Can the elderly be bound by arbitration agreements?

If any of us were to read the fine print on many of the contracts we sign, such as for cable TV and many other services and products, we would see that we often have agreed that disputes will be resolved by arbitration.

Arbitration means that instead of suing in court we and the company with which we have a dispute must go before an individual who listens to all the evidence and then makes a decision.

On its face, arbitration sounds great because it is supposedly less expensive and more efficient. But it also means there’s no jury that may be more sympathetic with our case, especially when it appears we’ve been taken advantage of by a company that throws its weight around like a 100-pound gorilla. And arbitration also means there’s no appeal of a decision that doesn’t go our way or doesn’t give us adequate compensation for our loss.

The elderly can be particularly hurt by arbitration agreements because many people take advantage of their diminishing capacity to understand what they sign, and perhaps their tendency to be more trusting.

An example is the elderly woman who turned her life savings over to a well-known investment firm expecting that it would manage her funds so she could live comfortably for her remaining years. Not too long thereafter she learned that her stock broker had carelessly lost nearly $300,000 of her investments.

The agreement she signed with the investment firm had an arbitration clause. She was not able to present her case before a jury that most probably would have awarded her significant compensatory damages. Instead, she was only awarded $5,000. She had no other recourse.

And that’s not all. She also got a bill from the arbitrator for $10,000 as her share of the arbitration costs. In the end, she was out $5,000 more than if she had not tried to recover anything at all.

The California Legislature and the courts have recognized that elderly persons are often abused financially. While initially aimed at protecting the elderly from abusing family members and caretakers, the courts have extended the protection to “elder financial abuse” by including nursing homes, financial institutions and others.

Often we have no choice but to either sign the contract with the arbitration clause or go elsewhere for the services or products we want. But we can take some comfort in knowing the courts will not always allow companies and institutions to enforce such clauses if they are unconscionable, especially with regards to the elderly.

Carleton Morrison practices law at Morrison Law in Bonsall. He may be reached at (760) 724-9580. His associate, Andrea Aston, may be reached at (760) 758-1565.