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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
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2002 Land Rover Discovery. Photo
courtesy of Land Rover.
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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.
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Jean Sternlight, Univ. of
Missouri School of Law
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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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