Bloomberg News
WASHINGTON The U.S. Supreme Court handed business groups a victory Monday by upholding a Conseco Inc. arbitration clause that consumer groups said may saddle homebuyers with excessive fees.
In a 5-4 ruling, the justices reaffirmed their support for private agreements to use arbitration rather than traditional litigation to resolve disputes.
The justices rejected claims by Alabama homeowner Larketta Randolph, who said a clause used by Consecos Green Tree unit in contracts with mobile-home purchasers was void because it was silent on the subject of fees.
The risk that Randolph will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement, Chief Justice William Rehnquist wrote for the court.
Justices Ruth Bader Ginsburg, Stephen Breyer, John Paul Stevens and David Souter dissented from that part of the high courts ruling. They said the court should have returned the dispute to a lower court for closer scrutiny of the fee question.
Ms. Randolph contended that Green Tree violated the Truth-in-Lending Act by failing to disclose a $15 repossession insurance policy she had to buy. She had sought to press her claim as a class-action.
Arbitration typically requires several hundred dollars of filing fees, plus hundreds or thousands more to cover compensation for the arbitrator. Court proceedings, by contrast, usually carry only nominal charges.
Green Tree argued that arbitrators frequently require the losing side to pay these costs. The companys lawyer also argued that Green Tree voluntarily pays at least some of the expense of consumer arbitration in many cases.
