Arbitration OptOut

Question

In the United States, is it required by law for a company offering a long term service contract to include an option to opt-out of their arbitration agreement, if the customer chooses to exercise that option? If yes, is it legal to set a time restriction such as 30 days or less to opt-out of the agreement then take away the option, requiring the customer to use arbitration after the 30 days to resolve disputes. Does it benefit the customer to use arbitration over the regular courts or is the arbitration clause in place purely for the benefit of the company?

Answer 1

See Suarez et al vs. Uber Technologies, Inc. An arbitration clause with a 30-day opt-out was upheld by a federal court in Florida, with the court citing the opt-out as one reason why it could be upheld. From reading the case, it would seem that it is partially dependent upon the underlying contract law of the state determining whether a clause is unconscionable, so there's no guarantee that this would apply everywhere.

Does it benefit the customer to use arbitration over the regular courts or is the arbitration clause in place purely for the benefit of the company?

The clause is there purely for the benefit of the company. If it was for the benefit of the customer, the company wouldn't attempt to force the customer into arbitration - the parties could simply agree to arbitrate their dispute, if both sides wanted.

But it's not like arbitration itself has no benefits to the customer. While arbitration has many drawbacks, it is usually quicker than the courts, which means the customer might get their money sooner if they win. Arbitration is usually cheaper than hiring a lawyer to sue in court.

Answer 2

In the United States, is it required by law for a company offering a long term service contract to include an option to opt-out of their arbitration agreement, if the customer chooses to exercise that option?

No. (There may be isolated exceptions to this principle for very particular kinds of services, but the exceptions are rare and this is not the general rule.)

Does it benefit the customer to use arbitration over the regular courts or is the arbitration clause in place purely for the benefit of the company?

It almost never benefits the customer to use arbitration in lieu of regular courts. This is put in place primarily to prevent consumers from bringing class action lawsuits and because arbitration forums are routinely biased in favor of the company.

Usually, an arbitration clause has the practical effect of denying the consumer any legal recourse whatsoever, and the consumer almost never actually utilizes this right.

Also, an arbitration decision can't be overturned by a court even if it clearly and obviously misstates the facts and applies legal rules that are clearly contrary to the law.