More and more car manufacturers across the country are slipping mandatory arbitration clauses into contracts for vehicles. Tesla and BMW have been doing this for years.
But why should you be concerned?
While voluntary arbitration can be a helpful way to resolve disputes quickly, being forced into mandatory, pre-dispute arbitration strips you of your right to go to court — often without you even realizing it. In fact, some of these clauses are so restrictive that your chances of getting fairly compensated for a defective vehicle as practically non-existent.
If you’ve purchased a car in California and are wondering how this clause might affect your rights under the California lemon law, we’re here to provide the clarity you need.
Let’s begin.
Understanding the Mandatory Arbitration Clause
A mandatory arbitration clause is a standard provision tucked into many car purchase agreements. Essentially, it forces you to handle any disputes directly with the dealership or manufacturer through arbitration, not through the traditional court system.
Here’s how the arbitration process typically works: After you file a claim, the manufacturer or dealership pays for an arbitrator to resolve your it outside of court. The proceedings are generally more informal than a court trial, and the rules of evidence are often more relaxed.
Once the arbitrator reviews the case, they make a decision regarding your compensation.
Why Do Dealerships and Manufacturers Include Arbitration Clauses?
Dealerships and manufacturers might push for arbitration clauses due to a few key reasons.
Cost
Manufacturers typically try to persuade consumers to choose arbitration because it is “cheaper” than going to court. They may also emphasize they pay for the entire arbitration process. What they don’t tell consumers is arbitration is generally much cheaper than going to court or paying out a settlement. In other words, it’s only cheaper for the manufacturer – and the consumer usually ends up not receiving the compensation they deserve.
Privacy
Unlike public court cases, arbitration is a private process. Manufacturers have a global brand image to protect – publicity of selling defective vehicles is the last thing they want. Any disputes settled during arbitration stay out of the public eye.
Quickness
Arbitration moves significantly faster than litigation. A quicker resolution means manufacturers can avoid long, drawn-out court battles, getting the issue settled and off their plate sooner.
While these reasons might seem practical, they often put you, the consumer, at a disadvantage. The process can limit your ability to gather evidence, appeal decisions, or even get a fair hearing.
The Impact of an Arbitration Clause on Your Lemon Law Rights
The California lemon law is designed to protect consumers who unknowingly purchase defective vehicles. It allows you to seek a refund or replacement if your car fails to meet the standards of quality and performance after a reasonable number of repair attempts.
But what happens when your purchase agreement includes a mandatory arbitration clause?
Limitations on Legal Recourse
When you agree to arbitration, you’re giving up on your right to take your case to court. And since arbitration does not adhere to any clear, well-established, and consistent rules set by the legal system, the process can feel less predictable and may not provide the same level of transparency you would expect in a courtroom setting.
Also, while arbitrators are supposed to consider the law and legal precedents when making their decisions, they aren’t strictly required to do so. There’s typically no review or oversight to ensure that the arbitrator follows fair practices.
Potential Bias
Arbitrators are usually paid for by the car manufacturer. As arbitrators don’t want to lose their jobs, they may be motivated to rule in favor of the manufacturer, regardless of the evidence presented. This means an arbitration for a defective vehicle can feel like playing a game of basketball – only the referees are bought and paid for by the other tea,/
Over time, this can lead to a pattern where arbitrators consistently side with businesses just to get more work in the future. It’s a setup that doesn’t leads to unfairness when you’re trying to resolve a dispute.
Limited Discovery
In a court case, both sides have the opportunity to gather and present evidence during the discovery process. You and the other party can request documents, interview witnesses, and collect other critical information in support of your arguments.
However, in arbitration, the discovery process is often much more restricted. You might face limitations on the types of evidence you can request or the amount of information you can obtain. This weakens your ability to build a strong and compelling case.
What to Do if Your Car Purchase Agreement Includes an Arbitration Clause?
We recommend you always take the time to read every document you’re asked to sign, including the fine print on both the front and back. Don’t let anyone rush you through this process. If you spot an arbitration clause, just say “no.”
Most forced arbitration clauses have a 30-day window to opt out. Be sure you do this.
Let the dealership know that if they want your business, they’ll need to remove the clause.
But if you accidentally signed a purchase agreement without checking for a mandatory arbitration requirement, don’t panic. There are still steps you can take to protect your rights.
Consult a Lemon Law Attorney
Your first move should be to talk to a seasoned lemon law attorney in California. A reputable attorney can review your purchase agreement and explain what the arbitration clause means for your case.
They can help you understand if the clause is enforceable, or whether you still have the option to get the courts involved. Since lemon law cases can be complex, having a lawyer in your corner can protect your rights and keep you on the track to justice.
Challenge the Arbitration Clause
Sometimes, an arbitration clause may not hold up in court, more so if it’s found to be unconscionable or overly one-sided. Your attorney can help you challenge the arbitration clause by arguing that it does not apply to your claim.
In case the court agrees, you may be able to proceed with your claim in the traditional court system instead of being forced into arbitration.
Look for Opt-Out Options
A few contracts may include an opt-out provision that allows you to reject the arbitration clause within a certain time frame after signing the agreement (usually 30-60 days). It’s important to review your contract carefully to see if this option is available.
If it is, make sure you take advantage of it within the specified period. Opting out can preserve your right to take legal action in court if necessary.
The Bottom Line
The best approach is to avoid signing an agreement with an arbitration clause altogether. However, if you’ve already signed one, it’s important to contact a lemon law attorney CA right away. With the right legal guidance, you can still fight for the compensation or replacement you deserve and navigate any challenges that come your way.
