Battle Of The Forms

WHAT YOU CAN DO TO PRESERVE YOUR CONSTITUTIONAL RIGHT TO GO TO COURT AGAINST BUSINESSES THAT RIP YOU OFF.

by William J. Woodward, Jr.
Professor of Law
Temple University
January 22, 2002

Here's how to give banks and telephone companies a dose of their own medicine with your own contract forms! (Please see "Caveats" below.)

THE PROBLEM

If you were to take the time to actually read the "stuffers" - the stacks of legal-looking documents that come with your utility bills and bank statements - you might be in for a surprise. Increasingly, these fine-printed, boring documents are new "terms of contract" claiming to govern the relationship you have with the provider. The practice is common in all forms of business with business and consumers alike. But what is new is a set of provisions limiting your access to courts and juries and limiting your ability to get meaningful relief if the seller or lender either doesn't comply with its service obligations or disobeys state or federal law.

These are the increasingly prevalent "dispute resolution" terms where the vendor's form proclaims that you give up your rights to sue in a court of law, that you opt for arbitration instead, and that you are not permitted to join with others in a class action against the provider.

These forms, typically, will assert that you agree to the new terms if you continue using the service or fail to object to the form. They claim your are stuck with the new terms if you do nothing.

Vendors know there will be few objections because few customers take the time to read the forms. Those few that do read the forms are unlikely to understand what they mean, or will believe they are stuck with whatever the form proclaims to be "the agreement."

You will find two kinds of these new terms in these stuffers. The first is your purported agreement to go to arbitration with any complaints you might have, instead of to a court. This means no appeal, perhaps no report or explanation of the decision, perhaps more limited relief, and may also mean substantially more fees than for a court in order to get the process going and substantial fees if you lose.

The other increasingly-common term is a prohibition on "class actions." This is a kind of law suit in which thousands of people who got cheated just a little by a business, can join forces, pool their resources and sue the business. Sellers and lenders know that if they cheat "just a little," few of the thousands or millions of individuals involved will find it worthwhile to pursue legal rights against them. Class actions solve this problem by joining all such claimants together so they can hire counsel and deprive the vendor of the unjust gain. Their purpose is not so much to get a dollar or two for the class members involved as it is to benefit the group generally by depriving the seller or lender of their motivation for cheating "just a little." A friend recently got a check for $10. This was his portion of a class action settlement with a business who had been accused of miscounting the minutes that its bills to consumers were based on. The Company had to pay over a total of approximately $74 Million in ill-gotten gains.

Class actions have become a very important form of consumer relief in the past 50 years, particularly with banks and utility companies. They benefit millions of consumers each year by keeping businesses honest. The "stuffers" say that you will not participate in such actions. It is easy to see that this is a huge escape from liability by the business if this "contract" not to bring class actions is effective.

A series of recent Supreme Court decisions has emboldened businesses; drafting "stuffers" with such provisions has become a cottage industry for lawyers representing businesses. There is plenty of business advantage to including such forms and (because customers don't read or understand the forms) little disadvantage in doing so.

But many people believe that you don't agree unless you do something to show your agreement. An old legal maxim proclaims "silence is not assent" and many believe this is particularly true when important rights are at stake. Occasionally, consumers have pressed these positions in court and won. But there may be a better approach, one that gives the envelope stuffers a dose of their own medicine.

ONE SOLUTION-THE "BATTLE OF THE FORMS"

When businesses trade with other businesses who can afford their own lawyers, they find (not surprisingly) that other business have contract forms of their own. Since forms for business sellers and business buyers alike are written by lawyers, you can understand that they will be one-sided, in favor of the business that hires the lawyer to draft the form (that is, after all, the lawyer's job!). In these settings, the business sellers send their (one-sided) forms to their buyers and the buyers respond by sending their (opposite-sided) forms with their order or with their payment. Each business has the objective of getting the contract their way rather than their partner's.

This exchange of legal contract forms is referred to in legal circles as the "battle of the forms." Given who is drafting the forms in the business vs. business battle of forms, the seller's form and the buyer's form will almost certainly conflict with one another. Most of the time, no one notices any conflict because (like consumers) everyone is too busy to read all the forms. But when a dispute arises, a judge has to make sense of the fact that there are two form contracts vying for control, not just one. Since there can be only one contract, the law has had to find a way to resolve this "battle of the forms."

The prevalent approach the courts have now taken is to see the terms in the forms that conflict as canceling one another out, leaving the seller and buyer to the background law on the questions that the forms conflicted on. So, for example, if the seller's form said "very limited warranty" and the buyer's form said "very big warranty," many courts would strike out both terms and leave the parties to whatever "warranty" the law otherwise prescribes. Most consumers are not lawyers and most are only barely aware of the implications of the "stuffers." They obviously don't have lawyer-drafted forms for dealing with their sellers and lenders. So we have not seen a "battle of the forms" take place at the consumer level. Moreover, Seventh Circuit Judge Easterbrook has opined that if the vendor sends a form but the consumer does not respond, the vendor's form controls -- in effect, he thinks it takes two forms to do battle.

There is no reason that a consumer cannot have her own form and do battle with a business that has tried to take away important rights by sending out its one-sided form to the consumer. There even seems to be a little poetic justice in it.

The contract form attached was designed for use with a utility supplier such as Sprint. Sprint's form, a portion of which is also attached, purports to bind its customers if the customers continue to do business with Sprint. The attached form responds, largely in Sprint's own language, and purports to bind Sprint if Sprint continues to do business with the vendee. It basically reverses the particular provisions found objectionable, returning them to the rights everyone else has, at least those who have not received a stuffer.

Obviously, the form is a sample only and would have to be modified for a different service or credit provider. But if you've gotten this far, you can easily make the necessary modifications.

There are some caveats in order. First, there is no guarantee that your form will control or have any legal effect whatsoever. Since consumers have not used contract forms in the past, there is no precedent for a court to bring a "battle of the forms" analysis to the problem. If these conflicting terms became important in a case in court, probably the worse that could happen is that a court would give the vendor its terms and ignore your form. On the other hand, sellers and lenders recognize that you are very unlikely to read or understand their forms, even though they remove many significant rights you have in the event a dispute comes up. Because your form only returns the legal rights to "normal"-the way they were before the vendor dispatched its "stuffer"-- courts may well be warm to the idea that your form is effective in blocking the vendor's.

Second, in sending in the form, you run the risk that your vendor will terminate your service. This is because the form obtains the vendor's agreement if the vendor does not terminate service, just as the vendor's form purports to get your agreement if you continue to receive service. You should be prepared for this and be willing to secure alternative services if the vendor decides to end the relationship. We might guess that many vendors would prefer to hold on to your business rather than to fight about your form.

Finally, because this is very "non-traditional," you may be seen by some as a little eccentric, as "rocking the boat" or as "getting in the way of business." Some of you will respond positively to such perceptions and some will react negatively.

I would be most interested in your experience with these documents.

William J. Woodward, Jr.
January 22, 2002

CAVEAT 1: The theory supporting the approach taken below is untested in court. If you take this approach, you risk having the service / credit supplied by your vendor cut off if they elect not to comply with your terms. In addition, a court may decide not to recognize the approach outlined below in the consumer context (it is well-recognized in the business arena).

CAVEAT 2: The approach taken below is "benign" in the sense that it doesn't purport to change the phone rates or the like but, rather, simply brings consumer rights back to where they were (and ought to be) before the arbitration / no class action clause arose. Whatever the chances that this approach will succeed, they are tied to the specific terms dealt with here.

There is, of course, no warranty that this approach will work, or that it will not have unanticipated negative consequences in other cases. Users proceed at their own risk. Please be careful!!

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FROM SPRINT TERMS AND CONDITIONS OF SERVICE, PUB. NO. 9300A.40 8/01

1. APPLICATION OF TERMS AND CONDITIONS OF SERVICE

1.1. General Application. These Terms and Conditions of Service (terms and Conditions), together with the current rates and restrictions applicable to your calling plan (Rates or Rate Schedule), constitute your agreement with Sprint (Agreement) for the Services that you purchase from Sprint Communications Company L.P. (Sprint). The Rate Schedules are incorporated into this Agreement by reference and are a part of this Agreement. YOUR ENROLLMENT IN. USE OF OR PAYMENT FOR THE SERVICES CONSTITUTES YOUR ACCEPTANCE OF AND AGREEMENT TO THIS AGREEMENT. IF YOU DO NOT AGREE WITH SPRINTS RATE SCHEDULES OR TERMS AND CONDITIONS, DO NOT USE THE SERVICES AND CALL SPRINT CUSTOMER SERVICE IMMEDIATELY FOR INSTRUCTIONS ON HOW TO CANCEL THE SERVICES.

1.2. Changes to Rates. Terms and Conditions. Sprint reserves the right to change its Rate Schedules or Terms and Conditions at any time. All changes to existing service and product offerings will be posted on Sprint's website at www.sorint.com/ratesandconditions/ at least 15 days before they become effective. In addition, Sprint may notify you in advance of any significant changes to these documents, including any increases to the Rates applicable to your calling plan, in one of the other ways identified in Section 13.9. . . . YOUR CONTINUED USE OF THE SERVICES CONSTITUTES YOUR AGREEMENT TO SPRINT'S RATES, TERMS AND CONDITIONS THAT ARE IN EFFECT AT THE TIME YOU USE THE SERVICES.

8. DISPUTE RESOLUTION

8.1. This Section applies to any dispute between you and Sprint arising out of or relating to this Agreement, including any dispute you may have regarding the Services, charges for Services, advertising, or any other dispute that either you or Sprint has that is related to this Agreement, even if the dispute arises after your Service has terminated. All disputes must be resolved as described in this Section. YOU AGREE THAT ANY DISPUTE WILL NOT BE RESOLVED BY A JUDGE OR JURY IN COURT (EXCEPT FOR SMALL CLAIMS COURT, IF APPLICABLE). YOU FURTHER AGREE THAT ANY DISPUTE YOU MAY HAVE AGAINST SPRINT CANNOT BE JOINED WITH THE DISPUTE OF ANY OTHER PERSON OR ENTITY IN A LAWSUIT, ARBITRATION OR ANY OTHER PROCEEDING, OR RESOLVED ON A CLASS-WIDE BASIS.

8.2. If you have a dispute with Sprint, you must first call Sprint's Customer Service department at the number listed on your invoice or write to Sprint at P.O. Box 569290, Dallas, TX 75356-9290, Attention: Manager, Executive Services, to attempt to resolve Your dispute. You must describe your dispute and provide Sprint with any supporting documentation. Likewise, if Sprint has a dispute with you it will notify you by letter sent to your billing address and attempt to resolve it before pursuing arbitration.

8.3. If either party is unable to resolve its dispute within 60 days of notifying the other party of the dispute, either party has the right to take the dispute to small claims court if it qualifies under the rules of that court. Alternatively, either party may request arbitration of the dispute through the American Arbitration Association (AAA). All disputes related to this Agreement that are not resolved informally or in small claims court, regardless of the legal or equitable theory under which they are brought, must be resolved through final and binding arbitration in accordance with the Federal Arbitration Act, 9 U.S.C § 51-16. ANY REQUEST FOR ARBITRATION OF A DISPUTE ARISING OUT OF OR RELATED TO THIS AGREEMENT MUST BE MADE WITH THE AAA WITHIN TWO YEARS OF: (a) THE DATE ON WHICH THE FIRST ACTION OR EVENT GIVING RISE TO THE DISPUTE OCCURRED, OR (b) IF THE DISPUTE INVOLVES CLAIMED OVERCHARGES BY SPRINT, THE DATE THAT SPRINT NOTIFIES YOU THAT THE CHARGES ARE VALID, WHICHEVER IS LATER.

8.4. The arbitration will be conducted by one arbitrator in accordance with the procedures outlined in this Section. The arbitrator is bound by the terms of this Agreement in conducting the arbitration and making any award, and may not modify or change its terms.

8.5. If the dispute involves $10,000 or less, the arbitration will be conducted according to the AAA'S Arbitration Rules for the Resolution of Consumer-Related Disputes in effect as of the date that a dispute is submitted to the AAA. as modified by this Agreement If the dispute involves more than $10,000, the arbitration will be conducted according to the AAA'S Commercial Arbitration Rules in effect as of the date that a dispute is submitted to the AAA, as modified by this Agreement. You may obtain a copy of the AAA'S arbitration rules and procedures from your local AAA office or by visiting their Web site at Www.adr.org.

8.6. You may be represented by an attorney in an arbitration. If the dispute involves less than $10,000, any in-person arbitration will be held at a location selected by the AAA in the state or area of your primary residence. If the dispute involves $10,000 or more any in-person arbitration will be held at a location selected by the AAA in the state or area of your primary residence or in the metropolitan Kansas City metropolitan area, at the option of the party filing the demand for arbitration. You and Sprint agree to keep all aspects of the arbitration confidential, including any testimony, documents, and award, except as may be required by law or to enforce any arbitration award.

8.7. Each party must pay its own expenses associated with any arbitration, including its attorney's fees. If you file a request for arbitration, you will have to pay a filing fee in accordance with the AAA fee schedule. Under AAA rules, some costs such as the arbitrator's fees and expenses will be allocated between the parties.

8.8. The arbitrator may not award punitive, exemplary, or similar damages, or attorney's fees. The parties agree that an award of such damages or fees will be void if issued. YOU AND SPRINT BOTH EXPRESSLY WAIVE ANY CLAIMS FOR DAMAGES THAT ARE EXCLUDED UNDER THIS AGREEMENT.

8.9. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

8.1O. In addition to the procedures described in this Section for resolving a dispute, you may also have the right to file a complaint with an appropriate federal or state regulatory agency.

8.11. If any portion of this Dispute Resolution Section is determined to be invalid or unenforceable, the remainder of the Section remains in full force and effect.

9. LIMITATIONS ON SPRINT'S LIABILITY. This Section describes the full extent of Sprint's liability to you for any claims in connection with the Services or this Agreement.

9.1. Liability Limitations.

A. SPRINT'S LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING FOR ANY PROBLEM YOU EXPERIENCE WITH THE SERVICES, WILL NOT EXCEED THE AMOUNT YOU ARE CHARGED FOR SERVICES DURING THE AFFECTED PERIOD. THIS INCLUDES, BUT IS NOT LIMITED TO, ANY DAMAGES ARISING OUT OF MISTAKES, OMISSIONS, INTERRUPTIONS, DELAYS, ERRORS, UNAVAILABILITY OR DEFECTS IN THE TRANSMISSION OF THE SERVICES.

B. SPRINT IS NOT LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, INDIRECT. PUNITIVE OR EXEMPLARY DAMAGES FOR ANY CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT, ARISING OUT OF ITS PROVISION OF SERVICES OR FAILURE TO PROVIDE SERVICES UNDER THIS AGREEMENT. CONSEQUENTIAL, INCIDENTAL, SPECIAL AND INDIRECT DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOST PROFITS, LOST REVENUES AND LOSS OF BUSINESS OPPORTUNITY, WHETHER OR NOT SPRINT WAS AWARE OR SHOULD HAVE BEEN AWARE OF THE POSSIBILITY OF THESE DAMAGES.

C. SPRINT IS NOT LIABLE FOR ANY FAILURE OF PERFORMANCE DUE TO CAUSES BEYOND ITS CONTROL, INCLUDING, BUT NOT LIMITED TO, ACTS OF GOD, FIRES, METEOROLOGICAL PHENOMENA, FLOODS OR OTHER CATASTROPHES; NATIONAL EMERGENCIES, INSURRECTIONS, RIOTS OR WARS, STRIKES, LOCKOUTS, WORK STOPPAGES, OR OTHER LABOR DIFFICULTIES, ACTS OF THIRD PARTIES, INCLUDING BUT NOT LIMITED TO LOCAL OR FOREIGN TELEPHONE COMPANIES; AND ANY LAW ORDER, REGULATION OR OTHER ACTION OF ANY GOVERNMENTAL ENTITY

D. THIS SECTION CONTINUES TO APPLY AFTER THE AGREEMENT ENDS.

E. Nothing in this Section limits damages that are conclusively determined to be the direct result of Sprint's wanton or intentional misconduct.

9.1. No Warranties. SPRINT MAKES NO EXPRESS OR IMPLIED WARRANTIES ABOUT ITS SERVICES THAT ARE NOT EXPRESSLY CONTAINED IN THIS AGREEMENT. SPRINT DISCLAIMS ANY IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. SPRINT ALSO MAKES NO WARRANTY THAT THE SERVICES WILL BE UNINTERRUPTED OR ERROR-FREE. YOU MAY NOT RELY ON STATEMENTS OF WARRANTY ABOUT SPRINT'S SERVICES; SUCH STATEMENTS ARE NOT AUTHORIZED BY SPRINT AND ARE NOT A WARRANTY BY SPRINT.

9.2. Exclusions. Sprint is not liable for claims or damages from:

A. your or your Authorized User's fault, negligence or failure to perform your responsibilities;

B. third party claims against you that arise out of your or your Authorized User's use of the Services;

C. claims for third party acts or omissions;

D. your or your Authorized User's acts or omissions;

E. the acts or omissions of any non-Sprint entity furnishing equipment, services or facilities for use with Services;

F. claims from a breach in the privacy or security of communications transmitted over Sprint's network, unless caused by some act or omission ~f Sprint;

G. claims due to fraudulent or unauthorized use of the Services provided to you, or unauthorized use of your telephone facilities to place calls on the Sprint network; or

H. a problem with the interconnection of Sprint's Services with the services or equipment of some other party.

10. YOUR LIABILITY You will indemnify, defend and hold Sprint harmless from all claims and demands by third parties for loss or damages arising out of the use of Services by you or your Authorized User, including but not limited to: claims of libel, slander, or the infringement of copyright; claims for the unauthorized use of any trademark, trade name, or service mark arising from the material transmitted over the Services; claims of infringement of patents arising from, combining with, or using in connection with, the Services, any apparatus and or systems furnished by you or your Authorized User; and all other claims arising out of any act or omission of you or your Authorized User in connection with the Services.

______________________________

William J. Woodward, Jr.
Terms and Conditions of Continuing Service with Sprint
January 10, 2002

1. General Application. The Terms and Conditions specified herein ("Woodward Form") supplement the "Sprint Terms and Conditions of Service" document ("Sprint Form") mailed to William J. Woodward, Jr. in December 2001. To the extent the Terms and Conditions herein are inconsistent with those in the Sprint Form, these Terms and Conditions control. By continuing to supply service, Sprint expressly agrees that the terms herein take precedence and agrees to these terms.

2. Dispute Resolution.

a. This paragraph is applicable to all disputes between William J. Woodward, Jr. and Sprint, regardless of the underlying issues and regardless of whether Sprint or Woodward is the complainant.

b. Sprint and Woodward agree that all claims of any kind may be adjudicated by a State or Federal court of law that otherwise has jurisdiction over the parties (including Small Claims Courts) or, alternatively, by arbitration agreed to by the parties after the time the dispute has arisen.

c. Sprint and Woodward agree that either may make claims against the other within the applicable Statute of Limitations with respect to such claims.

d. Sprint and Woodward agree that either Woodward or Sprint may join with other complainants in a dispute against the other, to the extent such joinder of claims or complainants is permitted by State or Federal law. Sprint and Woodward agree that this Agreement in no way limits the rights either party has to pursue their claims as otherwise permitted by law. Sprint hereby waives any objections it otherwise might have to the joinder or participation of its other customers in any legal proceedings commenced by Woodward, to the extent they are otherwise permitted by law to join in such proceedings.

e. Sprint and Woodward agree that a court or arbitrator may award any relief to the prevailing party that is otherwise permitted by law, including injunctive relief, consequential damages or punitive damages. This Agreement neither enlarges nor reduces Sprint's or Woodward's relief that would otherwise be permitted by law.

f. Sprint and Woodward agree that, notwithstanding Sprint's Paragraph 9.1, Sprint may be liable for all damages caused by its gross negligence.

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