Can A Company Prevent Litigation Through Forced Arbitration?

This intriguing question has recently cropped up in response to a bold effort on the part of corporate food giant, General Mills, to bind consumers to an arbitration agreement if the consumer, for example, downloaded a coupon from the company’s website, entered a company sweepstakes, or interacted with the company in certain other ways.

On April 2, 2014, General Mills added new legal terms to its website which required consumer disputes related to the purchase or use of any General Mills product or service to be resolved through binding arbitration if the consumer received from General Mills certain things the company construed as a benefit. There was immediate consumer and media backlash in response to General Mills’ policy change, with various sources worrying that the new policy forced consumers to give up substantial legal rights for so much as “liking” a General Mills Facebook page. In response to the massive negativity, whether deserved or not, General Mills retracted its policy change and reverted to its old legal terms on April 19, 2014. General Mills asserted its policy change was never intended to be as broad as some sources made it out to be, and “At no time was anyone ever precluded from suing [the company] by purchasing one of [its] products at a store or liking one of [its] Facebook pages.”

Although the General Mills forced arbitration effort was short-lived, it leaves questions as to whether similar forced arbitration agreements might be feasible or desirable. Certainly binding arbitration can be beneficial to companies as a relatively efficient way to resolve disputes. But, as General Mills discovered, consumers may not like the feeling that they are being relieved of their legal right to sue without their express consent, or possibly even their awareness. Forced arbitration is not a new concept — it has increasingly been employed by, for example, credit card and mobile phone companies following a few key court decisions permitting it. See, AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011); Rent-a-Center West v. Jackson, 130 S.Ct. 2722 (2010); Stolt-Nielsen, S.A. v. Animalfeeds International Corp., 130 S.Ct. 1758 (2010); Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006). Perhaps General Mills’ efforts were simply too broad an attempt at expanding the capabilities and scope of forced arbitration clauses by deeming that consumers had given up legal rights for too small an interaction with or benefit from the company. No doubt General Mills’ efforts will not be the last we see to use and broaden forced arbitration clauses, particularly as our nation becomes more and more litigious, but perhaps the next company to wade into the territory of expanding forced arbitration clauses must do so less ambitiously.

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