Friday, August 22, 2014

9th Circuit Takes Closer Look at Arbitration Clauses in Browsewrap Agreements

This decision was handed down by the 9th Circuit the other day, which, for those who follow such things, covers all of California, and is of extremely high importance for the entire tech industry as a result.

Let's summarize why it is important:

1. Browsewrap contracts have traditionally been upheld as valid by the Courts - this means that when you click "I Agree" when signing into a website or installing a piece of software, you are, in fact, agreeing to the dozens of pages of legalese you absolutely have not read.

2. Recently, big companies have been inserting a variety of very troubling, anti-consumer clauses into such contracts, including mandatory arbitration clauses and waiver of right to join class action suits.

(2) has been very troubling, because recently, the Supreme Court basically upheld the notion that by entering a shrinkwrap or browsewrap contract, you can agree to waive your right to participate in a class action suit, and instead have the dispute move to arbitrationThis is bad for consumers because, as customers of corporations themselves, arbitration bodies have a very strong incentive to side with corporations, over consumers, in order to get repeat business.

What is interesting in the above linked case, however, is that the Court basically said that an arbitration clause itself, as opposed to a clause relating about the waiving the right to participate in a class action suit in favor of arbitration, was being thrown out, with the reasoning of "Seriously... who reads those things!?" In other words, the Court said that a browsewrap contract that doesn't bring the mandatory arbitration clause to the forefront gives insufficient notice to the consumer - a very interesting ruling.

SCOTUS is the next step on this particular train - as it has the ability to undo a troubling history of the overreach of browsewrap contracts. It is yet to be seen how SCOTUS will rule on it - given the very pro-corporate history of its browsewrap and shrinkwrap agreements, I'm not holding my breath - but this decision has the possibility to wind back the clock a few steps in the favor of the average web consumer. It may also wind up, however, that next time you buy something on B&N you agree once to a clickwrap contract - and then hit "I Accept" a second time specifically when agreeing to arbitration language. Only time will tell.

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