The New York Times recently published a series of articles[1] reporting on the abolishment of the right to sue by virtue of mandatory arbitration clauses, particularly combined with class action waivers. This development is of course not new – commentators have been bemoaning the proliferation of arbitration clauses for some time now, and the primary Supreme Court cases upholding challenges to such clauses – AT&T v. Concepcion and American Express Co. v. Italian Colors Restaurant – were issued in 2011 and 2013, respectively.[2] What is new is the extensive analysis of cases over the past 4 years, including the increase in arbitration/no class action clauses following the Supreme Court decisions. Also noteworthy is the allegation that a move to block class actions “was engineered by a Wall Street-led coalition of credit card companies and retailers” along with their lawyers, including then-private lawyer John G. Roberts Jr. This puts a new spin on the argument of arbitration proponents that the practice is intended to benefit all players. Instead, the companies using these clauses are purposely and successfully evading claims by preventing class actions: just as it is unreasonable to bring a lawsuit based on a very small claim, so too is it prohibitively expensive to arbitrate a single small claim. As the Times reports, mandatory arbitration and class action bans are not just consumer issues but have extended to employment contracts, particularly in the restaurant and retail industries. The result is palpable: “Once blocked from going to court as a group, most people dropped their claims entirely.”
Last year I wrote about the proliferation of arbitration clauses in the specific context of website agreements.[3] I noted that there have been instances where consumer backlash caused a company to change its policy – General Mills in particular ended up reversing its stance on broadening the application of its arbitration clause.[4] But such consumer backlash is unusual. Other food company websites have mandatory arbitration clauses, including Publix.com, pg.com (Proctor & Gamble), and TysonFoods.com. And high traffic websites like Amazon.com, Ebay.com, and BarnesandNoble.com tend to include not only arbitration clauses and bans on class actions but also limitations on liability, indemnification provisions, and shortened statutes of limitation.
I welcome the increased attention to this issue that the New York Times analysis will bring.[5] Perhaps this investigation into the concerted actions that led to the success of arbitration/no class action clauses in the courts will result in more of that consumer backlash that caused General Mills’ about-face. Otherwise, as the Times quotes Professor Myriam Gilles, arbitration clauses are furthering a “privatization of the justice system.” Unfortunately, in this private justice system, repeat players control the decision-makers, secrecy thwarts public scrutiny, and there is in essence no right of appeal – all fundamental tenets of due process.
For more information, Allyson Haynes Stuart
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End notes
[1] Jessica Silver-Greenberg & Robert Gebeloff, Arbitration Everywhere, Stacking the Deck of Justice, The New York Times (Oct. 31, 2015); Jessica Silver-Greenberg & Michael Corkery, In Arbitration, a ‘Privatization of the Justice System’, The New York Times (Nov. 1, 2015).
[2] ATT Mobility LLC v. Concepcion, 560 U.S. 923 (2011); American Express Co. v. Italian Colors Restaurant, __U.S.__, 133 S. Ct. 2304 (2013).
[3] Allyson Haynes Stuart, Challenging the Law Online – Symposium on Nancy Kim’s Wrap Contracts, 44 Southwestern L. Rev. 265 (2014).
[4] See http://www.nytimes.com/2014/04/20/business/general-mills-reverses-itself-on-consumers-right-to-sue.html.
[5] I also recommend the documentary “Lost in the Fine Print,” produced by the Alliance for Justice, which discusses the Oakland restaurant’s case against American Express and other examples where, because of arbitration clauses, a consumer or employee gets no day in court or anywhere else.