Alabama Personal Injury Blog - Contracts

Dangers of Signing An Arbitration Agreement

Greg Cusimano — Sun, 20 Sep 2009 22:03:45 GMT

Consumers beware! Many consumer and employment contracts now include an “Arbitration Clause”. You can find the clause lurking in employment contracts, lease agreements, health care admissions documents, insurance enrollment forms and other consumer contracts. There are many dangers in signing an arbitration agreement.

You Lose Your Constitutional Right to a Jury Trial:

Signing a contract that contains an arbitration clause waives your constitutional right to a jury trial and in effect keeps you from having your dispute resolved by a court of law. Rather, you are required to submit your dispute or claim to a neutral third party, whom is neither an elected or appointed judge.

An Arbitrator’s Decision is Final:

After each party presents their case the arbitrator renders a decision that is final and binding on both parties. This decision cannot be appealed and unlike mediation. There are several other dangers in signing an arbitration agreement. Many arbitration clauses and systems do not allow you to recover your attorneys’ fees. This makes it practically impossible for consumers or employees to obtain legal representation. Additionally, the avenues for appealing an arbitrator’s decision are practically closed and regardless of whether the decision is erroneous, it cannot be easily overturned.

Arbitrators May be Biased Against Consumers/Employees:

Sometimes the arbitrator specified in the arbitration agreement may be biased because they depend upon the corporation for repeat business. Therefore, they have a personal motive and business interest in rendering decisions that favor the corporation. As a result, they are more inclined to rule against consumers and employees on the disputes that come before them.

Arbitration can Result in Significant Time Delays and be very expensive:

While arbitration is meant to serve as a more efficient method for resolving disputes, it can actually lead to significant time delays. Sometimes there are multiple arbitrators on a panel, which means that each arbitrator must juggle their schedule in order to hear your dispute. While your dispute may ultimately be heard, you might end up waiting awhile for your hearing to align with the schedules of multiple individuals. Most often the filing fees for Arbitration are 2 or 3 times more expensive that filing a case in court.

The Law may Not Make a Difference:

An arbitrator is not necessarily required to follow the laws that apply to your dispute. This can result in a seemingly unfair decision. Even though arbitrators are not able to completely disregard the law in rendering their decisions, it’s possible that they may render an unfair decision that does not go completely against the law.

Awards are Difficult to Enforce:

Since arbitration awards do not have the power of a court judgment they are not directly enforceable. Rather, if you seek to enforce an arbitration award you must resort to judicial remedies, such as bringing an action to “confirm” the award. While you may be able to utilize judicial remedies to obtain an award, these claims can be fiercely fought and often result in the consumer acquiring a significant amount of legal fees, fees which far exceed the economic incentive to bring their dispute in the first place.

Arbitration Clauses are Sneaky:

Consumers must be on the lookout for arbitration clauses. Arbitration clauses are inconspicuous because they are usually set forth in the fine print of a contract or are contained in an ancillary agreement. Consumers and employees are often unaware that they have agreed to mandatory, binding arbitration by simply purchasing a product or taking a job.

If you can, refuse to sign a contract containing an arbitration clause, cross through the language of the clause or attempt to negotiate its terms. Where it is impossible to negotiate, with large companies for example, you should shop around before you sign.

Originally posted at InjuryBoard by Greg Cusimano

Are Noncompete Agreements Enforceable?

Danny Lehane — Wed, 01 Jul 2009 12:49:27 GMT

Are non-compete clauses enforceable in Alabama? The short answer is yes but there are exceptions. Opinion after opinion on cases involving noncompetition agreements insists that such agreements are not favored. However, Ala. Code 1975, § 8-1-1 (a) states, “an employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a specified county, city, or part thereof so long as the employer carries on a like business therein.” Over the course of time there developed a four prong test to determine if a noncompetition clause/agreement is enforceable.

A court will enforce a noncompetition agreement only if:

1) the employer has a protectable interest;

2) the restriction is reasonably related to that interest;

3) the restriction is reasonable in time and place;

4) the restriction imposes no undue hardship.

What is a protectable interest? The Alabama Supreme Court has explained that in order to have a protectable interest, the employer must possess “a substantial right in its business sufficiently unique to warrant the type of protection contemplated by a noncompetition agreement .” DeVoe v. Cheatham, 413 So.2d at 1142 (Ala.1982). In addition, “a protectable interest may exist when an employee is in a position to gain confidential information, (to gain) access to secret lists, or to develop a close relationship with clients.” Clark v. Liberty Nat’l Life Ins. Co., 592 So.2d 564, 566 (Ala.1992).

In regards to a reasonable scope for a time and place, typically a geographical limit and a time limit are required. A noncompetition agreement stating that an employee cannot open a competing business anywhere for an indeterminate period of time after leaving the employer will likely be held to be unreasonable and unenforceable. Thus the protection of the employer’s interest should be concise as to a narrow, identifiable group of clients and potential clients as well as a reasonable time period. Ostensibly, the same agreement with specific geographical limitations and a limited time frame will be held to be enforceable in regards to reasonableness of time and place.

As previously stated, noncompetition agreements are not favored but they are upheld if the employer has a protectable interest and the restriction is reasonably related to that interest. Further the restriction cannot be unreasonable as to time and place; lastly, the restriction cannot impose undue hardship. The burden is upon the person or entity seeking to enforce a contract which restrains a lawful trade or business to show that it is not void under Ala. Code 1975, § 8-1-1.

Originally posted at InjuryBoard by Danny Lehane

Executing a Contract: Do I Need an Attorney?

Danny Lehane — Wed, 24 Jun 2009 10:35:19 GMT

At some point an individual will need an attorney to draft or interpret a contract. Whether one elects to use an attorney is a different matter. So, let us look at the if, when and why one would or would not need an attorney:

If during the course of your vast or not so vast education and life experience you have developed great skill in drafting, interpreting and reading innumerable contracts you could reach a point where you may not need the assistance of an attorney. However, most fall into the Homer J. Simpson category in regards to proofing multipage contracts: “I am not signing this until I read it OR someone gives me the gist of it.” Here is a little gem for you: if someone is requiring you to sign a contract, it is likely not for your benefit. Typically a contract handed to you for your signature is written for the benefit of the party requiring you to sign.

There is nothing like reading a bunch of words you do not understand and acting like you really do by giving the occasional head nod and uttering monosyllabic phrases such as “hmm” and “ah”, as you pour over a one hundred page plus document in the presence of every one waiting for your signature. Somewhere around page 15 of 110 pages is where, if you have glasses, you take them off, sit back and pretend to ponder the magnitude of the clause/paragraph (of the first part that is a subpart of the foregoing clause, notwithstanding the exclusivity of the previous clause…what?) that you just read. Note: even though you have no clue what you are reading, removing the glasses and giving that far-off pondering look makes you look quite intelligent.

At some point during this real-time unfolding disaster you will get the urge to ask what you think will be an intelligent question. This irrepressible force will rise through your body like lightning flashing from the east to the west. By this time you have arrived at the very sobering realization you have no screaming idea what you are reading and are about to commit to. You just know that a question must be proffered. Since you have no idea what you have read you know the question will not be designed to discover pertinent and vital information. No, this is purely a question for show. You have got to let these cats know that you know exactly what you are reading and furthermore we are all on the same level of expertise here. Thus, you ask the question: "As I read through these myriads of paragraphs and clauses, uh, it is clear to me that the, uh, intended bifurcation of the contractious* obligation of the first party to the, uh, second party is obilquitoius* and is drawn in a hypotanusian* manner which shall render all parties, uh, intrapulously* and incondruosly* bound. Am I correct in this interlopulation*?” The sound of crickets is a true indication these academicians have been duly impressed. So, put that in your contract drafting pipe and smoke it. (It should be noted that the words designated with the * are not real words. You knew they were not real words when you somehow formed them and utilized them. However, they sounded smart. Also, saying “uh” in strategic places throughout the question gives the appearance that you gave great thought to this inquiry when in reality this was pulled right out of your boo-tox.)

The bottom line is this: if you are entering into an agreement that requires a signed contract the safe route is to, at the least, get an attorney to review the document and advise you. If you have a contract written in pencil or crayon and the word “contract” is one of the many misspelled words you are likely going to be able to handle that one on your own.

Originally posted at InjuryBoard by Danny Lehane