Fox & Farley, Attorneys at Law

When Is a Forced Arbitration Agreement Unenforceable in Tennessee?

Many Tennessee Titans fans likely cheered the recent news that a federal appeals court in New York had rejected New England Patriots quarterback Tom Brady’s efforts to overturn his four-game suspension by the NFL. But the story behind the Brady case should give pause to anyone who has ever dealt with a nursing home or a business that has demanded you sign a mandatory arbitration agreement as a condition of receiving service. Indeed, the Brady litigation was not about whether the quarterback did anything wrong; rather, it was a challenge to the unusually broad arbitration clause created by the NFL’s labor agreement with its players union.

Court Declines to Require Arbitration in Home Sale Case

As most football fans know, NFL Commissioner Roger Goodell has the authority to discipline players for violating league rules. He is also the designated “arbitrator” if the players union wishes to appeal any disciplinary decision. In other words, Goodell hears all appeals of his own decisions. While this may be an “unorthodox” arrangement, according to the federal appeals court that heard Brady’s case, it was clearly negotiated for between the union and the league in their most-recent collective bargaining agreement. To put it bluntly, the union agreed to a bad deal and now they have to live with it.

Unlike the NFL, most everyday arbitration agreements are presented to customers on a “take it or leave it” basis. There is no opportunity for negotiation. And oftentimes, a business may lie or put undue pressure on a customer to sign an arbitration agreement.

A recent Tennessee case illustrates this problem. The plaintiffs purchased a manufactured home from the defendant. After the plaintiffs made a payment for about one-third of the home’s purchase price, a representative of the defendant asked one of the plaintiffs to come in and sign “some additional paperwork we need you to sign so we can move this house.” This paperwork included a mandatory arbitration agreement. According to court records, the parties never actually discussed the contents of the arbitration agreement, nor did the plaintiff read through the document fully before signing it.

There were subsequently problems with the delivery of the finished manufactured home. When the plaintiffs filed a lawsuit alleging negligence and breach of contract, the defendant moved to enforce the arbitration agreement. The plaintiffs responded that they were “fraudulently induced” into signing the arbitration agreement and it was therefore unenforceable as a matter of law.

The Tennessee courts sided with the plaintiffs. The Court of Appeals explained that the plaintiffs relied on a materially false statement made by the defendant’s representative—namely, that the plaintiff had to sign the arbitration agreement in order to receive delivery of the home that was already partially paid for. At trial, the representative said he routinely told customers this was a requirement. The Court of Appeals said that “was totally false,” and the defendant was accordingly liable for its “failure to ensure that its [representative] was fully informed shows utter disregard for the truth.” The court therefore returned the case to a trial court for further proceedings.

Get Help from a Knoxville Personal Injury Attorney

Arbitration agreements are often a mechanism to undermine the rights of consumers and other vulnerable parties. An experienced Tennessee personal injury lawyer can advise you on whether or not an arbitration agreement is enforceable, and help fight for your rights in court. Contact the offices of Fox & Farley, Attorneys at Law, in Knoxville or Clinton if you need to speak with someone right away.

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