Recent Equifax Breach Prompts Criticism of Arbitration Provisions (Updated)

The credit monitoring firm, Equifax, recently suffered a massive data breach, resulting in the exposure of the personal information of approximately 143 million Americans. This personal information includes names, Social Security numbers, birth dates, and addresses.

Equifax, realizing how terrible this is, has tried to respond by offering free credit report monitoring services to its customers for a year. But this isn't going over very well, as it appears that Equifax may be attempting to get people to waive their class-action rights and agree to binding arbitration provisions by signing up for the credit-monitoring service. From the Wall Street Journal:

The fine print in the Equifax agreement concerning the monitoring services said that consumers who take part waive the ability to bring or participate in a class-action suit, a class arbitration or other similar legal actions. That seemed to suggest that consumers would be bound to an individual arbitration process with the company, which some argue is a more difficult place for consumer to get larger rewards for their problems.

The Washington Post has similar reporting here, and a report from MarketWatch is here.

The Terms of Service that contain the "fine print" can be found here. Here is the relevant provision:

Binding Arbitration. Any Claim (as defined below) raised by either You or Equifax against the other shall be subject to mandatory, binding arbitration. As used in this arbitration provision, the term "Claim" or "Claims" means any claim, dispute, or controversy between You and Us relating in any way to Your relationship with Equifax, including but not limited to any Claim arising from or relating to this Agreement, the Products or this Site, or any information You receive from Us, whether based on contract, statute, common law, regulation, ordinance, tort, or any other legal or equitable theory, regardless of what remedy is sought. This arbitration obligation extends to claims You may assert against Equifax’s parents, subsidiaries, affiliates, successors, assigns, employees, and agents. The term "Claim" shall have the broadest possible construction, except that it does not include any claim, dispute or controversy in which You contend that EIS violated the FCRA. Any claim, dispute, or controversy in which You contend that EIS violated the FCRA is not subject to this provision and shall not be resolved by arbitration.

The key in this paragraph is the definition of "Claim," which is sufficiently broad to cover damages arising from the data breach (as these damages presumably arise from one's relationship with Equifax).

Equifax may claim that the Terms of Service linked to above do not apply to customers who enroll in the "TrustedID Premier" program that Equifax is offering after the breach. That program is linked to from this page (with a URL of www.equifaxsecurity2017.com). The Terms of Service associated with the TrustedID program are here, and while they also contain a pretty stringent-sounding arbitration provision, it does not contain the same, extremely broad "Claim" definition. [NOTE: See update below].

But the Terms of Service that I initially quoted should still apply to those who enroll in the TrustedID service because those Terms are extremely broad in their potential application:

THIS PRODUCT AGREEMENT AND TERMS OF USE ("AGREEMENT") CONTAINS THE TERMS AND CONDITIONS UPON WHICH YOU MAY PURCHASE AND USE OUR PRODUCTS THROUGH THE WWW.EQUIFAX.COM, WWW.IDENTITYPROTECTION.COM AND WWW.IDPROTECTION.COM WEBSITES AND ALL OTHER WEBSITES OWNED AND OPERATED BY EQUIFAX AND ITS AFFILIATES ("SITE"). YOU MUST ACCEPT THE TERMS OF THIS AGREEMENT, INCLUDING THE ARBITRATION AGREEMENT CONTAINED IN SECTION 4 BELOW, BEFORE YOU WILL BE PERMITTED TO REGISTER FOR AND PURCHASE ANY PRODUCT FROM THIS SITE. BY REGISTERING ON THIS SITE AND SUBMITTING YOUR ORDER, YOU ARE ACKNOWLEDGING ELECTRONIC RECEIPT OF, AND YOUR AGREEMENT TO BE BOUND BY, THIS AGREEMENT. YOU ALSO AGREE TO BE BOUND BY THIS AGREEMENT BY USING OR PAYING FOR OUR PRODUCTS OR TAKING OTHER ACTIONS THAT INDICATE ACCEPTANCE OF THIS AGREEMENT.

Sorry for all the capital letters. I strongly suspect that attorneys who draft terms of service agreements are secretly angry people, and sometimes the rage manifests itself in the work product.

In case you cannot read the paragraph above, it applies the terms in the Agreement to all websites owned and operated by Equifax and its Affiliates.

In response to critics pointing out how Equifax appears to be systematically herding potential Plaintiffs' into agreeing to binding arbitration, Equifax has set up this "Progress Update" page where it tries to put out the new fire that it has caused:

2). NO WAIVER OF RIGHTS FOR THIS CYBER SECURITY INCIDENT

In response to consumer inquiries, we have made it clear that the arbitration clause and class action waiver included in the Equifax and TrustedID Premier terms of use does not apply to this cybersecurity incident.

Have they though?

Let's go back to the Terms of Service -- specifically, to the relevant portion of the integration clause near the end:

ENTIRE AGREEMENT BETWEEN US. This Agreement constitutes the entire agreement between You and Us regarding the Products and information contained on or acquired through this Site or provided by Us, including through other linked third party Internet sites.

This appears to exclude Equifax's damage control statements, which appear on a separate page and are not included in the terms of the Agreement. All Equifax would need to do would be to point to this clause and argue that its statements elsewhere about the arbitration agreement not applying are of no legal relevance.

In short, commentators who are criticizing Equifax's response seem to have a pretty good point. Signing up for Equifax's free (for a year) credit report monitoring service may result in a waiver of rights that the average consumer would not expect, and likely would not agree to if it were put into plain English.

All of this may end up being moot, however, as signing up for the credit monitoring service requires customers to give Equifax the last six digits of their Social Security numbers. Perhaps those willing to entrust Equifax with this information following a breach of this magnitude are willing to agree to just about anything, including a waiver of the right to trial and right to join in a class action.

[UPDATE: 9/11/2017]

I have revised the post above to add the link to the TrustedID Program Terms of Use, which I had not linked to in the original post. Additionally, at the time I wrote the initial post, the TrustedID Program's Terms of Use included an arbitration provision, albeit one that was less all-encompassing than the provision in Equifax's general Terms of Service Agreement. The TrustedID Program's Terms of Use have now been updated and no arbitration provision appears in these terms at all. The TrustedID Agreement contains integration clause near the end of the Agreement, which states, in pertinent part:

ENTIRE AGREEMENT BETWEEN US. This Agreement constitutes the entire agreement between You and Us regarding the Products and information contained on or acquired through this website or provided by Us, including through other linked third party Internet sites.

This may have the effect of fulfilling Equifax's promise that their arbitration provisions do not apply to the recent breach. Users affected by the breach could visit the webpage for the TrustedID Program without ever accessing Equifax's general website (say, by linking to the TrustedID page from the link in the post above). And while the broad terms of Equifax's general Terms of Use still apply, Equifax would probably have a harder time arguing in court that customers are bound to the general Terms of Use if those customers could have enrolled in the TrustedID Program without ever visiting (or being prompted to visit) a page containing or linking to Equifax's general Terms of Use.

In short, users looking to enroll in the TrustedID Program now have a much stronger argument that they have not agreed to arbitration and may still pursue claims in court, either as individuals or through a class action. Of course, I just checked the TrustedID page and it is still seeking the last six digits of my Social Security Number ... so users still must decide whether entrusting Equifax with this information following the breach is a prudent action to take.

Wells Fargo Turns to Arbitration Clauses to Neutralize False Account Lawsuits

The New York Times reports that Wells Fargo has been using arbitration clauses in its contracts with customers to defeat claims that the bank set up false accounts for customers:

Ms. Zeleny, a lawyer who lives outside Salt Lake City and opened a Wells Fargo account when she started a new law practice, said it would be impossible for her to agree to arbitrate her dispute over an account that she had never signed up for in the first place.

The bank’s counterargument: The arbitration clauses included in the legitimate contracts customers signed to open bank accounts also cover disputes related to the false ones set up in their names.

Some judges have agreed with this argument, but some lawmakers and others consider it outrageous.

“Wells Fargo’s customers never intended to sign away their right to fight back against fraud and deceit,” said Senator Sherrod Brown, an Ohio Democrat, who introduced a bill last week that would prevent Wells from forcing arbitration in the sham account cases.

Yet even as the bank reels in the court of public opinion, Wells Fargo has been winning its legal battles to kill off lawsuits. Judges have ruled that Wells Fargo customers must go to arbitration over the fraudulent accounts.

In dismissing one large case seeking class-action status in California, a federal judge ruled last year that it was not “wholly groundless” that customers could be forced to arbitrate over accounts they had never agreed to. That case is now being settled, according to legal filings.

An earlier report, also in the New York Times, details Wells Fargo's efforts to compel arbitration in a Federal District Court in Utah:

Wells Fargo has asked a Federal District Court to order dozens of customers who are suing the bank over the opening of unauthorized accounts to resolve their disputes in private arbitrations instead of court, according to legal documents. 

The motion, filed in the United States District Court in Utah on Wednesday, is in response to the first-class action lawsuit filed against Wells since it agreed to pay $185 million in penalties and $5 million to customers for opening up to 2 million deposit and credit-card accounts in their names without their permission. 

. . .

Mandatory arbitration rules inserted into account-opening agreements prohibit customers from joining class actions or suing Wells Fargo. Instead, the agreements require individual, closed-door arbitration. 

Mandating arbitration when signing up for financial products has become standard practice after a Supreme Court decision in 2011 validated the practice. But customer advocates say it improperly denies customers the legal protections of court proceedings, such as the right to appeal, and helps to conceal corporate misconduct from the public and regulators because the related documents and hearings are not made public.

Folks in the media seem to have an unfortunate aversion to linking to actual documents, but I did some searching and you can find Wells Fargo's Motion to Compel Arbitration in the Utah case here. You're welcome, dear reader.

Wells Fargo's position in this motion is that the Plaintiffs admit that they set up at least one account with Wells Fargo voluntarily. In doing so, they voluntarily entered into agreements that their disputes with Wells Fargo would be settled through binding arbitration.

Here is one example of such a set of facts that Wells Fargo sets forth in its motion:

On July 9, 2010, Sbeen Ajmal, a California resident and at the time a Wells Fargo employee, opened a team member checking account (x5671) and a consumer savings account (x6215). Ajmal signed the Consumer Account Application for the two accounts as the primary joint owner on July 9, 2010; Mohammad Nazir was listed as a secondary joint owner. (Declaration of Karen Nelson (“Nelson Decl.”) ¶ 26, Ex. 3-A at 3.) In signing this application, Ajmal confirmed the following: “I have received a copy of the applicable account agreement and privacy brochure and agree to be bound by them… . I also agree to the terms of the dispute resolution program described in the account agreement.” (Id.; see also id. ¶ 26 & Ex. 1-G (March 2010 Consumer Account Agreement).) Ajmal further agreed that “disputes will be decided before one or more neutral persons in an arbitration proceeding and not by a jury trial or a trial before a judge.” (Id. ¶ 26, Ex. 3-A at 3.) Ajmal actively used her team member checking account (x5671), and had her paychecks directly deposited into the account. (Id. ¶ 27, Ex. 3-B.)

Another example references a customer who received a welcome letter stating that if his account remained open past a certain date, it would be governed by terms in the "Consumer Disclosure brochure." Among the terms in the brochure was an agreement that any "dispute" arising between the customer and Wells Fargo would be settled through arbitration. As for the definition of "dispute," the contract provided this definition:

[A]ny unresolved disagreement between you and the Bank that relates in any way to account[**] [emphasis added] or services described in this brochure [including] any claim that arises out of or is related to these accounts, services or related agreements. It includes claims based on broken promises or contracts, torts (injuries caused by negligent or intentional conduct), or other wrongful actions. It also includes statutory, common law and equitable claims. A dispute also includes any disagreement about the meaning of this Arbitration Agreement, and whether a disagreement is a ‘dispute’ subject to binding arbitration as provided for in this Arbitration Agreement.

[**NOTE: The quoted portion in the motion says "account," although it makes more sense if read as either "accounts" or "the account." Each alternative reading, however, significantly changes the potential scope of the arbitration agreement, as described in more detail below.]

Wells Fargo's argument is that the arbitration agreement in the accounts that the Plaintiffs admit to entering voluntarily apply to the dispute arising from Wells Fargo's alleged creation of additional accounts for those Plaintiffs without those Plaintiffs' permission. The Plaintiffs will likely argue that the scope of each arbitration agreement was limited to the account that was voluntarily created, and not to any accounts created without permission.

Wells Fargo's argument has merit because the arbitration provisions cited in its motion are generally quite broad. The bank can argue that once the customers created a contractual relationship with Wells Fargo, they agreed that future actions of Wells Fargo relating to the accounts or services fell under the arbitration provision in that contract. This argument is strongest under the terms of the contract described in the first quoted paragraph above.

But under the terms described in the second quoted paragraph above, Wells Fargo's argument might face more of an uphill battle. There, the "disputes" covered by the arbitration provision may be limited to the customer's account -- or to Wells Fargo accounts in general, depending on whether the term "account" is read as "the account," or "accounts." Based on the remainder of the quote and its context, it looks like the intended word was "accounts," which would strengthen Wells Fargo's position, but the quote as stated is ultimately unclear. If the Court reads the agreement giving rise to the account to extend only to Wells Fargo's actions in providing services under that particular account, the Plaintiffs will have a stronger argument, at least to the extent that the Consumer Disclosure brochure is the only applicable agreement.

The New York Times references some critics and lawmakers who are angry with Wells Fargo's strategy, but from a pragmatic point of view the bank would be foolish not to use these agreements. Arbitration agreements are supported by favorable Supreme Court case law, and because they can thwart Plaintiffs' litigation efforts early in the process. Whether anger by consumers and legislators over Wells Fargo's arbitration maneuvers is enough to prompt changes in the law governing arbitration clauses remains to be seen.

Pokemon Go Players: Beware of Binding Arbitration!

Unless you've been living under a rock or avoiding the outdoors for the past several weeks, you have probably heard of Pokemon Go, a smartphone app developed by Niantic. Pokemon Go compels 20-somethings to wander through my neighborhood at night, collide with trees, and enslave small creatures for the purpose of battling other players' small creatures. Players meander along sidewalks, streets, and beaches until they come across a Pokemon, which is superimposed on the surrounding environment through a phone's camera. For example, here is an Onix in my apartment perched on a (signed) copy of Justice Antonin Scalia and Bryan Garner's Reading Law:

What a time to be alive!

Players cavort through neighborhoods collecting items at "Poke Stops" and battling other Pokemon at Gyms. Sometimes they are mugged. The New York Times has this discussion of the history of Pokemon and the future of augmented reality games and the Wall Street Journal notes that the game is turning people into injury-prone zombies.

Legal commentary as varied as the creatures themselves is emerging as the game gains momentum. Commentators note interesting questions of property the game raises, the potential for players to injure themselves, and the risk of criminals stealing phones.

In this post, I'll focus on another line of commentary noting that those who sign up to play Pokemon Go forfeit their right to trial, agreeing instead to submit any claims to binding arbitration. Commentators note, and criticize, this portion of Niantic's Terms of Service here, here, here, and here.

Arbitration by Combat: The Consumer-Friendly Approach America Needs

A former classmate of mine, Amanda Werner, co-authored this article with Sonia Gill for some obscure political website.  Werner and Gill and criticize corporations' practices of drafting agreements that require consumers and employees to submit to binding arbitration rather than filing lawsuits. While I thought that Werner and Gill made some interesting points, their blanket attack on arbitration is a bit overbroad.  While certain forms of arbitration may preclude class action lawsuits or favor bigger businesses over consumers, the article ignores a woefully under-discussed form of alternative dispute resolution (ADR) that avoids many problems that traditional arbitration presents.

The arbitration I am referring to is, of course, Arbitration by Combat, in which parties to a contract agree that any dispute arising under the contract shall be submitted to binding arbitration in the form of trial by combat. Under a typical agreement the parties would each select a champion from a common pool and these champions would duke it out -- likely in the form of fencing or some other form of non-lethal combat in order to avoid prohibitions on dueling that exist in several states. This form of arbitration is under-utilized, but a version of it does exist in at least one contract of which I am aware.

Werner and Gill level several criticisms against arbitration, none of which apply to arbitration by combat.  Take for example this point:

If you have a credit card or checking account, there is a good chance you have signed away your legal rights in one these rip-off clauses. The same is true if you have a cellphone, bought a car from a dealership or attended a for-profit college. Many American workers will also find themselves unable to seek relief in court when wronged by their employer. In just the past 10 years, forced arbitration clauses have become so ubiquitous in American life that many people will find they have signed away their rights without even knowing it.

Arbitration by combat is anything but ubiquitous. This form of ADR is rare enough that companies adopting it will likely grab headlines, or at least footnotes in whimsical law review articles. Consumers contracting with these innovative companies will likely be aware of the unique dispute resolution procedures they are agreeing to. In fact, customers may choose to do business with these companies because of their progressive stance towards new and exciting forms of ADR. For corporations out there reading this post, this may be something to keep in mind...

What about these other arguments against arbitration?

Arbitration substitutes an unaccountable private decision maker for an impartial judge and jury, and consumers have little opportunity to present evidence or appeal a bad decision. Unlike a public court case, an arbitration is a closed proceeding in which evidence and decisions are often kept secret, leaving law enforcement agencies, regulators and members of the public with no way to monitor systemic corporate misconduct. Forced arbitration amounts to a license to steal, since companies have little incentive to correct bad behavior if they can get away with it — and even profit from it.

. . . 

Forced arbitration is inherently biased in favor of corporations because arbitration firms rely on repeat corporate players to bring in continued business for future disputes. This dynamic encourages the well-documented “repeat player bias” in arbitration: Companies that frequently arbitrate are far more likely to prevail than consumers with a one-time complaint. After all, arbitrators cannot stay in business if they bite the hand that feeds them.

The criticism of an unaccountable decision maker does not apply to arbitration by combat because the method of resolving disputes through trial by combat relies on the skills of the combatants rather than a third party's judgment. In a typical arbitration by combat scenario, the corporation and consumer would choose from a pool of potential combatants who would then do battle with one another. The party whose champion is victorious prevails in the dispute, and the matter is resolved.

Combatants in such a system are not likely to pander to the interests of corporations or consumers. Rather, the goal of the combatants will to have as strong a track record as possible, meaning that their top priority will be to effectively represent the party that has chosen them. The problem of "repeat player bias," therefore does not apply to arbitration by combat.

Additionally, if, as Werner and Gill contend, law enforcement agencies have no way of monitoring the internal processes of arbitration, arbitration by combat participants would be able to sidestep the obstacle of illegality which may otherwise cripple the integrity of an arbitration by combat contract. Contracts may require parties to agree to the rule that the first rule of arbitration by combat is that the parties not talk about arbitration by combat, or something to that effect.

In short, while Werner and Gill's article is notable, its blanket criticism of all arbitration is unfair. I urge the authors to take a closer look at all of the benefits of arbitration by combat before simply leaping to praise "constitutional and statutory rights."

"Arbitration by Combat"

An article on Game of Thrones, trial by combat, and arbitration that I coauthored with Raj Shah is now available on SSRN. You can download the full paper here. Here is the abstract:

Trial by combat is a popular method of dispute resolution in the Game of Thrones universe. While modern legal systems reject trial by combat as an unjust and barbaric practice, this article examines whether trial by combat may be employed as a means of private dispute resolution in the United States. This article evaluates whether ‘arbitration by combat’ provisions based on Game of Thrones and various historical approaches to trial by combat would be upheld by state laws and protected under the United States’ Federal Arbitration Act (FAA). This article concludes that while Game of Thrones-style arbitration by combat may violate state contract and criminal laws, arbitration by combat that conforms to less-violent historic practices may survive state law challenges and may even fall under the protection of the FAA.

Raj and I wrote this for a special issue of the Media and Arts Law Review dedicated to the subject of "Law and Law Breaking in Game of Thrones." Melissa de Zwart of the University of Adelaide Law School was extremely helpful throughout the editing process, as was an anonymous peer reviewer who provided numerous insightful suggestions and comments. Raj was extremely helpful and patient as a coauthor, as several deadlines in the editing process tended to coincide with me being in trial. Even when my schedule became hectic, Raj managed to provide thoughtful edits for the paper as a whole, making the final article far superior to what I alone could have produced.

Readers should know that I have not read any of the Game of Thrones books and that I have only seen a few episodes of the series. Raj is to thank for the sections of the paper regarding Game of Thrones (although I have seen some clips of the show's trial by combat to understand how violent the practice can be). Raj also primarily wrote the sections pertaining to the Federal Arbitration Act -- my contributions to the paper include the discussion of historic trial by combat and state-level obstacles to arbitration by combat provisions.

Finally, I would like to note the inadvertently timely publication of this article. A New York attorney recently invoked trial by combat in his own litigation proceedings. While that instance of trial by combat is unlikely to take place, I hope that our article can provide some insight into how trial by combat proceedings may find their way into the litigation process.

Arbitration by Combat and Game of Thrones

I am happy to announce that I will be coauthoring an article with my former UCLA Law classmate, Raj Shah, in an upcoming special issue of the Media and Arts Law Review. The issue will contain articles on "Law and Law Breaking in Game of Thrones." Prior posts on the call for papers can be found here and here.

Our article currently has the title, Arbitration by Combat. Here is the article proposal that we submitted:

Trial by combat is a popular method of dispute resolution in the Game of Thrones universe. The trials of Tyrion Lannister and Sandor Clegane stand as some of the most defining moments of the series. However, as the series vividly illustrates through Oberyn Martell’s duel with Gregor Clegane, trial by combat can pose mortal dangers for combatants not endowed with the protection of the god R’hllor. Furthermore, as Tyrion Lannister’s prosecution by the Iron Throne demonstrates, trial by combat can often lead to unjust results.

Trial by combat was also a common method for resolving disputes in medieval Europe. Trials by combat were subject to numerous procedural rules and were often (but not always) less violent than the disputes in Game of Thrones. But trial by combat has since been rejected as an unjust and barbaric ritual. 

The concerns surrounding trial by combat as a means of dispute resolution raise several interesting questions: can agreements to arbitrate disputes by means of a trial by combat be enforced in the United States? And if these “arbitration by combat” provisions are enforceable, what form of combat would be permitted under existing law? The more restrained historic form of trial by combat or the Game of Thrones variety?

In this article, we seek to answer these questions by examining how arbitration by combat agreements might implicate state and federal laws in the United States. First, we explore whether such agreements would run afoul of state laws barring contracts that are unconscionable or against public policy. We argue that savvy drafters of arbitration by combat provisions should avoid the gory proceedings in the Game of Thrones universe. But arbitration by combat based on historic practices may survive judicial review.

Second, we examine whether state regulation of arbitration by combat provisions would be preempted by the Federal Arbitration Act’s protections for arbitration agreements. In particular, we analyze whether the Act would protect an arbitration by combat agreement against state interference, given the U.S. Supreme Court’s recent expansion of the Act’s reach in AT&T Mobility v. Concepcion, 563 U.S. 321 (2011).

We argue that while Game of Thrones–style arbitration by combat may violate state contract laws, arbitration by combat that conforms to historic practices may find more success. We also conclude that there is a strong argument that an arbitration by combat procedure falls under the protection of the Federal Arbitration Act, provided it satisfies certain “fundamental attributes of arbitration” identified in Concepcion. That is, the combat would have to be informal, speedily resolved, and relatively inexpensive to conduct. Hence, state safety regulations of combat proceedings – while permissible – would be preempted to the extent they interfere with such characteristics.

The topic of this paper should not be too much of a surprise to regular readers of this blog. Trial by combat has always fascinated me, and you can find my previous posts on the subject here and here.

I must confess, however, that I am not well-versed in the Game of Thrones literature. Fortunately, my coauthor, Raj Shah, has extensive expertise in that area (as well as in the area of researching and writing about the Federal Arbitration Act). While Raj, like myself, has not published on the subject of Game of Thrones before, he has published a critical race perspective on U.S. standing doctrine in the UCLA Law Review, which you can find here.

As is the case with any post or paper I have announced on this blog, comments and criticism from readers are welcome. Our deadline for completing the full paper is December 19.

Words Not to Use?: Some Good and Bad Suggestions

I came across this article by Jeff Haden in Time yesterday evening, where Haden lists off words to avoid. The article itself is a few weeks old, but LexisNexis tweeted about it today, adding its own advice that practitioners avoid these terms in legal briefs:

20 botched words that will damage your legal briefs http://t.co/NjlY82goyA via @TIME @Inc pic.twitter.com/pSAXjhiyk6
— LexisNexis (@LexisNexis) June 2, 2014

Some of the words on Haden's list are certainly words to avoid. Words like "literally," and "irregardless" are terms that should generally be avoided. But the list contains a numerous other words that lawyers should use in certain contexts. And failing to include some of these words could leave an attorney in a bad place.

For example, "arbitrate" is one of the words on the list. Why this word should be avoided is unclear. Haden writes:

Arbitrate appears in many contracts. An arbitrator is like a judge; she hears evidence, reviews documents, etc, and then makes a decision. That’s different from mediate: a mediator doesn’t make decisions but tries to help two opposing parties work out their differences and reach a compromise or settlement. 

So if you agree to enter mediation in the event of a dispute, you and the other party will try to hash out your problem the help of a neutral party. And if you can’t reach an agreement that usually means your next step will be to go to court. 

If you agree to arbitration a neutral party will make a decision that you will have to live with. Normally there are no next steps. (Except maybe disappointment.)

I can't see why "arbitrate" is a term to avoid in the legal context. If a party is drafting a contract, including an arbitration provision can be a very strong way to avoid costly and uncertain litigation. While "there are no next steps," that's usually exactly what the drafter of the contract wants.

There are other words on Haden's list like "waiver," "behalf," "libel," and "majority," that may also be crucial in a legal brief. A father may bring a claim on behalf of his son for libel, and while the defendant may raise a defense of waiver, that tactic may be contrary to a majority rule that undermines the defense.

Admittedly some of Haden's advice is a bit more nuanced than the words indicate -- for example, he argues that "in behalf" should not be confused with "on behalf." And people in Georgia may want to avoid the term "libel" when "defamacast" is proper. But these examples aside, I don't think that LexisNexis was right to flag this as a list of terms that will damage legal briefs.

The Latest in the Magnificent Garner-Posner Battle

Reviews have been written, books have been authored, lawyers have been hired, and arbitration methods have been invented.

Brian Garner, the Editor in Chief of Black's Law Dictionary, is a coauthor of the book, Reading Law (the other coauthor is somebody named Antonin Scalia). Richard Posner, a judge on the Seventh Circuit and "law demigod," criticized Garner and Scalia in a New Republic article, and followed up on this criticism in his book, Reflections on Judging.

Garner replied by commissioning a report on Posner's criticism from Steven Hirsch, a partner at Keker and Van Nest. In that report (available here), Hirsch wrote that eight out of 12 of Posner's lines of criticism were unwarranted. Garner states that he wanted an objective take on the dispute, and that Hirsch's report provides this perspective.

Posner has just replied to this report. From Legal Times:

“Please convey my congratulations to Bryan Garner on inventing a new form of arbitration,” Posner wrote in an email Saturday to Legal Times. “Two parties have a dispute; one appoints an arbitrator to resolve the dispute; the other disputant is not consulted.”

Posner, who sits on the U.S. Court of Appeals for the Seventh Circuit, continued: “How beautifully that simplifies arbitration! No need for the parties to agree on an arbitrator, or for the American Arbitration Association to list possible arbitrators and the disputants cross out the ones they don't like.”

It will be interesting to see how this dispute plays out, and whether the latest version of Black's Law Dictionary will have an updated definition of "arbitration" in light of Posner's recent remarks.

General Mills Reverses Changes to its Legal Terms, Removing Arbitration Provision

The New York Times reports:

General Mills, one of the country’s largest food companies, on Saturday night announced in a stunning about-face that it was withdrawing its controversial plans to make consumers give up their right to sue it. 

In an email sent after 10 p.m. on Saturday, the company said that due to concerns that its plans to require consumers to agree to informal negotiation or arbitration had raised among the public, it was taking down the new terms it had posted on its website. 

“Because our terms and intentions were widely misunderstood, causing concerns among our consumers, we’ve decided to change them back to what they were,” Mike Siemienas, a company spokesman, wrote in the email. “As a result, the recently updated legal terms are being removed from our websites, and we are announcing today that we have reverted back to our prior legal terms, which contain no mention of arbitration.”

How did General Mills think their terms had been mischaracterized? In its blog, the company elaborates on its legal terms revisions. General Mills' post includes this remark:

We’ll just add that we never imagined this reaction. Similar terms are common in all sorts of consumer contracts, and arbitration clauses don’t cause anyone to waive a valid legal claim. They only specify a cost-effective means of resolving such matters. At no time was anyone ever precluded from suing us by purchasing one of our products at a store or liking one of our Facebook pages. That was either a mischaracterization – or just very misunderstood.

I mentioned in this previous post that I thought there was some misinterpretation about what the legal terms said -- some people had been reporting that purchasing General Mills products would result in a forfeiture of the right to sue, but the legal terms only appeared to apply to those customers who received coupons or "joined" the company's "online community" -- not all customers.

But the terms of the legal agreement said that the agreement applied to customers who "joined" General Mills' websites "as a member" and those customers who "joined" the company's "online community." This was the provision that led many to report that the legal terms applied to users who "liked" the company on Facebook, or followed the company on Twitter. And I think this interpretation of the terms follows from the former language in the agreement. So while General Mills is correct to say that the agreement did not preclude customers from suing as a result of a simple purchase, I don't think they are right to say that the agreement did not preclude lawsuits by consumers who liked the company on Facebook.

While I thought that General Mills' legal agreement contained some questionable provisions, and while General Mills' reversal of these changes is probably a good business move, this reversal means that the interesting legal questions I discussed in my previous post will not be explored by the courts.

UPDATE

Dave Hoffman at Concurring Opinions discusses the General Mills legal agreement and its revision here.

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 

. . . 

ANY DISPUTE OR CLAIM MADE BY YOU AGAINST GENERAL MILLS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR YOUR PURCHASE OR USE OF ANY GENERAL MILLS SERVICE OR PRODUCT (INCLUDING GENERAL MILLS PRODUCTS PURCHASED AT ONLINE OR PHYSICAL STORES FOR PERSONAL OR HOUSEHOLD USE) REGARDLESS OF WHETHER SUCH DISPUTE OR CLAIM IS BASED IN CONTRACT, TORT, STATUTE, FRAUD, MISREPRESENTATION, OR ANY OTHER LEGAL THEORY (TOGETHER, A “DISPUTE”) WILL BE RESOLVED BY INFORMAL NEGOTIATIONS OR THROUGH BINDING ARBITRATION, AS DESCRIBED BELOW.

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.

An Exciting Discovered "Opinion" on the Eventual Triumph of Arbitration

Adam Steinman posts at the Civil Procedure and Federal Courts Blog about this paper by Charles Sullivan and Timothy Glynn, The FAA Triumphal: A Modest Opinion.

The paper begins on a dramatic note:

The opinion reproduced below was delivered to us anonymously, with a cover note stating that it had been found on a photocopy machine in the Supreme Court of the United States.  Efforts to identify the source of the note have been unsuccessful; further, we have been unable to confirm that a case denominated Pasquinade v. Quillet Enterprises, Inc., was ever filed in that Court or in any other federal court.

The rest of the paper consists of the Pasquinade opinion, the beginning of which indicates that exciting things are to follow:

We hold both that the failure to refer to arbitration in haec verba does not bar a finding of an agreement to arbitrate under the Federal Arbitration Act, and that arbitration is so much the preferred method of dispute resolution under the FAA that, for all contracts within its ambit, arbitration should be presumptively the sole method of resolving disputes that arise under that contract. Only when the parties have expressly and unmistakably negated arbitration, and insisted on judicial resolution, should a court refuse to order arbitration.

I recommend that you read the entire opinion.  For example, take this passage from the beginning of the opinion:

The dissent’s position that this matter is not an “important question of federal law” is truly jawdropping.  After all, with only mild hyperbole, our decision today will oust both federal and state courts of jurisdiction to decide almost all contract claims. What could be more important?