Another One Bites the Dust: Dropbox Adds Arbitration Clause

March 07, 2014

It is difficult to be a consumer these days without being subjected to arbitration agreements. Most banks, cell phone companies, cable providers and major corporations include an arbitration agreement in their terms of service. Dropbox is one of the more recent companies to follow suit.

Dropbox announced on Feb. 20 that it was updating its terms of service to include, among other things, an arbitration clause. The company claimed in its announcement that:

“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 have visited this blog before, it should come as no surprise that we disagree with this statement.

Regardless, at least Dropbox has given its customers the choice to opt out of arbitration. (You can do so here.) Paul Bland, Senior Attorney at Public Justice, has written about arbitration clauses on this blog before and recently published a blog post examining Dropbox’s Opt-Out provision. He argues that while the opt-out provision is good for consumers, it’s also good for Dropbox – however, not for the reasons you might think.

“The point of Dropbox’s opt-out provision… 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.”

Paul’s argument is that companies that add an opt-out provision to their terms of service face less scrutiny by the general public and the courts. By adding an opt-out provision, Dropbox and other companies who include this provision likely will be more successful in banning class action litigations.  Paul writes:

“It is FAR harder in most parts of the country to get a court to ever strike down even the most unfair and abusive mandatory arbitration provision, if it has an opt-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.”

To read the entirety of Paul’s article, click here. If you use Dropbox, or any other service that includes an arbitration clause, Paul’s article as well as this guide by the National Association of Consumer Advocates is worth a read. I am certain that Dropbox will not be the last service you use to add an arbitration clause to its terms of service.


Photo Credit: Martin LeFrance

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