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Clifford’s Notes: Arbitration mandate fails PR test: General Mills backtracks after trying to limit legal options

July 7, 2014

Clifford’s Notes, Chicago Lawyer

By: Robert Clifford

Salmonella strikes your family after they eat cookie dough ice cream.

Shards of clear glass cause severe injuries when your toddler swallows it with his favorite cereal.

You break your front tooth when you chomp on a piece of metal tucked in your granola bar.

Foodborne illnesses and product safety are important concerns. In April, the Centers for Disease Control estimated one out of six Americans gets sick from foodborne disease, resulting in about 128,000 hospitalizations and 3,000 deaths.

But that didn’t sway General Mills’ recent decision to force binding arbitration as the only legal alternative to anyone who “liked” a product on Facebook, downloaded a coupon, subscribed to an e-mail newsletter, redeemed a promotion or maybe even simply bought its products.

The policy required unknowing consumers to give away their legal rights and instead be forced to arbitrate their claims with no other recourse. Certainly, there are some advantages to arbitration but not to someone who had no choice in the matter and who didn’t even know that was happening.

When the public outcry became so loud, a few days later on a Saturday at 10 p.m., the company reversed itself and said it was going back to its original policy because of concerns that its “intentions were widely misunderstood.” It certainly showed the power of the people when consumers banded together and demanded to be heard, calling the mega-corporation “schoolyard bully,” “dumb,” “sly,” “underhanded” and “cereal killers.”

General Mills owns Betty Crocker, Nature Valley, Pillsbury, Yoplait and all types of cereal from Cocoa Puffs to Cheerios. Perhaps the threat of a boycott of their products actually was the bigger reason: hitting the company where it really hurts — in its pocketbook. Some legal analysts argued that giving up your right to sue, to participate in a class action or to appeal the arbitration decision wasn’t enforceable given the vague wording of the revised policy and that General Mills would have to prove that the customer knew about the new policy.

It was reported that General Mills thought it was on solid legal ground given the U.S. Supreme Court ruling in AT&T Mobility v. Concepcion that held that companies could avoid class-action suits through a standard-form contract requiring disputes to be settled via one-on-one arbitration. The court then went on to hold in 2013 that an arbitration agreement was valid even if the terms of the agreement made pursuing a claim through one-on-one arbitration prohibitively expensive. American Express v. Italian Colors Restaurant.

But consider this: In the last 24 months, General Mills voluntarily recalled a number of products due to safety concerns. On the Food and Drug Administration website, here are a few examples:

  • On Sept. 6, 2013, General Mills voluntarily recalled a quantity of Pillsbury cinnamon rolls because “the dough may contain fragments from a broken piece of plastic on the production line.”
  • On June 3, 2013, it voluntarily recalled a small quantity of Cinnamon Toast Crunch “due to the possible presence of salmonella.”
  • On Sept. 26, 2012, the company voluntarily recalled a day’s production of Nature Valley Sweet & Salty Nut almond granola bars because it may contain peanuts not stated on the boxes’ ingredients list.

Food mislabeling can have serious consequences.

Sensitivities to peanuts, gluten, milk and other seemingly safe products can be deadly for those who take great precautions to avoid them.

Under General Mills’ withdrawn policy, your recourse would be to go to binding arbitration because its lawyers justified it in the following way: “While it rarely happens, arbitration is an efficient way to resolve disputes — and many companies take a similar approach.”

It is true that some consumers are forced into arbitration in some aspects of their lives: using a credit card, talking on a cellphone, visiting certain websites or admitting a loved one into a nursing home. The small print in those long contracts may give the consumer no other alternative should a problem arise.

Even though General Mills offered to pay the arbitrator’s fees, plaintiffs were still left to pay for their own legal counsel, and punitive damages are not allowed in arbitration — although they are allowed as monetary penalties in state and federal consumer protection laws meant to deter companies from violating them.

Corporations generally prefer arbitration because documents are not made public. General Mills also likely still has a bad taste in its mouth (pardon the pun) from the $8.5 million it paid last year to settle lawsuits that accused the company of making false claims about the health benefits of its Yoplait YoPlus yogurt and after agreeing in 2012 to take pictures of strawberries off the labels of its strawberry Fruit Roll-Ups after consumers watchdogs argued that the fruit was not actually an ingredient.

The lesson here: Be attentive, and speak up.

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