2007 Annual Report. 55 Marietta Street, NW Suite 903 Atlanta GA [P] [F] georgiawatch.org

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1 2007 Annual Report 55 Marietta Street, NW Suite 903 Atlanta GA [P] [F] georgiawatch.org

2 This report comes from Court Watch, a project of Georgia Watch, a nonprofit, nonpartisan group committed to strengthening the rights of consumers in Georgia. Every year, the Supreme Court of Georgia and the Georgia Court of Appeals issue decisions that significantly impact the rights that consumers have under the law. Because many of these decisions are not covered by the news media, Court Watch is dedicated to informing the public about the court decisions that affect consumer rights the most. This report contains a summary of the key consumer cases that the Supreme Court and the Georgia Court of Appeals decided during Contributors to the research and production of this report include 2007 Court Watch Fellowship recipient Nathan Gaffney and the Court Watch Advisory Committee. For more information on this project, visit 2

3 THE SUPREME COURT OF GEORGIA Payday Lending Case: Glenn v. State, 282 Ga. 27 (2007) (7-0 decision) pg. 4 Identity Fraud Case: Hernandez v. State, 281 Ga. 559 (2007) (7-0 decision) Insurance Setoffs for Personal Injury Benefits Case: Dees v. Logan, 282 Ga. 815 (2007) (7-0 decision) Lending Subrogation Case: Bankers Trust Co. v. Hardy, 281 Ga. 561 (2007) (7-0 decision) Tort Reform Offer of Settlement Case: Fowler Properties, Inc. v. Dowland, 282 Ga. 76 (2007) (7-0 decision) Tort Reform Patient Privacy Case: Allen v. Wright, 282 Ga. 9 (2007) (6-1 decision) Products Liability Inadequate Jury Instructions Case: Pearson v. Tippman Pneumatics, Inc., 281 Ga. 740 (2007) (7-0 decision) Medical Malpractice Statute of Limitations Case: Kaminer v. Canas, 282 Ga. 830 (2007) (4-3 decision) Gift Cards Dormancy Fees and Expiration Dates Case: Benson v. Simon Property Group, Inc., 281 Ga. 744 (2007) (7-0 decision) Arbitration Manifest Disregard of the Law Case: ABCO Builders, Inc. v. Progressive Plumbing, Inc., 282 Ga. 308 (2007) (7-0 decision) pg. 5 pg. 6 pg. 6 pg. 7 pg. 8 pg. 8 pg. 9 pg. 10 pg. 11 THE GEORGIA COURT OF APPEALS Discovery Sanctions for a Failure to Comply Case: Georgia Cash America, Inc. v. Strong, 286 Ga. App. 405 (2007) (3-0 decision) Arbitration Unconscionability Case: Crawford v. Great American Cash Advance, Inc., 284 Ga. App. 690 (2007) (3-0 decision) pg. 13 pg. 14 3

4 THE SUPREME COURT OF GEORGIA YEAR IN REVIEW 2007 INTRODUCTION TO GEORGIA S SUPREME COURT The Supreme Court of Georgia plays a profound role in Georgia s state government. As the highest court in the state s judicial system, the Supreme Court has the ultimate authority to interpret and apply the constitution of the State of Georgia and the laws of the state. The court is responsible for protecting individual rights, upholding the integrity of the state and federal constitutions and ensuring fairness and justice in the legal system. Unlike the Georgia General Assembly, the Supreme Court does not directly make law. However, once the court interprets a law, all of the state s lower courts are bound to follow that interpretation in future cases. Currently, there are seven justices on Georgia s Supreme Court: Chief Justice Leah Ward Sears, Presiding Justice Carol W. Hunstein, Justice Robert Benham, Justice George H. Carley, Justice P. Harris Hines, Justice Harold D. Melton and Justice Hugh P. Thompson CONSUMER WINS Payday Lending Case: Glenn v. State, 282 Ga. 27 (2007) (7-0 decision) (opinion authored by Hunstein, P.J.). This was an appeal of a criminal conviction under Georgia s payday loan statute. Criminal penalties for conduct harmful to consumers can be vital to the state s ability to protect its citizens from activities that have a negative financial impact on families and communities. In 2004, the legislature declared that payday lending is a criminal act, and that law was challenged in this case. A payday loan is a short-term loan with a grossly high interest rate, generally in the triple digits. 1 The terms of these loans are often unaffordable for the borrower, often turning a two week transaction into a long term debt trap. As a result, payday lenders market themselves to people in difficult financial circumstances. In 2004, the Georgia General Assembly enacted a new law making it illegal for Georgia lenders to issue certain types of payday loans. Last year, the Supreme Court decided a case in which it ruled that the payday lending law was constitutional. In Glenn v. State, 2 two people who were convicted of issuing payday loans argued that the law was unconstitutional. They first argued that the statute denied them equal protection of the law because out-of-state lenders are not subject to Georgia s Payday Lending Law. However, the court found that the law does not deny in-state lenders equal protection because the 1 For example, in one payday lending case from 2007 the annual percentage rates on payday loans ranged from 650 percent to 702 percent. Clay v. Oxendine, 258 Ga. App. 50 (2007). 2 Glenn v. State, 282 Ga. 27 (2007). 4

5 in-state lenders are not similarly situated to the out of state lenders, who are regulated by federal law. 3 The payday lenders also argued that the new law was unconstitutionally vague because it did not specifically prohibit the schemes they used in issuing loans. 4 The court rejected this assertion as well because the statute clearly prohibits payday lending in whatever form it is transacted. 5 It is important that the court upheld the broad wording of the statute because payday lenders have developed elaborate schemes, such as disguising the loans as sales-leaseback of a cell phone or coffee maker, in an effort to circumvent the law. 6 Identity Fraud Case: Hernandez v. State, 281 Ga. 559 (2007) (7-0 decision) (opinion authored by Melton, J.). As with payday lending, the legislature has chosen to enact criminal penalties for identity theft in order to protect consumers in Georgia. This case is significant because it examined the validity of the how the criminal act was defined by law. The court rejected a constitutional attack on Georgia s identity fraud statute in Hernandez v. State. 7 In that case, Hernandez had been charged and convicted of violating the law after he wrongly obtained the victim s social security number, used it to obtain a license, and then began to report wages to the Internal Revenue Service (IRS) under the victim s name. The defendant argued that the identity fraud statute was unconstitutionally vague and preempted by the Immigration and Reform Act of The court unanimously ruled the statute was not unconstitutionally vague because it specifically prohibits a person from accessing another s accounts with a financial institution, which is exactly what the defendant in this case did when he used the victim s Social Security number to report his job earnings to the IRS. 9 Moreover, the court found that Georgia s identity fraud statute is not preempted by the Immigration and Reform Act since nothing in the federal law expressly preempts the state law, and the two laws do not conflict in their enforcement or operation. 10 It should be noted that shortly after the Supreme Court issued this ruling, the Georgia General Assembly amended the statute, changing the elements of the offense. 11 The new law removed the requirement that the defendant must have intended to take something of value from the victim, thereby codifying a broader definition of the crime. The new law explicitly allows for prosecutions of persons who merely posed as someone else but did not steal a tangible asset Id. at Id. at Id. 6 See Clay v. Oxendine, 285 Ga. App. 50 (2007). 7 Hernandez v. State, 281 Ga. 559 (2007). 8 Id. at Id. 10 Id Ga. Laws 450, O.C.G.A

6 Insurance Setoffs for Personal Injury Benefits Case: Dees v. Logan, 282 Ga. 815 (2007) (7-0 decision) (opinion authored by Thompson, J.) (Carley, J., concurring). When a person with uninsured motorist (UM) insurance is injured in a car accident by an uninsured driver, that person may be entitled to recover from their insurance carrier and receive workers compensation and Social Security benefits. Some insurance companies, however, have created offset clauses in their policy agreements that reduce the amount the insurance company owes to a policyholder by the amount the policyholder has been paid in workers compensation or Social Security benefits. These clauses may deny the policyholder the funds they need to cover all of the costs they have suffered as a result of being involved in an auto accident. In Dees v. Logan, 13 the Supreme Court of Georgia ruled that insurance policies containing offsets for personal injury benefits are void and unenforceable because they conflict with Georgia s Uninsured Motorist Act. 14 The court also pointed out that setoffs do not prevent the policyholder from recovering twice for the same injury because the insurance company is not paying twice. 15 This decision ensured that policyholders would have the opportunity to recover the full amount to which they were entitled under the law. The Georgia General Assembly responded to this decision by passing Senate Bill 276, which expressly permits insurance carriers to use offsets for workers compensation benefits, effectively overturning part of this decision. SB 276 also expanded drivers access to UM coverage. Lending Subrogation Case: Bankers Trust Co. v. Hardy, 281 Ga. 561 (2007) (7-0 decision) (opinion authored by Sears, C.J.). The Supreme Court s decision in Bankers Trust v. Hardy protects the property rights of individuals who jointly own property. Before a lender issues a loan, they may choose to secure the loan with a piece of property owned by the borrower. If the borrower doesn t pay off the loan, the lender is able to sell the borrower s property and use the proceeds from the sale to pay off the loan. If a lender wants to secure a loan with property that is jointly owned, the lender must include all of the owners in the loan transaction. Otherwise, the lender will not be able to recover all the proceeds from the sale of the property. In Bankers Trust Co. v Hardy, 16 the Supreme Court of Georgia rejected an attempt to get around this requirement. In Hardy, a widow and her minor son jointly owned their house. The widow took out a loan to pay off an existing mortgage on the house. The lender secured that loan with the house as collateral but failed to include the son in the loan transaction. The lender assigned the loan to Bankers Trust Company, which gave the company the right to collect on the loan. When the loan 13 Dees v. Logan, 282 Ga. 815 (2007). All of the Justices on the court concurred with the opinion. Justice Carley wrote a separate concurrence to further support the majority's correct resolution of the issue. Id. at Id. at Id. at Bankers Trust Co. v Hardy, 281 Ga. 561 (2007). 6

7 went into default, Bankers Trust forced the sale of the house. The company then argued in court that it should receive the son s share of the proceeds based on the doctrine of equitable subrogation. 17 Bankers Trust contended that since the loan was used to pay off the mortgage on the house, it should be placed in position occupied by the mortgage holder (the mortgage holder would have been entitled to all of the proceeds from the sale of the property). 18 The Supreme Court rejected the argument that Bankers Trust was entitled to the son s share of the proceeds from the sale of the house. Bankers Trust was not allowed to subrogate because the son s interest was not accounted for in the loan transaction and the failure to account for the son s interest was the lender s own fault. 19 The mere fact that the son benefited from the loan transaction was not enough to justify application of the doctrine. 20 Thus, if only one owner of jointly held property offers her half of the property as collateral for a loan, the other co-owner will not lose his interest in the other half of the property if the first owner defaults on the loan. Tort Reform Offer of Settlement Case: Fowler Properties, Inc. v. Dowland, 282 Ga. 76 (2007) (7-0 decision) (opinion authored by Thompson, J.). In Fowler Properties, Inc. v. Dowland, the court determined Georgia s offer of settlement statute could not be applied to cases that were filed before the date when the statute became effective without violating Georgia s Constitution. 21 The Georgia General Assembly enacted the offer of settlement statute as part of the Georgia Tort Reform Act of That law allows a defendant to make an offer of settlement to the plaintiff. 22 The plaintiff can reject the offer, but if the plaintiff ends up obtaining an award that is less than 75 percent of the defendant s offer of settlement, then the defendant can make a motion that obligates the plaintiff to pay the defendant s attorneys fees and other costs of litigation. Under Georgia law, it is unconstitutional for a law that affects substantive rights to be applied retrospectively. 23 In Fowler, the Supreme Court concluded the offer of settlement statute affects the substantive rights of the parties in a lawsuit by creating a new obligation to pay the opposing party s attorneys fees. 24 As a result, the court found the offer of settlement statute was unconstitutional in so far as it applied to cases filed prior to the date that the statute became effective. 17 Subrogation is the substitution of a person to the rights of another person concerning a debt or claim which the former person has paid. The Law Dictionary 378 (7th ed. 1997). 18 Id. 19 Id. at Id. at Fowler Properties v. Dowland, 282 Ga. 76 (2007). The offer of settlement statute became effective on February 16, Id. at 77. The plaintiff in this case filed a lawsuit on December 18, Id. at O.C.G.A Fowler Properties v. Dowland, 282 Ga. 76 (2007). 24 Id. at

8 Tort Reform Patient Privacy Case: Allen v. Wright, 282 Ga. 9 (2007) (6-1 decision) (majority opinion authored by Carley, J.) (Hunstein, P.J., dissenting). The Georgia Tort Reform Act of 2005 also requires a patient who files a medical malpractice lawsuit to file a medical authorization form. 25 That form permits the defense s attorneys to obtain and disclose the patient s protected health information. 26 This requirement raises concerns over maintaining the privacy of a patient s medical history. These concerns may ultimately prevent patients with legitimate claims against medical care providers from going to court. In Allen v. Wright, Georgia s Supreme Court invalidated the Georgia statute requiring a patient to file a medical authorization form. According to the court, that statute conflicts with the guidelines of a federal law, the Health Insurance Portability and Accountability Act (HIPAA). Specifically, HIPAA requires that a patient s authorization to disclose protected health information must include notice of the patient s right to revoke the authorization. 27 The Georgia statute, on the other hand, does not require that kind of notification to be given. 28 Because HIPAA s requirements afford patients more control over their medical records, the guidelines of HIPAA mandate that the federal law preempts the Georgia statute. 29 As a result, the court s ruling provides greater protection of the privacy of a patient s medical history. Products Liability Inadequate Jury Instructions Case: Pearson v. Tippman Pneumatics, Inc., 281 Ga. 740 (2007) (7-0 decision) (majority opinion authored by Thompson, J.). This decision reaffirms the duty of a judge to adequately instruct the jury. This case also reaffirms the principle that a manufacturer should be held liable for an injury when the accident that caused the injury was a reasonably foreseeable consequence of a product s design. In Pearson v. Tippman Pneumatics, a 16-year-old accidentally shot the plaintiff in the eye after he pointed a paintball gun at the plaintiff, thinking that the gun s safety mechanism was engaged. 30 The plaintiff alleged that the 16-year-old was negligent in firing the gun and that the manufacturer defectively designed gun because the safety mechanism was not properly marked to indicate whether the gun was in the safe position. 31 In Georgia, products liability refers to a particular type of case when a plaintiff sues the manufacturer or seller of a defective product that has caused an injury, or if there is an allegation of defect in either design or manufacture. Among other things, the plaintiff must prove that the product s defective condition was the proximate cause of the plaintiff s injury. Put simply, proximate cause is shown when the plaintiff s injury is the natural and foreseeable consequence 25 O.C.G.A Allen v. Wright, 282 Ga. 9, 10 (2007). 27 Id. at Id. at Id. at Pearson v. Tippman Pneumatics, Inc., 281 Ga. 740 (2007). 31 Id. at

9 of the defendant s injury. However, this principle is often a difficult one for the jury to apply, and so it is imperative that the jury is completely and accurately instructed on the principle of proximate cause. At trial, the jury found that the manufacturer negligently designed the paintball gun but that negligence was not the proximate cause of the plaintiff s injury. 32 The Supreme Court reversed the jury s verdict after finding the judge failed to completely and accurately instruct the jury on the principle of proximate cause. 33 Specifically, the court found that since there were multiple potential causes of the injury, the jury should have been instructed that it could find the manufacturer liable if the 16-year-old s negligent act was a reasonably foreseeable consequence of the manufacturer s defective design CONSUMER LOSSES Medical Malpractice Statute of Limitations Case: Kaminer v. Canas, 282 Ga. 830 (2007) (4-3 decision) (majority opinion authored by Carley, J.) (Hunstein, P.J., dissenting). The court s decision in Kaminer v. Canas severely limits a patient s ability to sue a medical care provider over a misdiagnosis. The court s interpretation of the statute of limitations for medical misdiagnosis claims can deny patients the right to sue before they even know they have a reason to sue 35 and encourages patients to distrust the professional opinions of their providers. Derek Canas was born in 1984 with a rare heart condition that required him to undergo surgery and receive multiple blood transfusions. As Canas grew, he began to display the symptoms of pediatric AIDS. Neither Canas pediatric cardiologist, who began treating him in 1991, nor his pediatrician, who began treating him in 1993, were able to diagnose Canas true condition. In 2001, at the age of 16, Canas was finally tested for and diagnosed with AIDS. That same year, he filed a medical malpractice suit against the two providers. Ultimately, Canas lawsuit was prevented because, according to a majority of the court, the statute of limitations on Canas claim had already expired. A special law, called a statute of limitations, requires that certain claims be filed within a given period of time in Georgia usually two or four years, depending on the claim. Otherwise, the lawsuit can be thrown out by a court. Georgia s general tort statute of limitations begins to run when the plaintiff knows of or through the exercise of reasonable diligence should know of the injury and what caused it. 36 However, this discovery rule does not apply to claims that arise from a medical care provider s misdiagnosis of a patient. 32 Id. at Id. at Id. 35 See Kaminer v. Canas, 282 Ga. 830, 838 (2007) 36 CHARLES ADAMS, GEORGIA LAW OF TORTS 399 ( ed.). 9

10 Under the current law, a lawsuit that is based on a provider s misdiagnosis of a patient must be filed within two years of the date of the first misdiagnose. 37 As long as the patient s symptoms are apparent, the two-year period begins to run whether the patient knows they have been misdiagnosed by the provider or not. 38 In Kaminer v. Canas, a majority of the justices on Georgia s Supreme Court held that once that two-year statute of limitations expires, future failures by the provider to properly diagnose a patient s additional or significantly increased symptoms will not restart the statute of limitations. 39 This means that if the statute of limitations has run, the medical care provider could continue to misdiagnose the patient, year after year, without any fear of being sued. As a result, this decision should give Georgians great cause for concern. Gift Cards Dormancy Fees and Expiration Dates Case: Benson v. Simon Property Group, Inc., 281 Ga. 744 (2007) (7-0 decision) (opinion authored by Carley, J.). When a consumer purchases a gift card, the card may be subject to dormancy fees and expiration dates. A dormancy fee is a charge that deducts value off of the card if the card is not used within a specified period of time. Similarly, an expiration date causes a card to expire if the card is not used within a specific period of time. Not only do these restrictions frustrate the gift card recipient s attempt to make a purchase using the gift card, but the seller retains the unused balance on the card. Therefore, gift card dormancy fees and expiration dates ultimately prevent the card recipient from getting what the consumer paid for while providing the seller with a windfall. Some states restrict the use of gift card dormancy fees and expiration dates, 40 but Georgia law only requires that the seller conspicuously print the expiration date or dormancy fee on the card. 41 In Benson v. Simon Property Group, Inc., recipients and purchasers of gift cards between 2001 and 2004 claimed that dormancy fees and expiration dates violated Georgia s Disposition of Unclaimed Property Act (DUPA). 42 DUPA provides that when a gift card or certificate has remained unclaimed for five years, that property is presumed to be abandoned. At that point, the holder of the abandoned gift card must pay the state an amount equal to the price the purchaser paid for the gift card. 43 The plaintiffs argued that under DUPA, ownership of property cannot be forfeited. It never transfers to the state rather after five years the state becomes the custodian and will hold the property until the true owner comes forward to claim it. In this respect, contracts with terms 37 O.C.G.A (a). 38 Kaminer v. Canas, 282 Ga. 830, 833 (2007). 39 Id. at ConsumersUnion.org, State Gift Card Consumer Protection Laws, / html (last visited March 5, 2008). 41 O.C.G.A (b)(33). 42 DUPA provides that when property has remained unclaimed for five years that property is presumed to be abandoned and is subject to the custody of the state. 43 O.C.G.A (2008). 10

11 similar to those of the Simon gift cards that force the exchange of ownership before the statutory change of custody at five years violate public policy. Historically, courts have ruled that contracts that violate public policy are unenforceable as a matter of law. The Supreme Court rejected this argument after finding that the holder of an abandoned gift card is still obligated to pay the state an amount equal to the price paid for an unclaimed gift certificate after five years, regardless of whether the certificate previously expired or otherwise lost value. 44 As a result, gift card dormancy fees and expiration dates do not violate DUPA. Arbitration Manifest Disregard of the Law Case: ABCO Builders, Inc. v. Progressive Plumbing, Inc., 282 Ga. 308 (2007) (7-0 decision) (opinion authored by Melton, J.). If you have ever purchased health insurance or a computer, opened a credit card account or obtained a student loan, you probably have agreed to pre-dispute binding arbitration. 45 This means that if you, the consumer, are wronged by the corporation with whom you have done business, you must take your dispute to an arbitration panel. 46 By and large, consumer advocates agree that consumer arbitration is an unfair and undemocratic process. To illustrate, a recent study by Public Citizen found that [i]n more than 19,000 cases in which an NAF-appointed arbitrator was involved, 94 percent of decisions were for business. 47 Many factors contribute to how arbitration is an unfair process for consumers. To start, consumers lose many of the rights and procedural protections that they would normally have in court. 48 Also, it costs the consumer money to take a case to arbitration arbitration agreements can make the consumer pay for all or part of the cost of arbitration. 49 Arbitration may not take place in the state or region where the consumer resides. Also, there are real concerns that arbitrators are not neutral decision makers because corporations get to choose the arbitrator, and the arbitrator may rely on the corporation for repeat business. 50 Finally, the arbitrators do not have to explain how they reached a decision and are generally under no obligation to provide a written opinion. 51 Equally troubling is the fact that it is extremely difficult for a consumer to get a court to overturn the decision of an arbitration panel. One of the only ways that a Georgia court can vacate an award of an arbitration panel is if the arbitration panel shows a manifest disregard for the law Id. at National Association of Consumer Advocates, Binding Mandatory Arbitration, /bindingmandatory-arbitration/ (last visited March 5, 2008). 46 F. PAUL BLAND, JR. ET AL., CONSUMER ARBIT RATION AGREEMENTS 3 (5th ed. 2007). 47 PUBLIC CITIZEN, THE ARBITRATION TRAP 2 (2007), 48 BLAND, supra note 46, at Id. at Id. at Id. at ABCO Builders, Inc. v. Progressive Plumbing, Inc., 282 Ga. 308 (2007) 11

12 A recent Supreme Court decision makes it even more difficult to have an arbitration panel s decision thrown out by a court. In ABCO Builders, Inc. v. Progressive Plumbing, Inc., the Supreme Court unanimously ruled that even if a litigant can show an arbitration panel failed to apply the proper legal formula for calculating damages, a court will not vacate the arbitration panel s decision unless the litigant proves the arbitration panel s disregard for the law was intentional. 53 This is rarely possible, since there is usually no finding of fact or transcript available for the arbitration proceeding. 53 Id. at

13 THE GEORGIA COURT OF APPEALS YEAR IN REVIEW 2007 INTRODUCTION TO GEORGIA S COURT OF APPEALS Like the Supreme Court of Georgia, the Georgia Court of Appeals also issues opinions that can have a great impact on the rights of consumers. The Georgia Court of Appeals is an intermediate appellate court. 54 The Court of Appeals hears many more cases because its jurisdiction is broader than that of the Supreme Court. As a result, only the Supreme Court of Georgia can overrule an opinion issued by the Court of Appeals. Currently, the Court of Appeals has twelve judges. The court is divided into four divisions with each division consisting of three justices CONSUMER WINS DISCOVERY SANCTIONS FOR A FAILURE TO COMPLY Case: Georgia Cash America, Inc. v. Strong, 286 Ga. App. 405 (2007) (3-0 decision) (opinion authored by Ellington, J.) (Andrews, P.J., concurring in the judgment only). Discovery is the process which occurs before trial by which parties seek and obtain documents and facts that are relevant to the other side s arguments in a case prior to trial. There are mandatory disclosures and both sides must play by the rules when seeking or sending information between opposing parties. In this case, because a defendant intentionally ignored discovery requests by the plaintiff, the court ruled that the defendant was barred from using a defense argument at the heart of the requests. In Georgia Cash America, Inc. v. Strong, the Court of Appeals sent a strong message to corporations that there can be serious consequences for failing to comply with court-ordered discovery. In that case, plaintiffs who took out payday loans filed a lawsuit against payday lender Georgia Cash America, Inc., for deception, fraud and other violations of Georgia s law. 55 Because the plaintiffs signed loan contracts that contained arbitration clauses, Georgia Cash made a motion to compel arbitration which, if granted, would have allowed an arbitration panel to decide the case. 56 In response, the plaintiffs argued that the arbitration agreements were unenforceable and requested limited discovery on the issue. 57 After Georgia Cash failed to comply with several orders to turn over documents, the trial court found that the company was deliberately and willfully not producing the documents. 58 As a result, the trial court threw out Georgia Cash s arbitration defense. 54 Georgia Court of Appeals, A Citizen s Guide to Filing Appeals in the Court of Appeals of Georgia, 55 Georgia Cash America, Inc. v. Strong, 286 Ga. App. 405 (2007). 56 Id. at Id. 58 Id. at

14 The Georgia Court of Appeals affirmed the trial court s decision to strike Georgia Cash s arbitration defense. The court concluded that Georgia Cash s failure to produce the documents was inexcusable and that it was within the trial court s discretion to sanction Georgia Cash by striking its arbitration defense CONSUMER LOSSES ARBITRATION - UNCONSCIONABILITY Case: Crawford v. Great American Cash Advance, Inc., 284 Ga. App. 690 (2007) (3-0 decision) (opinion authored by Blackburn, P.J.). One way a consumer can avoid arbitration is to successfully argue an arbitration agreement is unconscionable. 60 Unconscionability is a legal defense that prevents the enforcement of a contract. In essence, when a defendant argues that an agreement is unconscionable, they are arguing the agreement is so unfair, it should shock the conscience of the court. Unfortunately, it is difficult to convince a court that an arbitration agreement is unconscionable. Crawford v. Great American Cash Advance, Inc. 61, typifies Georgia courts unwillingness to find arbitration agreements unconscionable, even under circumstances when the agreement is onesided or the borrower is not really aware of what they signed. In Crawford, a borrower took out two payday loans with interest rates of 176 percent and 238 percent, respectively, from Great American Cash Advance, Inc., a South Carolina payday lender. Each loan agreement contained a predispute binding arbitration clause, providing that all claims arising from the loan agreement were subject to arbitration. However, the lender retained the right to enforce the borrower s payment obligations in court. The arbitration clause also required each party to pay the costs of bringing their claim in front of the arbitration panel. After the borrower defaulted on the loans, Great American filed a collection action against the borrower in court. In response, the borrower alleged that Great American s loans violated Georgia s payday lending law. Great American filed a motion to compel arbitration on the borrower s claim for damages, and a trial court granted the motion. The borrower immediately appealed to the Georgia Court of Appeals, arguing that the arbitration clause was unconscionable because it allowed the lender to take its claim to court, yet the borrower was forced to arbitrate its claims against the lender. The court rejected the claim on the grounds that the borrower demonstrated her intent to be bound by the agreement, and the fact that the arbitration agreement did not require both parties to take all disputes to arbitration. In addition, the court rejected the argument that the agreement was unconscionable based on the requirement that the parties pay for the cost of arbitration. This argument failed because plaintiff did not produce any evidence that taking her claim to arbitration would be cost prohibitive. 59 Id. 60 See O.C.G.A Crawford v. Great American Cash Advance, Inc., 284 Ga. App. 690 (2007). 14

15 Moreover, the court reiterated that lack of sophistication or economic disadvantage of one attacking arbitration will not amount to unconscionability. 62 In addition to illustrating the difficulties of showing that an arbitration clause is unconscionable, this case also demonstrates an adjudication double standard: Some corporations who subject consumers to arbitration are able to avoid arbitration when pursuing their own claims. This suggests that these corporations do not view arbitration as a fair substitute for litigating their claims in court Id. at See BLAND, supra note 46, at

16 APPENDIX MEMBERS OF THE COURT WATCH ADVISORY COMMITTEE Roy Barnes For over 30 years, former Georgia Governor Roy Barnes has tried civil and criminal cases throughout Georgia and in neighboring states, including a successful consumer class action lawsuit against Fleet Finance that received national recognition in the early 1990s. Barnes has been a public servant for nearly as long as he has been a lawyer, starting at age 26 when he was elected the youngest member of the Georgia State Senate. After serving eight terms in the Senate, Barnes was elected to the State House of Representatives, where he served for another six years. In 1998, Barnes was elected to serve as the 80th Governor of the State of Georgia. During his term, he created the Georgia Cancer Coalition and served as Chair of the Southern Regional Education Board, the Southern Governor s Association, and the Education Commission of the States. In 2003, Barnes was honored with the 2003 John F. Kennedy Library Foundation Profiles in Courage Award. Phyllis Holmen Phyllis Holmen has served as Executive Director of Georgia Legal Services Program (GLSP) since June She is a member of the Executive Committee of the State Bar of Georgia Board of Governors, the Advisory Council to the Supreme Court of Georgia s Civil Justice Committee, and the Georgia Association of Women Lawyers. In March 2008, Holmen received the Elbert Tuttle Jurisprudence Award from the Atlanta Anti-Defamation League. She was also honored with the 2007 Lifetime Commitment to Public Service Award from Emory Law School, and the 2005 Lifetime Achievement award from the Atlanta Bar Association. Holmen was a member of the President s 2006 Task Force on Access to Civil Justice of the American Bar Association (ABA), and has served on the Supreme Court of Georgia s Indigent Defense Commission, the Governor s Judicial Nominating Commission, and the Supreme Court s Blue Ribbon Commission on the Judiciary. Ken Shigley Ken Shigley has 30 years of experience in trial and litigation work. After graduating from Emory University Law School, Shigley began his career as an assistant district attorney in the Tallapoosa Judicial Circuit. Back in Atlanta, Shigley defended lawsuits for a decade for insurance companies, corporations, and state and local governments across Georgia. For the past 17 years he has focused on representing individuals, families and small businesses as an attorney in private practice. A member of the Executive Committee of the State Bar of Georgia Board of Governors, Shigley also serves as the association s Secretary-elect. And since 1998, Shigley has been a faculty member of Emory University Law School s Trial Techniques Practices. Tom Stubbs Tom Stubbs is a founder and the first chair of the State Bar Consumer Law Section, and currently serves on the Executive Committee of the State Bar of Georgia Board of Governors. Stubbs has spent 17 years representing families and businesses in private practice, the last 13 16

17 years in DeKalb County. He was elected as president of the DeKalb Bar Association from 2004 to Stubbs also served for six years as a volunteer public defender in Decatur Municipal Court. Stubbs is currently a member of the National Association of Consumer Advocates, the American Bar Association and the League of Women Voters, among other groups. A Georgia native, Stubbs earned a M.A. in economics from the University of California, San Diego, followed by a law degree from Georgetown University. Nathan Gaffney COURT WATCH FELLOW Nathan Gaffney is a second year law student at Georgia State University s College of Law and a member of the Law Review. Gaffney graduated Summa Cum Laude from GSU with a degree in history and a minor in political science. Gaffney is the first recipient of Georgia Watch s Court Watch Fellowship, a role he accepted in July