A Funny Thing Happened On the Way to Arbitration

April 22, 2014

The U.S. Supreme Court loves arbitration. Less than a year ago it decided American Express v. Italian Colors Restaurant. There, Italian Colors Restaurant filed a class action suit against American Express on behalf of merchants who accept the American Express card, despite an arbitration clause in the merchant agreement. The Supreme Court gave effect the arbitration clause, and further held that a class action cannot be handled through arbitration. These holdings left merchants with no effective remedy, as no single claim could be brought against American Express because costs would far exceed the amount in dispute.

So it appeared likely that large corporations would use the American Express decision to advance protecting their interests by mandating arbitration in their agreements. And many have, including, until Saturday night, General Mills Corporation.

General Mills Corporation is a big dog in food world, and has been around since 1866. Recently, to—it’s words, not mine—“streamline complaints with arbitration … [to] be helpful.” Alas, there was lots and lots of consumer pushback, and on Saturday night General Mills reverted to its old Legal Terms. For a recap of the situation read General Mills Abandons Mandatory Arbitration After Consumer Outcry by Ricardo Lopez, published on Monday in the Los Angeles Times.

The people won this battle, at least it relates to General Mills. As I have expressed before, arbitration has its uses and can be an effective tool, but it’s often not a satisfactory substitute for a lawsuit and experience tells me it rarely delivers speedy, less expensive outcomes.


Leave a Reply