Category Archives: Uncategorized

Dropbox – New terms on arbitration and class actions

Dropbox today sent out notice of change of its Terms and Conditions. The biggest change is in dispute resolution.  The existing T&Cs specified only that the contract was subject to the courts and laws of California.  The new set does a couple of things:

  1. Commits you to use arbitration rather than going to court
  2. Removes your ability to participate in a class or consolidated action (whether arbitration or suit).

You can read until your eyes bleed about whether arbitration is better or worse than court action, and it does probably come down to the choice of arbitrator. Do consider, however, that an arbitrator does not have the power to subpoena evidence, and there are few if any rights of discovery. This means that your lawyer would not be able to know what evidence or testimony the company would have to be able to make use of it or prepare for it.  OK, that does work both ways and you would not be obliged to hand your evidence/testimony/witnesses over to the opposition, but chances are they will have more of the evidence and people able to give testimony than will you.  At the end of the day, there are pros and cons to using arbitration, but FORCING you to use arbitration is a one-sided deal. There is nothing to stop you agreeing to use arbitration should a dispute arise, and if Dropbox think it is such a good idea, they will no doubt agree.  But signing away your rights to NOT use arbitration might not be such a great idea.

All that notwithstanding, waiving the right to participate in a class action is less arguable from the position of the consumer.  The ability for a group of plaintiffs to jointly claim damages from a company means that the costs of action can be shared across the group, allowing a longer and stronger effort to be made. If enough people are hurt by the actions of a company, it will be much easier to get legal representation as a group than as an individual, because the lawyer stands the chance to get a slice of a bigger settlement pie than if a gaggle of individual suits/arbitrations need to be fought and won.  (Watch Erin Brokovitch for an entertaining education on class actions).

Dropbox is offering an opt-out from the Agreement to Arbitration in the new T&Cs. But the wording on the form is rather ambiguous:

“By submitting the information below, you are opting out of the agreement to arbitrate in Dropbox’s Terms of Service (“Terms”). This opt-out doesn’t affect any other parts of the Terms, including, for example, the controlling law provision or the requirements about in which courts legal disputes may be brought.

The problem is that in the section of the new T&Cs which includes the arbitration terms there are ALSO the paragraphs about waiving the right to class or consolidated actions and the section about which courts have jurisdiction. It is unclear precisely which paragraphs in the section you are opting out of by submitting the form. Specifically, it isn’t clear whether opting out of arbitration also opts you out of the class action waiver.

So it feels to me that the arbitration opt-out is a smokescreen for the class action clause.

I have asked Dropbox to clarify and will update if/when I get a reply.

I do recommend that you read the new and old agreements (both are easy reading as contracts go) and think about whether you want to opt out of whatever the opt out form actually opts you out of.