If you're one of millions of Starbucks customers who might buy or receive a prepaid card this holiday season, you might want to take a moment to send Starbucks a message: Don't take away my rights!
Buried in the fine print of the terms and conditions for Starbucks's prepaid cards is language saying, in effect, that you can't sue the company -- not even if it steals the money from your prepaid account. It's an odd stance for a company that portrays itself as consumer-friendly and socially responsible.
How can Starbucks take away your constitutional right to go to court? Because of an obscure 1925 law called the Federal Arbitration Act. The law was passed to ensure that sophisticated business parties are bound to their agreements to resolve disputes out of court. Imagine Starbucks makes a promotional deal with Lady Gaga, and later the two have a dispute over their contract. Instead of going to court, they might agree to go to binding arbitration with no appeals -- maybe to a particular arbitration firm that specializes in the quick resolution of conflicts between coffeehouses and Fame Monsters. If at the end of the arbitration either Lady Gaga or Starbucks doesn't like the result, they're stuck. The Federal Arbitration Act says they can't come crying about it to a judge.
Somewhere along the way, big companies got the idea of using the Federal Arbitration Act to force their customers and employees to pursue legal claims in private, secretive, company-friendly tribunals. Some of the real courts shrugged and signed off on the practice. The federal courts not only signed off but held that states can't protect their citizens from the practice. The Federal Arbitration Act stops them.
Eventually some companies figured out how to grant themselves virtual immunity from most consumer and employee claims. Last April, the Supreme Court held in AT&T v. Concepcion that companies can use the fine print of their contracts to ban class actions by their customers (and presumably their employees). Before Concepcion, class action bans were illegal in 20 states. The reason is that many claims aren't feasible on an individual basis, so a company that bans class actions effectively puts itself above the law in those cases.
Take your AT&T cell phone bill--or *ahem* your Starbucks prepaid coffee card. Say the company violates the law and charges you $2 illegally. Would you go to court over $2, or for that matter present your claim before the company's hand-picked arbitration firm in Seattle? Hardly. As one the country's most respected federal judges put it, "only a lunatic or a fanatic sues for $30." The legal system has an answer to this problem: the class action. If your $2 claim can be joined with those of 10 million other customers, then it's worth bringing a lawsuit to recover $20 million in ill-gotten gains.
Blocking this kind of accountability is what forced arbitration clauses are all about.
On Tuesday, Public Citizen and three other groups wrote to Starbucks, asking it to remove the forced arbitration provisions from its prepaid card contract. We also launched a petition campaign.
Why fuss about Starbucks in particular? Well, first of all, we plan to pick on some other companies too in the coming months. But what's interesting about Starbucks is that the company works so hard to project an image of social responsibility and consumer friendliness. We expect aggressive, anti-consumer campaigns from a company like AT&T. It has the lowest customer satisfaction among mobile providers, a set of companies that consistently drive their customers batty. You have to work pretty hard to be the worst of the worst. Maybe AT&T has specialists working around the clock to ensure that its customers are never satisfied.
The good people at Starbucks want us to expect more from them.