Despite Disney, 'Infinite Arbitration' Not Going Away
Oct 15, 2024
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David Horton, a law professor at the University of California, Davis and the mind behind the term 'infinite arbitration,' dives deep into the troubling world of arbitration clauses. He discusses the recent Disney case, where a widower faced forced arbitration amidst a wrongful death suit. Horton reveals how these clauses, embedded in online agreements, can strip consumers of their rights. He also outlines the Supreme Court's role in perpetuating these practices and speculates on future legal challenges to their enforceability.
Infinite arbitration clauses compel consumers to arbitrate any claims, significantly expanding the scope beyond traditional agreements and raising consumer protection concerns.
The backlash against Disney's arbitration practices illustrates how public scrutiny can influence corporate policies regarding broad arbitration clauses.
Deep dives
Understanding Infinite Arbitration Clauses
Infinite arbitration clauses extend the scope of arbitration agreements beyond traditional boundaries, allowing companies to require individuals to arbitrate any claims, regardless of their relevance to the original contract. This practice became more prevalent in the 2010s, influenced by several U.S. Supreme Court rulings that favored broad interpretations of arbitration clauses. For instance, while a standard arbitration clause might cover disputes related to employment, an infinite arbitration clause could compel a worker to arbitrate a personal injury claim that occurred unrelated to their job. This shift in arbitration practices raises concerns about individuals unknowingly relinquishing their legal rights when they agree to such broad terms.
Impact of Arbitration on Legal Rights
Arbitration can significantly disadvantage plaintiffs, who often receive better outcomes in court, particularly due to the inability to pursue class action lawsuits in arbitration. Plaintiff's lawyers argue that the procedural differences can hinder their ability to advocate effectively for clients, compounded by the fact that arbitrators depend on the companies that hire them. Furthermore, numerous cases illustrate how individuals are subjected to arbitration clauses unexpectedly; for instance, individuals may face binding arbitration after merely signing up for a service like Airbnb, even if their legal grievances arise from unrelated circumstances. This pattern has prompted concerns about consumer protection and the fairness of arbitration as a substitute for traditional litigation.
Corporate Accountability and Media Pressure
High-profile cases, like the wrongful death lawsuit against Disney, highlight the increasing scrutiny of infinite arbitration clauses and their implications. When public outrage ensued over arbitration claims related to a tragic incident at Disney World, the company opted to waive its arbitration rights, showcasing how media pressure can influence corporate policy. This episode not only brought significant attention to the issue of arbitration but also exemplified how companies may reconsider their use of these clauses in light of public perception. While such media-driven changes may not be common across all firms, they raise questions about the ethical responsibilities of businesses toward their customers.
Disney recently backtracked on its attempts to force arbitration on a widower who who filed a wrongful death lawsuit but, it said, had agreed to not take the company to court when he signed up for a free trial of its streaming service. This about-face, which followed a wave of bad publicity for Disney, may be the exception, not the rule, according to a law professor who specializes in arbitration.
David Horton calls these agreements "infinite arbitration" clauses because they force consumers to arbitrate all claims against a company—even claims that have no connection to the original agreement. And the University of California, Davis, professor says infinite arbitration claims are everywhere now, especially tucked into the online terms-of-service agreements that consumers rarely, actually read.
On this episode of our podcast, On The Merits, Horton talks about how the Supreme Court opened the door for these types of broad arbitration clauses, and why he thinks the issue could be heading back there in the future.
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