House Bill Prohibits Pre-Dispute Arbitration in Consumer Contracts

Filed in Advocacy, Business Management, Legal by on September 20, 2019 14 Comments

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Acting against the strong objections of NAHB, the House today approved the Forced Arbitration Injustice Repeal Act (H.R. 1423), legislation that would prohibit two parties from including in a contract a pre-dispute arbitration agreement. NAHB strongly supports the use of alternative dispute resolution (ADR), including binding arbitration, in consumer contracts.

NAHB has found that ADR is often the most rapid, fair and cost-effective means to resolving trade disputes – for the both the builder and buyer – arising out of the construction and/or sale of the home. In contract, litigation is expensive, time consuming and unlikely to produce the desired result – getting the problem repaired.

For the home buyer, the use of arbitration also provides them with certainty that any dispute will be resolved in a quick, fair and less costly manner than litigation.

NAHB members have priced their products based on an agreed-upon contract. Because arbitration allows businesses to contain their legal costs, those savings are often included in the price of the product.

Prior to the House vote, NAHB sent a letter to House members detailing our concerns with the bill and designated opposition to the legislation as a “key vote” because of its importance to the housing community.

For more information, contact Alex Strong at 800-368-5242 x8279.

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Comments (14)

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  1. Darius Grimes says:

    Hopefully its DOA in the Senate and I doubt POTUS would sign such a bill. Seems designed to enrich trial attorneys. Florida Right To Cure Laws are the best way to address construction complaints without expensive litigation and false claims.

    • CT says:

      Democrats yet again saying one thing and doing another, in so many ways.

    • Bruce Silver says:

      So, not long ago I sued a County for a unconstitutional taking of land. The panel of arbitrators I was stuck with were made up of divorce attorneys – who had no clue with respect to that type of law.
      They said my claim was worth $60,000. Instead I went to court and got a 6 figure settlement. I’ll take a judge and jury over arbitration any day.

      • kerry says:

        you are talking about something different. when it comes to buyers that are unreasonable because of buyers remorse there needs to be 3 arbitrators to make the call on those things.

      • Brian says:

        Bruce, would this type of arbitration, potentially worked in your case, … (1) you pick a lawyer, the county pick a lawyerm (2) each lawyer prepare the work for their side, (3) the two lawyers agree on a third lawyer to break any tie (4) the 3rd lawyer can spend 3 hours on the case, (5) the 3 lawyers decide the outcome

  2. CR says:

    Laws are basically made up by Lawyers/Politicians.
    And are designed to serve the above while disguised as good for the public at large.

  3. Angelo says:

    Arbitration is the worst. They split the tab in 1/2 and say that nobody wins. How is that fair? I would take a jury trial, which I have twice and won both times over arbitration 1x since 1979.

  4. NAHB confuses arbitration in theory with arbitration in practice. Arbitration is seldom undertaken until after discovery which means time and money spent. Mandatory arbitration also means the use of small claims court for the collection of small balances owed is out making the cost to the contractor to collect small amounts prohibitive.
    I agree that arbitration can be a very effective alternative to resolving disputes, but making it mandatory in contract rather than an option agreed to by the parties once the situation over which a dispute has arisen is not helpful for the consumer or for the contractor. It merely moves the venue in which a dispute will be resolved from the court’s calendar to a private dispute resolution calendar. No doubt the courts love it, but I disagree that it is inherently a benefit for the parties.

  5. Marty Hoye says:

    I few years back I was threatened a lawsuit because I did not want to enter a construction contract with an attorney. I discovered he has an attorney when he wanted the arbitration clause removed. Didn’t take a law degree to realize his motives.
    Arbitration allows me to run my construction business fairly and always try to do the right thing. If this protection was removed my overhead would skyrocket to cover attorney fees and my clients will pay the tab.

  6. Bob Whitten says:

    I agree with CR above – laws are made by politicians who, in the majority, are lawyers by previous occupation or education. They have a vested interest in encouraging law suits across the country and globe. We all know the only winners in these situations are the attorneys.

    Just like having the AICPA be the consulting body to the IRS – there will NEVER be a simple tax code!!!

  7. In a recent mediation, both the mediator and our attorney assured me that in a jury trial, facts mean nothing and perceptions as well as sympathies mean everything. In arbitration, the arbitrator is required to consider only the contract and the facts of the case. Without an arbitration provision, I will raise our prices to cover the anticipated additional costs associated with litigating to collect final balance from customers who see litigation as a means to avoid payment and perhaps profit from a consumer friendly jury. This bill will punish honest customers and reward the dishonest ones who would game the system.

    • John Tyksinski says:

      Exactly John. Best comment so far.

      There are always exceptions to ever rule, a few were stated above by others. The reality is the excessive litigation in America, in all fields, truly only serves the attorneys best. Why else do you see constant, almost virtually unlimited dollars going into advertising by attorneys? Does anyone really believe this is anything other than self-serving???

  8. Mike McNally says:

    The jury system is a sham. Period. Try explaining home building to 12 people who don’t want to be in a court room and who already made up their minds that since you build, you must have a lot of money! Just give the buyer $40,000 to $50,000 should be no problem for a building company, They make millions. This is what the jury does “group think” and get back to watching TV. Florida has cost to cure, North Carolina has mediation and all states should have mandatory Arbitration. Look up the European model court system and implement as much as you can into your contracts as fast as you can. Other countries have all but done away with the jury system be cause of the length of time it takes to get to court (2 to 5 years), crazy legal costs and the unpredictability of the jury. At the very least, have professional jurors that are paid a salary to be there.

  9. B Jack Smith says:

    As an former practicing attorney and builder, I perhaps have a unique perspective. Arbitration is incorrectly viewed as some sort of costs savings measure….but nothing could be further from the truth. Not only do you still have all the attorney fees, you’re paying the “finder of fact” for their services, whereas the court system provides the same at taxpayer expense. There is no appeal, and no due process guarantee in arbitration, and while perhaps a smaller “time window” there is every bit as much time required of the parities and their attorneys. Having represented clients in both sittings, and observing the absurd costs and lack of due process and appeal, I started advising clients to NEVER enter into a contract with mandatory arbitration clauses. Yes, jury trials can be “iffy”, but putting all your hope in one individual, an arbitrator, is just as risky….with no option for appeal. And, don’t fool yourself, almost every state is willing to take the arbitrators ruling and treat the same exactly as they would a judgment, the same is filed with the county clerk and all the same collection tools are available as with any other judgment.

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