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Be mindful the next time you purchase a box of cereal or pancake mix – you may be waiving your right to sue the manufacturer in court!
Companies are increasingly finding innovative ways to bind consumers and employees to arbitration agreements. The Supreme Court’s recent arbitration decisions in opens in a new windowStolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., opens in a new windowAT&T Mobility LLC v. Concepcion, opens in a new windowOxford Health Plans LLC v. Sutter, and opens in a new windowAmerican Express Co. v. Italian Colors Restaurant, have made it easier for companies to limit litigation costs by funneling most disputes to binding arbitration. Not only can companies require that any and all disputes be arbitrated, but they can set the terms governing the arbitration’s location, size, and scope. For example, companies frequently include language in their arbitration agreements requiring that disputes be arbitrated on an individual basis, thus barring collective or class-actions. Courts will routinely enforce such arbitration agreements, provided the consumer or employee knowingly agreed or consented to the arbitration provision (whether included in a “clickthrough” or “clickwrap” agreement, terms-of-service, privacy policy, employment agreement, etc.).
It is no surprise then that given such a business-friendly arbitration climate, companies are using routine – some may argue trivial – transactions as a means to expand the the scope of arbitration. A perfect example of this strategy is featured in opens in a new windowtoday’s New York Times. General Mills (owner of Cheerios, Bisquick, Betty Crocker, and many other brands) has updated its privacy policy to include a mandatory arbitration provision which, it claims, subjects consumers who interact with the company in certain ways (downloading coupons, joining its Facebook page, entering company-sponsored sweepstakes, and even simply purchasing its products) to binding arbitration. Of course, whether a consumer who “likes” Cheerios on Facebook waives her right to sue General Mills in court for any and all claims remains to be seen. But, as the New York Times article points out, General Mills is certainly not alone in pushing the boundaries of arbitration. In the wake of the Supreme Court’s recent arbitration jurisprudence, many companies have taken similar steps, although not without opens in a new windowheavy criticism from consumers, as demonstrated several weeks ago when opens in a new windowDropbox included a mandatory arbitration provision in its terms of service. Consumer reaction to Dropbox’s decision was largely negative, despite the fact that it gave users the opportunity to opt-out. Nevertheless, such decisions come at a price, including the potential loss of consumer good-will (at least in the short-term). However, given the spiraling costs of litigation, it is a price that many companies are increasingly willing to pay.
