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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, 2016).

 
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.

 

Nominations for the Golden Gorilla Award can be made through the discussion forum, which is regularly monitored by our esteemed webmaster.

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