Settling Disputes without Going to Court – Mediation & Arbitration

By Doyice J. Cotten

An agreement to mediate and/or arbitrate any grievance against a provider can be included in the membership agreement or the liability waiver. The following language is one example of language that can be used in the agreement. Another version of this article was published earlier by Fitness Management magazine.

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If there is any dispute over $500 between you and California Fitness, both parties agree to submit it to binding arbitration, using the American Arbitration Rules (Rules).  Arbitration means that neither you nor California Fitness can sue each other in court over the dispute and that a neutral arbitrator will decide it, not a jury or judge…

The arbitration covers any dispute related to your membership and this Agreement, including financial obligation, … personal injury… If there is any dispute over the applicability of arbitration or the validity of the … waiver provision only an Arbitrator … may decide the dispute…

…the maximum an Arbitrator may award is the cost of your annual membership.  The Arbitrator cannot award you any direct, indirect, special, consequential, or punitive damages… (Cronin v. California Fitness, 2005 Ohio App. LEXIS 3273)

This language was included in the California Fitness membership agreement. It is designed to prevent lawsuits and to limit the size of any awards.  The plaintiff challenged the enforceability of the clause in court claiming the arbitration clause was unconscionable because it denied him any real chance to redress his grievances and that the confidentiality provision violated the Ohio CSPA’s purpose to deter fraudulent conduct in consumer transactions.

The court’s decision stated that Ohio’s public policy encourages arbitration as a dispute resolution tool. The court upheld the clause noting that:  it was clearly marked “Arbitration and Limitation of Liability,” it bound both parties equally, it was written in the same size type and font as the rest of the agreement, the contract was not unduly long, the provision was clear, it specifically provided that the signer could have rescinded the deal within three days if not satisfied, and there was no evidence he could not understand the provisions. The effect was to restrict the claim to arbitration and to limit any award to the cost of the plaintiff’s annual membership.

Mediation/Arbitration Process

While courts in many states might not enforce such a restrictive arbitration agreement as the one above, courts in most states do favor arbitration agreements. Most, however, are not as one-sided (limiting recover to the cost of an annual membership) as the California Fitness agreement.

Alternate dispute resolution is a blanket term referring to alternatives to courtroom adjudication of disputes.  Two forms that can benefit the club owner are mediation (a process in which a neutral mediator works to help the parties reach a satisfactory settlement) and arbitration (a binding process by which an arbitrator hears the parties arguments and makes a ruling).  The mediation/arbitration process has a number of advantages over the court system.  The mediation/arbitration process:

  • Is generally less expensive than the court system.  Arbitration costs are generally less than court costs, attorney’s fees are less, and potential awards are generally less.
  • Usually requires less time than the court system.  Lawsuits can drag on for years.  Mediation/arbitration is more likely to be completed within a few months.
  • Is more private, thereby reducing the likelihood of damaging publicity.  Trials are public record, while these hearings can be private, with results that are confidential.
  • Is usually friendlier and less formal than a trial.  Since the process is less combative, parties are more likely finish the process on a friendly basis.

For these reasons, many recreation, sport, and fitness providers are now including a mediation/arbitration agreement within either the membership agreement or within the liability waiver.  Such agreements can be very detailed, as in the document at the beginning of this column, or can involve wording such as

“I further agree that if a legal dispute arises, I will attempt to settle the dispute through mediation before a mutually acceptable mediator whose name appears in the registry of names recognized by the ‘State’ courts as qualified persons for mediation assignments.  To the extent mediation does not result in a resolution, I agree to submit the dispute to binding arbitration through the American Arbitration Association in ‘State.’”[1]


[1] For more information regarding mediation and arbitration, see Cotten & Cotten. Waivers & Releases of Liability, 2010.

Photo Credit: Thanks to Andy54321 (http://www.flickr.com/photos/andyb/502619575/sizes/m/)