Another Attempt to End Forced Arbitration in Lemon Law Cases

forced arbitration

If you bought a new or pre-owned vehicle that has a defect, you will likely want to resolve the problem as quickly and cost-effectively as possible. Unfortunately, some cars have issues that cannot be fixed, despite making several trips to the repair shop. In the event your vehicle turned out to be a lemon, you may be wondering what your legal remedies are — especially if your purchase order contained an arbitration clause.

Arbitration is a voluntary dispute resolution process used in California Lemon Law cases. Significantly, consumers who purchased vehicles that do not conform to their warranties may choose to litigate their lemon law claims instead. However, some vehicle manufacturers include forced arbitration clauses within the fine print of their contracts which can easily be overlooked and present a roadblock in obtaining justice.

What is Forced Arbitration?

Arbitration clauses generally provide the consumer with the option to resolve their lemon law claim in arbitration. However, forced arbitration clauses are meant to prevent a consumer from bringing a lemon law claim in court. These clauses give a manufacturer the ability to resolve disputes with consumers directly, using an arbitrator who determines the outcome of the matter. In many cases, forced arbitration clauses can limit a consumer’s legal recourse — and their compensation. Forced arbitration clauses can also help the manufacturer avoid accountability for selling a defective vehicle.

A good example of a forced arbitration clause concerns Tesla. At the time of purchase, every consumer signs a purchase order stating that they cannot litigate a lemon law claim against Tesla unless the defect is repaired within 60 days of ownership. In other words, after the first two months of owning the vehicle, a consumer can only pursue a remedy through arbitration and is barred from commencing a lawsuit. While a consumer is given the opportunity to opt-out of the clause within 30 days, the opt-out provision can be easy to miss — and misunderstand.

What is the Forced Arbitration Injustice Repeal Act?

Consumers have long been affected by forced arbitration clauses. Notably, a federal bill has brought these types of contractual provisions to the forefront. The Forced Arbitration Injustice Repeal (FAIR) Act, introduced in Congress in 2019, is an attempt to end mandatory arbitration for good. If passed, the bill would prohibit businesses, including auto manufacturers, from including forced arbitration clauses in their purchase orders and contracts.

While California already has strong consumer protection laws in place, the FAIR Act would be applicable on the federal level. It applies not only to consumer purchase orders but to employment contracts, antitrust matters, and civil rights disputes.

Should You Arbitrate Your Lemon Law Case?

Although manufacturers encourage arbitration as a way to resolve your claim faster, it’s critical to be aware that these programs are usually not beneficial to the consumer. Depending on the facts of your case, your interests might be better served by filing a lawsuit. In addition, the stronger your claim is, the more likely the manufacturer will be willing to settle for a fair amount of compensation.

Arbitration has several disadvantages for consumers. It’s essential to understand that arbitration is much less formal than litigation, and there is no discovery process or required exchange of information to help you prove your claim. While arbitration doesn’t bar you from taking your claim to court if the outcome of your case was unfavorable, you should be aware that the arbitrator’s decision can be raised during litigation — even if it was adverse to your interests.

By arbitrating your lemon law claim, the manufacturer may be able to get away with paying out far less than they would have had you pursued litigation. If you prevail in a court case, you may not only be entitled to a replacement vehicle or refund, but you can recover consequential damages, incidental damages, a civil penalty, and attorneys’ fees.

Avoiding Arbitration in Your Lemon Law Case

No one expects to drive home a lemon. However, when you review your purchase order prior to buying a vehicle, it’s crucial to look it over for any language mentioning arbitration. For instance, as with Tesla, there may be a specified period of time in which you can opt out of a forced arbitration clause. It’s imperative to do so to avoid any issues you could potentially face in the future should your vehicle fail to conform to its warranty.

Additionally, if you are seeking a replacement vehicle or a refund for your lemon, don’t allow yourself to be pressured into arbitration by the manufacturer. They may try to convince you that arbitration will be faster and more convenient — but this is not necessarily the case for the consumer. By litigating your case, you may be able to maximize your compensation for the inconvenience and economic burden you endured due to purchasing a lemon.

Contact an Experienced Southern California Lemon Law Attorney

If you bought a lemon, it’s best to consult with a knowledgeable lemon law attorney who can assess the facts of your specific case. The attorneys at The Ledbetter Law Firm have extensive experience handling California lemon law cases and can advise you concerning the best course of action to obtain a favorable outcome.

The Ledbetter Law Firm provides representation to consumers in Southern California who have purchased lemon vehicles and helps them obtain the refund or the replacement that they deserve. With offices conveniently located in Los Angeles and San Diego, California, telephone and video conferencing options are also available. Call (310) 507-7022 to schedule a consultation with a California Lemon Law attorney today.