Pro and Contracts has done plenty of general contracts over the past 18 months of Fine Print Fridays, but as part of a new series on arbitration, this week we will look specifically at the Arbitration provision in Verizon Wireless’s Customer Agreement. As has been continually expressed groups such as Consumerist, arbitration provisions are generally bad news for the consumer, but necessary if you want the product or service to which it is attached.
As a contracts attorney who is also a realist, I have always been of the mind that although you can’t change these contracts because they are adhesion contracts, you should at least know how you are going to be screwed before it actually happens. That is the purpose behind Fine Print Friday, and it will be the purpose behind Pro and Contracts’ new series on arbitration.
So, in much the same format as prior Fine Print Friday installments, I will go through the Verizon Wireless Customer Agreement Arbitration Provision, and pull out the points that are most important, most likely to cause you headaches, or just the strangest.
1. Location of Arbitration. Strangely, as opposed to the dire picture of a typical arbitration provision by Consumerist (which is quite funny), Verizon’s arbitration provision places the arbitration in the county in which the customer lives (or more specifically, the county of the customer’s billing address). This is a nice feature, although the arbitration requirement isn’t so great.
2. Customer’s Choice of Procedure. If the dispute is for less than $10,000, the customer can choose whether the dispute is arbitrated or brought in small claims court (also known as conciliation court, as exemplified by Judge Wapner and Judge Judy). If the customer chooses arbitration (why s/he would choose that option I do not know), then the customer can also choose whether they use the arbitration rules of the American Arbitration Association or the Better Business Bureau’s dispute resolution rules (PDF).
**A quick note on small claims court: Different states have different limits on the amount of money that can be claimed in small claims court. In Minnesota, for instance, the limit is $7,500. So even if a dispute with Verizon is for $9,000 (under $10,000, allowing the customer to choose small claims court), if that customer resides in Minnesota, the most that can be requested in small claims court is $7,500. If the customer wanted the full $9,000, s/he would be restricted to arbitration. Depending on your location, you should check with your small claims court or an attorney before making this choice.
3. Pre-Arbitration Mediation. Prior to arbitration,the customer may opt to take part in an internal (i.e., run by Verizon) mediation. Two important points about this: (1) The mediation is confidential; nothing said during the mediation can be used in any future proceedings, including arbitration or litigation. (2) If the customer opts for the mediation and mediation is not successful, Verizon will pay for any arbitration filing fees, administrative fees, arbitrator fees, and appeal fees. Of course, this potentially makes the arbitrator non-neutral, but it’s money the customer does not have to pay.
4. Settlement Offers. This one is just weird, but I’ll try to break it down. Before arbitration, Verizon may make a settlement offer. If the customer rejects it, is awarded more than the settlement offer, but is awarded less than $5,000, Verizon will pay $5,000 plus attorney’s fees and expenses. If the customer is awarded more than $5,000, Verizon will pay that amount, but that does not say anything about attorney’s fees or expenses, so presumably they will not pay those. Finally, the provision does not address what happens if the customer rejects the settlement offer and is awarded less than that amount. I assume that Verizon will just pay the award at that point, but it is not addressed.
5. Jury Trial Waiver. Although arbitration provisions are generally upheld, the final section of Verizon’s arbitration provision states that a trial by jury is waived. That means that even if you bring a dispute to trial, you cannot have a jury and will be limited to trying it in front of a single judge. Since a jury would be far more likely to side with the consumer rather than the behemoth company (which may have upset members of a jury as well), this is a huge disadvantage for consumers.
A final note: Arbitration provisions are not always upheld; they can be determined to be unenforceable just like any other contract provision. But as with any contract, you should always assume that you will be held to all the provisions in the contract, regardless of how crazy it sounds at the time you sign it. Technically, if you sign it, you agree to it.
This is the first in a series of arbitration-related posts. This post was meant to show you what you might find in a prominent arbitration agreement. Future posts will highlight important concepts in arbitration agreements, as well as enforceability, consequences of arbitration, and examples of other good and bad arbitration agreements.
And as usual, please provide comments on what else you would like to see addressed in this series.
(photo: http://www.flickr.com/photos/31929468@N07/)
About Graham Martin
Graham Martin is a solo practitioner focusing on Contract law (including drafting, review, and litigation). He operates Martin Legal Services, LLC in the Minneapolis-St. Paul area.
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Have you looked at home builder “warranty + surprise arbitration” contracts?