When complaining doesn’t work

Sometimes legal action is the answer if you can’t get satisfaction otherwise.

Consumer Reports Money Adviser: May 2010

You've contacted everyone at the company that did you wrong, all the way up to the CEO, and you've gotten nowhere. You've filed complaints with the Better Business Bureau and the state and federal agencies that have jurisdiction over that type of business, all to no avail. Yet you're sure the company violated the law or at least the terms of your agreement.

It might be time to pull out the big guns. Sometimes getting a lawyer involved or threatening to sue is enough to prompt a recalcitrant business into making good or at least taking a serious look at the issue. In other instances, you may need to file a lawsuit, either in small-claims court or with a higher authority, depending on the issue and the amount involved.

Know your legal position

First, do some research to see if you have a legal leg to stand on. Many Web sites can help, including those run by state and federal government consumer agencies; nonprofit groups like the Better Business Bureau; legal publishers such as Nolo (www.nolo.com); trade and bar associations; and attorneys who focus on consumer issues or the area of law that pertains to your gripe. You can also look up many state laws online. Bookmark Web sites and download anything you find useful.

Calling an attorney is often the best next step. Ask friends and relatives if they can refer you to one. Other resources include your local bar association and the National Association of Consumer Advocates (www.naca.net). The Web site Avvo.com can help you find attorneys by area and specialty; it also includes information on any disciplinary actions against them. Some lawyers provide free or low-cost consultations, either independently or through state bar associations. Always ask about any fees before you go in.

Don't assume that a lawyer won't be interested in your small-dollar case. Many consumer laws provide for minimum or punitive damages, including laws involving truth-in-lending, debt collection, consumer leasing, and deceptive and unfair trade practices, says Daniel Blinn, managing attorney of the Connecticut-based Consumer Law Group. "I've handled many cases involving warranties where the attorney's fees were substantially larger than the amount sought," he says.

Even if he's not willing to take on a case, Blinn advises consumers on whether they have a basis for their complaint and how to proceed. He also sometimes writes complaint letters on their behalf. And he may help consumers prepare their case for small-claims court. He typically charges $200 to $400 for those services.

Once you've framed your argument, send the company what's called a demand letter, which outlines your dispute and the applicable law or regulation. If a company has violated the terms of a contract, cite the provisions. State how you want your complaint resolved. You can find a sample demand letter at www.nolo.com.

Send the letter by certified mail, return-receipt requested. Keep a copy, as well as any receipts, contracts, responses, and other documentation. If the merchant responds with an offer, consider it carefully.

If the demand letter doesn't work, you might want to take your case to small-claims court. This is often the best place to resolve cases that involve small amounts of money. The process is much less formal than in a higher court. You don't need an attorney, but many states allow you to bring one (although small-claims judges often don't award attorney's fees). Small-claims cases rarely involve a jury. Whether you can appeal depends on the state and situation. In California, for example, only the defendant (or plaintiff who loses a counterclaim) can appeal a decision.

Other criteria vary by state as well, such as the maximum dollar limit of a claim, which in many states is around $5,000. The limit is $15,000 in Delaware but only $1,500 in Kentucky. Filing fees are typically under $100. You can find information on your state's rules at www.consumeraffairs.com/consumerism/small_states.htm.

Where to file?

Generally, you must bring the case in the court that has jurisdiction where the defendant lives or does business, or where the transaction or injury took place. This can be a problem if the company is across the country. Some contracts have clauses requiring lawsuits to be filed in certain courts, typically near the business. In some states, such provisions are hard to enforce. California allows filing a complaint where the plaintiff lives in some cases, including for claims involving consumer purchases. Massachusetts and Vermont allow claims to be filed either where the plaintiff or defendant lives. But if the defendant is far away, especially in another state, it may be difficult collecting on any judgment you obtain locally.

If you want an attorney, weigh the costs. Lawyers typically charge hundreds of dollars an hour, which can easily consume any amount you're awarded, assuming you win. An attorney may work on contingency or for a flat fee. In some jurisdictions, such as Rhode Island, most corporations must have an attorney, which means you could find yourself up against a pro.

If you're representing yourself, sit in on small-claims hearings in your area so you can see how things work, advises Richard Alderman, director of the Consumer Law Center at the University of Houston.

A defendant may have the right to move a case to a higher court, which some companies do to discourage consumers from proceeding. But that can backfire. Blinn cites one of his cases as an example: A car dealer moved a dispute from Connecticut small-claims court, where the maximum judgment at the time was $3,500, to state Superior Court. It awarded the consumer about $9,000 in damages and then added interest and attorneys' fees for a total of more than $100,000.


Seek a higher authority

Depending on the size and complexity of your case, it may be necessary to bring it to a higher court. It's usually a bad idea to attempt that without an attorney. "Somebody really has to put in a lot of time to learn about the court rules and procedures to pull that off," Blinn says. "That's very difficult on your own."

If you opt to pursue a lawsuit, discuss fees and costs with an attorney in advance. Find out if he or she will work on a contingency-fee basis or if you'll be billed for the entire cost regardless of the outcome. Also ask the attorney to estimate how long the process is likely to take.

Alternatives to the courtroom

In arbitration and mediation, complaints are heard by an individual or panel outside of a courtroom. The services are offered by third parties, including arbitration and mediation companies, industry associations, and even government agencies. State-run automotive lemon-law programs often use arbitrators. The Better Business Bureau runs both types of programs.

Both methods are private, faster, and might cost less than going to trial. You'll introduce evidence and may even call witnesses, just as in a court proceeding.

A mediator tries to get both parties to agree to a resolution. An arbitrator makes a decision after hearing evidence. In binding arbitration, you and the other party are bound by the decision, meaning that you can't take your case to court if you disagree. (There may be grounds for appeal, say, in the case of fraud by the arbitrator.)

Among the drawbacks, there may be no decision explaining the reasons for an award. And if there is, it generally can't be cited as case law. So you can't point to someone else's arbitration victory in court. Arbitrators are also unlikely to give the large awards that juries sometimes do.

Finally, it's hard to determine whether an arbitrator is being impartial, especially if the company chooses the arbitration firm. An arbitrator may fear that too many decisions against the company might cost him or her future business.

What to do

Don't automatically agree to arbitration. Even if your contract with a company contains a mandatory arbitration clause, an attorney may be able to challenge it. In deciding whether to arbitrate, determine the cost, how the process works, and the standards the arbitrator will apply.

Mediation may be a good option, but weigh the costs. The San Francisco Bar Association's program charges $250 per party, which covers an hour of preparation and two hours of mediation time.

Before agreeing to either method, it's a good idea to consult an attorney.

This article appeared in Consumer Reports Money Adviser.

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