Arbitration: A Cost-Effective Solution for Vehicle Dealers

Arbitration is the preferred method for resolving disputes for vehicle dealers. It avoids jury trials and class action lawsuits. It also avoids a long, more intense, and more costly litigation. For example, a regular Court litigation can cost you more than $100,000 just in your attorney’s fees. An arbitration done with the American Arbitration Association (AAA) usually can cost about $25,000 in your attorney’s fees. These fees are on top of the damages, costs, and attorney’s fees you might have to pay to the consumer. In short, a single case can cost you at minimum $40,000 for a $10,000 car. Of course, it is best to do your disclosures properly so that you can minimize or even avoid these high costs.

The Importance of Timely Arbitration Fee Payment

The time for payment of the arbitration fee is set by law. Specifically, California Code of Civil Procedure Section 1281.97 states that the arbitration fee must be paid within 30 days of payment deadline. If these fees are not paid within 30 days, then the dealer is in material breach of the arbitration agreement. There is no extension of time and not even an honest mistake can extend this deadline.

Consequences of Late Fee Payment or Non-Payment

1. Consumers Can Force Arbitration and ask for all their attorney’s fees:

Some consumer attorneys elect to push the case to arbitration, but then demand attorney’s fees for asking the Court to force arbitration. Courts have awarded consumers upwards of $12,000 for attorney’s fees just for their motion to force arbitration. After the Court’s order, you could be forced to pay the arbitration fee anyway, otherwise you will be found to have violated the Court’s Order, which has additional consequences.

2. Consumers Can Elect to Avoid Arbitration and Proceed with Court Litigation

Some consumer lawyers, especially when the case is a bad case for the dealer, elect to continue with the Court process. While you may have avoided the arbitration fees, the Court process involves immediate risks such as a significant increase in attorney’s fees, as well as having to face a jury who are likely more friendly to the consumer.

In conclusion, make sure that the arbitration fees are paid on time.