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I'd like to start off by saying that this is somewhat of a follow-up to a previous question I had asked back in June, 2016. I've continued to struggle with trying to find an agreement that resolves the issue I've been having. In this time, I've fulfilled all the requirements to continue through to arbitration and have been preparing to do so.

My question's focus pertains to the Customer Agreement clause, which explains how the arbitration reward is handled. Highlighted is the specific section:

(6) WE MAY, BUT ARE NOT OBLIGATED TO, MAKE A WRITTEN SETTLEMENT OFFER ANYTIME BEFORE ARBITRATION BEGINS. THE AMOUNT OR TERMS OF ANY SETTLEMENT OFFER MAY NOT BE DISCLOSED TO THE ARBITRATOR UNTIL AFTER THE ARBITRATOR ISSUES AN AWARD ON THE CLAIM. IF YOU DON'T ACCEPT THE OFFER AND THE ARBITRATOR AWARDS YOU AN AMOUNT OF MONEY THAT'S MORE THAN OUR OFFER BUT LESS THAN $5,000, OR IF WE DON'T MAKE YOU AN OFFER, AND THE ARBITRATOR AWARDS YOU ANY AMOUNT OF MONEY BUT LESS THAN $5,000, THEN WE AGREE TO PAY YOU $5,000 INSTEAD OF THE AMOUNT AWARDED. IN THAT CASE WE ALSO AGREE TO PAY ANY REASONABLE ATTORNEYS' FEES AND EXPENSES, REGARDLESS OF WHETHER THE LAW REQUIRES IT FOR YOUR CASE. IF THE ARBITRATOR AWARDS YOU MORE THAN $5,000, THEN WE WILL PAY YOU THAT AMOUNT.

To my understanding, this clause basically says if the arbitrator offers any amount of money more than what was formally offered by the business, I'll be rewarded a minimum of $5,000. The business has made a few offers, all of which are for account credits with them (and are certainly far too low to accept).

Their exact response when I had asked about how their settlement offer would be paid was as follows:

"This would be a direct financial adjustment to your [Phone Provider] account. You were properly advised that the promotional offers are not a cash value type of offer, but a direct financial adjustment to the account will save you the equivalent amount not having to pay your [Phone Provider] bill until the credit amount has been depleted."

Questions:

  • Since the account credit offers are worth no real cash value, would that mean that any real-money offer made by the arbitrator could/would cause me to win since money certainly gives the impression of actual currency?
  • Is there any particular reason why an arbitration clause would floor the reward to such a notable amount? Is this number passing a threshold to prevent other legal grounds from following?

Follow-up:

05/17/2017: I went through the arbitration process and was deemed an award of $900.00, along with $52.89 in interest. Both of these are going to be paid in US dollars. However, I'm still under the impression that being paid in US dollars is more "money" than the $1,300 in "non-cash value" credits they had offered prior. I sent them an email requesting they uphold the agreement, but I'm not sure if this is too much of a technicality.

05/30/2017: The business followed up with a statement of "The customer agreement does not address the delivery of the settlement offer, but the amount of it." I'm not sure if that statement is accurate since the clause denotes "money" as the medium, not a generic value. I'm just not sure if this is something that has enough foundation to fight for in another arbitration case or to potentially pursue in court.

03/09/2018: I opened a second arbitration case to contest that the business didn't conform to their customer agreement. My position was that $952.89 was worth more than $1,300 in account credits. I was found in favor and they were required to pay out the minimum value listed in the arbitration clause because account credits have no monetary value (the answer in this question helps explain why that result happened).

04/19/2018: I sent an intent-to-arbitrate letter again stating that I was looking to open a third case because they failed to pay the full amount of money in accordance with the arbitration clause below. The original approach was that they still failed to pay $5,000 each time I won a higher amount than they offered. I structured my claim that they were $5,000 short as I only received two payments, but both should have been raised to $5,000 individually. The other perspective was that they were technically only $952.89 short.

05/10/2018: We came to an agreement of a settlement amount. I am in the process of signing and finally being done with cycling arbitration claims over contract technicalities and oversights. Gathering about ten times the original claim amount was worth it, but it did take about two and a half years.

  • I guess you ended up with $5900 + interest? Since the second arbitration would find they underpaid the first award by $4047.11, with no settlement offer, it seems that you'd be owed the $5000 from the second arbitration, not counting the amount you already received. – Ben Voigt Apr 9 '18 at 4:27
  • @BenVoigt You're absolutely correct =). The first arbitration award was $952.89. The second arbitration award was $4047.11, which should have been paid out as $5000, but they didn't. So, I'm sending another intent to arbitrate letter tomorrow (the deadline of the arbitration award timeframe) as they're technically $952.89 short of the second award. If they don't make an offer and I fight for that missing amount and win, then the third arbitration should floor to $5000 as well. Cyclical, but not breaking any rules ^^. – Xrylite Apr 9 '18 at 16:45
  • If I were you and they still don't get it the third time around ("it" being that they can't write checks for less than $5000) I'd start looking for a lawyer to take it to regular court. Big Telco will try to compel arbitration based on the arbitration clause, but when the judge sees the evidence that they've repeatedly failed to follow their own arbitration payout procedure, I should think the motion to compel gets denied and the discussion shifts to punitive damages. – Ben Voigt Apr 9 '18 at 18:02
  • Meanwhile the arbiters are happy to keep finding in your favor, because the cycle keeps bringing them business. At least up to the point where Big Telco gets so fed up that they go to the effort of announcing a contract change modifying the arbitration clause to name a different arbiter... and that's awfully expensive because unilateral contract changes usually give all customers the chance to cancel without early termination fees. – Ben Voigt Apr 9 '18 at 18:04
  • @BenVoigt I've considered small claims since they pay all attorney fees as well. The catch with that is I can only go after them for "direct damages," which usually doesn't include punitive damages. Wouldn't be impossible, but repeated breach of contract may open the doors to something beyond what the contract allows. Arbitration is great since they pay every fee associated with it (nearly $3000 each time). I'll certainly update as I go. I've a few ideas on how I can get into a third case advantageously. – Xrylite Apr 9 '18 at 21:13
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That is a bit of queer provision.

I'm not going to answer your first question because I think that it is a gray area with no definitive answer.

In answer to your second question, my strong suspicion is that it is drafted in the shadow of a particular state consumer protection act.

An arbitration clause is allowed to change your procedural rights, but cannot change substantive rights that cannot be waived by a pre-dispute contractual agreement. If it does that, it is void and you can go to court instead of an arbitration forum.

Many consumer protection laws provide that a prevailing party is entitled to minimum statutory damages in lieu of actual damages if they are smaller, in addition to your reasonable attorneys' fees and litigation costs if you prevail. This is done to make it economically viable for private citizens to sue over violations of the consumer protection law that would otherwise involve actual damages too small to be worth suing over, without having to bring a class action.

If the relevant consumer protection law has a minimum $5,000 statutory damages amount for some claims covered by the clause, this clause would prevent it from being invalidated, while allowing the merchant to still have access to the consumer unfriendly arbitration forum in which class action lawsuits are probably also barred while class action lawsuits would not be in court. For a big merchant, it is far better to have to pay $5,000 and attorneys' fees to the handful of people who bring arbitrations and win them, than to lose a single class action lawsuit for millions of dollars.

  • Your clarification behind the value makes complete sense. I presumed the number selected wasn't arbitrary or with innate kindness for the one filing. You hit it right on with court being economically more difficult since the value at hand is likely lower than what an attorney would cost. I'll wait a few days for any other potential answers =). – Xrylite Oct 22 '16 at 21:36

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