• Read before you sign!
    • Large national and multi-national corporations are effectively privatizing an important segment of the civil justice system in this country by including fine-print, non-negotiable, take-it-or-leave-it, mandatory, binding arbitration clauses in their standard-form contracts."
    • Nevada Supreme Court Justice James C. Nelson
    • The Problem. The Solution. Words of Encouragement. Final comment, by Fred Pharis
Read before you sign!
Alert! Read this before you buy a manufactured (mobile) home or sign an arbitration agreement.

"The instant case and others we have considered likewise demonstrate why the right of access to the courts must be protected as the fundamental constitutional right it is. These cases point inescapably to the conclusion that, for their own obvious economic benefit, large national and multi-national corporations are effectively privatizing an important segment of the civil justice system in this country by including fine-print, non-negotiable, take-it-or-leave-it, mandatory, binding arbitration clauses in their standard-form contracts."
- Nevada Supreme Court Justice James C. Nelson in Kloss v. Edward D. Jones.

The problem.

Mobile home manufacturers, financers, and dealers, across the United States, are engaging in an industry-wide practice of forcing arbitration agreements on their customers.

[Note: Since this article was authored, automobile financers have begun including arbitration agreement in Louisiana finance contracts. It is advised not to use GMAC, Ford Motor Credit, or such finance companies. Instead, use a local bank, credit union, other institution, or finance through an existing home mortgage loan that doesn't require arbitration.]

As shown above, this is part of a nation-wide phenomenon. Arbitration is a non-judicial process where a person, often a retired judge, but not necessarily, is chosen to act like a judge, but in a private proceeding, outside a real courtroom. A facility to have the hearing must be found, procedural rules must be determined to be used, and the agreements control. Provisions can vary widely.

Unfortunately, while many industry types hail arbitration as a viable alternative to judicial proceedings, the marketplace simply does not support that idea. With state and federal courts, filing fees are kept to a minimum, it doesn't cost up-front to pay the judge, who is a public servant, and the processes have been in place for a long time. The judge, paid a salary by public monies, is not beholding to one side or the other. Therefore, the procedures are tried and true, familiar to most consumers, and with all attorneys.

Contrast that with arbitration proceedings. Depending on the agreement you sign, you could be forced to pay for up to three arbitrators. If each charges a conservative $150.00/hour, an eight hour proceeding would cost $3,600.00! However, most arbitrators also charge for out of court preparation time. Additionally, if you are required to use an arbitration "service," such as the American Arbitration Association, or other service, you could be forced to pay a filing fee of up to $1200.00.

Additionally, you have no right to appeal. And, once you've gone to arbitration, courts are loathe to overturn an arbitrator's decision for gross malfeasance, even if he or she doesn't not follow the law!

In short, this is clearly a power play by the business organizations who already have the money to force a consumer to put up large amounts of cash to play the game, even if there is a legitimate complaint, with no appeal oversight nor an absolute obligation for the arbitrator to follow the law.

In effect, unless your claim is a lock cinch, or at least monetarily great, most persons will not be able to afford the high cost. This has the side effect of forcing persons into bankruptcy, or not bringing a claim that is important but not likely to bring a certain amount of money.

For example, if your mobile home's roof is defective and the claim is worth less than $5,000.00, are you going to risk up to $2,500.00 in arbitration start-up costs, especially if your claim is on the borderline in terms of time to bring the claim or as to who is actually responsible? Most people are not going to bring such a claim. The manufacturer has the luxury of making it so oppressive they don't have to worry about most claims. This, in my opinion, provides for an attitude already present in the industry - sell manufactured housing, gloss over defects, make shoddy repairs, and then tell the consumer they have no further rights after just a year. This is explained in my article, A special case: Mobile Homes in Louisiana.

The solution.
You have decided you want to buy a manufactured home, a single-wide, double-wide, or even triple-wide. You are signing all the papers, and there is a special document, with a title similar to this - "Arbitration Agreement." And, in the "Retail Installment Contract," there is a section on arbitration. Many of these agreements state that if you have any type of claim, even if it is so small that you could ordinarily bring it in your local small claims court (in Louisiana, usually $3,000.00, or less), you must go into arbitration, to use a special service, such as the American Arbitration Association. The financing documents I've seen have arbitration provisions so confusing I couldn't understand what was meant. Often terms meaningful under one state's law, but with no effect in Louisiana, are used, just confusing the situation. However, here comes the rub - if the seller or financer wants to use state court because you refuse to pay them or they have some other dispute with you, they can go to state court, if they want! What an unfair and unconscionable contractual term. The Louisiana Third Circuit Court of Appeal has invalidated such an arbitration agreement because it was so unfair. But, another court, especially hostile, ultra-conservative federal courts, could make a different decision if it wants to, so you still aren't protected.

So, what do you do? The solution is simple. Read what you are signing, or better yet, before you get into the all the paperwork, tell the dealer you are not signing an arbitration agreement. His reply is likely to be, don't worry, nothing will happen to your home, and if it does, you can take it to arbitration. Most consumers will not be filing a claim, that is true, but I have seen claims in excess of over 50% of the purchase price of the home or where clearly the home should be returned to the manufacturer. See War Stories.. Remember, you are buying a "manufactured" product, not built on-site, and therefore, the quality of the home can vary widely from home to home. The consumer doesn't know what he or she is getting into until the home is set up and delivered. It is not worth the chance.

Will the home then be sold to you? I predict, yes. If they want to sell it, they will be willing to forego the signing of the arbitration agreement. Be careful, however. In addition to the manufacturer's agreement that is often present, manufactured home financing companies often have a hidden arbitration clause in the finance agreement. "X" it out, refuse to sign it. It may be a hassle, but, unless you want to give up substantial rights, my advice is do not sign.

Words of Encouragement.
Despite these reservations, I have successfully prosecuted arbitrations on mobile homes and on a Jim Walter site-built house. An arbitration proceeding can be made to work, but it is a daunting task and an experienced attorney should be used.

Final comment.
As a free-market enthusiast, I have no problem with viable economic alternatives to what can sometimes be a lengthy litigation process. However, if arbitration is truly a solution to a well-established court system, it will be developed in a manner that is fair to all parties. If such a service is truly valuable, the marketplace will support it. Even if an "Arbitration Agreement" is not signed at the time of the sale, nothing in the law prevents the parties from agreeing to use arbitration later. The system simply isn't attractive nor economically viable in its present form. However, the willingness of the legal consumer to use alternatives to a full trial is shown by the fact that many cases are "mediated" (non-binding dispute resolution) after a suit has been filed, because it is often workable and useful. If a consumer with a claim can look to a fair arbitral forum with reasonable filing fees, high marks in following legal precedence, and arbitrators who are fair and not associated with an industry promoting it, arbitration is workable.

However, too many times arbitration is expensive, the agreement is oppressive to consumers, and industry-affiliated arbitrators know on which side their bread is buttered. Therefore, the consumer must be very cautious.

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