News: Dropbox Is Adding An Arbitration Clause To Its Terms Of Service

Dispute Resolution Terms Incorporate Provisions Popularized By AT&T v. Concepcion

     Dropbox, that marvelous tool allowing you to share folders with your other computers, as well as with third parties, has notified its users that it is updating its terms of service, effective March 24, 2014.  One change will be the addition of arbitration clauses to Terms of Service and to the Dropbox for Business online agreement. 

     Here are features of the dispute resolution mechanism: 

• Begin with informal dispute resolution before bringing a formal proceeding.
• Both sides agree to arbitrate to resolve any claims relating to the Terms or the Services through final and binding arbitration – except as set forth under Exceptions to Agreement to arbitrate.
• Parties may opt-out of the agreement to arbitrate by submitting an opt-out form.
• Arbitration will be administered by the AAA under the Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes. 
• Arbitration will be held in the US in the county where you live or work, San Francisco (where Dropbox is headquartered) or any other location the parties agree to.
• Dropbox will pay arbitration fees for claims less than $75,000.  If you receive a more favorable award than what Dropbox offers to pay, you get a bonus of $1,000, in addition to the award.  Dropbox won’t seek fees and costs in arbitration – unless the arbitrator determines your claim is frivolous.
• Exceptions to the arbitration requirement include small claims, or injunctive relief for certain claims.
• There is a class action waiver:  “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.”
• Additionally:  “Class arbitrations, class actions, private attorney general actions, and consolidation with other arbitration aren’t allowed.” 
• The judicial forum for disputes to which the agreement to arbitrate is found not to apply, other than for small claims actions, will be in federal or state courts in San Francisco.
• The Terms are governed by California law except for conflicts of law principles.

     As I read through the terms, I wondered what clauses were covered by the opt-out form.  The opt-out form provides:  “[Y]ou are opting out of the agreement to arbitrate Dropbox’s Terms of services (“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 “no class actions” waiver, read literally, applies to more than arbitration, and the opt-out form, read literally, seems to say that even if you opt out of arbitration, you can’t file a class action. 

     Additionally, if you opt out, and bring a claim in court for greater than $75,000, you (or at least, your attorney) is going to get to see San Francisco – a great city to visit.

     Obviously, Dropbox’s attorneys have read AT&T v. Concepcion, and they have drafted the arbitration provisions with the intention that they pass judicial muster. For now, I am going to suspend judgment as to whether every one of the provisions will be enforceable.  If you use Dropbox, I urge you to also read the new provisions that will go into effect concerning permissions the user gives to Dropbox, and concerning privacy.