Forced arbitration from LG appliances

Forced arbitration from LG appliances
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[Mods - if this isn’t financial enough, please move to a more appropriate category.]

We recently had a washing machine begin to fail. After a little research (way too much according to my wife), we decided on an LG. Surprisingly, Best Buy price matched ABT, which beat Home Depot by a buck, so we made the purchase, with delivery a week later.

The machine was delivered without incident. The geeks must be paid by the piece, because they couldn’t get out fast enough. As I started to connect the hoses and peruse the manual that was taped to the top of the machine, I noticed this, also taped to the top of the machine:

Is this now a common tactic? Is it common for all appliance manufacturers? Most of our financial service providers have really pushed arbitration, but opt outs were available. As for products, we purchased a GE fridge in 2016, and it did not have this requirement.

We promptly returned the washer without using it, and have ordered a different one (not from Best Buy). It probably won’t be noticed by anyone other than the Best Buy kids that didn’t know what arbitration was until I enlightened them.

What really ticks me off is that this requirement is never even hinted at pre-delivery. For all of the buzz words, phrases, and “for you” things that Best Buy is happy to repeat ad infinitum, they apparently don’t know the “transparency” buzz word. On the positive side, Best Buy didn’t even question the return and they didn’t try to add a pick up fee.

While my soapbox is out, I’m kind of surprised at Consumer Reports. They’ve been railing against arbitration clauses by banks and utilities for years. Yet, they rate this LG product at the top of the heap with absolutely no mention of their arbitration clause. // rant off

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Nowadays I don’t know that any company would prefer that it’s customers sue them instead of going through arbitration.

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Some or all of LG’s consumer appliances which carry a mandatory binding arbitration clause also have this opt-out clause: https://www.lg.com/us/arbitration

Opt Out. You may opt out of this dispute resolution procedure. If you opt out, neither you nor LG can require the other to participate in an arbitration proceeding. To opt out, you must send notice to LG no later than 30 calendar days from the date of the first consumer purchaser’s purchase of the product by either: (i) sending an e-mail to optout@lge.com, with the subject line: “Arbitration Opt Out” or (ii) calling 1-800-980-2973. You must include in the opt out e-mail or provide by telephone: (a) your name and address; (b) the date on which the product was purchased; © the product model name or model number; and (d) the serial number (the serial number can be found (i) on the product; or (ii) online by accessing https://www.lg.com/us/support/repair-service/schedule-repair-continued and clicking on “Find My Model & Serial Number”).

You may only opt out of the dispute resolution procedure in the manner described above (that is, by e-mail or telephone); no other form of notice will be effective to opt out of this dispute resolution procedure. Opting out of this dispute resolution procedure will not affect the coverage of the Limited Warranty in any way, and you will continue to enjoy the full benefits of the Limited Warranty. If you keep this product and do not opt out, then you accept all terms and conditions of the arbitration provision described above.

Did you try calling them and asking whether your washing machine is eligible for arbitration opt out?

I agree with you that it’s tough to find a good washing machine. Ours was made in 2004 and we’re not holding out hope that it lasts too much longer. I’d be interested to hear what your best value ends up being.

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Good for you taking a stand.

After the 1 year warranty, what could you possibly sue them for?
Does the arbitration clause prevent class action lawsuits?

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I was livid after reading the first post. But then I remembered that arbitration cannot preclude/prevent small claims. I’m guessing your appliance or any repair costs won’t exceed small claims.

Nice to see that there’s an opt-out. But this is getting ridiculous. And it’s not likely to change any time soon, given the (terrible) balance in SCOTUS.

LG and Samsung are both generally considered high quality for appliances and carry longer warranties (like 10 years for some parts, vs 1-5 from other brands), but they also cost a lot more.

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It’s common for arbitration clauses to include a small claims carve-out, but I don’t think there is any legal requirement for them to do so.

Yep, this is consistently a partisan issue. Both sides are not the same.

This is ridiculous and should be illegal, but is increasingly common unfortunately.

Vizio does the same but has an opt-out.

LG also does this on phones, as does Samsung. Samsung has litigated this at least a few times with mixed success IIRC, depending on the political makeup of the court they’re in. Apple does not and never has, AFAIK.

The Arbitration Fairness Act is a good start but IMO is still inadequate. In addition to prohibiting arbitration for certain categories of agreements (consumer, employment, etc.), I would prohibit it in any contract of adhesion. I would also like to see existing arbitration clauses like this retroactively invalidated and the statute of limitations retroactively tolled (and revived, if expired) on any civil causes of action that were covered by a prohibited arbitration agreement. That would produce an immediate rush of class litigation for illegal behavior that companies thought they had gotten away with due to arbitration – which would serve them right.

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I like the sentiment and I appreciate and agree with the frustration, but I completely disagree.

I also generally dislike mandatory binding arbitration, but would encourage people to actually read the clauses. They may not be all that bad (not saying OP’s isn’t bad, but they’re often used in non-adhesion contracts for legitimate reasons). Sometimes companies will use that sort of language in their clauses.

I suspected that there may be a legal requirement, because I learned from reading @emcdemc’s saga against Citi that the arbitration associations’ rules state that arbitration cannot preclude small claims. I figured they wouldn’t do this if they didn’t have to.

The clause is not just a binding arbitration agreement, it also prevents consumer from joining a class action. The fact that a consumer is:

  1. automatically bound by terms she may not be aware of (that binding arbitration note is attached to the appliance and could have easily been misplaced, fallen off, disregarded the same way all other papers and manuals are usually disregarded),
  2. must understand what the heck the terms mean, and
  3. must opt-out within 30 days (usually by mail at her own cost) in order to retain her rights

is preposterous. I would actually expect the whole thing to be illegal under something like UCC, but IANAL.

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As @scripta said, the clauses being discussed here all have class action waivers. There’s no way that can be turned into something good. The only clauses I know of that require individual arbitration while permitting class actions are in the securities industry, where FINRA rules permit brokerages to require arbitration of individual claims but prohibit brokerages from requiring arbitration of class claims. Even that isn’t all good – there’s some evidence that FINRA individual arbitration is (unsurprisingly) biased towards the securities industry.

It’s just utterly unethical and immoral, and should not be legal. At all. Period. And companies intentionally use these clauses to get away with fraud and other misbehavior that can only be realistically pursued as a class. That’s why I’d like to see, as part of a Congressional solution, the SOL on civil claims covered by an abusive arbitration clause tolled and, if expired, retroactively revived. Companies are making their risk calculations under the (currently correct, unless they’re one of the unlucky ones to earn an AG or FTC action) assumption that they can get away with just about anything. They deserve to have that blow up in their face and be stuck litigating, and ultimately paying out damages on, all those overcharges, defective products, or other harms from a decade ago (or more). Hopefully it’ll be a lesson to, well, not be assholes in the future.

(By the way, IANAL, but I believe Congress has the power to do this, because the ex post facto clause of the US Constitution has been held to only apply to criminal matters. State constitutions may prohibit the retroactive revival of time-barred civil claims, but Congress can at least do this for federal statutory claims. I think you are a lawyer, so maybe you have some input on this?)

Consumers should read these clauses, but mostly don’t. That’s not surprising – we know consumers tend not to be the most rational economic actors. The other problem is that even if they do read them and know about them, they often can’t realistically do anything about them: many of these clauses are in contracts for services or matters where there is no realistic alternative or where all of the alternatives also require arbitration. For example, the two ISPs available to me (cable and telco) both require arbitration, as do all major cell phone providers. You can find other examples in the employment area, where employees are often forced to sign an arbitration agreement or quit on the spot with no severance – hardly a voluntary agreement. (See the background in Ernst & Young v. Morris, a case decided by SCOTUS earlier this year where the employer emailed its employees arbitration agreements that they were deemed to have agreed to if they did not immediately quit upon reading the email.) Similarly, severance agreements now often include arbitration clauses – and remember, many Americans aren’t in a position to handle an unexpected $500 expense, let alone turn down a few weeks of severance pay over an arbitration clause when they unexpectedly lose their income.

I agree that arbitration can be useful when you have contracts between parties of similar bargaining power and sophistication, and I wouldn’t prohibit it there. It’s used in collective bargaining agreements, for example, with more fairness and success than the standard arbitration terms forced upon non-union employees. Business-to-business contracts that are individually negotiated and where both parties are represented by counsel are another area where they serve a legitimate purpose. (But we shouldn’t assume that arbitration should be allowed in all business-to-business contracts, because small businesses are often the same as consumers. The local cupcake shop has just as much ability to “negotiate” terms with Comcast over Internet service as I would.)

You’re right that AAA and JAMS, the two most common arbitration firms, require the small claims carve-out in consumer contracts, but AFAIK there isn’t a legal requirement. I think it’s one of those things where the larger players are incentivized to give a little to try to avoid regulation. It’s also not really a big thing for them – small claims actions are always individual actions, so it still serves the real purpose of preventing class actions. (If anything, companies would prefer small claims court over arbitration, because arbitration is expensive – easily far more than the dollar amounts involved in the average small claims action – and the company pays almost all of those costs in consumer arbitration.)

(Sidenote: The fee allocation is actually somewhat of a legal requirement, from what I understand. It’s not a hard rule, but if the arbitration clause requires a consumer to pay $10k in arbitration fees to arbitrate a $1k dispute, and doesn’t include any alternative, there’s a good potential for the clause to be found unconscionable. But even that is probably harder after Amex v. Italian Colors.)

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No I didn’t call them, but I will know to should this arise again. If the label had indicated that there was any wiggle room, I would have checked into it, and would still have the machine. To me, that notice implies, pretty strongly, that there is no choice. Also, if Best Buy had told me there was an opt out, I would have kept the machine and they would still have the sale.

As for what we finally chose, I ordered a GE (Haier) last night, at almost 1/2 the price of the LG. It is kind of scary though, as GE washers are almost non-existent in Consumer Reports recommendations. We bought a GE w/d in 2011 at our last house and we were very pleased for the five years we used them. I hope these do as much

As for the LG, although I didn’t use it, I found one feature that showed some thought went into the design. There was a magnetic device that held the door open a few millimeters when not in use. I’ll probably rig a manual version for the GE. Previously, we just left the washer door completely open.

After a year, if the doors started exploding, I could participate in a class action, or sue them individually. The arbitration clause precludes both.

– edited to reflect proper ownership of GE Appliances

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[quote=“scripta, post:6, topic:3093, full:true”]
I was livid after reading the first post. But then I remembered that arbitration cannot preclude/prevent small claims. I’m guessing your appliance or any repair costs won’t exceed small claims.

I was unaware of a mandatory allowance for small claims court. However, it also eliminated the option of a class action.

I was less angry about the arbitration clause than that it was hidden until I took delivery. They are perfectly welcome to require arbitration and I am perfectly welcome to not purchase it.

I am looking forward to changes from the almost perfect balance in SCOTUS. :smile:

This is replacing a 10 year old Samsung. I’m pretty thrifty, but was very pleased when this started to die. If the new one has the same issues, I’ll return and take back the comments about the Samsung.

I wouldn’t consider the opt-out to be an acceptable solution anyway because it bifurcates the class, which means a class action for a defect like that is less likely to be filed. “[product] purchasers whose doors started exploding” may be a large enough group for an attorney to take on the litigation risk, but “[product] purchasers whose doors started exploding and who opted out of the arbitration clause” is probably not.

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As previously mentioned, I particularly disliked the way the notice was given. If the notice was plastered on the display models, or was in the description on the product’s web page, I would be less upset. I lost a couple of hours of sleep and will lose two more when they come to pick it up because the notice was hidden until delivered.

I dislike arbitration, in general, for only a couple of reasons:

  1. The actions are almost never made public
  2. The fees (and thus, future fees) are paid by the manufacturer

Some people don’t think that future income can influence people. I wish that I were that optimistic, but alas …
If arbiter A consistently rules in a way that economically aids the manufacturer and arbiter B consistently rules in a way that economically harms the manufacturer, who is the manufacturer likely to hire to arbitrate their cases?

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Isn’t forced arbitration in some ways preferable, especially in a situation like this? Arbitration is very expensive for the company, it can cost them up to $2k per instance (from what I have read).

Let’s say you have a dispute about a washer that cost $1,000. If they are not willing to resolve the issue, you send a certified letter to LG demanding arbitration. I think they will be much more likely to spend the $1k on resolving the issue than to spend $2k on the arbitration, unless they are just trying to stand their ground.

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Yes, the high cost of arbitration can give you leverage in a small individual dispute, but the tradeoff is that you lose the ability to file or participate in a class action. And in a larger dispute, you will almost certainly be worse off in arbitration. Overall, I don’t find it to be a good tradeoff, but others may disagree.

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Sure, why settle a $500 problem for $1,000 individually, when you can join a class action and score a check for $50 three years later.