Dropbox’s opt-out arbitration clause: Is it for real?

By: The VNN Team  //  Arbitration, Consumer News

by Carol Thompson

Forced arbitration clauses are everywhere, including the popular file sharing and storage company Dropbox.

The arbitration clause means that should an individual be harmed in any way, or have a dispute with Dropbox, the matter must be taken to arbitration with an arbitrator selected by the arbitration company chosen by Dropbox. The agreement also prohibits class action cases, hence, if multiple Dropbox users are harmed, they cannot join together to bring action against the company. Each harmed consumer would need to bring a separate action.

According to Dropbox’s Terms of Service, “If you don’t want to agree to arbitration, you can easily opt out via an online form, within 30-days of these Terms becoming effective.”

But can you?

According to Paul Bland, a senior attorney with Public Justice, a consumer advocacy organization, “The point of Dropbox’s opt-out provision (which is similar to opt-out provisions used by some banks, Comcast, and most nursing homes, etc.), is that it allows Dropbox to tell courts and any critics that its arbitration policy is NOT a “take it or leave it” proposition. Dropbox wants to be able to say it provision is voluntary and optional. And, at first blush, it is. But there IS a catch…”

Bland continues, “As Dropbox knows, and as anyone familiar with marketing and consumer behavior realizes, only an incredibly tiny proportion of consumers actually read through fine-print contracts. It is absolutely predictable that only a tiny proportion of Dropbox customers will notice the opt-out term.”

Unfortunately, many, if not most, consumers don’t understand mandatory arbitration, and are unlikely to know that Dropbox contains an arbitration clause. That’s because most consumers don’t take the time to read the fine print in contracts and agreements and if they do, few will actually take the steps to opt-out of the arbitration agreement.

Bland points out that some years ago, AARP undertook a study of the privacy policies that federal law requires financial institutions to send out. While most consumers don’t want their financial institutions sharing their personal information, few read the privacy policies and opt out of the disclosures.

Bland stated that it would be surprising if one percent of Dropbox users opted out of its arbitration clause.

Bland added that there are two main reasons why Dropbox has an opt-out clause. The first reason is because it’s more difficult in most parts of the country to get a court to strike down even the most unfair and abusive mandatory arbitration provision if there is an out-out term.

” Courts regularly reach the conclusion that even if a term would otherwise be illegal, if it’s contained in an arbitration clause with an opt out, that it has to be enforced,” Bland said.

And second, it gives Dropbox a public relations response to the charge that it’s hosing its customers, he added.

Companies take advantage of arbitration agreements to overstep the judicial laws that allow class actions.

The inclusion of an opt-out clause does give a company more traction should a consumer attempt to bypass arbitration and take a dispute to a court of law. Conversely, the exclusion of and opt-out clause can give a consumer more traction should they wish to take a dispute to court or appeal the decision of an arbitrator.

 

Image: Flickr/Ian Lamont