Paypal policy update: No class-action suits
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tl;dr
The issue in question was whether or not Dell's Terms and Conditions of Sale could legally force the company's customers to settle disputes through arbitration rather than in a court of law. This is the second time in recent history that the ninth circuit has found such arbitration clauses unenforceable due to the unconscionable burden they place upon the purchaser.
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The court based its ruling in Omstead v. Dell directly upon an earlier case, Oestreicher v. Alienware, in which Alienware (a Dell subsidiary) attempted to force Mr. Oestreicher into arbitration. In that decision, the court wrote that the Alienware contract was unconscionable because it was a "contract of adhesion." A contract of adhesion is a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party [the customer] only the opportunity to adhere to the contract or reject it.
There's a pretty good round up of illustrative opinions here: http://www.uclpractitioner.com/2012/03/new-opinions-interpre...
Side note...that reminds me of my Military Service contract with the Government.
But this is good, giving up your right to sue is not something that should be allowed in Terms and Conditions...now a separate agreement that still wouldn't preclude using the service/material/item in question, perhaps there is room for that.
edit: added trust quote.
They're similarly restricting class action suits, but doing so in a way that comes off as quite generous.
So, you can opt out. But they will retain a herd immunity of sorts -- as long as a critical mass of users doesn't opt out, a class action can never gain steam. Clever.
Incidentally, has anyone managed to opt out? I can't figure out how to (the new TOS doesn't even show up for me, so it may be that non-US users are not affected)
Opt-Out Procedure.
You can choose to reject this Agreement to Arbitrate ("opt out") by mailing us a written opt-out notice ("Opt-Out Notice"). For new PayPal users, the Opt-Out Notice must be postmarked no later than 30 Days after the date you accept the User Agreement for the first time. If you are already a current PayPal user and previously accepted the User Agreement prior to the introduction of this Agreement to Arbitrate, the Opt-Out Notice must be postmarked no later than December 1, 2012. You must mail the Opt-Out Notice to PayPal, Inc., Attn: Litigation Department, 2211 North First Street, San Jose, CA 95131.
The Opt-Out Notice must state that you do not agree to this Agreement to Arbitrate and must include your name, address, phone number, and the email address(es) used to log in to the PayPal account(s) to which the opt-out applies. You must sign the Opt-Out Notice for it to be effective. This procedure is the only way you can opt out of the Agreement to Arbitrate. If you opt out of the Agreement to Arbitrate, all other parts of the User Agreement, including all other provisions of Section 14 (Disputes with PayPal), will continue to apply. Opting out of this Agreement to Arbitrate has no effect on any previous, other, or future arbitration agreements that you may have with us.
Of which the efficacy is certainly arguable, since a truly reputable firm might seek to provide such a mechanism in an easy-to-use manner. Whereas a shady operation would, and do, ignore the directive anyhow.
These days, messages in my inbox fall into two categories: Messages with an "unsubscribe" link, or spam.
This didn't use to happen in the olden days.
Stay classy PayPal. :-/
If you start a class action lawsuit, the best thing PayPal can do is to sue you for contractual non-performance. At least in Europe, even if the contract say that you won't file a lawsuit, the court will throw that part of contract out, usually for constitution terms.
So is this legal in the US? How many of your constitutional rights can you give up in a contract in the US?
For example, you can agree to resolve disputes in binding arbitration, and then you could only sue on the grounds that the arbitration was in some way unfair.
Similarly you can agree to not take part in a class-action suit, while still being allowed to sue as an individual.
Now that only applies to contracts that are negotiated. Contracts of adhesion (a non-negotiable contract when there is a disparity of power, like an EULA between you and Microsoft) have a lot more restrictions.
It looks like Pay Pal is trying to get around this by allowing users to opt-out, thus making it negotiable. I'm not sure if there is precedent for that. Those who are actually lawyers might know.
In fact, in the US the notion of class action lawsuits and the rules around them were completely imported into US law (in a very weird way) by the judiciary. Even then they were skeptical.
Wikipedia actually has a reasonable history of what happened here in the US (or at least, it is similar to what i learned in law school).
You aren't actually contracting away any constitutional rights here, which is one reason why they allow it (though you can actually contract away constitutional rights in some cases)
Even the binding arbitration part is allowed, as per the Federal Arbitration Act (which has been upheld several times).
You can appeal the arbitration, just not on most substantive grounds (which sucks, but c'est la vie).
In the US, the general rule is that you can give up your Constitutional rights via contracts. It's, e.g., the basis for our criminal justice system, where plea bargaining (which is the criminal analogue of a civil settlement contract) is used in almost all cases despite a Constitutional right to a jury trial.
Thats astonishing.
I see from your profile that you are a lawyer, so I'll ask. Are there any limits to the rights a person give can give up? Could they, for example, voluntarily sign a contract that irrevocably places them in servitude to someone else (13th amendment)?
You are completely and totally wrong about everything you just said. I run a business and every client signs a contract agreeing to mandatory binding arbitration. Why? Court cases are expensive, and most of my clients are attorneys themselves or have significantly more resources than I do.
Both sides agree on an arbitrator and each side pays 50% of the fee. Arbitration is not some back room circle jerk where the defendant gives the arbitrator a couple hundred bucks for a favorable ruling, and the notion that it is is offensive to people like me who rely on that option. And guess what? If the arbitration was like that, you're within your right to sue.
It's simply how the incentives are aligned. If judges were paid salaries by major corporations and could be fired at the corporation's whim, the court system would, at the very least, seem unfair.
For two small entities wanting to disagree over something, arbitration might work out OK. But it absolutely does not work out between consumers and large corporations. Fair or not, they don't seem fair, and seeming fair is the legal system's number one task.
I think it was mentioned elsewhere that contracts that are both (A) between parties of vastly disparate power, e.g. Microsoft's EULA and the average Xbox gamer; and (B) "take it or leave it" style contracts have been ruled on at least one occasion to be untenable.
Understanding this is not usually the case in the US, I'd rather have a legal system that seemed unfair unless you researched the details than one tried to seem fair from the outside at the risk of being unfair to specific groups.
Also I don't need to do this, because I'm in Norway and I have no reason to join an American class action suit and in Norway you can't sign away your rights in this manner.
I dislike runaway litigation as much as anyone, blah blah blah, but you can't keep me from peaceably assembling for whatever reasons I see fit.
See also http://en.wikipedia.org/wiki/AT%26T_Mobility_v._Concepcion
Obviously a contract can't protect a company from, say, criminal enforcement by the SEC, because that's a right held by the government, not the injured individuals.
Maybe in your country.
In Australia, at least, they can not.
When going ice skating those signs that say "Skaters do so at their own risk" mean nothing in Australia. There are certain rights an individual can not sign away.
i.e. if the ice skating rink from the above example is negligent in their requirement to provide a level of care, then they need to be punished by a court.
Court: a year (or more) of legal fees, proceedings, headache, stress, and pain in the ass. Settle: Get less cash, be done with it.
In both cases, you're being compensated for the violation of your basic rights. In one of them, you take up the court's time and pay for it dearly in order to make your point publicly and to potentially get more money. In the other, assuming you're trying to sue someone without too much hubris such that they're willing to settle, the affair is much tidier, but generally less bitter for the loser, too.
"you agree not to sue if you injure yourself, even if it was due to our negligence... "
When I sign it (because I can either agree, or not play the game of paintball with my mates), I just do so on the basis that a clause like that wouldn't hold up very well.
In the UK, on the other hand, I don't think they're enforceable at all.
Though I'm not sure if it would be possible because you need to sign the letter.
For some time I was getting a page banner on netflix.com telling I had to go agree to this. I never did. I keep expecting them to cancel my service. Perhaps they went and agreed for me.
Even if you could sign away your right to sue, these are contracts, so things aren't so black and white. We're talking civil law here, which means even if you did sign away your right to sue, you could sue anyway. You'd break the contract, which would open you to counter-suit, but hey, we're all lobbing grenades at that point, so why the hell not, right?
For context, I'm currently being sued for something that every attorney I talk to says is a "total bullshit suit", yet it's been going on for two (almost three) years now.
Big fing surprise.
In reality though, your problem is with Congress. This had nothing much to do with class action lawsuits, and everything to do with the federal arbitration act and whether it preempts state law. Congress could trivially fix this by adding two sentences to the law.