Rivian and Lucid Following in Tesla's Footsteps Regarding Arbitration Provisions

If you are not familiar with that, several Tesla owners are discovering that they cannot go to court against the BEV maker because they accepted an arbitration provision when they bought their cars. That forces them to use this conflict resolution tool instead of the traditional legal instruments for solving any dispute. For a long time, that was seen as a way to relieve courts and make them faster. Ultimately, that became something that helps companies and courts more than it helps end users seeking to correct something.

In Tesla's case, the arbitration provision will prevent several customers from joining class actions due to the BMS_u029 and BMS_u018 error codes. Those considering suing the EV maker due to the Tesla Files will have to check if they opted out of the arbitration provision or not before taking any measures. Lucid and Rivian owners are in the same boat.

The most extended clause in Lucid Air's reservation agreement is the 13th: "Disputes, Arbitration & Class Action Waiver." The document informs reservation holders that they have 60 days to opt out of the clause after signing it. Ironically, the following clause determines the governing law in the agreement: "the Federal Arbitration Act and federal arbitration law." Apparently, reservation holders receive the purchase agreement about a week before delivery. The 24-page document is not available online, but it seems it has the same clauses regarding arbitration and the option not to accept it.

Rivian uses its own website to address arbitration. In its binding contract to purchase, it refers to a URL where the terms of the arbitration clause are and just states it is now part of that document. Customers who do not take time to read the document and are not curious about that the internet address in it will end up subject to arbitration.

When you go to that page, you see quite a long legal text that makes those accepting it give up their right to join a class action, apart from making arbitration mandatory for any issue they face. Unlike Lucid, Rivian only gives its customers 30 days to refuse the arbitration provision. On the other hand, the contract and disputes related to it are "governed by the laws of California, U.S.A., without regard to choice or conflict of law principles of any jurisdiction, except as otherwise provided in the Arbitration Agreement or the supplemental terms applicable to your region or a specific product or service."

Rivian takes its arbitration focus even further: its employees are also subject to it, just like Tesla workers are. I could not confirm if Lucid also imposes such deals on its employees, but it would not surprise me if it did. I learned about Rivian in the worst way possible: it tried to force a former female employee to go to arbitration in a sexual harassment case she filed on September 6, 2022.

Rivian argued in November that the lawsuit should be in an arbitration court because of the three-page "Mutual Agreement to Arbitrate Employment-Related Disputes" Angela Betancourt signed when she was hired. However, Senate approved the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act in February 2022.

The new law determines that the victim of sexual harassment can choose whether to go to court or ask for an arbitrator's help. Although there is no news about how this lawsuit is going, the BEV maker should defend itself in a federal court. It is pretty unlikely that any judge will deem Rivian as correct when it says this case belongs in arbitration.

If that was not enough for Rivian to have in common with Tesla, the R1T manufacturer also has a racism lawsuit against it. On February 27, Cornelius Richardson filed a case in a federal court in Illinois, accusing the company of not making enough to prevent his fellow workers from calling him racial slurs. Apparently, Richardson worked for MacLellan Services, a Rivian contractor. This is probably why the company did not try to force him into arbitration.

Curiously, a Rivian forum reveals that some owners know about the risks of not being able to sue the company but choose not to opt out of the arbitration provision. It is not clear if they think their vehicles will not present any problems that only a court decision will help them fix or if they just don't care. Some of them may also be investors in the company. Whatever the reason they have to submit to the company's rules, the point is that they may eventually regret doing that.

Lucid already showed it might have the same care for quality control and testing as Tesla does. The Air has paint problems, 12V battery issues, frequent Turtle Mode episodes, and other concerns that may require owners to take more decisive action to solve. Rivian is presenting worrying bills for fender bender repairs, which shows the R1T was developed without repairability in mind. If arbitration were beneficial to customers, they would probably select it themselves. Forcing them into it is not the message new companies should be sending to potential buyers.