The Fall Of Arbitration Clauses And Bars To Class Relief In Consumer Agreements:
This is not a law blog, and I am no lawyer. However, the recent flap about Amazon’s dekindling of Orwell’s works led me to dig into the Kindle license agreement looking for loopholes.
I said at the time that Amazon was headed for court:
So, a close reading by a law-savvy lay person suggests that Amazon never stated that it had the rights to dekindle books or other materials once legally purchased or acquired through a subscription. In fact, Amazon never mentions that dekindling is possible.
While they do assert the rights to change all the terms of the agreement at will, it is unlikely that a court would support the notion that they could delete legally purchased materials, and especially users’ annotations, which are clearly owned freely by the users.
So, the likelihood is that Amazon will offer some settlement to those who were harmed by this. I am betting hundreds of dollars per person. And those who lost extensive notes are likely to be able to claim higher damages.
A number of others (like those interviewed by IW writer Thomas Claburn, and various commenters to my earlier posts) pointed out that the terms that state that the consumers only option was arbitration. I thought this was a travesty.
Peter Friedman, a Visiting Assistant Professor at the University of Detroit Mercy Law School, has dug up recent court cases that indicate that in recent months, various US Courts have ruled that arbitration clauses and various bars to class relief are unsupportable. His examples include various consumer cases with phone companies, Dell, Blockbuster, and others. His conclusion:
GUEST-POST | Part Two: The Emergence in the Last Month of an Express Judicial Recognition that Arbitration Clauses Barring Class Relief in Consumer Agreements Are Void by Peter Friedman]
Contract law should not be a means of enforcing performance of actions whose legitimate purposes are being perverted in a particular deal. The purpose of arbitration is not to be a procedural snare to trap a party into a situation in which he can get no feasible remedy for a legal wrong; its purpose is to promote efficient dispute resolution. Courts finally, in the last month, are making this point explicit. No doubt these issues will continue to be litigated in the immediate future; already, at least one firm has announced that it will be filing a class action against Amazon for breach of the Kindle end user license agreement in connection with Amazon’s recall of 1984 and Animal Farm. More importantly, the U.S. Supreme Court, toward the end of its recent term, has agreed to hear Stolt-Nielsen S.A., et al. v. AnimalFeeds International Corp., in which the Court will decide “[w]hether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act.”
Courts are acting in legitimate ways when they require disputes to be resolved in ways that provide relief for and deterrence of wrongdoing. Institutions that administer arbitrations are beginning to recognize the problems as well. This month, the National Arbitration Forum (“NAF”) has entered into a consent decree, settling a suit brought by the Minnesota Attorney General, pursuant to which the NAF has agreed to refrain from arbitrating consumer transactions altogether. And the American Arbitration Association (“AAA”) has voluntarily imposed a moratorium on the administration of debt collection arbitration programs in all consumer transaction cases. It is time for legislatures to step in as well.
So, as I hoped, Amazon will be heading for court based on a class action suit, unless it settles with those damaged by their recent actions. And user agreements everywhere will likely have to be rewritten without the arbitration verbiage and the attempts to bar class action.
