Companies routinely include arbitration clauses in consumer contracts. These clauses commit consumers to binding arbitration; they can also include a waiver of a consumer’s right to class action lawsuits and release a company from liability altogether. However, if a company fails to enforce an arbitration agreement, it is worthless. The knowledgeable consumer law attorneys of Camden & Meridew are well-versed in how to avoid or assert an arbitration clause.

Enforce an Arbitration Agreement or Face Waiver

Almost any kind of contract can contain an agreement to submit to arbitrate a dispute instead of letting it go before a judge or jury. The benefits of arbitration are that disputes can be resolved fairly, quickly, and with less expense than the traditional court system. However, some have pointed out that arbitration clauses may result in a system that prevents average consumers from bringing class action lawsuits or having their cases heard before a jury of their peers.

Regardless, to be relevant, the party seeking arbitration must act to enforce the arbitration agreement. Failure to do so may result in a waiver of arbitration and keep the matter in a judicial forum, possibly leading to unwelcome results in the form of higher damage awards and increased costs and fees.

Considerations for Use of an Arbitration Agreement

Parties to a contract or dispute agree to use alternative dispute resolution (ADR) methods, such as arbitration, to avoid the lengthy and expensive process of litigating in court. If structured properly, arbitration and other ADR methods offer quicker resolutions, lower costs, more confidentiality, and flexibility in the remedies ordered. Although these processes take place outside the judicial system, they are still bound by both federal and state laws, such as the Federal Arbitration Act and the Indiana Uniform Arbitration Act.

An arbitration agreement can be made before or after a dispute arises. In the context of consumer contracts, especially credit card contracts, such clauses are routinely included in the agreement setting the terms for dispute resolution upfront.

Speak Up to Enforce an Arbitration Agreement

An agreement to arbitrate is not self-executing, and a delay in asserting an arbitration clause may result in a waiver of arbitration. This is exactly what happened in the case of Smith v. GC Servs. Ltd. P’ship.

In this case, GC Services (GC) attempted to collect an allegedly unpaid credit card debt of Smith. The credit card contract contained a clause requiring arbitration of all disputes and waived Smith’s right to class action relief. Shortly after GC attempted to collect the debt, Smith filed a class action suit, alleging that GC violated the Fair Debt Collections Practices Act.

GC filed a motion to dismiss but failed to mention the arbitration agreement. After Smith later filed a renewed complaint, GC again failed to raise the arbitration agreement. After 13 months of significant discovery and motion practice, GC finally petitioned the court to compel arbitration. The U.S. District Court for the Southern District of Indiana denied GC’s motion to compel.

Don’t Sit on Your Rights

On appeal, the U.S. Court of Appeals for the Seventh Circuit noted that waiver “encompasses both intentional relinquishments and implicit abandonments of [a] right” and that contractual rights can be waived just like any other provision. The Seventh Circuit affirmed the district court’s finding that GC’s failure to assert the arbitration agreement for so long was inconsistent with a desire to enforce an arbitration agreement and resulted in the waiver of arbitration. The right to arbitrate and the waiver of class action were part of the same clause; therefore, waiver of the right to arbitrate also resulted in the waiver of the right for GC to oppose class certification of the action.

Diligence in asserting the right to arbitrate is incredibly important in preserving that right. Most collection agencies know that consumer agreements contain arbitration clauses and move to compel arbitration. When they do not, common sense dictates that parties should not be protected from their own mistakes. As in many other circumstances, failure to assert your right generally results in its waiver.

Address Arbitration Disputes with Accomplished Counsel

Corey Meridew of Camden & Meridew is experienced in helping both companies and consumers navigate their way through contracts and any arbitration provisions they may contain. Whether you wish to enforce an arbitration agreement or seek to avoid one, we can help. Contact us today by completing this convenient online form or calling us at 317-770-0000.

This website supplies general information about the law but it is provided for informational purposes only. This content does not create an attorney-client relationship and more importantly is not meant to constitute legal advice. You should not act on any of the information contained herein without first consulting an attorney.