Knology arbitration clause

by Ted Frank on June 13, 2008

Overlawyered favorite Justinian Lane thinks he’s discovered a smoking gun in the Knology arbitration clause:

All disputes arising out of or relating to this agreement (other than actions for the collections of debts you owe us) including, without limitation, any dispute based on any service or advertising of the services related thereto, shall be resolved by final and binding arbitration… (Emphasis added.)

Aha! Justinian thinks: proof (or, as he exaggerates, “the final nail in the coffin”) that arbitration isn’t cheaper than court for debt collection! Except Justinian, as his is wont, hasn’t read the entire contract, and misses the real kicker to the consumer in ¶ 17:

Subject to the arbitration and dispute resolution requirements of Paraqraph 16 this Agreement is governed by and construed in accordance with the laws of the State of Georgia and You consent to the jurisdiction of the federal District Courts of Georgia and the Circuit and District Courts of Fulton County, Georgia with respect to any dispute arising under this Agreement.

Yes, Justinian, if he tries to skip out on his debt to Knology, will face a lawsuit in Fulton County, Georgia, where he has accepted personal jurisdiction 767 miles away from his hometown. But at least he won’t have to arbitrate! (NB Fulton County debt collection has horror stories at least as bad as anything Public Citizen concocted in its anti-arbitration report.)

Are there jurisdictions with efficient debt-collection procedures in court that work out to be cheaper than arbitrators? I don’t doubt it, and perhaps Fulton County is one of them. Some providers, however, would prefer not to force their customers to go cross-country in a debt proceeding, and recognize that arbitration will be cheaper than trying to collect debts in thousands of jurisdictions across the country. The Knology agreement certainly doesn’t contradict this; that Justinian has found an agreement that is worse for debtors than a straightforward mandatory binding arbitration clause is hardly an argument for outlawing mandatory binding arbitration clauses.  It just shows that banning mandatory binding arbitration will make consumers worse off, because vendors who can’t count on arbitration will instead use forum-selection clauses to protect themselves from hellhole jurisdictions.

(Separately, Justinian’s figures for the fee schedule for NAF ignores the legal expenses involved in filing in court versus filing with an arbitrator; multiple court appearances and filings are needed, versus a single filing with an arbitrator.)

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07.15.08 at 9:27 am

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1 collection lawyer 06.15.08 at 1:27 am

I have worked with the NAF on several consumer collection arbitration projects. They certainly tried to get my company’s business, but would not agree to take any steps that would in any way influence their arbitrators.

That said, the Fair Debt Collections Practices Act would require a collection lawsuit (and arbitration, for that matter) to be brought in the jurisdiction in which the consumer resides, regardless of any forum selection clauses in the underlying agreement. Thus, while I sympathize with your post, it is simply incorrect to justify the creditor’s rejection of arbitration on the basis of their forum selection clause, which will be unenforceable.

2 Ted Frank 06.15.08 at 9:04 am

CL, by my understanding, the FDCPA would not apply to Knology’s collection of its own debts so long as they use their own name, because it is not a “debt collector” subject to FDCPA § 811. See FDCPA § 803(6)(a) (codified at 15 USC § 1692a(6)(a)). Some state laws would indeed prohibit Knology’s actions.

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