Mark Pestronk
Q: I am working with a local attorney to develop a new set of terms and conditions for our retail sales and tour operations. I want to be fair to our clients, but I don't want to encourage frivolous litigation. So, I am interested in your opinion about the following questions: Should we require arbitration instead of litigation? Should we instead provide an option to arbitrate? Should we provide for a mediation process? Should we provide that the terms and conditions are to be interpreted in accordance with the law of a particular state? If so, can it be our state? Should we provide for an exclusive forum i.e., suits must be brought only in the courts of our city?
A: Since almost all of my clients are travel agencies or tour operators, my role is to protect my clients to the maximum extent possible from the risks and costs of litigation. Therefore, your basic goal in drafting terms of additions should be to maximize self protection, as long as your terms are likely to be upheld by a court.
Let me say at the outset that my advice is not to treat clients unfairly. Rather, you should settle all legitimate claims promptly and equitably before litigation, but if a client unreasonably demands compensation for something for which you have no liability, you should make it as tough and risky as possible for the client to sue you successfully.
Many legal experts recommend that you require arbitration or mediation of all disputes. The main reason for such a requirement is to rule out class-action lawsuits, as there are no class actions in arbitration or mediation unless a court has ordered it. Class actions are very expensive and drag out for years.
However, in my experience, there almost no class-action lawsuits brought against any travel agencies or tour operators except for the biggest online operators. So I really would not worry about class actions.
On the other hand, with arbitration or mediation, the consumer often thinks that: a) he can argue the case without an attorney and b) the arbitrator or mediator will "do what is right" and not necessarily what the terms provide. Although these beliefs are often wrong, the consumer is much more likely to pursue arbitration than to file a lawsuit, if you require or even allow it in your terms.
So, don't allow for arbitration or mediation. Instead require the consumer to resort to court, but make it a court that is inconvenient for the consumer, if possible. Specifically, I recommend that you provide that all litigation must be brought in the federal or state court in your home city or county and that your terms must be interpreted in accordance with the law of your state.
In 1991, the U.S. Supreme Court upheld Carnival Cruises' terms requiring that all lawsuits be brought only in Miami Dade County, as long as the passenger had notice of the requirement. You should take advantage of the Supreme Court's pro-business decision, but be sure to state conspicuously the name of the city or county where suits must be brought, and get your attorney's help in drafting the clause.