Car Dealer Insider May 15, 2008
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Car Dealer Insider May 15, 2008

Arbitration: a friendly or frightening option for dealers?

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Arbitration: a friendly or frightening option for dealers?

Mandatory pre-dispute arbitration agreements have become quite popular in the retail automotive world over the past five years or so, largely because they can help ward off class-action lawsuits. But are dealers generally better off under arbitration - in which an arbitrator makes the final decision - instead of settling customer disputes in court? Ask some leading dealership attorneys and you'll find a hung jury.

Although members of the National Association of Dealer Counsel, a trade association of nearly 500 attorneys and association executives representing the interests of motor vehicle dealers, are currently fighting the passage of the Automobile Arbitration Fairness Act of 2008 - in an attempt to preserve the dealer's right to choose how to settle disputes _(DBB 5/1/08) - they are split on the merits of arbitration.

Two attorneys at opposite ends of the spectrum, active NADC members who contributed to our previous article, are Michael Charapp of Charapp & Weiss, LLP and Thomas B. Hudson of Hudson Cook, LLP.

The pros

Tom, also editor-in-chief of CARLAW®, a monthly review he developed to inform subscribers about current legal developments in automotive finance, has been a proponent of mandatory arbitration as a means of settling dealer-consumer disputes for about two decades.

"A properly-drafted arbitration agreement is the dealer's equivalent of a bullet-proof vest," says Tom in an informational booklet he published titled _Why Dealers Should Implement Binding Arbitration.

First, arbitration proceedings tend to be quick and efficient when compared to lawsuits, so the rewards are likely to be much smaller, explains Tom. Lawyers are also less likely to file a lawsuit when they see their client has signed an arbitration agreement - especially if that agreement prohibits class relief.

A properly-drafted arbitration agreement shouldn't force a dealer to arbitrate claims... (292 of 1169 words)

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  • Essential Office Manager - Is lax employee computer access putting your dealership data at risk? (662 words)
  • Dealerships' YouTube connections drive more traffic to their websites (654 words)
  • New Ideas (247 words)
  • New York legislature takes aim at dealership pay plans (822 words)
  • News You Can Use - Dates to save, trends to watch (217 words)
  • Trend spotting (266 words)