Dear Dropbox, I’ll Take the Arbitration

by Brian Rogers on February 22, 2014

in Miscellany

website terms of service

Dropbox revised its terms of service recently and sent an email to its users notifying them of the changes. I haven’t read through the entire ToS yet. But Bill Carleton’s post on his Counselor @ Law blog yesterday prompted me to take a look at the arbitration clause. I’m sharing my comment to his post here because I’d like to hear some contrary views. Let me know what you think in the comments or shoot me an email.

Here’s my comment:

Bill: When I read the bit about arbitration in Dropbox’s email alerting me to changes in the ToS, I assumed Dropbox was inserting a class action waiver in response to recent favorable court cases. Many companies have used such provisions to effectively insulate themselves completely from customer complaints. I view this as deeply troublesome, and I’m leaning toward hoping that Congress will overturn recent precedent by legislating consumer protections. (This is in contrast to my initial reaction to the cases, as reflected in my post AT&T Mobility v. Concepcion: Is Class Arbitration Dead?. My views have changed as the subsequent Supreme Court decisions have taken a different tack than I expected and companies have taken advantage of the decisions to the detriment of their customers.)

I went to the Dropbox ToS to opt out of the arbitration provision. But I changed my mind because I’m happy with what they’re offering: I still have access to small claims courts (on my turf), Dropbox pays the arbitration fees, the arbitration can be held on my turf, and Dropbox will pay $1,000 in addition to the arbitration award if the arbitrator awards me more than the last offer on the table before the arbitration commences. I think I’d fare better under that arrangement than the coupons I might get as a class member in a class action. As a consumer, I’d rather have access to real relief in arbitration than some theoretical right for someone to vindicate my rights through a class action in court.

I’d love to hear an opposing view. For your readers’ benefit, here’s an excerpt from the arbitration clause:

Arbitration Procedures. The American Arbitration Association (AAA) will administer the arbitration under its Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes. The arbitration will be held in the United States county where you live or work, San Francisco (CA), or any other location we agree to.

Arbitration Fees and Incentives. The AAA rules will govern payment of all arbitration fees. Dropbox will pay all arbitration fees for claims less than $75,000. If you receive an arbitration award that is more favorable than any offer we make to resolve the claim, we will pay you $1,000 in addition to the award. Dropbox will not seek its attorneys’ fees and costs in arbitration unless the arbitrator determines that your claim is frivolous.

Exceptions to Agreement to Arbitrate. Either you or Dropbox may assert claims, if they qualify, in small claims court in San Francisco (CA) or any United States county where you live or work. Either party may bring a lawsuit solely for injunctive relief to stop unauthorized use or abuse of the Services, or intellectual property infringement (for example, trademark, trade secret, copyright, or patent rights) without first engaging in arbitration or the informal dispute-resolution process described above.

No Class Actions. You may only resolve disputes with us on an individual basis, and may not bring a claim as a plaintiff or a class member in a class, consolidated, or representative action. Class arbitrations, class actions, private attorney general actions, and consolidation with other arbitrations aren’t allowed.

Judicial forum for disputes. In the event that the agreement to arbitrate is found not to apply to you or your claim, you and Dropbox agree that any judicial proceeding (other than small claims actions) will be brought in the federal or state courts of San Francisco County (CA). Both you and Dropbox consent to venue and personal jurisdiction there.

Image credit: ilco via stock.xchng

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{ 3 comments… read them below or add one }

David Webb February 25, 2014 at 3:53 am

I can’t think of a good reason to pre-emptively reduce my legal rights. Dropbox and I can always mutually agree to go to arbitration later, and I can opt out of any class action if I choose. But if I contract out of my rights to participate in a class action then I am giving up option value for no consideration.

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James Young March 1, 2014 at 8:12 am

According to Consumerist, you still have the right to agree to Arbitrate, even if you opt out. Whereas, if you agree to arbitration you can not reverse that position. Therefore, they suggest one ALWAYS opt out of forced Arbitration if possible, as it gives the consumer greater flexibility for legal recourse http://consumerist.com/2014/02/25/why-you-should-opt-out-of-forced-arbitration-in-3-sentences/

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Brian Rogers March 1, 2014 at 11:23 am

James: Thanks for sharing the article. It makes good points. Although you can agree to arbitrate later, Dropbox won’t then be obligated to agree to do so, nor will it be obligated to arbitrate on the terms it’s currently offering, which I view as pretty favorable for me as a consumer.

I’m sure my thoughts on this issue are in the minority, and I’m not recommending that others choose not opt out of the arbitration. My views on arbitration are colored by my dim view of the efficacy of class actions to help individual consumers in most cases.

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