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Dropbox – No Good Deed Goes Unpunished

As someone who pays more attention than most to website terms of use (TOU), I’m amused by the kerfuffle over the Dropbox announcement this week that it is adding an arbitration provision to its TOU.

Reading the comments on the Dropbox blog, you would think this was the most devious, anti-consumer thing the company could have done.  But while these arguments have facial appeal (“THEY’RE CUTTING OFF MY CHANCE TO BE HEARD IN COURT!!”), they don’t acknowledge the reality of the situation.

Consider: the vast majority of consumer Dropbox users don’t pay Dropbox ANYTHING.  They’re using a free service.  And the rest of them aren’t paying much; maybe a few hundred dollars a year, at most.

Why is this important?  Because it means that most consumers will have little-to-no damages in any suit against Dropbox.  Like, little enough that it wouldn’t justify paying the filing fee in small claims court (typically $100-$200), let alone dealing with the time and expense of a full-blown case.

Dropbox is offering a free, expedited means of getting such claims resolved.  While many argue that the arbitrators will be biased toward Dropbox as the company is paying the bills, in my (20+ years) experience this is not a real concern.  Or at most it’s an edge case, a minimal risk compared to the crap shoot you’ll get in small claims court.  But more importantly, it’s a very minor concern compared to the fact that the Dropbox arbitration procedure removes the cost and friction that would leave most small, legitimate claims stillborn.

And another point on that friction:  Dropbox allows users to bring the arbitration in whatever county the user lives or works.  The typical website TOU – which you almost never hear objections about – will contain a forum selection clause requiring that all claims against the company be brought wherever the company is headquartered.  Such provisions are routinely upheld (and make a world of sense from the company perspective).

Dropbox COULD have said, “fine – you got a claim?  You can have your day in court.  In San Francisco.”  Instead, they’ve set up a process that makes it far easier for the vast majority of consumers to have claims addressed.

Yet predictably, they’re getting abused for it.

5 thoughts on “Dropbox – No Good Deed Goes Unpunished”

  1. Well that’s one way to look at it, but you’ve ignored the class action waiver. You’re right that most claims are likely to be small. That’s exactly the sort of situation where class actions make sense.

    1. Class actions very rarely make sense (except for the attorneys representing the class). And as Dropbox has removed any cost associated with consumers seeking to vindicate those small claims, the availability of class relief matters even less.

      1. Bashing class action lawyers is definitely a popular pastime, and I’m not going to defend them as paragons of virtue. As a means of making consumers whole, class actions suck, but they can be an effective check on corporations.

        As for Dropbox agreeing to pay all the costs of arbitration, that’s a double-edged sword. On the one hand, it makes it affordable for consumers. On the other, an arbitrator isn’t likely to be too hard on the company that pays all his bills, is it? You say that’s not a real concern, but objective data says you’re wrong.

        In debt collection lawsuits, for example, it turned out that consumers rarely had a chance against collectors who were bringing lots of business to the arbitrators, even when they might have prevailed in court. (National Arbitration Forum took it a step further, and actually colluded with debt collectors to screw consumers. That’s the industry you want us to trust?) Anecdotally, I never lost a debt collection defense lawsuit, even when consumers lost effectively identical cases in arbitration.

        1. Consumer arbitration has gotten a bad rap because most companies use it not to stymie legitimate consumer claims, but to make it easier for the company to collect consumer debts. I expect – but don’t know for certain – that Dropbox is doing this not to make their job as a plaintiff easier (my guess is they do little-to-no collections), but to help stymie the flood of meritless pro se complaints that most large internet companies face.

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