Skip to content

The Dangers of Binding Mandatory Arbitration

The brilliant Stephanie Mencimer has a new article entitled Suckers Wanted: How Car Dealers and Other Businesses Are Taking Away Your Right to Sue.  In it, she starts by outlining the problems she had in trying to buy a car without an arbitration agreement.  When she and her husband asked the dealership to remove the arbitration clause, the dealership refused and told them that it was non-negotiable and that no other dealer in the area would sell them a car without a similar provision.  The irony of that position is best set out by the following excerpt from her article:

Mandatory arbitration clauses are so insidious that car dealers actually furiously lobbied Congress to get them banned in their contracts with auto manufacturers. The National Automobile Dealers Association wrote members of Congress in 2000 that if they weren’t outlawed for the dealerships, mandatory binding arbitration clauses would allow “multinational motor vehicle manufacturers…to be able to unilaterally deny small business automobile and truck dealers rights under state laws that are designed to bring equity to the relationship between manufacturers and dealers.” Congress agreed and passed legislation protecting the dealers. Apparently, though, the car dealers didn’t see a problem in using the same sort of underhanded contracts with their own customers. (Some of them may also be forced to use the clauses whether they like it or not. Several major auto manufacturers’ credit divisions have told their dealers that they won’t provide financing to any dealerships that don’t have arbitration clauses in their sales contracts, says Paul Bland, a lawyer and expert on arbitration at the nonprofit law firm Public Justice.)

Hopefully some help is on the way.  Ms. Mencimer does outline a list of potential reforms that might minimize some of the federal arbitration requirements.

Ms. Mencimer also has an interesting blog post relating to a very unique problem with arbitration  As a dispute between a soldier and Daimler/Chrysler financing was getting under way, the soldier was deployed to Iraq.  Under federal law, any litigation between the two parties would be temporarily suspended by federal law until the soldier returned.  But not so with arbitration.  There is a real risk that the arbitration will go forward while the soldier is overseas, leaving the soldier unable to present testimony in support of his claims.

For some of our thoughts on arbitration, check out some previous posts:

  • How Arbitration Steals Your Day In Court
  • Doctors Now Requiring “No Sue” Agreements
  • Arbitration and the Godless Bloodsuckers
  • The Flight From Arbitration
  • Arbitration:  The $27,000 answer?

To contact Austin Personal Injury Lawyer, Austin Personal Attorney, Austin Accident Lawyer, Austin Injury Lawyer Perlmutter & Schuelke, PLLC or to learn more about Austin Personal Injury visit

20 Years OF TRUST

For 20 years, our personal injury clients have trusted us to help get them the benefits they deserve.

Books Schuelke was a huge asset. I wholeheartedly endorse Mr. Schuelke without a moments hesitation

- Sara Hickman