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Texans who say they’ve waived their right to have disputes settled by juries because they signed contracts with binding arbitration clauses asked the Legislature for help at an April 3 hearing. But Houston solo Fred Bosse, chairman of the House Civil Practices Committee, says state lawmakers are “very limited” in what they can do because the Federal Arbitration Act governs arbitration matters if interstate commerce is involved. In 1983, the U.S. Supreme Court held in Cone Memorial Hospital v. Mercury Construction that the FAA created a “liberal federal policy favoring arbitration,” providing arbitration clauses with the presumption of enforceability. “The remedy for this may be in Washington, D.C.,” says Bosse, a Democrat whose committee is studying arbitration and other nonjudicial procedures designed to keep disputes out of the courthouse. Some attorneys say the state could level the playing field in the area of arbitration. While the Legislature’s authority over arbitration is limited, lawmakers could enact measures to make the process “fair and balanced,” says John C. Fleming, an attorney-mediator with Austin, Texas’ Galton, Cunningham & Bourgeois. Fleming, also an adjunct professor at the University of Texas School of Law, says the Legislature could consider establishing unconscionability standards for contracts. Although Texas Civil Practice and Remedies Code � 171.022 says a judge may not enforce an agreement to arbitrate if it is determined to be unconscionable at the time the agreement was made, there are no standards for making that determination. Fleming also says lawmakers could consider disclosure requirements for arbitrators. He says arbitrators could be required to disclose any relationship they might have with parties to a dispute, and a process could be provided to disqualify an arbitrator. Scenarios in which a party to a dispute might want to disqualify an arbitrator are described in a report written by Austin attorney Cris Feldman for the consumer advocacy group Texas Watch. The April 3 report on consumer pitfalls in binding arbitration says some arbitration firms contract to handle all consumer disputes for a particular corporation, and a business may use the same arbitrator repeatedly once that individual has ruled in its favor. Fleming, who’s on the commercial arbitration panel of the American Arbitration Association, which provides arbitrators, says he never knows if AAA has handled 100 disputes for a company or only one when he’s assigned a case. “Arbitration clauses are allowing large corporate interests to privatize the civil justice system and eliminate the [consumer's] ability to have a day in court and find justice,” alleges Feldman, of counsel at Ivy, Crews & Elliott in Austin. Feldman says the Legislature could help consumers just by opening the now-secret proceedings to the public. Making arbitration awards public record would enable consumers to check on a company’s record, he says. Fleming says a party in an arbitration proceeding has the option under existing law to make an award public record by asking a judge to confirm it. Several witnesses at an April 3 hearing of the Civil Practices Committee said consumers often don’t know until a dispute arises that they signed away the right to have a jury settle a complaint against a company. Dawn Richardson, one of the witnesses at the hearing, sued her homebuilder but says in an interview that she isn’t likely to get her claim before a jury because her contract calls for binding arbitration. In Richardson v. David Weekley Homes, et al., the Austin woman alleges among other things that her home has been rendered uninhabitable by toxic black mold that developed because the builder failed to repair leaks. Richardson filed the suit last month in Austin’s 53rd District Court. “We had to evacuate our home after only five weeks,” Richardson says. When the Richardsons vacated the $238,000 home in June 2001, they left behind all their possessions, which the suit alleges have been contaminated. The builder offered to settle with the family. According to a letter in the court file that was written by the builder’s attorney, Chris Pappas, Weekley Homes offered to repair any construction defects, remediate existing mold, pay the Richardsons $25,000 for their inconvenience and pay up to $25,000 more for attorney fees. Richardson also alleged in the suit that her 2-year-old daughter suffered brain damage, impairing her speech and motor skills. Pappas says the builder responded promptly when the Richardsons reported the water leak and had tested to see if the repairs ordered were done properly. The builder also offered to provide temporary housing for the family. Pappas, with Houston’s Dunn, Kacal, Adams, Pappas & Law, says the builder has filed a motion to compel arbitration. The provision for binding arbitration is “clearly marked in the contract,” he says.

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