Paypal policy update: No class-action suits(cms.paypal.com)
cms.paypal.com
Paypal policy update: No class-action suits
https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=ua/upcoming_policies_full
20 comments
The court did not rule the contract unconscionable because it was a contract of adhesion. They ruled that it was both a contract of adhesion and unconscionable, the combination of which made it unacceptable to the court. "Take it or leave it" remains perfectly acceptable, unless combined with unconscionable terms.
IANAL, but wouldn't the Supreme Court's subsequent ruling in the AT&T case supersede that? http://www.npr.org/2011/04/28/135785797/supreme-court-impose...
Courts have avoided Concepcion with surprising frequency by holding that it did not preempt ordinary unconscionability rules.
There's a pretty good round up of illustrative opinions here: http://www.uclpractitioner.com/2012/03/new-opinions-interpre...
There's a pretty good round up of illustrative opinions here: http://www.uclpractitioner.com/2012/03/new-opinions-interpre...
[deleted]
I love the 9th Circuit.
"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."
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.
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.
I wonder if this is part of David Marcus' plan to "radically change" paypal and "earn your trust again"...
http://ndy.gd/JJgB
edit: added trust quote.
http://ndy.gd/JJgB
edit: added trust quote.
It's interesting in contrast to the way Microsoft does it, as explained by grellas here: http://news.ycombinator.com/item?id=4460843
They're similarly restricting class action suits, but doing so in a way that comes off as quite generous.
They're similarly restricting class action suits, but doing so in a way that comes off as quite generous.
Well, class action suits itself are not free of problems.
They're not, but they're a solution to a basic structural problem in the law. In countries like the US that depend on private suits to accomplish what in some other countries would be done through government enforcement actions, it becomes possible to profit by screwing over a large number of people for a small amount each. If that amount is less than a threshold, it becomes unprofitable to litigate, and only a few such claims will be brought, far less than the actual damages caused by the company.
> Unless you opt out: (1) you will only be permitted to pursue claims against PayPal on an individual basis
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)
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)
From the Policy Updates page:
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.
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.
Thanks. I found an easier way -- deleting my PayPal account.
But expect more legal agreements to do this.
I do expect to see more of it, although I prefer to see it done the way Microsoft does (I've linked it elsewhere in the thread). What rubbed me the wrong way about this one wasn't the policy, but how they make opting out as difficult as possible.
Hence the emergence of such legislation as: https://en.wikipedia.org/wiki/CAN-SPAM_Act_of_2003
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.
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.
Sure, but by making it hard for legitimate companies to spam you, we get a much clearer separation of spam from ham. You don't have to know who all the bad guys are, it's enough to know who all the good guys are.
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.
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.
I am opting out by emailing the first @paypal.com address I can find. I have altered my agreement with paypal to the effect that notifying them in this way is permissible.
I'm glad they make it so easy!
There is one good thing about the method they've chosen...if you could rally up tens of thousands of PayPal users, they would be swamped.
I'm from Europe and I don't really getting it.
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?
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?
IANAL, but while you cannot totally give up your right to sue, you can voluntarily restrict it.
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.
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.
To put it simply, class action lawsuits have never been a constitutional right in the US.
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 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).
> So is this legal in the US? How many of your constitutional rights can you give up in a contract in the US?
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.
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.
"In the US, the general rule is that you can give up your Constitutional rights via contracts"
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)?
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)?
As a non-lawyer, I'd be interested to know if existing Paypal customers in the US can request a declaratory judgement on the enforceability of the arbitration clauses. I feel there would be a beneficial chilling effect on service providers if customers could bring class-action suits for declaratory remedies about adhesive and unconscionable/inequitable terms of service—that is, without having to first breach the terms of the contract (which could only happen on an individual basis and in which case the playing field would be massively un-level).
Sue in small claims court? I thought part of the point of class actions were to make things cheaper for defendants by only having to defend one case instead of thousands.
Binding arbitration is even better for defendants, though, since all they have to do is pay their friend the arbitrator to rule on their side. There are no checks and balances, no jury of your peers, no appeals process, and no reason for the arbitrator to ever side with you. If you sign a contract that includes a mandatory binding arbitration clause, it means one thing: the other side intends to violate the contract.
I'm familiar with your history on HN and your work with open source and appreciate both, so please do not take offense to this.
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.
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.
The problem is not back room deals but how the system converges on local maxima. Say you're consumer C and you have a problem with megacorp A. Megacorp A chooses arbitrator B. B sides with you. Consumer D has a problem with A, and B again sides with the consumer. Arbitrator B is fired by megacorp B. Megacorp A brings in arbitrator D, who sides with Megacorp A. This continues, generating happiness for Megacorp A and plenty of income for Megacorp D, making everyone happy but consumer C.
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.
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.
The comparison to judges would be a fair comparison if both parties paid 50% of the judge's salary, and both parties had to agree on which judge to use. Arbitrators are simply not chosen and paid for by the corporations. The way it is typically done is that one arbitrator is agreed upon by both parties (negating any implications of foul play), or each party chooses one and those two arbitrators choose a third.
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.
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.
I don't think the corp gets to choose the arbitrator, which essentially invalidates all of your logic on this one.
I would like to find the first form on their page, find out where it posts to and post my opt out there. If the web server responds with a 200 OK then I know they got it so I have opted out and received a confirmation that they got my message.
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.
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.
FnordFnordFnordCo LLC Policy update. This update to the User Agreement effective ca. many years ago. contains changes that affect how claims you (PayPal) and FnordFnordFnord have against each other are resolved. You (PayPal) will be used only as a last resort. Pretty much if there is any alternative better than a carrier pigeon, it will be used.
Absurd. Think of what a class action lawsuit is, in its bare form - it is a form of free speech - a peaceable assembly.
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.
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.
How is this even legal?
The Federal Arbitration Act of 1925 - http://en.wikipedia.org/wiki/Federal_Arbitration_Act
See also http://en.wikipedia.org/wiki/AT%26T_Mobility_v._Concepcion
See also http://en.wikipedia.org/wiki/AT%26T_Mobility_v._Concepcion
Visa has the same policy: https://www.palmettocitizens.org/info/visa.html
Until a judge rules it binding, it isn't. It's just a bunch legal verbiage.
This is something I don't get about these clauses in contracts. Law should supersede any private contract otherwise what's the point of having such law?
Laws create private rights, and those rights can be contracted-away. Say the securities laws create a private right of action for people who make misrepresentations on a prospectus. If you're an investor who buys a security from a shady issuer, you can choose to sue or not. The law just creates a right of action, it doesn't force you to use it. The law views contracts to give up that right of action as being just a part of your discretion in exercising that right.
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.
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.
> Laws create private rights, and those rights can be contracted-away.
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.
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.
Right, I should have mentioned this is for the US. Here, legal rights are presumptively waivable, even Constitutional ones.
The US also holds certain rights that cannot be signed away, some of which hold for the whole US and some of which are per state. IANAL, but as I understand it the US does allow you to waive your right to pursuing certain types of claims in court (and that waiver can potentially be overturned on a case-by-case basis) but only by allowing arbitration instead. Arbitration is, in the most basic way of speaking, private court with different rules in effect. This is allowed because the US specifically allows it. In fact, the US has generally been a strong advocate of arbitration.
If you can't waive your rights, you can't even settle out of court. That's what a settlement is -- an agreement to waive right to due for some payment.
In the case of basic rights, why would you want to settle out of court?
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.
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.
How is it hard to understand? Settle does not in any way mean "forgive" or "forget" or "waive."
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.
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.
Why do you have to agree to that before hand? Why doesn't the contract prevent Paypal from suing other parties?
If you replace "rights" with "remedies", your comment makes a lot more sense.
The legal terminology is a little confusing given the common usage of the word "right." The option to sue that arises under some law as the result of a specific injury is a "right." The compensation for that injury from a successful suit is the "remedy." You can of course bargain away your remedy, but winning a suit and paying it over to someone else, but that's not what I was referring to.
I've often thought about this. Specifically, if you want to play a game of paintball or some other physical activity, there is often a waiver you sign which says something along the line of:
"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.
"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.
IANAL, but it looks like in the US it really depends on state, but often the waiver only protects against negligence, not gross negligence.
In the UK, on the other hand, I don't think they're enforceable at all.
In the UK, on the other hand, I don't think they're enforceable at all.
So where is the webpage that takes your Name, Address, paypal Email, and sends the opt-out letter for you, for $0.99 ?
Paid via Paypal of course.
Though I'm not sure if it would be possible because you need to sign the letter.
Though I'm not sure if it would be possible because you need to sign the letter.
I've started seeing these on my Visa card as well, about 1 month ago. I wonder which one tipped the other off about it, or which case made this so sensitive to these large companies.
That's okay, seriously. I have no intention of ever using paypal ever again. Case closed. I wonder how many new customers this is going to loose them? Only time will tell.
Contracts only mean what the courts say they mean. And if your only agreement is a "yes" typed into a text field or a checkbox clicked, probably mean even less than that.
Oh no and paypal said they were changing... yeah like 99% of paypal users have the time and money to sue paypal individually, yeah change...
Netflix, just this week added a similar EULA...
Netflix annouunced that some months ago in the US. Are you just seeing it now?
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.
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.
Words on a page.
it is legal ?
IANAL, but it's hard to sign away your right to tortious remedy like this (in most cases). At least in the way we think of it.
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.
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.
Let's start a class-action lawsuit to challenge it.
"Scalia was joined in AT&T Mobility v. Concepcion by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito."
Big fing surprise.
Big fing surprise.
The supreme court started class actions in the US, the supreme court ended them (in practice).
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.
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.
Am I the only one surprised with the widespread use of "IANAL" as an abbreviation ?
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.
...
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.