A recent case decided by the Second Circuit Court of Appeals resulted in a victory for companies that attempt to gain an upper hand by using unfair arbitration agreements to limit consumers’ options. The Court affirmed the power of arbitration agreements, even those that appear to have been designed solely to make it difficult for consumers to hold companies accountable for their actions.
The case, Duran v. The J. Hass Group, involved a woman who sued the scam artists behind a debt relief company that ran off with the last of the woman’s money and left her with nothing. The woman, Bernadita Duran paid The J. Hass Group $4,000 to settle her existing credit card debt. Rather than perform the services they promised, the company stole Duran’s few remaining dollars, leaving her in an even worse financial situation than before.
Duran then tried to sue the company, ultimately discovering that she had signed an arbitration agreement with J. Hass Group. Duran was surprised not only about the arbitration clause, but was especially stunned that it contained a clause requiring all disputes to be heard in Arizona (known as a forum selection clause), thousands of miles away from her hometown of New York City.
Duran asked a federal district court to hear her case, claiming that the forum selection clause contained in the arbitration agreement was unconscionable because she could not afford to fight a legal battle across the country. The district court rejected Duran’s claim, deciding that if Duran wanted to challenge the forum selection clause she would have to take the matter up in arbitration. In Arizona.
Sadly, the Second Circuit Court of Appeals recently issued an opinion agreeing with the district court. This means that Duran will now either have to spend money contesting the validity of the agreement in Arizona or simply accept the loss of her money, allowing J. Hass to get away with its scam.
Arbitration agreements, like the one in this case, are frequently used by companies to limit the options of injured consumers. The agreements are especially popular in the context of nursing homes and almost always work against the interests of individuals. Arbitration agreements can include bizarre forum selection clauses like the one in the case that make filing a claim inconvenient if not outright impossible. Arbitration agreements also often result in settlements that are much smaller than what a lawsuit might achieve. Another benefit to companies who use arbitration clauses is that all the information disclosed during the process remains confidential and can be kept out of the public record, unlike the proceedings in a courtroom. The hope is that other appeals courts across the country take a different approach than the one adopted by the Second Circuit, if not, consumers everywhere will suffer.