> We Both Agree To Arbitrate. You and Dropbox agree to resolve any claims relating to these Terms or the Services through final and binding arbitration by a single arbitrator, except as set forth under Exceptions to Agreement to Arbitrate below. This includes disputes arising out of or relating to interpretation or application of this "Mandatory Arbitration Provisions" section, including its enforceability, revocability, or validity.
> 14.5. NO CLASS ACTIONS. Developer may only resolve disputes with Dropbox on an individual basis and will not bring a claim in a class, consolidated or representative action. Class arbitrations, class actions, private attorney general actions, and consolidation with other arbitrations are not allowed.
(Not a lawyer.) It's the same issue, but a different context. The issue currently before the Supreme Court is whether the National Labor Relations Act, which provides workers the right to unionize and engage in concerted activity, prohibits class-action waivers. The (eventual) outcome of that case will not be relevant to the Dropbox agreement at issue here, because the Dropbox agreement is not an employment contract.
Some of those cases are about the NLRB's authority, not anything else. I didn't look up all of them.
Past that so, as far as i know, attempting to waive class arbitration is untested against an explicit state policy, and i have doubts it would survive.
The only case about this so far is whether class action arbitration waivers are enforceable in general in the face of it being "too expensive" to arbitrate individually (no state law, etc, was at issue here), and the answer is "yes, they are enforceable". This is not surprising, these kinds of straight policy arguments rarely are winners in court. A state law would instead be a preemption issue.
It's one thing to say "you must arbitrate", which is clearly covered by the Federal Arbitration Act. That is why state laws that attempt to ban such clauses are preempted.
However, there is nothing that i'm aware in that act (though admittedly, it's been a while since i looked at the act), that preempts state laws prescribing the form of arbitration.
Thus, a state law saying "arbitration is awesome, but banning class arbitration is against our public policy", if they exist, should be valid. Preemption must be very clear.
Again, it's been a while, but when they were first preempted, states mostly did not have such laws on the books (IE they found required arbitration to be against public policy, and that was preempted by the FAA. They did not have laws that said that banning class arbitration to be against public policy)
Of course, if someone knows of a part of the FAA that explicitly allows prescribing the form of arbitration, then yeah, everyone is gonna lose.
Funny story: most of the places that pushed so hard for required arbitration had clearly not thought through the consequences. They still haven't, AFAICT.
I remember having lunch with one of the counsel at EBay and some other companies about a year after the original supreme court ruling on class actions, and he was very happy they could require arbitration (they got a lot of nuisance suits, to be fair to them), and asked me why Google didn't require arbitration (Note: I'm not legal counsel for Google, i haven't been involved in Google's TOS in years, blah blah blah)
I pointed out that class action/courts generally at least required a licensed lawyer to maintain and work on the suit, which was expensive, whereas arbitration could be done by lay people, and that he was essentially betting that nobody could make it cost effective to have a paralegal or someone manage fifty arbitrations at once, or a class arbitration.
I suggested that was probably a bad bet.
I still believe it to be a bad bet.
(It hasn't changed a lot because the other side of this is still fighting to the death instead of considering new business models. They are very much not used to dealing in volume)
> I pointed out that class action/courts generally at least required a licensed lawyer to maintain and work on the suit, which was expensive, whereas arbitration could be done by lay people, and that he was essentially betting that nobody could make it cost effective to have a paralegal or someone manage fifty arbitrations at once, or a class arbitration.
This depends on the state. Some states still consider that to be unauthorized practice of law, even in arbitration.
Even if a law firm wants to manage hundreds of individual arbitrations, finding individual people to opt in makes that very difficult. In consumer cases, the harm to individual consumers is often very small. The law firm would have to advertise to those consumers somehow and those consumers would have to take the time to opt in and give individual attention to the minimally-valued case - just not very practical or scalable.
> Thus, a state law saying "arbitration is awesome, but banning class arbitration is against our public policy", if they exist, should be valid. Preemption must be very clear.
Concepcion seems to make it very clear that such a rule would be preempted by the FAA. The nonsensical reasoning in Concepcion applies just the same if the rule invalidates class waivers specifically (that is, permits the arbitration agreement to be enforced but strikes only the part prohibiting class actions, which would result in arbitration proceeding on a class basis) as it does if the rule invalidates the entire arbitration agreement (as the CA Supreme Court rule did).
"Concepcion seems to make it very clear that such a rule would be preempted by the FAA. "
I've read it forward and backwards and i don't see it.
"The nonsensical reasoning in Concepcion applies just the same if the rule invalidates class waivers specifically (that is, permits the arbitration agreement to be enforced but strikes only the part prohibiting class actions, which would result in arbitration proceeding on a class basis) as it does if the rule invalidates the entire arbitration agreement (as the CA Supreme Court rule did)."
Again, i'm going to disagree.
There is a huge difference between proscribing action and proscribing form of action, and Conception's reasoning seems pretty wholly inapplicable to the latter, only the former.
It also does not, in any way, deal with the preemption issue that would occur, and every case i can find on the other side of this seems to say they would allow states to constrain the form.
The court reasoned that the purpose of the FAA was
"'not [to] mandate the arbitration of all claims, but merely
the enforcement . . . of privately negotiated arbitration
agreements.'"Id. at 70 (quoting Dean Witter Reynolds Inc. v.
Byrd, 470 U.S. 213, 470 U. S. 219 (1985)).
While the FAA therefore preempts application of state laws
which render arbitration agreements unenforceable, "[i]t
does not follow, however, that the federal law has
preclusive effect in a case where the parties have chosen in
their [arbitration] agreement to abide by state rules.""
...
Unlike its federal counterpart, the California Arbitration
Act, Cal.Civ.Proc.Code Ann. § 1280 et seq. (West 1982),
contains a provision allowing a court to stay arbitration
pending resolution of related litigation. We hold that
application of the California statute is not preempted by
the Federal Arbitration Act (FAA or Act), 9 U.S.C. § 1 et
seq., in a case where the parties have agreed that their
arbitration agreement will be governed by the law of
California.
See Volt Inf. Sciences v. Stanford Univ., 489 U.S. 468 (1989)
Where california's "form of arbitration" requirements were specifically affirmed.
A state law saying "arbitration is awesome, but banning class arbitration is against our public policy" still has the effect of finding part of an arbitration agreement unenforceable. The rule effectively changes an agreement from "We agree to arbitrate disputes. No arbitration will proceed on a class or collective basis." to "We agree to arbitrate disputes. Arbitration may proceed on a class or collective basis." I don't see how the fact that the state rule would only render part of an arbitration agreement unenforceable, as opposed to the entire agreement (like the CA rule did), matters. Quoting Concepcion (emphasis mine):
> We differ with the Concepcions only in the application of this analysis to the matter before us. We do not agree that rules requiring judicially monitored discovery or adherence to the Federal Rules of Evidence are “a far cry from this case.” Brief for Respondents 32. The overarching purpose of the FAA, evident in the text of §§2, 3, and 4, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.
...
> Although we have had little occasion to examine classwide arbitration, our decision in Stolt-Nielsen is instructive. In that case we held that an arbitration panel exceeded its power under §10(a)(4) of the FAA by imposing class procedures based on policy judgments rather than the arbitration agreement itself or some background principle of contract law that would affect its interpretation. 559 U. S., at ___ (slip op., at 20–23). We then held that the agreement at issue, which was silent on the question of class procedures, could not be interpreted to allow them because the “changes brought about by the shift from bilateral arbitration to class-action arbitration” are “fundamental.” Id., at ___ (slip op., at 22). This is obvious as a structural matter: Classwide arbitration includes absent parties, necessitating additional and different procedures and involving higher stakes. Confidentiality becomes more difficult. And while it is theoretically possible to select an arbitrator with some expertise relevant to the class-certification question, arbitrators are not generally knowledgeable in the often-dominant procedural aspects of certification, such as the protection of absent parties. The conclusion follows that class arbitration, to the extent it is manufactured by Discover Bank rather than consensual, is inconsistent with the FAA.
A state law like this would still manufacture class arbitration, so I don't see how it could avoid Concepcion's holding. And the holding that requiring the availability of classwide arbitration "interferes with fundamental attributes of arbitration" seems impossible to work around.
(Also, if there was a possible "backdoor" way of prohibiting class waivers while still complying with Concepcion, I expect California would have tried it already.)
> Note specifically that it's saying policy judgements cannot override the FAA. It also explicitly says background principle of contract law may affect its interpretation. One of those background principles is traditionally being state law on how contracts are interpreted and what is allowed or not allowed. In fact, that's where all the contract law they talk about is coming from. There is no federal contract law.
But would this state law really be a "background principle of contract law"? It sounds like it would have "a disproportionate impact on arbitration" and "stand as an obstacle to the accomplishment of the FAA’s objectives" (which, according to Concepcion, is somehow incompatible with class arbitration); it's not just some generally applicable rule. Any state law that tries to require the availability of class arbitration is not going to pass Concepcion under that broad test, no matter the vehicle.
There is no federal contract law, but the current Supreme Court has gotten awfully close when it comes to arbitration. One example: in DirecTV v. Imburgia (https://www.supremecourt.gov/opinions/15pdf/14-462_2co3.pdf; unlike the other decisions, this one was not on party lines), the Supreme Court was unwilling to defer to the California Court of Appeals on contract interpretation relating to arbitration.
You should be right, but it's just not something the current Supreme Court will go along with.
> Last i looked, there is pending legislation on this matter, so ...
" I don't see how the fact that the state rule would only render part of an arbitration agreement unenforceable, as opposed to the entire agreement (like the CA rule did), matters. "
I'm very surprised you would say that. It matters quite a lot. Rules affecting the procedure by which you get process are very different than rules as to whether you get process at all, and i'm not aware of any case ever holding otherwise.
IE a rule that says "if you have a dispute under $2000, you are always allowed to go to small claims court" is very different than a rule that says "if you have a dispute under $2000, you can't sue anyone at all".
In practice, saying things like "you may not appeal" would usually be valid limits on procedure when "you may not sue" will not be.
I mean, this is essentially saying "i don't see why whether it's procedural or substantive due process would matter".
You are citing a decision that examined whether, based on regular old public policy, you could get out of a classwide arbitration waiver. Yes, it says a bunch about how that ain't gonna happen.
It also says things like:
"In that case we held that an arbitration panel exceeded its power under §10(a)(4) of the FAA by imposing class procedures based on policy judgments rather than the arbitration agreement itself or some background principle of contract law that would affect its interpretation"
Note specifically that it's saying policy judgements cannot override the FAA. It also explicitly says background principle of contract law may affect its interpretation. One of those background principles is traditionally being state law on how contracts are interpreted and what is allowed or not allowed. In fact, that's where all the contract law they talk about is coming from. There is no federal contract law.
This seems 100% consistent with the case i cited to you, which explicitly allowed a California state contract law to affect the rules of how an arbitration agreement proceeded under the FAA.
That case is still good law from the Supreme Court, was explicitly not overruled, and appears to be exactly the kind of thing they leave open in the quoted part above, so until i hear otherwise, i'm going to go with that :)
It's 100% clear you aren't going to get out of it based on public policy.
"(Also, if there was a possible "backdoor" way of prohibiting class waivers while still complying with Concepcion, I expect California would have tried it already.)"
Last i looked, there is pending legislation on this matter, so ...
IANAL, but as far as I understand this is grey area and some courts/judges will see something like this differently, because there is a set of rules that courts find irrelevant whether you put them in your terms or not. For example, you can agree to the terms where point 1.2.3 says "you agree that our employee can break into your house in the middle of the night and strangle you to death". The mere explanation "they agreed on the terms" clearly will not suffice; furthermore courts have found that terms of service have to be reasonable that a sound person would have to agreed upon (sorry not enough time to find citations). Whether the judge will dismiss lawsuit because corporation told them "no in-court litigation" or not is really up to a judge and not a cover-them-all type blanket.
Unfortunately, the GOP Supreme Court has made these arbitration agreements nearly bulletproof. What you've written makes a lot of sense and is how it should be, but judges now have very little leeway in not enforcing arbitration agreements. See AT&T Mobility v. Concepcion (https://www.supremecourt.gov/opinions/10pdf/09-893.pdf) and Amex v. Italian Colors (https://www.supremecourt.gov/opinions/12pdf/12-133_19m1.pdf). (Concepcion in particular originated from a California Supreme Court ruling that these agreements were unconscionable and unenforceable in certain situations.)
So, it's definitely the case that the FAA preempts state laws banning required arbitration.
However, Amex is not about whether a class action arbitration waiver is enforceable in the face of a state law holding them unconscionable.
Instead, Amex is about whether a class action arbitration waiver is enforceable in the face of it just being "too expensive" to arbitrate individually. There was no state law at issue. Just a straight policy argument.
The answer to that is quite clearly "yes, it's enforceable".
But the opinion goes to great pains to say such waivers are a matter of contract law, which is very traditionally the role of the states. Hence my assumption is that if a state did say that, as a matter of contract law, class action arbitration bans are against public policy, it would be a matter of preemption, and i can't see why the state would lose on the law (though they may lose anyway given the current court makeup)
Personally I'm disappointed Drew (still a CEO) would agree on these changes, but hey! with $1 billion dollars in pocket I assume he doesn't have to care about what anyone says anymore.
Binding arbitration is societal and legal poison, and must be killed. I strongly encourage everyone in the mean time, to opt out ASAP!
Edit: At least you’ll be in court, or part of class action, rather than stuck in their arbitration system!
For example they can use it to argue that sending an opt-out mails indicates that you have read the clause. It also indicates that you have read the TOS in general. It also indicates that you agreed to the rest of the TOS. Etc etc.
Edit 2: It doesn’t, it implies that you read this thread, or their announcement.
I would expect that if you send the opt-out mail that will weaken your standing in court. Everything you give the other side makes the other side stronger and gives them more vectors to argue and attack.
For example they can use it to argue that sending an opt-out mails indicates that you have read the clause. It also indicates that you have read the TOS in general. It also indicates that you agreed to the rest of the TOS. Etc etc.
> For example they can use it to argue that sending an opt-out mails indicates that you have read the clause. It also indicates that you have read the TOS in general. It also indicates that you agreed to the rest of the TOS. Etc etc.
You could point to this thread, and say "I read a NY Times article a few years ago that said arbitration was shitty Then I saw people saying 'email this address to opt out,' so I did." That statement could also be entirely accurate.
Quite simply, if you fail to opt out, you will have almost no chance at all of successfully fighting the arbitration agreement. Period. The Supreme Court precedent leaves little room for dispute on this point. So yes, everyone should follow the instructions and opt out.
Nothing in court is simple. It's always humans arguing with humans. Also, the examples you gave in other parts of this thread were from very different types of contract then this one.
Maybe someone could start a service that automatically opts them out from arbitration clauses. Extra nice if it will send snail mail for the TOSes that require snail mail opt out.
If a lot of places required snail mail, you could charge to send that. Offer to do digital opt out free as a sort of trial. If there aren't many snail mail opt outs, then I don't see a way to make money from it unless you have it as a loss leader for a legal services automation company.
It seems more like part of a more comprehensive bundle of services to me, not something you’d offer solo. Maybe bundle it with a service that takes EULAs and generates billet point lists of their main points?
Very enforceable. You clicked accept, you accepted. If you didn't read it, that's on you.
According to the American Bar Association's wording on "Best Practices for Ensuring Enforceability" [0]
> There is a check-box that users must click adjacent to an affirmation similar to, “By clicking on the box, you are indicating that you have read and agree to the Terms of Use”;
> The webpage is designed so that if the user does not check the box manifesting assent to the terms, the user cannot proceed in the transaction;
> In addition to a check-box that users must click, the terms of use are available either in a nearby scrolling text box or a nearby hyperlink;
> Any hyperlink of the terms is obvious, e.g., “Terms of Use” is underlined and has decent size lettering and visible coloring (not small lettering and not obfuscatory coloring);
> Any hyperlink of the terms has a central or obvious location on the webpage, e.g., the hyperlink is directly below the “I Agree” button (not relegated to the bottom of the webpage, which would require the user to scroll down to a submerged portion of the webpage);
> Any hyperlink of the terms immediately displays the terms (instead of requiring the user to click on a series of hyperlinks to view the terms);
> The terms of use are evident in every webpage on the website (rather than visible on only one webpage), in addition to requiring users to attest that they have read the terms of use;
> The terms are in readable font (at least 12 point); and
> The agreement contains all requisite elements of an enforceable contract (e.g., consideration, sufficiently definite material terms, etc.).58
Which is funny because in the past and in other legal areas, a contract requires a meeting of the minds, requires that everyone have adequate representation available, etc. Yet with click through contracts you have none of that. You don’t even have any sort of validated identification of the party that supposedly “signed” the “contract.” You have lopsided terms that do nothing to create equity between parties or indicate that informed negotiation took place. It’s just one party dictating terms to another party, with the ability to rewrite those terms on a whim with some petty opt-out period.
EULA / TOS click wrap and shrink wrap licenses make a mockery of contract law out of convenience, transferring effectively what was supposed to be a reasonable agreement between two identified and informed parties and making it a completely one sided agreement dictated to one party, which nobody has actually identified until a claim arises.
The alternative is to not have license agreements. License agreements just end up including terms that companies wish they could change about the law but can’t. So instead of having to get politicians to ban reverse engineering, they just include it in their license. Instead of having to get policiticans to ban or limit class action lawsuits, they just force you out of the courts.
It is beyond absurd. It is a lose-lose situation for end users - if we read each line of every EULA, thats all we would be doing all day. If we don't, then we accept very unfriendly terms.
It is important to capture terms when you sign up for things commercially and fight/negotiate terms that allow changes without notification.
I’ve definately run into situations where vendors decide to change the rules after the fact, even with things like shrinkwrap desktop software.
If you cannot negotiate with the counter party or it’s a goliath like Microsoft/Google/etc who wont negotiate with you, make a practice of downloading terms every quarter as they change.
You are very correct, the fundamental problem here is not that people don't read the EULA, it is that the world "agree" is not meaningful in this context, there is no equitable power relationship between you and the company you are "agreeing" with, they can insert any demand they wish and you have no ability to negotiate or power in the discussion. You should not have to read the EULAs, because companies should not be allowed to require that you waive your fundamental rights like this as a precondition of using their service. If you have a right to sue but every company can demand you waive it before you interact with them, you actually have no right at all.
If mandatory arbitration is allowed, the right to sue does not exist. You cannot have one but not the other.
> they can insert any demand they wish and you have no ability to negotiate or power in the discussion
you have no ability to negotiate because they have something you want, and you're unwilling to give them anything they might want. would a meaningful fraction of the population pay even $1/mo to receive better contractual terms on their dropbox account?
without looking at it, i expect that the terms for S3 look quite a bit better.
> You should not have to read the EULAs, because companies should not be allowed to require that you waive your fundamental rights like this as a precondition of using their service
whoa there. there's allll sorts of stuff that can go into a contract besides waivers of "fundamental rights", that you'd really not want to agree to willy nilly.
>you have no ability to negotiate because they have something you want, and you're unwilling to give them anything they might want. would a meaningful fraction of the population pay even $1/mo to receive better contractual terms on their dropbox account?
Yes, you've accurately described the power relationship in the contract "negotiation" and how it allows exploitation and abuse.
>whoa there. there's allll sorts of stuff that can go into a contract besides waivers of "fundamental rights", that you'd really not want to agree to willy nilly.
Agreed, I was being hyperbolic. You should of course read EULAs (though there's an argument to be made that they should be required to be streamlined, or expressed in plain-language and short)
But you don't have to check the EULA for a "slavery clause" that promises you and your children in eternal servitude to the company, similarly you shouldn't have to check to see if you are giving up other fundamental rights.
I can give you an example from a very different legal tradition, the German one. Even some in Germany say it goes too far in the other direction but it might be valuable to see what others are doing.
Whenever a contract party uses preformulated clauses (i.e. not negotiated for that specific contract) such as TOS, they are limited in what they are allowed to put in there and any unclear clause is interpreted to their disadvantage. It cannot be unreasonably detrimental or surprising to the other party. For contracts with consumers there is a list of what is definitely considered detrimental. It includes binding arbitration.
Yes, this limits the freedom to conclude contracts. The justification used is that usually the party using preformulated clauses has much larger negotiating power and such a relationship is usually not made of equals.
I've wondered if there couldn't be a reasonable superset of base statements in simple English that had a fuller legal meaning, but were generally consumer friendly and agreed upon by a council of business and government. These could be read and agreed to fairly quickly.
(Effectively the law, but as written for Simple English Wikipedia; and much more limited in length.)
As has been said, reading every legal document in the footer of every site/product is just not practical. The vast, vast majority of consumers are absolutely at the mercy of every company they deal with.
> There is a check-box that users must click adjacent to an affirmation similar to, “By clicking on the box, you are indicating that you have read and agree to the Terms of Use”;
> The webpage is designed so that if the user does not check the box manifesting assent to the terms, the user cannot proceed in the transaction;
> In addition to a check-box that users must click, the terms of use are available either in a nearby scrolling text box or a nearby hyperlink;
> Any hyperlink of the terms is obvious, e.g., “Terms of Use” is underlined and has decent size lettering and visible coloring (not small lettering and not obfuscatory coloring);
> Any hyperlink of the terms has a central or obvious location on the webpage, e.g., the hyperlink is directly below the “I Agree” button (not relegated to the bottom of the webpage, which would require the user to scroll down to a submerged portion of the webpage);
> Any hyperlink of the terms immediately displays the terms (instead of requiring the user to click on a series of hyperlinks to view the terms);
> The terms of use are evident in every webpage on the website (rather than visible on only one webpage), in addition to requiring users to attest that they have read the terms of use;
> The terms are in readable font (at least 12 point); and
> The agreement contains all requisite elements of an enforceable contract (e.g., consideration, sufficiently definite material terms, etc.).58
Haven't the courts put extra limits on the terms that are enforceable in click-through EULAs? E.g. a court would strike a click-through term where you "contractually agreed" to pledge Facebook all your current and future income in exchange for the ability to post photos of your cat.
