This is a response to the American Association for Justice's October 2013 article, "License to Steal: How the U.S. Chamber Forced Arbitration on America".
Introduction
By opening a credit card envelope in the mail...or even taking a first sip of coffee, millions of American consumers are unknowingly giving up their rights and protections established by more than 200 years of constitutional law. (p. 3)
I am not aware of any court that considers merely opening a mailed envelope or consuming purchased coffee acceptance of any arbitration contract. AAJ is probably referring to change-in-terms notices to credit cards and the terms and conditions for Starbucks gift cards. This misstatement of the contract formation process is just the beginning of sloppy scholarship by AAJ.
Enter the Corporate Trojan Horse
To Big Business, the boilerplate [arbitration] clauses are the ultimate out. Accountability for all misconduct and violations of law has been eliminated by a paragraph of fine print that is rarely ever read. (p. 4)
A significant number of court decisions involving challenges to arbitration provisions noted that the clauses were, in fact, prominently called out. (collect cases here). Contrary to AAJ's insinuation, arbitration does not eliminate corporate accountability; individual consumer relief is generally not limited, and arbitration agreements cannot affect government agency action to recover on behalf of consumers. See EEOC v. Waffle House, Inc., 534 U.S. 279 (2002).
Have one of these? Then you've "agreed" to give up your rights: Credit cards, Checking account, Student loans, Cell phone, Cable, Internet, Computer, Employment contract, House, Health care, Starbucks card, even French fries (p. 4 callout)
AAJ misrepresents that businesses almost universally require consumers to agree to arbitration as a condition of purchasing the items or services on the above list. For many of the items on the list, this is simply not true:
- Credit cards. Due in part to a settlement by four major credit card companies where those companies agreed to remove their arbitration clauses, on December 31, 2010, only 48% of credit card loans were subject to arbitration. Peter Rutledge and Christopher Drahozal, "Contract and Choice", 2013 BYU Law Review 1, 20
- Checking account: As of November 2012, only 47% of banks require arbitration. The Pew Charitable Trusts, Banking on Arbitration at 3 (2012). Notably, Bank of America dropped arbitration for personal accounts after the NAF ceased operations. Kathy Chu, "Bank of America ends arbitration of credit card disputes", USA Today, Aug. 13, 2009.
- Computer: the only major OEMs I know of that have arbitration are Dell and Gateway. (add the Drahozal 2003 article later)
- Employment contract: no evidence to suggest that arbitration in employment contracts is as universal as AAJ makes it out to be
- French fries: more sloppy scholarship. AAJ might be referring to James v. McDonald's Corp., 417 F.3d 672 (7th Cir. 2005), where the plaintiff purchased fries that had a game piece for a promotional sweepstakes and then claimed that the sweepstakes was run fraudulently and demanded the right to be considered for the grand prize. The Court of Appeals noted that the plaintiff "cannot claim, on the one hand, that a valid contract obligates McDonald's to redeem her prize and, on the other hand, argue that no contract binds her to the contest rules." Id. at 678. This does not suggest that fast food companies require purchasers of french fries to arbitrate, much less that those companies do so universally.
Interestingly, the footnote only cites the Starbucks Gift Card terms and conditions and a page by Imre Szalai, an Associate Professor of Law at Loyola University New Orleans, promoting a book he wrote on arbitration. (I should ILL the book.) Also, AAJ does not discuss provisions that purport to allow consumers to reject arbitration agreements at the time of entering into a contract, which is a notable oversight.