Consumer Advocates Warn About ‘Forced Arbitration' Clauses

Everyone’s been told to read the fine print, but what if a customer doesn't get that fine print until after a service is already completed and then ends up having a problem? Montgomery County’s Office of Consumer Protection is warning customers about such language.

“We are here to really tell consumers to be aware of forced arbitration clauses that might be buried in documents that they receive. That's really important. Many consumers might not even realize the potential harm of signing something,” said Eric Friedman.

Rockville, Maryland, resident Lori Shapiro said it happened to her.

"I never expected to have a problem. I'd been going to the same place for four years with no issue,” she told the News4 I-Team.

Shapiro said a few months after taking her car to a Jiffy Lube on Frederick Road, she began having engine trouble. She eventually needed a new one, she said, due to a cracked oil plan.

"I don't have $6,000 for an engine," she said.

After an attorney for the Jiffy Lube franchise said the problem was not the shop’s fault since she drove the car thousands of miles after the service, she decided to file a complaint with the Office of Consumer Protection.

"They called me and they said, ‘You know, we're going to do everything we can to help you, but there's a little problem,’" Shapiro said.

"The initial response from Jiffy Lube and Jiffy Lube attorney was that we should close the complaint because the consumer was in breach of contract," explained Friedman.

On the back of the receipt Shapiro signed was a dispute resolution clause, which read: “The parties agree to submit any controversy or claim arising out of or relating to the goods and services rendered to mediation administered by Mediation and Arbitration Services of Virginia, LLC (MAS) at a cost not to exceed $100 prior to initiating litigation. Any such claims must be initiated in writing within 90 days. If mediation is not successful, arbitration will be initiated with the cost shared equally between both parties pursuant to MAS commercial arbitration rules. The customer further agrees that failure to abide by this provision constitutes a material breach of this contract, which prevents it from asserting any claim against any Jiffy Lube Service Center.”

Shapiro told the I-Team she didn’t knowingly agree to anything.

"So, you sign a receipt to get your car back without ever having agreed to that prior to any service," she said.  

"In theory, arbitration can save money,” said Lauren Saunders, an attorney for the National Consumer Law Center.

She said arbitration can work if both parties agree to it. It can keep cases out of court and be quicker. The cases are supposed to be heard by an impartial third party.

But Saunders said when arbitration is the only choice because the company says so, that becomes forced arbitration.

"You don’t have the right to go to court, you have to go to an arbitrator who they designate," she said.

According to her, more businesses are now using forced arbitration language and consumers lose almost 97% of the cases to the companies.

“Arbitrators have an incentive to rule for the company that's going to bring them more business,” Saunders said. “Arbitrators are paid by the hour, they're paid by the case, and a big company is going to bring them more cases. They'll never see that consumer again.”

Shapiro’s attorney said he paid the required initial $100 fee to start the process with the company listed on the back of that Jiffy Lube invoice, Mediation and Arbitration Services of Virginia.

The I-Team learned the listed president for that company is Paul Warren, according to Maryland business records. He’s also the attorney who represented this particular Jiffy Lube in Shapiro’s case, which he confirmed in a letter to the county obtained by News4.

“That is the most obvious conflict of interest that you could possibly have in a document,” said Friedman. "It’s strange and remarkable that the attorney and the merchant thought it could even possibly be appropriate."

Warren disputes there’s any conflict at all and told the I-Team in an email, “MAS does not provide any service in such proceedings beyond providing a list of independent mediators and coordinating the scheduling of the session.” He also said, “The language regarding alternative dispute resolution is included to provide an opportunity for the company to discuss and attempt to resolve any dispute or misunderstanding with a customer before communication is cut off and either side has to incur needless litigation costs. Jiffy Lube franchisees take the Pledge of Satisfaction seriously, and in my 20+ years of working with this franchisee, I have never seen a meritorious claim that was submitted to mediation go unresolved prior to litigation. Mediation is a voluntary process that ensures that each party's perspective is heard, and typically in consumer claims like this, no lawyers are present. Very few claims against Jiffy Lube in Montgomery County have gone to arbitration.”

The owner of the franchise has several other Jiffy Lubes in the area. Montgomery County sent him a cease and desist letter to remove the dispute resolution language from its invoices, saying it could be a violation of the county’s consumer protection code. The county said it has not heard back.

The I-Team took a vehicle in for an oil change to the same shop Shapiro visited and found that same clause listed on the back of the receipt.

When News4 reached back out to the owner and his attorney for an interview the attorney said in an email, "To my knowledge, the specific language you reference in the invoice is no longer used. Current invoices mention only that mediation is required before litigation but do not mention a specific company.”

To make sure, News4 visited another Jiffy Lube owned by the same person for another oil change, and after the service, the same dispute resolution was on the back of the invoice.

"I mean, how can you ask someone to sign an agreement after you do the work?” Shapiro asked.

In the end, she and her attorney decided against the mediation, saying it felt unfair with the attorney’s connection to the company.

“Had I known that was one of their things, I wouldn’t have gone there,” Shapiro said. “The main reason I went to Jiffy Lube was for the convenience."

Jiffy Lube said it regrets she "chose not to participate in any type of dispute resolution.”

The I-Team also contacted Jiffy Lube International in Texas to ask if this same language is used company-wide. A spokesperson said, “We are committed to providing an outstanding customer experience at each of our more than 2,000 franchised locations. In the event a customer is not satisfied, as stated in our Policy & Procedures Manual for Franchisees, mediation is one of several options to resolve the dispute.”

Responses from Jiffy Lube attorney Paul Warren:

Thank you for your email. I have contacted the Jiffy Lube franchisee involved and been asked to reply to your inquiry as follows:

The language regarding alternative dispute resolution is included to provide an opportunity for the company to discuss and attempt to resolve any dispute or misunderstanding with a customer before communication is cut off and either side has to incur needless litigation costs. Jiffy Lube franchisees take the Pledge of Satisfaction seriously, and in my 20+ years of working with this franchisee, I have never seen a meritorious claim that was submitted to mediation go unresolved prior to litigation. Mediation is a voluntary process that ensures that each party's perspective is heard, and typically in consumer claims like this, no lawyers are present. Very few claims against Jiffy Lube in Montgomery County have gone to arbitration.

Unfortunately, some customers assume that Jiffy Lube and other vehicle servicers are insurers of a vehicle's condition regardless of the number of miles driven or relationship of the complaint to the services provided. The customer referenced in your email, for example, appears to have driven her car 4,997 miles before a courtesy "top off" and another 9,298 miles before experiencing any issues. There are numerous Maryland cases that uniformly hold that such facts warrant summary judgment dismissal of the claim if pursued in court.

Jiffy Lube sincerely regrets that the customer referenced in your email chose not to participate in any type of dispute resolution, as its franchisees value its customer relationships as one of their core values.

Thank you for your email and attention in this regard.

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Mediation by definition is a voluntary process wherein each party may be heard and make their own decisions. The parties are the only decisionmakers, and this franchisee does not have attorneys present during customer mediations nor does it utilize mediators with whom either it or the customer has a relationship. Regardless, the customer you reference refused to participate in mediation or any other ADR process so cannot be said to have been forced into mediation – she opted out. 

To my knowledge, the specific language you reference in the invoice is no longer used by any of this franchisee's stores. Current invoices mention only that mediation is required before litigation but do not mention a specific company. With respect to this particular customer, she was invited to select the mediator of her choice and, again, chose not to proceed.

Last, for many years companies and governmental entities such as the Department of Defense and the US Postal Service have engaged and/or employed mediators to help resolve disputes. The intention behind this Jiffy Lube franchisee's use of a Dispute Resolution clause is to provide customer service, continuing dialogue, and resolve meritorious disputes. It has never utilized me nor any person employed by me as a mediator or arbitrator. When a customer has requested mediation, a list of independent mediators in the area where the parties are located is sent to the customer along with their bios and available dates so that they may choose who they wish to mediate the claim.

Customers who go through mediation almost uniformly report greater satisfaction than those who try to resolve claims through the court system, which has hard and inflexible rules of evidence. With respect to the customer you reference, given that she appears to have driven her car 4,997 miles before a courtesy "top off" and another 9,298 miles before experiencing any issues, her legal claim would likely have been dismissed, but she could perhaps have received information regarding the cause of her vehicle's problem and explored ways to address it in a non-confrontational setting like mediation. Again, we regret that she chose not to take advantage of this process.

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Below is the language sent to the customer in question. MAS confirmed the franchisee's availability to participate in mediation and stated:

(MAS has) confirmed Jiffy Lube's willingness to participate in mediation. We just need you to send payment in the amount of $100 to begin the mediation process, which can be paid via credit card or check payable to MAS. Upon receipt of your client's fee and that of Jiffy Lube, we will retain a mediator in your area for a 2-hour session and secure mutually available dates for the session. Please let me know if you have any questions.

Customers of this franchisee contribute only $100 of the mediation fee; the franchisee covers the remaining cost. Again, as I mentioned before, when a customer requests mediation, a list of independent mediators in the area where the parties are located is sent to the customer along with their bios and available dates so that they may choose who they wish to mediate the claim. In this instance, the customer stated that they would not be proceeding with mediation, i.e., they opted out.

MAS does not provide any service in such proceedings beyond providing a list of independent mediators and coordinating the scheduling of the session.

Reported by Susan Hogan, produced by Rick Yarborough, shot by Steve Jones and Lance Ing, and edited by Steve Jones.