In response to a New York Times report about General Mills' new anti-consumer legal terms connected to its website privacy policies, Forbes came to the defense of the large corporation and its recent attempt to immunize itself from class action lawsuits.
On April 16, The New York Times reported that General Mills had changed its legal terms to include burdensome forced arbitration clauses, contract provisions that force consumers to waive their right to sue or join a class action. In the aftermath of the high-profile publicity and condemnation from consumer advocacy groups, General Mills abandoned the change after complaining their short-lived class action bans were "mischaracterized."
Forced arbitration clauses have become increasingly popular in the wake of Supreme Court decisions upholding the legality of such clauses. Unsurprisingly, forced arbitration is beloved by right-wing media and corporations alike, because they make it exceedingly difficult for injured consumers to join together in a class action.
However, General Mills' forced arbitration agreement was particularly outrageous. According to the Times, the new terms could be interpreted to bind consumers by merely downloading coupons, interacting with the company's website through social media like Facebook, or by entering a sweepstakes or contest, even if they were unaware that they had supposedly relinquished their right to sue.
In a recent column in Forbes, columnist Daniel Fisher responded to the Times by minimizing the importance of class actions as a method of recovery for injured consumers, and hyped forced arbitration clauses as an adequate alternative. Fisher went on to mock the Times for flawed reporting before relying on right-wing talking points about forced arbitration:
The bigger issue is what the Times writers work so strenuously to keep out of their stories. The fight here isn't over individual lawsuits; it's over class actions, those cases that reward lawyers with millions of dollars in cash fees and give their clients little to nothing. In editorials and articles like this, the Times carries water for the class-action bar, which also happens to supply a significant amount of money to the Democratic Party each year. The paper conflates the individual right to sue with the right of lawyers to assemble huge groups of consumers, typically without their knowledge or participation, into zombie armies that can compel companies into settling on lucrative terms.
What do General Mills customers really give up if they agree to an arbitration clause?
[A]rbitration does offer some advantages over traditional litigation. Such as: No lawyer would ever take a small case against General Mills in the first place. The General Mills policy specifies a $200 filing fee, which the company waives in cases involving less than $5,000. And anybody who really wants to preserve his right of jury trial can opt out of the policy entirely by notifying General Mills in writing.
Fisher's claim that the Times “conflates” an individual's right to sue with class actions is a rather disingenuous distinction on his part. Far from representing “zombie armies” of consumers, class actions have become one of the most efficient ways to litigate group claims that represent a common injury. As Fisher himself explains in his column, “no lawyer would ever take a small case against General Mills” -- which is exactly why class action lawsuits exist in the first place. Because individual claims are often of little value on their own, it's unlikely that consumers would bring them at all unless they were combined with other similar claims. And without class action litigation, there is little incentive for corporations to refrain from scamming or otherwise injuring consumers.
Unfortunately, the conservative justices of the Supreme Court have been busily rewriting class action and arbitration precedent to further this form of corporate immunization, cheered on by right-wing media along the way.
Fisher's complaint that class actions only benefit lawyers is not only inaccurate, it ignores the fact that forced arbitration clauses are designed to advantage corporations -- not consumers. According to Public Citizen, Fisher's claim that the costs of arbitration offer an “advantage” over class actions is suspect:
A claimant must pay steep filing fees just to initiate a case -- seldom less than $750. These fees do not cover the arbitrator's hourly charges, which are generally in the range of $200 to $300 per hour, split between the parties. All these fees must be deposited in advance, and almost always amount to thousands of dollars. Because the claimant has usually sustained a serious loss in the dispute with the business -- foreclosure on a home, firing from a job, termination of a franchise or dealership -- most individuals covered by an arbitration clause cannot afford these costs and are forced to drop their cases.
As conservative Seventh Circuit Court of Appeals Judge Richard Posner pointed out in a 2004 opinion, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” Arbitration is no better -- especially not Fisher's version, which would apparently have consumers arbitrate their claims with no legal representation at all (given that “no lawyer” would take such a small case).
Since it is not actually economically rational for consumers to initiate hundreds or thousands of individual low-dollar arbitration cases, it can be assumed that General Mills hopes consumers won't bring any at all. A recent report from the Consumer Financial Protection Bureau shows that, although “tens of millions of households are subject to arbitration” clauses in contracts for their credit card and checking account agreements, only 1,241 cases were filed with the American Arbitration Association between 2010 and 2012. These numbers suggest that arbitration clauses aren't quite as wonderful for consumers as Fisher claims.