A troubling trend has developed in America wherein citizens have unwittingly given up their right to file a lawsuit, if they are injured as the result of the negligence or even the intentional acts of another, by agreeing to arbitrate disputes. We see these arbitration agreements in numerous contexts, but the most egregious examples occur in nursing home contracts. Upon admission, the nursing home gives the resident or his or her family a book of documents to review and sign. Buried in the middle of the paperwork is an arbitration agreement which expressly provides that should any dispute arise between the nursing home and the resident, it shall be resolved by arbitration. This provision explicitly applies to claims against the nursing home alleging negligence for causing the patient's injury or death.
Residents and their families almost universally sign the arbitration agreement presented to them because they do not understand what they are signing. They either did not notice the arbitration language at all or did not understand it well enough to object. In the most egregious circumstances, the nursing home admission personnel will tell the resident that arbitration is cheaper and quicker than lawsuits filed in our court systems. We strongly disagree with this assertion. You can be assured that if arbitration did not benefit the nursing home, it would not ask residents to arbitrate.
Despite what proponents will tell you, arbitration has few benefits and many drawbacks for the common citizen who has suffered a legal injury.
Arbitrations Are Much More Expensive Than Lawsuits
Companies will try to convince you that arbitration is a cheaper route than a lawsuit. However, arbitrations generally consist of a one to three person arbitration panel. The arbitrators are lawyers and they charge by the hour. Three arbitrators could cost more than $1,000.00 an hour combined, which is split equally between the parties. Depending on the complexity of the litigation, the arbitrators' fees could be in the tens of thousands if not hundreds of thousands of dollars. For a large corporation, arbitrator fees are inconsequential. For most individuals, these fees can be crippling and serve as a significant impediment to pursuing a claim.
The court system is relatively inexpensive. While there are filing fees when a lawsuit is filed, those fees are normally less than $500.00. You don't have to pay for the Judge's time as he or she is paid by the taxpayers. When you file a lawsuit, you and your lawyer can direct all of your resources to proving your case rather than paying for the decision makers' time. Lawyers may not be willing to accept an otherwise meritorious case because the cost of arbitration is too significant when compared to the potential reward. Indeed, litigation is expensive without having to pay arbitration fees. Arbitration fees add to the financial burden and must be considered in evaluating a claim. Even where the lawyer takes on the risk and has a positive outcome for the client, the arbitration fees are litigation expenses, which are taken out of the award/settlement proceeds, thereby substantially reducing the net distribution to the victim.
Our Court system is set up to resolve disputes and it works quite well. Importantly, it is not so costly that it prohibits access to those who have limited resources.
Arbitration Decisions Are Influenced By The Arbitrator's Interest In Getting Hired Again
Most arbitrators are usually lawyers who dedicate their law practice to arbitrating cases. They arbitrate for money. It is how they earn their living. An arbitrator, who renders a big verdict against a corporation, does not get hired again by that company or any company. Corporations will be involved in hundreds if not thousands of arbitrations per year. No fiscally responsible company would hire an arbitrator who has a reputation for giving out multi-million dollar awards to claimants even if the award is completely justified by the evidence. Thus, while arbitrators may claim they are completely unbiased and believe they are, there is always a conscious or subconscious degree of self-preservation implicated in each decision they render. They want to get hired again.
Juries on the other hand do not have any self-interest in the outcome. While it is true that jurors come with their own biases and preconceptions, they never have a financial stake in the outcome of a litigation. They are not trying to convince the parties to hire them again to serve on their next jury. This process is what the Framers of our Constitution envisioned when they drafted it.
There Is Normally No Right To Appeal An Arbitration Decision
Most arbitration decisions are binding. This means when the arbitrator renders his or her decision, all parties must live with it regardless of any errors the arbitrator may have committed during the course of case.
All state courts, including Kentucky, and the Federal Courts, provide a right to appeal a trial judge's decisions. If the trial judge makes a wrong decision and it affects the outcome of the case, an appellate court can reverse and give the losing party another chance to win their case without being tainted by errors. While our trial judges try hard to make the right decision, they are not infallible. The appellate process ensures the integrity of the legal system by correcting errors made by the trial court and by giving all litigants a fair opportunity to win their case.
If an arbitrator is wrong, the losing party must live with the decision regardless if it is contrary to well established precedent. Rarely does arbitration benefit individual claimants. Instead, it benefits big corporations, which is why they routinely insert arbitration clauses in lengthy documents hoping you won't notice them until it is too late.
What can you do to avoid arbitration and maintain your right to trial?
Read Documents Before Signing Them
It is impractical to read everything given to you. When you sign contracts to purchase homes or apply for credit cards, the paperwork is voluminous, written in small print and contains complicated legalese. However, you should still try to scan the document looking for reference to arbitration. If you sign the agreement, the other side will argue that you agreed to arbitrate even if you had no idea arbitration provisions were contained in the document. While our courts may not ultimately enforce the arbitration agreement, the best way to avoid arbitration is to never sign a document requiring it. If you see reference to it, do not sign it. Nursing homes cannot reject patients because they will not agree to arbitrate. So simply refuse to sign it and your right to pursue a lawsuit if the nursing home negligently cares for you or your love one will still be intact.
Other types of companies may be able to legally require arbitration agreements as a condition of their contract. You should consult with an attorney to determine whether they can make you agree to arbitrate as a condition of the contract.
Ask If The Agreement Requires Arbitration
While the contract speaks for itself, it may not be simple for you to understand. The Company's representative is not authorized to lie to you even if the arbitration clause is in writing contained within documents presented to you. You have a right to ask questions and you have a right to honest answers. There is no substitute to reading the contract and understanding it, but certainly a Company that lies to you about what you're signing is going to look bad to a judge and a jury in the future.
Consult A Lawyer
It is unreasonable and impractical to consult a lawyer about every document you sign. It could be costly as well. However, the higher the risk to you, the more careful you should be about what you sign. We've discussed nursing home agreements. The risk that you or a loved one gets injured in a nursing home is significant. Contracts, which you require you to make a significant financial investment, put you at significant risk and you likely do not want to agree to arbitrate. Any contract wherein you agree to perform a service putting yourself at risk of suffering an injury is a situation wherein you do not want to agree to arbitrate. You should consult with a lawyer before signing the contract so you can understand the consequences of what you're signing. If you have signed the document already, a lawyer can assist you in navigating through the legal process to avoid having to arbitrate if there is a way.
Satterley & Kelley is dedicated to fighting for the rights of people who have been injured in a variety of ways. If you have been injured in Kentucky, contact us and we will counsel you on your rights including how to fight an arbitration clause which you were tricked or coerced into signing.