Parents, Students Go Back to School with Forced Arbitration in Tow

by Christine Hines

Look out, parents of public K-12 students. School photos and school meals this year come with a side of “terminating your legal rights.”

The school year has just begun and parents’ inboxes are filling up with notices reminding them to register their children for lunch programs and after-school activities. Meanwhile, the companies they trust to provide these services have also sent updated terms and conditions, which now include severe restrictions on families’ legal rights: forced arbitration clauses and class action bans.

These recent changes come amidst tremendous momentum in Congress to end forced arbitration and to restore the rights of ordinary people to seek accountability in court when harmed by corporate wrongdoing. The U.S. House is extremely close to voting and passing the Forced Arbitration Injustice Repeal Act, which would bar forced arbitration clauses in contracts from deciding the outcome of consumer, civil rights, employment, or antitrust violations. The FAIR Act has 219 cosponsors.

Forced arbitration is abhorrent under any circumstance, but using it against families in the public school system is a new low. That does not seem to bother Heartland Payment Systems which owns and operates MySchoolBucks, an online payment service for school activities, and has adoptes these restrictive terms. According to the provider’s website, “more than 2 million families with kids at over 30,000 schools across the United States trust MySchoolBucks with their payments for school meals, after-school programs, bus passes, athletic fees and more.”

This past summer, parents received an email notice that the payment provider changed its terms of service effective July 31, 2019, to insert new requirements that prohibit parents from filing lawsuits and participating in class actions against it. Any legal complaints against Heartland/MySchoolBucks, according to the new terms, would have to be heard on an individual basis in private, secretive arbitration.

As if adopting forced arbitration was not shady enough, there may be something even more sinister behind MySchoolBucks’ sudden change in terms.

The arbitration provision references a Florida class action Story v. Heartland Payment Systems filed in June, which alleges that the payment provider tacks on fees to the actual costs of meals and other school services, while misleading consumers into believing that the fees are going to the respective school districts, government entities. Florida parent Max Story used MySchoolBucks to pay for his child’s school meals where he claims that the company included “program fee” charges to the actual meal costs.

The complaint, filed on behalf of Mr. Story and others similarly situated, alleged that the payment providers’ actions violated state consumer laws. According to the complaint, MySchoolBucks’ states on its website that a program or membership fee may be charged dependent on the student’s school district, and that the provider advertises on its site that MySchoolBucks is “free” and that the school districts impose the fees.

Public school districts have stated that they do not collect or receive these fees, the complaint said. The complaint references the Federal Trade Commission and court decisions that have held that it is illegal to use language in a contract or advertising to deceive consumers into believing that a charge or fee is imposed or transmitted to a government entity.

Heartland seeks to apply its newly added forced arbitration clause and class action ban retroactively to all pending litigation, and specifically to Story v. Heartlands.

“IF YOU ACCEPT THESE TERMS OF SERVICE AND A CLASS IS CERTIFIED IN THE STORY MATTER, YOU WILL NOT [SIC] PERMITTED TO PARTICIPATE IN THE STORY CASE AS A CLASS MEMBER.**”

Mr. Story’s lawsuit demonstrates how class action bans in forced arbitration clauses can be block meaningful accountability. Heartland is allegedly tacking on fees to each transaction through MySchoolBucks. While the amount is pocket change to some parents, Heartland could be siphoning money from thousands of parents around the country through deceptive practices. No one would go to arbitration or court individually for such small fees, but when countless others may be ripped off for the same amount, a class action is the best, and sometimes only, way to obtain redress for systemic and potentially illegal harm.

Most people don’t read fine-print terms and conditions that are often pages long. They simply click through. But for those who did, they would have faced an unfortunate decision: secure school benefits for their children or wipe away their rights. While others may have simply clicked and accepted, possibly surrendering their rights without knowing it.

Users of Shutterfly, the online image publishing service, also faced a similar predicament. Shutterfly is not just a popular Internet photo tool, it also provides fundraising support for public schools and organizations. It has expanded its reach in schools with its recent purchase of Lifetouch, the self-described national leader in school photography.

Julie Strandlie, a concerned Fairfax County, Virginia parent who also happens to be a longtime advocate against forced arbitration, received an email notice days ago from Shutterfly where it announced an update to its terms of use to, among other things, “clarify your legal rights in the event of a dispute and how disputes will be resolved in arbitration.”

“I am a long-time Shutterfly customer — for personal and business use and to raise money for my kids’ schools,” said Strandlie. “In addition to creating products, Shutterfly stores online millions of photos for its users. This new forced arbitration provision effectively prevents families from having any legal remedies in case of a data breach.”

Forced arbitration clauses and class action bans are a bane on the rights of all consumers and workers. Corporations should be prohibited from using their fine print contracts to deny harmed individuals’ right to go before a judge and jury.

Public school service providers should be held to even higher standards as they contract with government entities to deliver products and services to young people and their families. It is also critical that parents retain their legal rights to stand up for their children.

Increasingly, lawmakers are waking up to the plight of ordinary people who find the courthouse doors locked when they are harmed, and to corporations that act badly because their fine print shields them from accountability. It is time for Congress to seize this moment to pass the FAIR Act for the benefit of all consumers, workers, small businesses, and families.