> 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)
> 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.
Is this exact thing what's being considered in some of the more recent Supreme Court cases? https://www.npr.org/2017/10/06/555862822/no-class-action-sup...