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Arbitration Agreements and Class Action Waivers: Dropbox

posted by Adam Levitin

It's hardly news that arbitration agreements are used to effectuate class action waivers.  The Supreme Court has blessed the comandeering of a federal policy favoring enforcement of forum selection clauses to limit types of proceedings, including those that have nothing to do with forum and are necessary for effective vindication of small value claims.  

While arbitration ageements have been a particular problem in consumer finance, they also appear in things like telecom agreements, and now, to my chagrin, for Dropbox, a popular free cloud storage service. Dropbox announced a change in its terms of service that includes an arbitration clause.

Here's how the changes are pitched on Dropbox's website:

Here’s a walk-through of the major changes:

  • Arbitration. We’re adding arbitration clauses to our Terms of Service and Dropbox for Business online agreement. Arbitration is a faster and more efficient way to resolve legal disputes, and it provides a good alternative to things like state or federal courts, where the process could take months or even years. If you prefer to opt out of arbitration in the Terms of Service, there’s no need to fax us or trek to the post office — just fill out this quick online form.

No mention here that the arbitration clause includes a class action waiver, which is surely why Dropbox is included it.  In other words, the most important new term in the new agreement is not highlighted.  You'd only find that out here, in the terms of service: 

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.

To Dropbox's credit, they are allowing opt-outs from the arbitration provision.  I'd be much more impressed if the arbitration were an opt-in, but that's wishful thinking. I am rather confused what it means to "opt out" of the arbitration provision, as that is not defined in the opt-out form.  I don't know if it means just no arbitration, or if it means opting out of the class action waiver or the forum selection or the predispute resolution clause.  My interpretation is that this is a broad opt-out of all of the Dropbox dispute resolution procedures, and that is what I think I have done by opting out. But whether you want to waive valuable rights or not, you should know that there's a class waiver buried in the agreement and not highlighed by Dropbox in its notice. 

[Update:  One other observation.  Dropbox has allowed comments on its blog, which is a nice thing, especially as they are allowing anonymous comments without any sort of sign-in.  (I'm sure they can figure out who I am, though, via my IP address, if they care, as they already know it from when I access my Dropbox).  While a lot of the comments were angry about the arbitration, they were focused on the venue provision, requiring a San Francisco venue.  That's good old fashion Carnival Cruise Line v. Schute.  None of the comments seemed to recognize that the real issue isn't the venue, problematic though that may be, but the class action waiver.  It strikes me that the public interest world needs to do a better job explaining to the public why arbitration agreements really matter. It's not the corrupt arbitrator problem so much as the inability to vindicate widespread small dollar harms problem.] 

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