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West Virginia's Highest Court Holds That a Corporation May Not Use Arbitrators Who Rely on the Corporation for Income Court Finds Arbitration Clause Biased and Unfair
The plaintiffs in Toppings v. Meritech Mortgage Services, Inc., are Margaret and Roger Toppings, an elderly couple who live in Little Buffalo Creek, West Virginia. They survive on their $849 monthly Social Security check. Roger has a seventh-grade education and cannot read, write, or understand written documents. Margaret has a fifth-grade education. The lawsuit alleges that Meritech targets the elderly for loans which typically contain high interest rates, fees and charges. In late 1999, the Toppings took out a home equity loan of approximately $37,000 from Meritech. The loan required them to make monthly payments of $378 for nearly 15 years and then to make a balloon payment of $36,615 to satisfy their debt. When they were handed the loan papers, the Toppings asked to have someone read and explain the papers to them. The closing agent – and insurance agency – hired by Meritech had received no information about the loan documents and knew nothing about them. The Toppings were told they could read the 64 pages when they got home after they signed. The Toppings were unaware of either the balloon payment or the mandatory arbitration clause, which designated the National Arbitration Forum as the arbitration service provider. "Meritech had a profit motive for selecting the National Arbitration Forum to replace judges and juries for all disputes," said F. Paul Bland, Jr. of TLPJ, who also represented the plaintiffs in the oral argument in the West Virginia Supreme Court. "The record shows that the Forum had repeatedly demonstrated favoritism toward lenders over consumers, and that the Forum represented itself to lenders as a way for them to shield themselves from legal accountability. These facts strongly support the Court’s decision." In the Toppings decision, the Court cited a lengthy footnote in a case decided just a few days before, State ex rel. Dunlap v. Berger. In that footnote, the Court stated that "neutrality in the selection and composition of any forum or tribunal is essential to the legal validity of contractual provisions providing for dispute resolution mechanisms," particularly when those provisions are imposed upon consumers in take-it-or-leave it form contracts. The Court held that where a lender selects the decision maker who is compensated on a fee-per-case basis, that is presumptively an impermissible and structurally unfair system. Along with Bland, TLPJ’s legal team included TLPJ Consumer Rights Fellow Michael J. Quirk and Olender Fellow Khalid Elhassan. Links to the plaintiffs’ petition and reply brief are posted on the Briefs and Legal Documents page of TLPJ’s web site, www.tlpj.org. ### Trial Lawyers for Public Justice is the only national public interest law firm dedicated to using trial lawyers’ skills and resources to advance the public good. Founded in 1982, TLPJ utilizes a nationwide network of more than 2,700 trial lawyers to pursue precedent-setting and socially significant litigation. It has a wide-ranging litigation docket in the areas of civil rights and liberties, consumer rights, worker safety, toxic torts, environmental protection, and access to the courts. TLPJ has a special litigation project devoted to fighting mandatory arbitration, including arbitrator bias. TLPJ is the principal project of The TLPJ Foundation, a not-for-profit membership organization. It has offices in Washington, DC, and Oakland, CA. The TLPJ web site address is www.tlpj.org. TLPJ’s West Coast Office can be contacted at (510) 622-8150. TLPJ’s West Virginia State Coordinator is Harry G. Deitzler in Charleston, (304) 345-5667. |
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