Golden Gorilla Cases
Gorillas love Arbitration
Below are summaries of reported cases or describing those companies to whom arbitrationsucks.com
has decided to award the Golden Gorilla Trophy for their creative use of
arbitration clauses to their benefit. Before signing a contract with a
mandatory arbitration clause, think about the consequences.
| First Merit Bank and Mobile Consultants, Inc.|
Pete and Janie de los Santos
purchased a mobile home for their daughter, Sarah, and her husband, Gary
Alvarez. They bought the home from Verde Homes under Verde's retail
installment financing agreement. Verde assigned this contract, which Pete and
Janie signed, to Signal Bank (now FirstMerit Bank). The agreement contained an
Arbitration Addendum, which required binding arbitration for "all disputes,
claims, or other matters in question arising out of or relating to this Loan,
its interpretation, validity, performance or the breach thereof."
After Verde delivered the home, the de los Santoses tried to revoke their
acceptance, claiming that the home was defective and that Verde failed to
perform certain promised repairs.
The de los Santoses asserted that the sellers misrepresented that they owned
the homesite, and that the homesite included a driveway and septic system.
They also claimed that the sellers were not properly licensed, misrepresented
the terms of the loan, failed to provide a credit report to Sarah and Gary
Alvarez, and failed to make other disclosures regarding interest rates and
credit. The de los Santoses further alleged that the sellers fraudulently
double-charged them for insurance that was already paid for in the installment
contract. In addition, the de los Santoses asserted that after taking
possession of the home, they learned that the home was not yet complete, that
it lacked carpeting and air conditioning, and that it was not installed
properly. They also charged that the sellers failed to repair these defects in
a timely and workmanlike manner, that they never installed an air conditioner,
and that the sellers' attempts to repair the septic tank were untimely and
defective. Finally, the de los Santoses asserted that the bank wrongfully
denied their attempt to revoke the contract, criminally trespassed on their
property, and wrongfully repossessed the home.
As a specific challenge, Sarah and Gary Alvarez contended that their claims
are exempt from the Arbitration Addendum because they did not sign the
contract. But the court held a litigant who sues based on a contract subjects
him or herself to the contract's terms.
Here, the de los Santoses testified, in two sworn affidavits, that the AAA
charged a minimum $ 2,000 filing fee and a $ 250/day/party hearing fee, along
with several other unspecified fees, for hearings before a three-member panel.
They claimed these costs were excessive. The court stated it need not decide
whether these costs would be excessive. After filing a lawsuit, the plaintiffs
were ordered to submit to arbitration. See 44 Tex. Sup. J. 900 (June 14,
|AMERICAN HOMESTAR OF LANCASTER,
INC. AND NATIONWIDE HOUSING SYSTEMS, INC|
The issue in this
mandamus proceeding was whether the Magnuson-Moss Warranty Act prohibited
enforcing predispute binding arbitration agreements in warranty disputes
involving a consumer-product purchase. The court of appeals held that the
Magnuson-Moss Act prohibits such agreements. 19 S.W.3d 484, 491. The Texas
Supreme Court disagreed. Therefore, the Texas Supreme Court conditionally
granted a writ of mandamus and directed the court of appeals to vacate its
order refusing to compel arbitration. Thus, the plaintiffs were not
entitled to sue on their claims. Texas Supreme Court June 7, 2016.
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