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Every day, consumers may be unknowingly signing away their rights to sue companies – such as online retail platforms, gig economy apps, and streaming services – even if the claims have no relation to the service a person signed up for.
In a current lawsuit, Walt Disney World is arguing that the contract a widower entered when signing up for the Disney+ streaming service several years ago means that a wrongful death lawsuit he’s brought against a restaurant at the theme park cannot go forward in court.
Disney joins other companies such as Airbnb and Walmart that are using increasingly aggressive strategies in attempts to steer lawsuits they face from consumers into arbitration, a private legal process viewed as disadvantaging plaintiffs. Customers more and more must agree to contracts with sweeping arbitration clauses to use their services, but the consequences can be larger than they can be expected to comprehend.
“The Average Joe in society doesn’t know what arbitration is, let alone understand the content of what they’re signing,” said Creighton University Law Professor and arbitration expert Hossein Fazilatfar.
The issue of so-called “infinite arbitration clauses” will likely need to be addressed by the Supreme Court, Fazilatfar and other arbitration law experts told CNN, as the high court’s previous arbitration-related precedents have turbocharged the use of such contracts.
In the Disney case, a widower has sued the amusement park company on behalf of his dead wife after she suffered a fatal allergic reaction, allegedly from a meal she ate at a park restaurant in 2023. Disney has asked the court to move the dispute to arbitration, meaning the case would not go before a jury or otherwise continue in court. To make the argument, Disney is pointing to a subscriber agreement the widower allegedly entered when signing up for Disney+ that included an arbitration clause, as well as the Terms of Condition in the online platform he used to buy Epcot tickets for his family for the 2023 trip.
The tickets were never used, because the woman died two days before the planned Epcot visit, the widower’s legal filings say.
The widower’s lawyers called Disney’s arguments “preposterous” in court filings that said, under the rationale, the company was “explicitly seeking to bar its 150 million Disney+ subscribers from ever prosecuting a wrongful death case against it in front of a jury even if the case facts have nothing to with Disney+.”
They noted that the widower believes he only signed up for a month-long free streaming trial, as it appears he canceled the subscription before he was ever charged.
Neither the widower’s lawyers nor the Disney attorneys responded to CNN’s request for comment for this story.
It’s unclear how courts will view the dispute. But legal experts say it’s not unheard of for companies to utilize the tactic Disney is employing – arguing that arbitration clauses can reach any affiliate under a company’s corporate umbrella, and cover any allegation, even if it’s unrelated to the transaction that prompted the arbitration agreement.
Legal analyst read through the Disney+ contract. Hear her thoughts on Disney’s attempt to block lawsuit
“This is a hot issue in arbitration law,” said Stephen Ware, an arbitration law expert at University of Kansas School of Law.
A string of pro-arbitration rulings in the 2010s at the US Supreme Court have propelled the push toward a more muscular understanding of when arbitration clauses can be enforced.
“Twenty years ago, you would have never seen this type of motion to compel to arbitration,” said David Horton, a University of California-Davis School of Law professor who has written law review articles examining the dynamic.
Lower courts have disagreed on whether to read such arbitration clauses as broadly as companies like Disney are arguing. The Supreme Court has not directly addressed the practice, but a “circuit split” on the issue, as it was raised in telemarketing lawsuits against DirecTV, makes it more likely the justices will want to take up the issue.
Arbitration does have some benefits for both sides, by making resolution of disputes more cost-efficient and less time-consuming than a lawsuit that goes before a court or jury. But arbitration also is seen, according to Horton, as favoring big companies who are “repeat players” in the arbitration space, because they know how to work the process to their advantage.
And, thanks to a 2019 Supreme Court ruling handed down by the conservative majority, arbitration clauses foreclose class action claims unless the contract explicitly says such claims are allowed. That makes it harder for plaintiffs to find lawyers who will represent them, since individual claims are usually too small to make them lucrative enough for an attorney to want to take on.
Similar arguments made by Airbnb, DirecTV and Walmart
Courts have taken differing views on whether to accept the type of aggressive claims of arbitration clause enforcement that Disney is making.
But companies, with increasing frequency, are writing remarkably expansive arbitration language in contracts put forward to consumers and then using that language to argue that it covers all kinds of legal disputes, according to Horton, the UC Davis professor.
For instance, when faced with lawsuits stemming from episodes at their rentals, Airbnb has pointed to the arbitration language in the Terms of Services users agree to sign up for an account with the service.
In a wrongful death lawsuit brought against Airbnb by the estate of a man who was killed at one of its rentals, the company pointed to the arbitration clause in the agreement the man had entered when signing up for an Airbnb account, even though the deceased man had not rented the property where his death had occurred. The Nevada Supreme Court ruling in favor of Airbnb cited a unanimous 2018 ruling by the US Supreme Court that said courts cannot decide whether an arbitration clause covers a dispute if the contract language says an arbiter must also resolve any such question.
In another case, Walmart successfully used an arbitration clause to push back on a civil rights lawsuit it faced.
A Black family had sued Walmart after one of its employees falsely and without evidence accused the family of shoplifting, creating an embarrassing scene in front of the family’s neighbors and classmates. But because, months prior, one member of the family had signed a contract containing an arbitration clause in order to drive for Walmart’s grocery delivery service, a federal judge ruled that civil rights lawsuit could not move forward in her court, and most go to arbitration instead. Her ruling cited the precedent from the 2019 Supreme Court class-action case, known as Lamps Plus, Inc. v. Varela.
Perhaps the case law that is most on point to the arguments Disney is using arises out of lawsuits brought under the Telephone Consumer Protection Act against DirecTV for alleged telemarketing calls to individuals who were on a do-not-call list.
In multiple class action cases, DirecTV pointed to arbitration clauses in contracts that the plaintiffs had signed – not with the satellite TV company, but with the phone services provider AT&T Mobility, when the individuals had purchased cell phones. DirecTV argued the arbitration language in the cell phone contracts applied to the telemarketing claims, because, years later, AT&T Mobility’s parent corporation acquired DirecTV, making it an “affiliate,” as referenced in the contract’s arbitration language.
The 4th US Circuit Court of Appeals, in a ruling that also cited the 2019 Supreme Court opinion, accepted that expansive read of the arbitration clause. However, the 9th US Circuit Court of Appeals, in a later case dealing with the same set of circumstances, disagreed, concluding that the AT&T Mobility contract’s arbitration language, while sweeping, was not explicit enough to apply to a “future” affiliate like DirecTV.
When courts have encountered these arguments, they have had to wrestle with two conflicting principles, according to Horton, who has coined the term “infinite arbitration clause” for contracts that try to cover any possible dispute a consumer could bring against a company.
Courts “intuitively” recognize that “it’s absurd to say you’re bound by an arbitration clause in a contract even if the subject of the contract has nothing to do” with your lawsuit, Horton said. But on the flip side, however, is Supreme Court precedent that says the relevant federal arbitration law requires courts to “enforce arbitration agreements according to their terms.”
“Some courts say that precedent applies to these infinite arbitration clauses, regardless of whether your claim has a link,” Horton said.
