What Arbitration Clause? Illiteracy As A Defense To Arbitration

Sep 25 2018

I admit I was surprised to find that a person can agree to a written arbitration clause, even though he or she is illiterate. I was even more surprised to find that illiteracy is no defense to enforcement of an arbitration clause under Mississippi law, but it is under Texas law. (Like you, I’m already thinking of the elitist Northeast jokes, but I’m not going there.)

WARNING: THOSE OF YOU WHO CAN’T READ, STOP NOW! Why it helps to put something in capital letters, if a person can’t read it anyway, is mystifying, but it does help save a contract from unconscionability, in Mississippi. One summer, I spent some time in Hungary. I can promise you that it made no difference whether the Hungarian language was capitalized – I had no idea what it was conveying.

So, one court would respond, get someone to read the contract in Hungarian to you, and translate it to English, before you sign it. It’s true, that would work fine as long as the translator was honest. It really wouldn’t be much help if the translator were looking to deceive me, or help sell me something I didn’t want. If I believed the translator was honest, and only found out later that he wasn’t, I would be in trouble if my Hungarian contract was somehow subject to Mississippi law.

The case, construing Mississippi law, involved Washington Mutual Finance Group, seeking to compel arbitration against a group of people collectively lumped as “the Illiterate Appellees.” The trial court, after hearing the evidence, decided that illiteracy coupled with a lack of oral disclosure, made the arbitration agreement unconscionable. The case involved the Illiterate Appellees obtaining loans from the finance company, and also purchasing credit, life, disability and property insurance. Presumably, when they started to receive bills, they found out they were paying for insurance they did not need or want. They had never been informed that they were signing arbitration agreements. To the contrary, when they did ask about the nature of the documents they were signing and said they could not read them, the salesperson told them they were signing insurance and finance papers.

Who becomes accountable: the salesperson who stood to earn commissions on these insurance contracts by giving a vague answer, or the people who said they couldn’t read and needed help? You already know. The Illiterate Appellees are accountable because they never directly asked about the arbitration agreement itself. You see, “any inaccurate impressions WM Finance’s statements may have created would indisputably have been cleared up had the Illiterate Appellees simply complied with their legal obligation to read the contract or have it read to them.”

In Texas, to the contrary, two different cases determined that the plaintiff who could not read an arbitration agreement because (1) he was functionally illiterate or (2) he could not read English, did not have to arbitrate their personal injury cases. The Hispanic plaintiffs, alleging that the documents were not translated nor did they know what they were signing when their boss told them not to worry about it and sign quickly so they could get back to work, were injured in an explosion. The functional illiterate was seriously injured when a 65-ton hydraulic crane which he was operating toppled. His evidence also proved that the employees who presented him with the arbitration document did not themselves understand it and therefore no one could explain it. Besides, throughout the opinion, the judge called him Tommy.

There may be some result orientation in these cases. State courts have a great deal of expertise in adjudicating personal injury cases, and do not believe that these cases should be disappearing from their dockets. Although it was not argued in the Texas cases, there is a Seventh Amendment Constitutional right to a jury trial in personal injury cases, and the waiver of that right must be knowing, voluntary and intelligent. On the other hand, there is no jury trial right under most consumer protection statutes, and the federal courts seem happy to have these cases diverted to a different forum.

But the court allowing arbitration may have sensed that there is a slippery slope if John Q. Public can argue that he cannot be forced into arbitration unless he can understand the contract language. Even literate people cannot understand standard language in many contract clauses. If these clauses were held unenforceable, lawyers might have to rewrite them in plain English.

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Joseph D. Garrison

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