Important Request for Binding Mandatory Arbitration Stories

Are you aware that by signing a contract with Terminix, YOU are voluntarily signing away your rights as granted by the Seventh Amendment of the United States Constitution?

There is no way to know how many cases have gone to arbitration as there is no public record of arbitration proceedings. As to arbitration giving everyone a “fair third party to decide,” that’s highly debatable and is the crux of ongoing lawsuits trying to overturn the binding arbitration provision; and it’s not Terminix trying to overturn it! After all, Terminix took the issue of  arbitration all the way to the U.S. Supreme Court; and as one newspaper reported, “Company officials said that their contracts with customers prohibit lawsuits over service.”

According to Public Citizen News, May/June 2000, pgs. 8-9:

• In 1995, the U.S. Supreme Court in Allied Bruce Terminix v. Dobson made it more difficult for courts to deem arbitration clauses unenforceable.  In the suit, a state court had found that an arbitration agreement between a homeowner and pest control company was invalid because the contract did not involve interstate commerce.  The FAA [Federal Arbitration Act] applies only to contracts involving interstate commerce.) But the Supreme Court ruled that the pest control contract did indeed involve interstate commerce and that any disputes therefore had to go to arbitration.
   
• Mandatory arbitration clauses are trouble for consumers because they are:
   
• Costly.  It can cost consumers hundreds of dollars to file for arbitration and thousands to pay for a hearing -- fees that often must be paid up-front.
• Almost always decided in favor of companies. A Washington Post story recently reported that First USA, the nation’s largest second-largest issuer of credit cards, has won 99.6 percent of arbitrated consumer disputes.
• Fundamentally unfair.  Consumers don’t have equal bargaining power with large companies, don’t have experience with arbitration, and don’t have the power to negotiate the arbitration clauses out of the contracts.  Also, while consumers unwittingly sign away their right to sue in court, corporations retain their right to take consumers to court.
• Conducted in secret, without a public record (as in a jury trial), so that repetitive offenses by a company go unreported.
• Especially harmful to consumers with small losses, as they prohibit class action lawsuits, thereby prohibiting people from aggregating their small claims into one lawsuit to make it economically viable.

In addition, many mandatory arbitrations:

• Must be conducted in a place convenient to the corporation, not the consumer.
• Allow the corporation to pick the arbitration service, thus giving arbitration companies incentives to issue pro-corporate rulings.

Public Citizen President Joan Claybrook said, “It’s like playing in a professional sports league, and you’re playing against a team that has the biggest salaries, chooses the referees, sets the rules, and plays all home games.  Consumers can’t win in that league.”

The mandatory arbitration clauses often are in fine print or buried in standard, take-it-or-leave-it contracts, so when consumers buy or use a produce or service, or employees sign standard paperwork at orientation, they sign away their right to sue a company, often without realizing it. As a result, consumer or employee access to public courts is blocked.

In reaction to growing concern over the issue, Public Citizen is launching a campaign to persuade Congress to end the use of mandatory arbitration clauses.  “Companies that use these clauses are knowingly tricking their consumers into giving up their rights,” Claybrook said. “Many people have never even heard of arbitration. Consumers are being denied their day in court. It has to stop.”

Texas Arbitration Fight:

While Public Citizen battles for our rights in Congress, the following e-mail letter may interest anyone willing to help others attempting to overturn the mandatory arbitration clause in court:

I am an attorney in Houston, Texas, and I presently have two complaints filed with Terminix.  One suit was filed and aborted once it became clear Terminix will appeal everything forever.  I am building a lawsuit against Terminix for the deception, fraud, and gross negligence in treating the house.  However, in the course of working on these cases, it becomes abundantly clear that the arbitration clause may be vulnerable, particularly to a class action.  I would like to collect as many contracts as possible to determine the extent of what is already clear -- that Terminix has used many different forms in Texas for the same service which affects consumer rights dramatically.  [Not just looking for contracts from Texas.]

In addition Terminix is vulnerable to a class action arising from the “new damage” fraud. They define new damage as wood that is infested with live activity that they see. Since they never probe (absolutely the most fundamental means of determining if live activity is in an area) and they never come to the consumer’s house during wall covering removal, they systematically avoid the opportunities for seeing live activity and therefore avoid responsibility.  I would like anyone who has been told by Terminix that their damage was not new damage or anyone who is willing to share their contracts or discuss the possibility of participation in a class action, to please contact me at evin@housedefects.com or call my office at 1-888-869-9690.  My name is Evin Dugas, and I am with the law firm of Dugas & Inselmann, P.C.

Posting on February 13, 2002 to this site’s guestbook by Mr. Dugas:

This is an update on arbitration with Terminix.  A Travis County District Court (Austin, Texas) held that the Terminix arbitration clause did not cover Deceptive Trade Practices Act claims.  Additionally, Terminix agreed to submit to arbitration outside of the American Arbitration Association (AAA) knowing that they would save thousands of dollars on fees.  This is a useful tactic since AAA fees are prohibitive and non-AAA arbitrators are more likely to be plaintiff/consumer friendly. Also, the AAA has specific rules regarding claims of less than $10,000 that may not allow Terminix to arbitrate before them. Consumers should consult AAA rules regarding consumer claims.

Alabama Arbitration Fight:

Major Victory in Alabama Terminix Class Action.  Posted November 4, 2002, to this site’s guestbook by an attorney in Alabama, Tom Campbell:

We got a great decision two weeks ago from the Alabama Supreme Court.
They invalidated the arbitration clause for all Alabama customers, and the
Court is allowing the case to go forward.  A link to the opinion is at http://www.wallacejordan.com/decisions/Opinions2002/1010555.htm.

I am back in the case representing the Leonards and the class. We will seek a refund of all annual fees because Terminix failed to conduct annual inspections as required by law in Alabama statutes. The failure to do them is a crime in Alabama.

The Supreme Court opinion is a very important one to lawyers who file consumer protection class actions. It held that no reasonable consumer could be expected to file an arbitration case and spend the $1,000 or more in filing fees to recover a few hundred dollars and, consequently, the clause is unfair.  The reasoning would not necessarily extend so far as to allow avoidance of the arbitration clause for consumers suing for thousands in actual termite damage. Also, the case governs claims in Alabama only.  Although other states may follow the Alabama Supreme Court opinion, this fight took five to six years to win.

Customer’s Arbitration Loophole Victory in North Carolina.  July 2007, a former Terminix customer in North Carolina wrote:

I just want to say that I was victorious over Terminix II in North Carolina. Terminix had not responded to my complaints about their installation of termite bait traps and did not show on time for pest control services.  After dealing with the local office and contacting the corporate office, I received very little resolve to the issues. After I stopped paying for several months, their story changed to "you pay us what you owe and we will fix the problems." After refusing to pay for the services through their payment plan, they took me to court. After contacting an attorney with my complaints and going to small claims court, my case was heard and dismissed with prejudice in my favor and my legal fees to be paid by Terminix.  How?  The arbitration loop hole.  The contract states that BOTH  parties agree to arbitration to resolve disputes. When Terminix filed in court to sue me for the payments, they violated their own arbitration clause in the contract, making the contract null and void. He then awarded me my legal fees to be paid by Terminix, because the case should never have gone to court, they were bound to arbitration only.