial Lawyers for Public Justice, a consumer advocacy group in Washington.

Arbitration advocates said arbitration helps consumers and dealers settle disputes quickly and less expensively than going through the courts. Those opposed to arbitration are primarily lawyers worried about losing substantial fees, said Gary Adams, president of the Greater Cleveland Automobile Dealers' Association.

But arbitration can put consumers at a serious disadvantage by eliminating their right to go to court, to appeal an unfavorable decision and to require the other side to provide documents that could support their case, said Reggie James, an official with Consumers Union, the nonprofit publisher of Consumer Reports magazine.

Photo of Law Professor Jean Sternlight. Jean Sternlight, Univ. of Missouri School of Law

Consumers can also be hurt because without the dispute being aired in court, it is harder for the public to learn about defects or problems with a dealership, said Jean Sternlight, a professor at the University of Missouri who is nationally known for her studies of arbitration.

Dealers say arbitration is good for consumers. However, the National Automobile Dealers Association doesn't feel it is good for dealers -- if the dealers are the ones being forced into it.

The association has been lobbying Congress for a law that would stop automakers from imposing arbitration on dealers as part of their franchise agreements.

"For the car dealers to be asking for this is unintentionally hilarious," said Bland, of the trial lawyers' group.

Adams said arbitrators do a good and impartial job. The objection of the national dealers association, he said, is that the automakers want to set the rules instead of relying on an independent organization, such as the American Arbitration Association.

The arbitration association "is a long-standing, well-established arbitration provider, so it does offer some comfort," Sternlight said. "But where the concern comes up is if arbitration is imposed on people who don't have a choice."

A serious problem with arbitration, Bland said, is that under federal law, even if the arbitrator makes a serious error, there is no meaningful way to appeal. Consumers do have limited ability to force the dealer to provide records and information that may be
crucial to their case, he said.

And then there's the impartiality of the arbitrator, Consumers Union's James said. The theory is that the arbitration companies want to stay in business and an arbitrator may figure too many unfavorable decisions could result in them being fired.

"These things are popular with industry because they win their cases . . . and that should give consumers pause," James said.

Consumer advocates say the biggest problem is when buyers don't know they agreed to arbitration or don't understand the implications.

Gibson, for instance, said he didn't find out he had agreed to arbitration until he hired Dean Young's Akron law firm to sue Land Rover Akron. The suit says the dealership did not inform Gibson that his Discovery had been damaged in an accident at the dealership
before he bought it.

David Walter, an owner of Land Rover Akron, declined to comment because the matter is in litigation.

There are several reasons arbitration is attractive to dealers, Sternlight said. Arbitration can be less expensive than going to court, and if the case is lost, there is the hope an arbitrator will award less than a judge or jury.

Finally, some dealers may find it comforting that consumers who have agreed to arbitration agreements could face trouble getting a lawyer to represent them. Those consumers also may legally be excluded from a class-action suit, which can involve huge legal expenses and awards.

If a dealer insists on keeping an arbitration clause in a sales contract, lawyer Bland has this advice: "Consumers shouldn't buy products at a company that insists they give up their . . . rights."

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