Annoying fine print may not even be legal

By Bob Sullivan  (on msn.com 12.21.2012a

Can the New York Yankees change the First Amendment and make their fans agree to the change? They tried recently.

"Ticket holders acknowledge and agree that the Yankees' ban on foul/abusive language and obscene/indecent clothing does not violate their right to free speech," the team wrote recently in a new far-reaching set of fine print published in the October edition of Yankees Magazine.  The phrase appears on tickets, too.

Anyone who’s been to the Bronx recently probably wouldn’t fault an attempt to make it more family friendly, but can a baseball team change the Constitution and force you to accept it?

Welcome to the world of “boilerplate” language -- also known as mouseprint, standard form contracts, fine-print fraud, shrink-wrap contracts, etc.  

U.S. consumers rarely engage in any kind of transaction today without clicking or signing away a wide swath of their rights. Cellphone contracts, software purchases, baseball tickets, credit card applications -- all include lengthy tomes full of ominous warning that most of us ignore.

Regular readers of this column know I am a collector of fine print and its absurdities, such as school waiver forms asking parents to sign away their kids’ right to “enjoy life.”

Consumers hate fine print, but emotions rarely carry the day in courtrooms. So corporations have been having a field day with barely readable terms and conditions for some time. In fact, fine-print writers have been emboldened by a recent Supreme Court decision in which the court took their side.

But in a new book titled “Boilerplate,” author and lawyer Margaret Jane Radin is taking aim at the intellectual and legal basis of fine print, trying to put a serious dent in the legal argument behind it.

"I don't think there's a contract, ever, when something is just dropped on us," Radin said, "especially when there is no option to vote with your feet as a consumer, when there are no alternatives.”

Radin’s point is that contracts, by definition, involve two equal parties that negotiate terms, while fine print is issued on a "take-it-or-leave-it" basis. (Just try to negotiate a lower early termination fee or strike out any clause when you sign a cellphone agreement.)  In layman's terms, fine print is merely a list of bad things that can happen to you, the consumer. You might get hit with a penalty fee; your service might be terminated; your right to join a class-action lawsuit is surrendered.

Some lawyers would call these take-it-or-leave-it agreements "contracts of adhesion," a special class of contracts that can be ruled unenforceable if the consumer persuades a judge that the provisions are "unconscionable." As you might imagine, that's a high bar -- it means generally that such provisions would be shocking to a normal person's conscience as excessively unfair. Such a legal battle also involves an excessive amount of legal fees, so it's not a realistic option for an aggrieved cellphone holder.

Radin wades into this confusing situation with a fairly radical idea. Trying to shove fine-print agreements into contract law, she argues, is like trying to shove a round peg into a square hole. She calls it “legal gerrymandering.” Instead, courts need to adopt a brand-new way of looking at fine print, she says.

Her view is simple: Interactions between consumers and companies are more like brief encounters with strangers than negotiated bargains between equal parties. As such, they fall into the realm of tort law, rather than contract law, Radin argues.

That change would have dramatic implications for fine-print haters everywhere. Were these agreements viewed as torts, angry cellphone owners would retain the right to sue for damages, including pain and suffering, if they believe a company has violated their rights, by making an unauthorized withdrawal from the consumer's checking account, for instance.

Generally, the argument in favor of fine print has been economic. Industry groups have repeatedly argued that standard-form agreements are essential because no one wants every consumer negotiating their own terms and conditions for every transaction. The logic runs like this: Form agreements save companies money, particularly when they limit liability and the potential for costly lawsuits, and that savings is passed on to consumers.

But some rights can't be signed away, Radin argues, even if a consumer seemingly agrees to that. Even if it saves them money.

"Important rights can't be canceled by a private party just because they pay the value," she said. "For example … you can't sell food with E. coli just because it's cheaper. … You can't say we haven't maintained our airplanes, but our prices are cheaper, so you assume the risk if we fall out of the sky."

Fine print that limits liability or complicates consumer costs is everywhere  –  on coffee cups, on dog bone packaging. It’s flashed for a brief moment on TV mortgage ads, it’s read at record-breaking speed on radio ads for car leases. Falling under the general term “disclosure,” its absurdity and ineffectiveness is hard to debate.

“Disclosure doesn't work. We don't understand it, even if it's in large print. We don’t read it, even lawyers,” Radin said. “That’s why we have to start evaluating these disclosures a different way. They aren’t contracts.”

When consumers talk about fine print, they usually focus on hidden language that imposes punishing late fees, doubles prices after some unknown trial period or springs other tricks and traps that ding their wallets. But when consumer lawyers talk about fine print, they are usually complaining about something a bit more theoretical -- common provisions within agreements that indicate consumers waive their rights to sue the company if something goes wrong or join in a class-action lawsuit.  Instead, consumers are forced into a process known as binding mandatory arbitration. Most consumer agreements with banks, cellphone companies, credit card issuers, television subscription services and other service providers  include arbitration clauses.

Consumer groups and class-action lawyers despise such provisions and have been fighting them in courtrooms around the country for some time, arguing that waiver of jury trial rights is “unconscionable.”

After compiling a mixed legal record, the fight was dealt a devastating blow last year, when the U.S. Supreme Court sided with AT&T in a case involving a consumer who sued to have a class-action lawsuit waiver thrown out of a cellphone contract. Within months, similar waivers began appearing in nearly all consumer agreements, dealing a blow to the entire class-action system.

Consumer lawyers argue that waiving a right to a jury trial in order to buy a car or baseball ticket is similar to waiving the right to free speech.

Anyone who's ever received a 50-cent coupon because of an old class-action lawsuit that earned lawyers millions knows that lawsuits are hardly a panacea for the problem of misbehaving companies or those that impose overreaching terms and conditions.  But neither is a free market, argues Radin, unless it is truly a thriving market with informed consumers.

In many markets, consumers have few or no choices. Most cellphone firms have the same early termination fees and arbitration clauses, for example.  Meanwhile, if fine print is too small to read or too arcane to understand, there won't even be a handful of ace consumers who can provide a watchdog effect. What happens next is called a "lemon's equilibrium," a term first coined in the 1970s by economist George Akerlof.  

"If there is a lot of competition in a marketplace, and at least some consumers are very well informed, then market forces can have a positive impact on fine print,” Radin explained. “But even if there's a lot of competition, but not enough people in the market know what's going on, there's a race to the bottom. Everybody just buys the cheaper product ... and everyone gets a lemon."

Radin's argument is broader than a need to protect consumers from $480 satellite dish early termination fees or to preserve their right to sue. She thinks that industry's reliance on sweeping rights clauses in every consumer agreement, and the courts' compliance with that, has created an alternate legal system in America -- one that voters never agreed to.

"This is creating a mockery of state legislatures. We elect legislators, they decide something is important and debate it, then vote on a law, then it becomes law,” she said. “Then corporations write rules and they effectively become law, contradicting what the legislature did. What we think of as a contract is really important to our conception of social order. Think of how many people are affected by (boilerplate language). If it is thousands or millions of people, that's letting a firm create a new legal universe.  That undermines our rule of law."