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BY JOSH FEIT |
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Starting next month, when you sign on the dotted line at a Scott Thomason car dealership, you won't just be getting a set of new wheels--you'll also be signing away your right to have your day in court. Attorneys for Portland's largest auto dealer last week said they intend to include a "binding arbitration" clause in their sale contract, a clause that commits both the buyer and seller to use a private arbitrator if disputes arise from the sale. Arbitration is a simple concept with clear benefits. Say you and an auto dealership get into a tiff over an interpretation of your financing agreement. Rather than getting bogged down in the court system, you can resolve the dispute through arbitration. That is, both sides agree on a third-party arbitrator, pay the arbitrator a fee and make their cases. Brian Posewitz, a partner at Tonkon Torp LLP who represents Thomason, says the car chain decided to use private binding arbitration because it is more efficient and less expensive than the court system. "These are not high-dollar cases, and they don't justify tying up the court system," Posewitz says. "The court system is too slow. People just want to get it resolved." In Oregon, however, every county court already has an arbitration system for contract disputes less than $50,000. Thomason's contract would bypass the court system for a private arbitration process that, unlike the county process, is not subject to appeal. Local consumer lawyers, who represent clients in both private and public arbitration, say the move toward private arbitrators is a lemon for consumers. "If a consumer came to me and asked if they should sign a contract with a private arbitration clause in it, I'd say, 'Don't do it. You're much better off in the court system,'" says Portland lawyer John J. Cosgrave. Thomason Auto Group's 14 outlets are actually late in joining the trend toward private, binding arbitration. Most Portland-area dealers--including Ron Tonkin and Carr Chevrolet--already have binding arbitration clauses in their contracts, usually tucked away on the back page in gray type. Auto dealers aren't the only businesses using private arbitration: Real-estate agents, stock brokers and construction contractors have all moved toward the private arbitration system in the last decade. Thomason's decision to use private arbitrators to resolve disputes also conforms to another trend. The particular arbitration service it's chosen is Arbitration Service of Portland Inc. ASP, which has been doing business in Portland since 1985, is the arbitration service of choice for local auto dealers and real-estate firms: The company is designated on the standard contracts of the Oregon Auto Dealers Association and the Portland Metropolitan Area Realtors Association, says ASP president Jim Damis. According to local consumer lawyers, car dealers' practice of locking consumers into binding arbitration--and locking them into using ASP--is bad news for three reasons. First, the private-arbitration system is more expensive than Multnomah County's system. In the county system, arbitrators charge $100 an hour and costs are capped at $250 per party. ASP arbitrators, in contrast, charge $150 an hour and have no cap; in some cases, costs reach $600 per party, says consumer lawyer Ed Benett. Second, some local lawyers say ASP's system is stacked against the consumer. To demonstrate that point, Cosgrave compares ASP's system with the county system. In the county's method, each side gets a list of five potential arbitrators, picked randomly from a list of 750 lawyers who have agreed to hear disputes. Then, the two sides negotiate and choose an arbitrator. If they can't agree, they can demand a brand-new list of choices. At ASP, Damis provides six potential arbitrators he handpicks from his list of 400 lawyers. Each side can toss out two, and Damis makes the final selection from the two or more names left. Consumer lawyers such as Michael Baxter say Damis' power to choose the arbitrators tilts the system in favor of the car dealers. First, he says the potential arbitrators often include lawyers who represent auto dealers in their private practices. Second, even though Damis' master list includes 400 lawyers and judges, Baxter says he sees the same eight or so names repeating from case to case. Damis, whose private practice represents real-estate agencies, told Willamette Week that consumer lawyers like Baxter are "paranoid." "It's pure happenstance that he has seen some of the names repeat," Damis says. He acknowledges, however, that his process isn't random like the county's. He says this is a good thing. ASP groups its arbitrators into classes of expertise so that a criminal lawyer, for example, isn't assigned to a construction case. It makes sense that lawyers who represent car dealers would be assigned to auto disputes, he says. At the same time, Damis acknowledge that he doesn't choose consumer lawyers for these cases because he believes their background is too "narrow." The concern that the deck is stacked against car buyers highlights the most important downside of ASP arbitration, say consumer lawyers. In the binding arbitration process, there is no right to appeal. "I want to go to a jury of my peers when I get screwed by an arbitrator," Cosgrave complains. "ASP is binding arbitration. There's no appeal." The right to appeal in front of a jury paid off for two of Cosgrave's clients, John and Melanie Wright. The Wrights discovered that their recently purchased car had been painted over to conceal prior damage. Last April, after first losing in front of a county arbitrator, the Wrights won $7,500 when Cosgrave appealed the case to a jury.
originally published August 12, 1998 |
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