Homeowners across the state rallied in front of the State Capitol prior to providing testimony to the Business and Industry Committee on the abuse of binding arbitration clauses in new home contracts. The Committee was charged by the Speaker of the House Pete Laney to investigate binding arbitration where the consumer has little if any bargaining power. From the testimony it was clear: arbitration in itself could be an effective way to resolve disputes without the use of the court system, but the current use of mandatory, binding arbitration in new home contracts is costly, abusive, and extremely unfair to the new  .

Homebuyers agree to pre-dispute binding arbitration inticed with a promise it is faster, just as fair, and less costly than the civil court system. Only when a serious dispute arises does the homeowner learn the hidden details of the arbitration clause. They learn it is too fast for justice to be served, extremely unfair, far from free, and no way to opt out of it. They learn the fate of the biggest investment of their life now lies in the hands of a high cost kangaroo court of arbitrators instead of a jury of their peers.

Contrary to popular belief, the cost of arbitration is significantly higher than using our court system. Extra non-disclosed fees are over and above attorney costs, which are incurred whether in arbitration or in court. Eees can range from as little as $375.00 for a "mail order justice" for a dispute of $75,000 or less, to thousands of dollars requiring a three ring circus of high paid arbitrators to hear your case. These are only the filing fees and do not include the cost of the arbitrator, room rental, arbitrator "study time" or a stenographer. Compare this to a $125.00 filing fee in our court with your taxes paying for the courthouse, the judge, the jury, and all support personnel.

And how fair can this system possibly be when you have a mail order justice system with a paper only review determining the fate of a $75,000 defect in the biggest investment of your life? A significant defect with your new home should be resolved with a serious and through review of the facts by a judge and jury in a civil court. This court, up until recently, was guaranteed by the 7th Amendment to the Constitution and has a long history of fairness.

Testimony at the hearing dislcosed yet another abuse. A Houston attorney arbitrated a case against a builder where the homeowner lost. Only after the arbitration was the arbitrator found to be counsel for the Greater Houston Builders Association. And during the arbitration period, he authored an amicus brief to the Texas Supreme Court supporting the GHBA in removing our implied warranty of habitability. He also wrote a brief on a case that directly affected the arbitration. How fair can this be when this type of conflict of interest was not disclosed prior to the arbitration?  This kind of abuse was only one example brought to the attention of our elected officials last week

The abuse and non-disclosure of the extra fees and facts of mandatory binding arbitration clauses calls for immediate action by our State Legislature. The issue is not how much arbitration costs, or how fair it is. Instead it is whether all the facts of arbitration and all associated fees have been disclosed to the homebuyer prior to accepting the contract. From the testimony at the hearings, it is clear this is not being done.

Arbitration clauses should be removed from new home contracts as a prerequisite to purchasing the home. Only when a dispute arises should the owner be given the option of binding arbitration instead of the current court system. Only when the extra fees, rules, procedures, and backgrounds of the arbitrators are openly disclosed to the homeowner can they make a reasonable and educated decision.

Disclosure of the facts to reach an informed choice will allow binding
arbitration to stand on it's own or fall on it's farce.