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November 9th, 2015
The New York Times recently published an article titled “Arbitration Everywhere, Stacking the Deck of Justice.” In this article, the authors examine the growing number of arbitration clauses used by large companies in their contracts with consumers. The article states that “[b]y inserting individual arbitration clauses into a soaring number of consumer and employment contract, companies like American Express devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices. Over the last few years, it has become increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration.” The article continued by providing a broad summary of certain key court cases on this issue.
In the article, F. Paul Bland Jr. was quoted stating, “[c]orporations are allowed to strip people of their constitutional right to go to court . . . Imagine the reaction if you took away people’s Second Amendment right to own a gun.” Unfortunately, the previous quote rings true in the tristate region and in our firm’s cases. Many times, people enter into contracts with arbitration clauses without actually reading the contract and realizing the significance of the agreement.
While we run into arbitration issues in many of our practice areas, this is a topic very applicable to oil and gas leases. Many times, arbitration clauses are in contracts where the consumer has very little, if any, negotiation power. However, we have successfully negotiated arbitration clauses out of oil and gas leases. Like many of the other issues I have discussed in oil and gas blogs, many people enter into oil and gas leases containing arbitration clauses without any knowledge that they are signing away their right to bring a claim in court and, instead, will be forced to address any future issues in arbitration. By entering into a lease with an arbitration clause, an individual waives their right to have a jury hear their claims. Furthermore, the cost of pursuing a claim through arbitration would likely be significantly higher. Moreover, the arbitration clause may make bringing claims for smaller amounts of damages nearly impossible, as many arbitration clauses contain class action bans.
I wrote this blog not only to raise awareness about the New York Times’ article and arbitration issues as a whole, but also to encourage people to have a complete understanding of all terms contained in an oil and gas lease before signing. As I have stated before, some of the most difficult conversations I have with potential clients involve stating that we will not be able to take their case or help them receive the actual value of their mineral rights due to a lease that was entered into without full knowledge of the future implications.
