Re: Guest Post - Arbitration

1

I'm disappointed that DropBox's latest ToS update mandates arbitration (unless you're an existing user who opts out).


Posted by: sral | Link to this comment | 04-18-14 5:45 AM
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1 Only if you fill out a form with them within 30 days from the time of notice received which was back in early March or late February IIRC (coincidentally I was just looking at it in a seldom used gmail account of mine).


Posted by: Barry Freed | Link to this comment | 04-18-14 5:47 AM
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I can't possibly see how this holds up in court.

On the one hand, I agree. On the other hand, I can't possibly see how courts have upheld the mandatory arbitration clauses that have been at issue in most of the recent court challenges. It's infuriating.


Posted by: urple | Link to this comment | 04-18-14 6:18 AM
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Yeah, this is short on details but to me it looks like there are major contract formation issues here. Nobody's going to impute your assent to terms that are simply floating out there on the Internet just because you buy the company's product in a grocery store.

If you're affirmatively clicking "I agree" before you download the coupons or order online or whatever, though, then it will totally hold up in court. (Well, as a practical matter, plenty of state courts will still refuse to enforce, but they'll be acting lawlessly.)


Posted by: potchkeh | Link to this comment | 04-18-14 6:22 AM
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Someone ought to bring a class action against this. Then they could settle it and every member of the class would get a coupon for 10% off some General Mills product, and the lawyers would get a million dollars.


Posted by: CharleyCarp | Link to this comment | 04-18-14 6:30 AM
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And thinking about it some more, it occurs to me that GM's real idea here might not be what they're claiming (i.e., creating enforceable arbitration agreements with all customers), it might simply be a device to create ascertainability/commonality issues that will make class certification tough. If you try to bring a class action on behalf of GM customers, a lot of them probably will have clicked "I agree to arbitrate" at some point when they downloaded a coupon or whatever. Of course, the vast majority won't have. But then you'd have to take a look at each potential member to figure out whether they could participate or whether they had at some point clicked on something constituting an agreement to arbitrate. That's the kind of inquiry that makes a class problematic.


Posted by: potchkeh | Link to this comment | 04-18-14 6:45 AM
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I'll yield to no one in thinking that arbitration is bullshit (for domestic matters) but wish we could resolve these consumer labeling disputes with a stronger regulatory state, rather than with the armchair attorney general model.

OK, not going to happen in the near term . . .


Posted by: CharleyCarp | Link to this comment | 04-18-14 6:52 AM
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If you're affirmatively clicking "I agree" before you download the coupons or order online or whatever, though, then it will totally hold up in court. (Well, as a practical matter, plenty of state courts will still refuse to enforce, but they'll be acting lawlessly.)

One would think, after taking first-year contracts, that most click-through terms of service language would not be enforceable, and that state courts refusing to enforce it were getting it right.


Posted by: Bave | Link to this comment | 04-18-14 7:09 AM
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Yes, but Bave, you're forgetting about the Federal Arbitration Act, the magical, incredible power that for some reason not actually articulated in the language of the statute automatically kills non-business friendly state law at will and which federal judges who are neoconfederates on other issues are willing to use to eat up any relevant state contract law, because really what's the point of the law but to protect the rich.


Posted by: Robert Halford | Link to this comment | 04-18-14 7:19 AM
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8: Most state courts enforce click-through terms as a general matter, in one form or another. The whole "meeting of the minds" thing is pretty much a relic in this context. The refusal I meant in 4 is a refusal to enforce arbitration agreements in otherwise-enforceable contracts--lots of states go through all sorts of contortions to evade precedent on that. (And to be clear, by "lawlessly" in 4 all I meant was "in ways that can't be squared with controlling precedent".)


Posted by: potchkeh | Link to this comment | 04-18-14 7:19 AM
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10- controlling federal precedent under the FAA that is pretty damn lawless itself, you should add for clarity.


Posted by: Robert Halford | Link to this comment | 04-18-14 7:21 AM
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11: Absolutely. (And I say that as someone who was intimately involved in the lawlessness in question.)


Posted by: potchkeh | Link to this comment | 04-18-14 7:28 AM
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This provision isn't much different from the credit card arbitration causes, where you get something in the mail a few years after you got your credit card that informs you that you will have to arbitrate all claims in the future if you ever use your card again. Those provisions have generally been upheld, to the detriment of my Christmas bonus in the past few years.

Coming soon: Signs at the entrance of stores saying that by entering onto the property, you agree to arbitrate any claims (including personal injury cases).


Posted by: unimaginative | Link to this comment | 04-18-14 7:39 AM
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Coming soon: Signs at the entrance of stores saying that by entering onto the property, you agree to arbitrate any claims (including personal injury cases).

This is mentioned in the link in the OP. I'm going to hang one on my front porch.

I'm also going to have it printed on the back of my business cards. "By accepting this card, you agree to binding arbitration in the event of...."


Posted by: urple | Link to this comment | 04-18-14 7:43 AM
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I do have a real question about the limits of these binding arbitration clauses. Is anything that would be okay in a negotiated commerical agreement okay in this context, or are there some other, independent limits (and if so, what?)?

E.g., in a true negotiated commercial agreement, I believe it would be enforceable for two sides to agree not only to resolve any disputes with binding arbitration, but also to agree up front that whoever initiates the arbitration claim must pay the costs of both parties for the entire arbitration, regardless of whether they win or lose. Would that pass muster under a click-through?


Posted by: urple | Link to this comment | 04-18-14 7:48 AM
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On re-reading 15, it dawns on me that I have no idea what the phrase "pass muster" actually means.


Posted by: urple | Link to this comment | 04-18-14 7:50 AM
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It's like in the Grey Poupon commercial with the fellows in the Rolls Royces.


Posted by: Natilo Paennim | Link to this comment | 04-18-14 7:53 AM
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15.last: Probably not. Courts can still (at least for now, but give the Supreme Court time!) refuse to enforce consumer arbitration agreements that put prohibitive dispute-resolution costs on the consumer.* Lots of (but by no means all) consumer arbitration agreements require the company to pay all costs of arbitration, precisely to avoid putting that sort of thing in play.

*To be clear, I'm talking about provisions that require the consumer to pay arbitration fees or the like. If your claim is one that would, e.g., require prohbitive sums to obtain expert testimony or the like, that's too bad.


Posted by: potchkeh | Link to this comment | 04-18-14 7:56 AM
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18: that makes sense.


Posted by: urple | Link to this comment | 04-18-14 7:57 AM
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15: The unconscionability doctrine theoretically still applies ot arbitration clauses in consumer cases. The arbitration clause you describe seems unconscionable to me, especially in a personal injury situation. (I have to pay both parties' costs if the Cheerios that I bought with an online coupon poisoned me?) But for class actions, current law seems to be that nothing can be unconscionable, because there is nothing unconscionable about a world without class actions.

We are working on a case where a tax prep company wass lying about the interest rate on its refund anticipation loans, because of an undisclosed fee of about $25. Is it unconscionable to require everyone who was defrauded of $25 to arbitrate in the Company headquarters city at their own expense? We may get a ruling some day.


Posted by: unimaginative | Link to this comment | 04-18-14 7:59 AM
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refuse to enforce consumer arbitration agreements that put prohibitive dispute-resolution costs on the consumer

But this is clearly not well enforced, since courts have upheld consumer agreements with things like requiring the arbitration to occur in Des Moines, Iowa, regardless of where the consumer is located.


Posted by: urple | Link to this comment | 04-18-14 8:00 AM
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mosty pwned by the esteemed opposing counsel.


Posted by: unimaginative | Link to this comment | 04-18-14 8:00 AM
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The arbitration clause you describe seems unconscionable to me, especially in a personal injury situation. (I have to pay both parties' costs if the Cheerios that I bought with an online coupon poisoned me?)

Okay, but "seems to me" may not be a good metric here, because while I completely agree with you (and I assume the clause I suggested likely wouldn't be enforced), nearly all binding arbirtration clauses in consumer agreements "seem to me" to be unconscionable. Courts generally seem to have a different view.


Posted by: urple | Link to this comment | 04-18-14 8:03 AM
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21: Well, they don't have to refuse to enforce for things like that.* Some states will, some states won't. My point was that, at least for now, the FAA doesn't preempt states that would refuse to enforce on grounds like that from doing so. Whereas it does preempt a state from refusing to enforce on the grounds that it favors efficient resolution of disputes on a class-wide basis.

*Although really, most of the consumer arbitration agreements out there are trying to avoid petty bullshit like that. They'd rather include "consumer favorable" terms that might cost them a few bucks here and there and not have to fight over the agreement's enforceability, because all they care about is the class issue.


Posted by: potchkeh | Link to this comment | 04-18-14 8:06 AM
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23: true


Posted by: unimaginative | Link to this comment | 04-18-14 8:23 AM
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Muster is a military thing, right? Where all the troops stand at attention and the colonel walks down the ranks looks each one over and tells them to trim their sideburns?

Presumably "passing muster" means that your sideburns are fine.


Posted by: Spike | Link to this comment | 04-18-14 8:53 AM
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The muster of the vultures - ha!


Posted by: Roderick Spode | Link to this comment | 04-18-14 9:06 AM
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I have a case pending right now over whether choice of law & choice of forum clauses directing to courts in /law of company HQ state are enforceable in an employment contract. (It's not the actual employment contract, but a separate agreement that amounts to a purchase of customer accounts.) I'm on the employer side of this one.

Living and working in my state is "extraordinary" certainly, but that might not be exactly what Justice Alito had in mind in Atlantic Marine Construction.


Posted by: President Someone | Link to this comment | 04-18-14 9:31 AM
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State statute: Every stipulation or condition in a contract by which any party to the contract is restricted from enforcing the party's rights under the contract by the usual proceedings in the ordinary tribunals or that limits the time within which the party may enforce the party's rights is void. This section does not affect the validity of an agreement enforceable under Title 27, chapter 5.

They had to put that last bit in after getting reversed by the USSC (twice, maybe?) on arbitration clauses.


Posted by: CharleyCarp | Link to this comment | 04-18-14 9:40 AM
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24.2 is correct, but after Italian Colors it sort of feels like a lot of (corporate) people weren't asking for enough, doesn't it?


Posted by: widget | Link to this comment | 04-18-14 9:42 AM
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Another state statute: An [arbitration] agreement concerning venue involving a resident of this state is not valid unless the agreement requires that arbitration occur within the state of Montana. This requirement may only be waived upon the advice of counsel as evidenced by counsel's signature on the agreement.

I don't know whether this has been invalidated by the federal courts yet.


Posted by: CharleyCarp | Link to this comment | 04-18-14 9:59 AM
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30: Yes, definitely, hence my first parenthesis in 18. And the "not asking for enough" was no accident. Incremental moves.

Am I misreading 29? It looks like an outright ban on arbitration agreements except under the terms of the UAA. I dont' see how that withstands even a sane FAA jurisprudence.


Posted by: potchkeh | Link to this comment | 04-18-14 10:16 AM
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Courts can still (at least for now, but give the Supreme Court time!) refuse to enforce consumer arbitration agreements that put prohibitive dispute-resolution costs on the consumer.* Lots of (but by no means all) consumer arbitration agreements require the company to pay all costs of arbitration, precisely to avoid putting that sort of thing in play.

This also has the effect of creating a customer-buyer relationship between the defendant and the arbitrator. The implicit conflict of interest is not exactly unwelcome to the company defending the complaint. Arbitrators in consumer cases know which side their bread is buttered on. That's not the only reason companies prefer arbitration to the courts, but it's one of them.


Posted by: knecht ruprecht | Link to this comment | 04-18-14 11:06 AM
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33: That's one commonly-asserted problem with arbitration agreements that I actually think is overblown (which isn't to say nonexistent). The linked scandal was a big deal, but in general there's no evidence that the mainstream arbitration outfits like the AAA favor corporations over consumers, at least any more than courts do (and when I last looked at the evidence, a couple years ago, there were reasons to believe that consumers overall win somewhat more frequently in arbitration than they do in court; though of course that kind of thing is hard to pin down, since so many proceedings are wrapped in confidentiality agreements, both in court settlements and in arbitration).

But for the most part the companies don't give a shit if they lose an individual arbitration every day of the week. That's pocket change, and well worth limiting/eliminating class risk, which is where the money is. A lot of people seem to think companies like arbitration because it's biased in their favor, but the motivation for these things is generally not to win on the merits more frequently, it's to never have to defend a class action.


Posted by: potchkeh | Link to this comment | 04-18-14 11:21 AM
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34 -- I am strongly of the view that FINRA arbitration, in particular, exists to screw over investors and favor banks. I agree that AAA doesn't seem that bad. I also agree with the rest of your comment, for consumer arbitration avoiding class actions is the primary concern (which of course is also inconsistent with "consumer class actions don't matter because all they do is pay out venal lawyers and coupon settlements").


Posted by: Robert Halford | Link to this comment | 04-18-14 11:25 AM
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Banks s/b brokerages there.


Posted by: Robert Halford | Link to this comment | 04-18-14 11:26 AM
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IMO, an arb is a lot more likely to look for a split the baby solution, while a judge is going to be looking at on/off switches like rules 12 and 56. So I'd expect individual consumers to do a bit better in arb than in court.

32.2 -- Yeah, well, maybe not. Our Supreme Court, though, has been willing to fight the feds pretty much every step of the way, reading USSC caveats and descriptions of their holdings in as limited a way as possible. I thought they were right to do so wrt Citizens United, and I guess I can live with them doing so on consumer arbitration.

That venue restriction (cmt 31) isn't in the UAA, is it? Does the UAA also exempt personal injury claims, as the Mt version does?


Posted by: CharleyCarp | Link to this comment | 04-18-14 11:42 AM
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A lot of people seem to think companies like arbitration because it's biased in their favor, but the motivation for these things is generally not to win on the merits more frequently, it's to never have to defend a class action.

This strikes me as entirely plausible; the fact that the deck is stacked in their favor* is just icing on the cake.

*not just the bias of the arbitrator, but the rules of procedure, especially the limitations on discovery.

I am strongly of the view that FINRA arbitration, in particular, exists to screw over investors and favor banks

The number of people who doubt the truth of this statement and are not directly or indirectly in the employ of a bank is, to a first approximation, zero.



Posted by: knecht ruprecht | Link to this comment | 04-18-14 12:02 PM
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37.2: I did a little poking around and it looks like "ordinary tribunals" encompasses arbitration, so all that statute appears to be doing is saying that an agreement (arbitration or otherwise) that waives rights or remedies is unenforceable. Which is (for now) consistent with federal FAA jurisprudence, and with a few exceptions (such as state-law rights to public injunctions) is probably not something the corporate overlords are terribly worried about in the consumer context.

37.3: Pretty sure no (on both the venue and PI questions) but I don't know the UAA very well (nobody litigates under the UAA, do they?). But if that venue restriction singles out arbitration agreements for special conditions (i.e. if venue provisions in other contracts aren't subject to the same limitation), I don't see how it survives the FAA. Wasn't Casorato via Montana? They should have learned their lesson!

38: I'm really not sure which way things cut on balance, but some procedural arbitration rules tend to benefit claimants, especially unsophisticated/low-resource claimants. Relaxed rules of evidence being the big example. The problem with discovery limitations (which are typically at the arbitrator's discretion) is that they make fishing expeditions; opinions vary on whether that's really a problem.


Posted by: potchkeh | Link to this comment | 04-18-14 12:12 PM
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I was kind of shocked that 17 wasn't Moby.


Posted by: JRoth | Link to this comment | 04-18-14 12:26 PM
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39.2 -- The statute quoted in 29 has been applied to choice of forum clauses outside the arbitration context. Casarotto was from here, but take a look at paragraphs 23-27 in Keystone.


Posted by: CharleyCarp | Link to this comment | 04-18-14 1:24 PM
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