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Thursday, April 17, 2014

In Its New Statement of Legal Terms, General Mills Greatly Restricts Consumers' Rights to Sue

The New York Times reports:

General Mills, the maker of cereals like Cheerios and Chex as well as brands like Bisquick and Betty Crocker, has quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, “join” it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways.
Instead, anyone who has received anything that could be construed as a benefit and who then has a dispute with the company over its products will have to use informal negotiation via email or go through arbitration to seek relief, according to the new terms posted on its site. 
In language added on Tuesday after The New York Times contacted it about the changes, General Mills seemed to go even further, suggesting that buying its products would bind consumers to those terms.
General Mills' online agreement certainly seems to go as broad as it told the Times. At the top of its webpage, it states, "Please note we also have new Legal Terms which require all disputes related to the purchase or use of any General Mills product or service to be resolved through binding arbitration." Looking to the legal agreement suggests that the terms apply to a broad range of activities, although they may not apply to all consumers who purchase General Mills products. Here are the portions of the agreement that give me this impression:

1. Your agreement to these legal terms 
These terms are a binding legal agreement (“Agreement”) between you and General Mills. In exchange for the benefits, discounts, content, features, services, or other offerings that you receive or have access to by using our websites, joining our sites as a member, joining our online community, subscribing to our email newsletters, downloading or printing a digital coupon, entering a sweepstakes or contest, redeeming a promotional offer, or otherwise participating in any other General Mills offering, you are agreeing to these terms.

Of course, your decision to do any of these things (i.e., to use or join our site or online community, to subscribe to our emails, to download or print a digital coupon, to enter a sweepstakes or contest, to take advantage of a promotional offer, or otherwise participate in any other General Mills offering) is entirely voluntary. But if you choose to do any of these things, then you agree to be bound by this Agreement.
. . . 
3. Dispute resolution; binding arbitration 
. . . 
Later portions of the arbitration waiver indicate that consumers who go to arbitration cannot consolidate their classes with other consumers, meaning that consumers who agree to the contract waive any class action rights.

This is a pretty notable development in General Mills limitation of its own liability, and I don't think that this contract will stand up in all the situations the contract claims to cover. Also, I don't think that General Mills has accurately stated what its contract actually says in its discussion with the New York Times.

Who Does the Contract Purport to Cover?

General Mills seems to have told the times that buying any General Mills products would subject consumers to the terms of its contract, including waiving one's right to sue. This does not seem to be an accurate statement about what the agreement actually says.

While section three of the agreement applies to a broad variety of activity, including the purchase of General Mills products, section one of the agreement specifies what constitutes agreement to the terms of the agreement. Section one, while quite broad, seems to require customers to engage with General Mills in some online capacity in order for the contract to apply -- customers need to receive some sort of benefit or coupon from the company, or they need to be part of an "online community" like Facebook.

So while the arbitration section is broad, it should only apply to those customers who meet the description of section one of the contract. This means that customers who purchase General Mills products at stores without ever interacting with General Mills online would not be bound by this agreement. Which makes sense -- General Mills would not be able to enforce a contract against consumers who had never had a chance to read that contract.

This means that somebody has misstated the precise scope of the contract -- it is not immediately clear whether this misstatement is the fault of General Mills or the Times. But I imagine that most folks in the media are going to say that General Mills purports to extend its arbitration contract to all consumers who purchase General Mills products (as I write this, Fox News' Shepard Smith is reporting that very claim), but this interpretation misses the limitation of the contract to those customers specified in section one of the agreement.

Is The Contract Legally Binding?

People may criticize General Mills' arbitration provision as unfair because it voids consumers right to sue both alone and in classes. But the Supreme Court has taken a very favorable view of arbitration provisions. AT&T v. Concepcion is a recent example of this approach. There, the Court held that state laws that disproportionately affect arbitration provisions in an unfavorable manner are preempted by the Federal Arbitration Act, meaning that arbitration provisions can only be held unenforceable under generally applicable principles of contract law.

But General Mills' contract raises questions beyond the arbitration issue. The contract reminds me of websites' strategies of employing "browsewrap" contracts (commonly presented by websites as "terms of use") that purport to bind website visitors to the terms of a contract as a result of visitors' simply accessing the website. Some of the actions that cause customers to fall under the scope of the agreement do not require customers to manifest assent to any contractual terms -- for instance, users who follow General Mills on Facebook or Twitter do not need to acknowledge and affirm that by doing so, they are ceding their contractual rights.

Contrast General Mills' automatic application of the terms of the contract to other websites' "clickwrap" contracts, which require users to "read" through the terms and conditions and affirmatively indicate their consent by checking a box or taking some other action. While users almost never read these agreements, they are at least required to manifest their assent to the agreement in some manner. General Mills agreement seems to forego this requirement -- purporting to apply to all consumers who receive benefits from General Mills or follow the company on social media.

Courts may not be willing to enforce browsewrap agreements, since these agreements assume that the customer has looked up the terms of service, and since there is no indication that customers in browsewrap situations have assented to the terms of the contract. While there have not been many cases on this issue, some of the cases are summarized in this article by Mark Lemley. For further reading on the issue of browsewrap contracts, I recommend this article by Nancy Kim.

In light of courts' refusal to recognize browsewrap contracts, General Mills may not be able to enforce its contract against customers who do not affirmatively assent to the terms of the contract. Following the company on Facebook or Twitter is almost certainly not enough to bind customers to the contract -- users that do this do not indicate any assent to forfeit their rights to sue, and users may not even visit General Mills' website, let alone the specific portion of the website that lays out the agreement.

Customers who receive coupons or other benefits from the company may be more likely to fall under the terms of the agreement, although they still have a good argument that the agreement does not apply. If customers have visited the website to obtain coupons recently, those customers would have been alerted that the company recently enacted broad waivers to the right to sue, so customers visiting the website may be on notice about the change. But unless customers affirmatively manifest their assent to the terms of the website by clicking a checkbox or signing a version of the agreement, General Mills still has a pretty weak case.

Conclusion: Interesting Questions Ahead

General Mills' new policy represents a confluence of several interesting and developing legal issues, including the validity of browsewrap contracts and the strength of arbitration provisions. It will be interesting to see how General Mills tries to enforce its contract and what plaintiffs end up successfully challenging the contract. I think that plaintiffs who follow General Mills on Facebook and Twitter, and plaintiffs who purchase products without interacting with the company online have solid claims against the agreement's enforceability. But General Mills' agreement covers many different types of customers, and courts will need to address the range of claims that differently situated plaintiffs end up bringing.

UPDATE (4/21/2014)

As I explore in more detail in this post, General Mills has reversed the changes to its legal terms. My links in this post link to the company's current terms, which no longer contain the arbitration provisions I have quoted.

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