An Illinois Supreme Court ruling upholding consumers’ right to file lawsuits in the courts despite contracts that purport to require binding arbitration is being seen as a victory for consumers. The ruling is likely to have a substantial impact on similar cases under consideration by federal and state courts in Ohio, New Mexico and a number of other states.
“This decision establishes a new rule in the giving consumers the right to file lawsuits when the arbitration forum specified as an integral part of the sales contract is no longer available,” said Aaron M. Zigler, the partner at the Korein Tillery law firm who argued the case.
“The Court has struck down an arbitration clause that was used to deprive consumers of a meaningful remedy in the face of inappropriate conduct by a merchant. The Court’s ruling means that, under these circumstances, companies’ one-sided agreements cannot be used to deny consumers their right to their day in a court of law.”
Korein Tillery filed the case in state court in 2002 on behalf of consumers who were misled by inflated claims concerning the speed of Pentium 4 computer processors sold by Gateway demanded that the dispute go to arbitration as required by its “Terms and Conditions” booklet included in the box with the computer.
After the National Arbitration Forum (NAF), the sole arbitration provider allowed by Gateway under the Terms and Conditions, stopped performing consumer arbitrations in order to settle a lawsuit brought by the Attorney General alleging consumer fraud, deceptive trade practices, and false advertising, Korein Tillery argued that the arbitration provision requirement was void.
The Illinois Supreme Court agreed with Korein Tillery that the arbitration forum specified in the contract was “an integral part” of the arbitration clause and the absence of that forum entitled the consumer to seek a remedy in court.
Zigler said corporations across the country have been increasingly using mandatory arbitration clauses usually buried in small print in agreements for consumers, investors, and employees to prohibit lawsuits in favor of arbitration heavily weighted in companies’ favor.
“These arbitration clauses are designed to eliminate consumers’ right to their day in court,” Zigler said. “There’s often no knowledge, choice, or understanding by a consumer and nearly all companies marketing credit cards, phones, mortgages and computers now use them, as do banks, car dealers, doctors, and insurers. There are tens of millions of these agreements and courts across the country are now deciding whether such clauses can be used to make customers, employees, and shareholders contractually ‘waive’ all of their rights.”
Paul Bland, a senior attorney at Public Justice who is involved in appellate litigation challenging arbitration clauses in more than a dozen states, said the decision in could have far-reaching impact on behalf of consumers. “This is an important victory for consumers not only in Illinois, but across the nation,” he said.
