Arbitration fees place tenant at 'severe disadvantage'
Courtesy InmanWiki www. inman.com By Bob Bruss
Dino and Kim leased an apartment. In January 2002, they discovered water incursion in the apartment walls and ceilings, which caused mold, mold mycotoxins, airborne mold spores, fungus and bacteria in their rental unit.
In addition, Kim was injured when she slipped and fell on a concrete ramp in the apartment complex.
Purchase Bob Bruss reports online.
The tenants sued their landlord and the property management company for negligence, intentional tort, premises liability, breach of contract, breach of the implied warranty of habitability, unfair business practices and false and deceptive advertising.
The landlord and property management company moved for a court order to compel binding arbitration of the dispute. Pointing to the rental agreement with the tenants, the landlord noted the arbitration clause gave the tenants only 180 days after injury to demand arbitration before a panel of three arbitrators with arbitration fees to be paid in advance and shared equally.
Dino and Kim responded that the binding arbitration clause in their rental agreement is unconscionable because it creates an "undue economic burden," which will place them at a severe disadvantage to the wealthy corporate landlord. In addition, Dino and Kim argued the arbitration clause is a contract of adhesion because they could not "opt out" when they rented their apartment.
At the trial, Dino and Kim's attorney noted each arbitrator, often a retired judge, charges $2,000 to $3,000 per day. Such high fees would deprive tenants Dino and Kim of their right to recover reasonable damages, their attorney argued.
IF YOU WERE THE JUDGE would you require Dino and Kim to submit their lawsuit to binding arbitration and pay arbitration fees in advance?
The judge said NO!
When Dino and Kim rented their apartment, the judge began, they were probably unaware of the binding arbitration clause in their rental agreement. It is very unlikely they understood that agreeing to arbitration of future disputes means forfeiting their right to a jury trial, court rules of evidence, and the right to appeal an arbitration decision, even if it is in error, he continued.
The arbitration clause in Dino and Kim's rental agreement was offered on a "take it or leave it" basis, the judge explained, because the tenants had no bargaining power with the landlord.
Requiring a tenant to file a personal injury claim within a very short 180 days and to pay arbitration administration costs in advance caused the rental agreement arbitration clause to lack "bilaterality," the judge emphasized. This rental agreement was a contract of adhesion, the judge noted, because the tenant had no bargaining power and that is contrary to public policy.
The binding arbitration clause in Dino and Kim's rental agreement was unconscionable and lacked mutuality since it was a contract of adhesion, the judge ruled. Therefore, this lawsuit may proceed to court trial because the rental agreement binding arbitration clause is unenforceable due to lack of bilaterality, the judge concluded.
Based on the 2003 California Court of Appeal decision in Jaramillo v. JH Real Estate Partners Inc., 3 Cal.Rptr.3d 525.
Courtesy InmanWiki www. inman.com By Bob Bruss
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