Want a Shot of Arbitration With That Latte?

 (Editor's note: the following blog was written by J.G. Preston, press secretary at Consumer Attoryneys of California. It is posted here with his permission)

Want a shot of arbitration with that latte? Just use your Starbucks Card! Recently Starbucks announced changes in its rewards program for users of its prepaid Starbucks Card. The announcement was greeted with outrage from customers who will need to spend more to get a free drink.

But what should really outrage cardholders was buried at the bottom of the email they received announcing the changes: Anyone who clicks on the terms of service learns they surrender their legal rights by using the Starbucks Card instead of any other form of payment. What that means is if Starbucks harms you at one of its stores, whether you can take them to court – and whether you can be fully compensated for your injuries – depends entirely on how you paid for your coffee. While they may not happen often, bad things can happen at Starbucks. Ask the 51-year-old San Diego County chiropractor who slipped on a just-mopped floor and hit his head on a cash register. He had to undergo a year and a half of brain-injury therapy and has not been able to work again. Or the 73-year-old Pasadena woman who tripped on a raised portion of flooring that had already been cited as a dangerous condition, broke her leg, then suffered a stroke after surgery. Then there is the Utah woman who suffered burns to her mouth and esophagus after sipping a drink that contained cleaning solution used in the coffee and espresso machines. If these customers had used a Starbucks Card to pay for their purchase, they would be unable to take the company to court for their injuries, as those terms of service make clear:

This agreement includes an Arbitration provision that governs any dispute between you and us. Unless you op out, as described below, this provision will:

      • Eliminate your right to a trial by jury; and
      • Substantially affect your rights, including preventing you from bringing, joining or participating in class or consolidated proceedings

In fact, just having a Starbucks Card is enough to eliminate your right to take the company to court, because the terms of service includes this: “By buying, loading or using your Starbucks Card, you agree to these terms.” Cardholders disputes against Starbucks must be taken to arbitration, where an arbitrator – not a judge – is not bound by the law in a secret proceeding (“neither you nor we may disclose the existence, content or results of any arbitration,” according to the terms of service). Decisions are “final and binding and subject to only very limited review by a court.”

Starbucks’ terms prohibit the arbitrator from awarding punitive damages or any damages for pain and suffering. Those terms also bans consumers who have been similarly cheated out of small amounts to join together in a class action, instead forcing each consumer to pursue his or her claim individually. If Starbucks rips off every card holder by a few dollars, that would mean millions of dollars in ill-gotten gains with no accountability.

But here’s the most alarming provision of the terms of service: In the event that Starbucks or its affiliates are found liable to you, you shall only be entitled to recover actual and direct damages and such damages shall not exceed the last balance held on your Starbucks Card.” (emphasis added) You have thousands of dollars of medical bills from your injury? If “the last balance held on your Starbucks Card” is $10, that’s all you can recover. (And the terms of service also prohibit you from having a balance of more than $500 on your card.)

Keep in mind these restrictions apply only to customers with a Starbucks Card. Pay with cash, a debit card or a credit card, and Starbucks can be held completely accountable for its actions.

Of course, the only way to find out about this is to click on – and read – the terms of service at the bottom of an email that already has you upset about needing to spend more to get a free cup of coffee. And if you are a new customer who didn’t get that email Hope you find those terms of service on your own.

Consumer Attorneys of California is a professional organization of plaintiffs’ attorneys representing consumers seeking accountability against wrongdoers in cases involving personal injury, product liability, environmental degradation and other causes. Learn more at www.caoc.org