Netflix Terms of Service Invalidates Your Right To Sue

New submitter ebombme writes "Netflix has decided to go the route of AT&T and others by trying to take away the rights of their users to form class action lawsuits against them. A copy of the new terms of use states 'These Terms of Use provide that all disputes between you and Netflix will be resolved by BINDING ARBITRATION. YOU AGREE TO GIVE UP YOUR RIGHT TO GO TO COURT to assert or defend your rights under this contract (except for matters that may be taken to small claims court). Your rights will be determined by a NEUTRAL ARBITRATOR and NOT a judge or jury and your claims cannot be brought as a class action. Please review the Arbitration Agreement below for the details regarding your agreement to arbitrate any disputes with Netflix.'"

Comments

Not legal.

[Anonymous Coward]

Next question.

Re:Not legal.

[macs4all]

It is perfectly legal. Business lobbies have purchased congress to affirm in law that these stipulations are allowable.

Really? I must have missed the repeal of the Seventh Amendment to the U.S. Constitution (which guarantees not only a right to sue, but in fact guarantees a JURY TRIAL in any controversy in excess of TWENTY dollars), AND the vacating of 250 years of case law that stands for the proposition that the waiver of a constitutional right must be express, informed and knowing.

A "click contract" doesn't meet any of those criteria, regardless of what South Park would lead you to believe.

Re:Not legal.

[kurt555gs]

Verizon just won this in the Supreme court. You must be reading Constitution V 1.0 which is out dated. The 7th Amendment has been revised to allow big companies to do what ever they want as I just said along with reducing the 1st, 2nd, 4th, 5th, and 6th amendments to meaningless gibberish.

Re:Not legal.

[iamgnat]

Really? I must have missed the repeal of the Seventh Amendment to the U.S. Constitution

Not a repeal, but a sound gutting:

• ARS
• Reuters
• NYT

yep

[poetmatt]

entirely non starter. Not enforceable either.

So why is this news?

Re:yep

[Anonymous Coward]

Completely enforceable in the US.

US Supreme Court ruled that binding arbitration agreements are legal and enforceable.

Still, not news, as every company will soon have this clause.

Re:yep

[russotto]

Right, because the law explicitly makes arbitration legal. (See "Federal Arbitration Act"). The courts don't want to have to deal with actually providing justice (or even injustice) to pissants like us; better to fob us off on a "neutral" arbitrator hired by the other party who can deal out injustice without bothering the judges.

Re:yep

[Anonymous Coward]

So... is anyone going to provide a citation instead of just shouting that the other person is wrong?

Re:yep

[errandum]

Arbitration doesn't work like this (at least where I come from). There are 3 arbitrators, one yours, one from them and one neutral, as in, agreed by both parties. So the "neutral" should be neutral. And even if it is only one, it should still be agreed by both.

On the other hand, it is highly unlikely that you'll ever get a giant compensation via arbitration, and I believe that is what they are trying to avoid. It is also extremely more cost effective in terms of legal bills.

Unlike most people, I do believe that most claims should be decided like this. Decisions would be speedier, there would be no legal system to abuse because you have more money and power than the common joe...

Most people don't know what arbitration is... That's why they complain. It is actually a common clause in contracts between giant companies - and believe me, none of them want to lose money.

Re:yep

[Tsian]

This blog discusses the case and its ramifications briefly

Significance: Under this Supreme Court ruling, consumer contracts that require binding arbitration and prohibit participation in classwide arbitration are allowable.
http://lawprofessors.typepad.com/banking/2011/05/us-supreme-court-okays-binding-arbitration-clauses-prohibiting-consumers-from-joining-class-actions.html

Re:yep

[russotto]

Arbitration doesn't work like this (at least where I come from). There are 3 arbitrators, one yours, one from them and one neutral, as in, agreed by both parties. So the "neutral" should be neutral. And even if it is only one, it should still be agreed by both.

You might go to an arbitrator once or twice in your lifetime. These companies deal with them all the time. That means every arbitrator has no incentive to keep you happy and every incentive to keep the other side -- their repeat customers -- happy.

Unlike most people, I do believe that most claims should be decided like this. Decisions would be speedier, there would be no legal system to abuse because you have more money and power than the common joe...

Yes, decisions would be speedier all right.

Most people don't know what arbitration is... That's why they complain. It is actually a common clause in contracts between giant companies - and believe me, none of them want to lose money.

Giant companies can use arbitration effectively because they're already similarly situated.

Re:yep

[poetmatt]

Uh, no. They said certain parts of binding arbitration agreements are enforceable if it doesn't create an undue burden. They didn't say you could actually give up your right to litigation.

Re:yep

[russotto]

You're forgetting that the decision on an arbitrator has to be agreed by both parties. If you feel you're getting the short end of the stick, simply don't agree to him and another one needs to be found.

How, as a consumer, am I to know anything about the arbitrator? I don't have a legal department to research these things. And in any case, all arbitrator are similarly situated -- they all hear a lot of cases where the plaintiff is J. Random Consumer who they'll never see again, and a few massive companies who they'll see again and again and again.

Your assumption that every arbitrator in the country will be corrupt is the reason why there is no progress and the courts are jammed.

It's not that every arbitrator in the country is corrupt. It's that the process is such that the arbitrator's interests naturally favor the corporation. If an arbitrator gets the reputation of being too consumer-friendly, the corporations (who can research these things) will stop agreeing to him and he's out of a job. If an arbitrator gets the reputation of always agreeing with the corporation, most consumers won't even know about it, and those few who do find out aren't significant enough to matter.

In any case, deciding disputes is the civil courts' JOB. If they can't do it, why the heck do we even have them?

Re:yep

[digitalaudiorock]

Yup...and I can't for the life of me figure out how that jives with the 7 th Amendment: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." Seems pretty clear to me.

Re:yep

[dgatwood]

You are correct. What the GP was thinking of is called "mediation". Binding arbitration means that you agree to abide by the decision.

Worse, binding arbitration means that you lose the right to sue over afterwards. Once arbitration begins, your right to sue is gone. This is why binding arbitration should be limited to minor disputes over small sums of money. If that's not what you're dealing with, you are always better off getting a lawyer and going to court, challenging the binding arbitration clause as unconscionable.

At least in the state of California, mandatory binding arbitration clauses in contracts of adhesion (e.g. the Netflix contract) are almost always found to be unconscionable. Unfortunately, the recent Supreme Court decision undid all this, reversing some thirty years of fairly consistent case law in the name of federal preemption. At this point, the only way to get back our right to sue is to demand that Congress pass laws fixing this heinous abuse of justice.

Mandatory binding arbitration clauses in contracts of adhesion are way beyond unconscionable. They are a fundamental abrogation of the legal principles upon which this country was founded. The justices who made this decision should be ashamed of themselves for putting the profits of big corporations above the public's right to not get screwed by them.

Re:yep

[i-like-burritos]

Yup...and I can't for the life of me figure out how that jives with the 7 th Amendment: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." Seems pretty clear to me.

The Constitution is like the Bible. It's supposedly sacred and infallible, but It's not meant to be taken literally and you have to let the courts interpret it for you (in the context of their own personal interests). As time passes, more and more of it gets flat-out ignored, and eventually it will only ever be read as an academic exercise by historians.

Re:yep

[Solandri]

Tossing $20 and 1789 into an inflation calculator (which only goes back to 1800) comes out to about $250 in 2010. Most people's annual Netflix subscriptions fall below that, and one could argue that it's the monthly fee which has to fall below $250 since you can cancel the service any month if you're unhappy with it.

Re:yep

[Maxo-Texas]

Which is why the ridiculously low levels to qualify for Felony crimes should also be adjusted for inflation...

Re:yep

[91degrees]

Well, sorta yes, sorta no.

If I offered a service, I might suggest that disputes are dealt with by arbitration, and you might agree. This would typically be legal, and often this is something both sides would prefer. In this case you are signing away your right to sue, and courts tend to be quite happy with this. Of course, in this situation, the chances are you have read and pretty much understood the terms.

In this case though, it's not a negotiation. If you contacted Netflix and asked them to remove this clause, they would simply refuse. In this case, it's not even an agreement. They're imposing a new set of rules on you.

So you're right (probably - IANAL), but it's not a rule that always applies.

Re:yep

[MickLinux]

And since the government holds that it cannot be sued, then that means that the seventh amendment no longer applies to anything. Yes, I am trolling when I say that it looks to me like it jives with the rest of the United States Constitution.

who wrote this?

[mapkinase]

Your rights will be determined by a NEUTRAL ARBITRATOR and NOT a judge or jury

Kafka?

Irrelevant for the normal consumer

[FaxeTheCat]

The values i a Netflix subscription is just too small for a normal person to engage in a lawsuit. Even a class action suit would be off little value (look at history - only lawyers get any real money out of it). The real power for the subscribers is to stop the subscription. And you do not need to sue or go to arbitration over that.
And of course, if they give bad service it is far more efficient to slashdot them over it than to sue anyway.

Re:Irrelevant for the normal consumer

[jonsmirl]

That's the real problem. The only winner in these class actions is the lawyers. They get $20M. The consumers get coupons and the service raises their price to collect the $20M and give it the lawyers.

I got a check for $0.02 in a mortgage case when the class action lawyer took home $65M. Funny how the account servicing fee went up $0.10 a month after that. Probably cost me over $20 to recover that $0.02 I had been "cheated" out of.

Re:Irrelevant for the normal consumer

[sarysa]

I have to agree. The real potential damage by Netflix is so small, suing them makes little sense to begin with. That said, I find it amusing that they mention in the TOS that you can sue in small claims. A torrent of those could do a lot of damage, and would be difficult to defend. (Insufficient legal resources) Probably what the AT&T guy was going for.

Re:Irrelevant for the normal consumer

[Sponge Bath]

The values i a Netflix subscription is just too small for a normal person to engage in a lawsuit.

What if Netflix leaked your private information, including credit card, and decided to hide the fact for months until you are the victim of identity theft that takes years of aggravation to clean up? Is that enough value to seek a legal remedy?

Re:Irrelevant for the normal consumer

[Uberbah]

Why. Are you going to start contributing to court fees when you sign up for a class action lawsuit, so you share in the risk?

What other legal rights can they get you to waive?

[mykos]

I'd like to test this sometime and see if I can take someone's life, liberty, or pursuit of happiness from them.

Re:What other legal rights can they get you to wai

[Hatta]

In the US it's common to take someones life and/or liberty because of their pursuit of happiness.

Not irrelevant at all

[drinkypoo]

There is more motivation than getting paid back in a lawsuit; there is also the goal of causing a company to change its behavior. And the threat of a lawsuit tends to mitigate their bad behavior preemptively; it's obviously not guaranteed to work, but it probably does help.

EULA = broken

[Anonymous Coward]

There is another matter here.

The inclusion of such a clause would render the contract void in a number of jurisdictional, thereby voiding the whole EULA. Just another case of careful work by a contract lawyer being completely undone by their employer. See shrink-wrap EULA's contained inside of an opaque product package that you become bound to only after you open it, these are automatically void.

Netflix has authority beyond the law?

[dicobalt]

The company should be fined and their head of legal sent off to federal "pound you in the ass" prison for even attempting to put this in an EULA. How can an EULA supersede law?

If Netflix has this "right"...

[mallydobb]

then I as a customer have the right not to choose their service, simple as that. I really don't see how this can be legal, but I am unable (and unwilling) to be a person who brings this to court to test the waters.

Re:if they break the law...

[History's Coming To]

In the UK you can't sign away your statutory rights. If I sign a contract saying I won't sue for negligence and the company are negligent, then I can sue and the judge will probably see the contract as a minus point for the defendant/s.

Example - my landlord can put a clause in the rent contract saying he is not responsible for the safety of animals (reasonable, as I live on a farm), but he can't get out of a statutory obligation such as ensuring electrical safety in the premises, no matter what I sign.

Re:USA,

[Spiked_Three]

Mod him up. I live here (the US) and I agree. The US is becoming a joke to me too.

Another fine example, DirecTV has over 30,000 consumer complaints AND had an injunction filed against them in 2009 for deceptive business practices. And they have changed absolutely nothing in their business model. They still lie, bait and switch, refuse to allow you to cancel, then claim on TV they have the highest customer satisfaction rating.

Life in the US is about dodging ripoffs from large corporations, co-sponsored by the government that encourages it. There used to be a certain amount of good faith expected in business, that is gone completely. Investors demand more profit, and don't care who gets ripped off to get it. That is the entire problem. The founders of capitalism warned if the rich got too powerful the system would fail - and it is, but the rich will not let you know that.

Look at it another way (if it is not obvious); You are being required to give up the Constitution in order to watch a movie in a way that is convenient to you. Are you living in the United States of america or some warlord run African tribe? Sure we have choice in America, paper or plastic? George Carlin said it in the 90s. Other than our grocery bags, little else is left up to us (In Seattle, plastic grocery bags become illegal starting in June :| )

IAAL and it IS unenforceable

[PDG]

The AT&T case was unique in that the SCOTUS overrode a CA statute that was OVERLY generous to consumers (and completely unfair to businesses) and said the arbitration clause was valid. MA on the other hand will toss out such a clause (as they did in the Dell case) as it simply stripped a consumer's right to the court. So I repeat, the AT&T does NOT validate all arbitration clauses, all it did was invalidate enforcement of a CA statute that was superceded by the Fed Arbitration Action.

Re:IAAL and it IS unenforceable

[VortexCortex]

Just out of curiosity, what's your take of the wording of:

These Terms of Use provide that all disputes between you and Netflix will be resolved by BINDING ARBITRATION.

Does this not also mean Netflix can't sue its customers in court either?

The corporate 5 on the Supreme Court aside

[HangingChad]

I don't understand how any click-through contract is legal. When you buy a house, you make the offer in writing and anything you scribble in the margins takes precedent over what's typed. Handwriting ON BEHALF OF [COMPANY NAME] above my signature saved my butt more than once.

There's no place to make margin notes in a click-through agreement, no negotiation and no consideration from the vendor. Click-throughs are not an agreement, they're hostage taking. It's not right making them enforceable.

Re:The corporate 5 on the Supreme Court aside

[sixtyeight]

Yes, this is known as "qualifying your signature". Even attorneys will tell you it's okay, but I've had more than one cop threaten to jail me if I continued "defacing the ticket".

There's also a very good case for them being unenforceable due to being "compelled to contract". This case has not been made.

The original meaning of the term involved any contract that was just too heinous, against the law or against the public morals. Modern America now uses the phrase to refer only to contracts which are too one-sided, in which one party has too much control.

That becomes relevant for the following reason: The standard thinking is that anyone is free to simply not make a contract, even a EULA. ("Fine, just don't use the product.") This is no longer feasible in the software world, and increasingly in the rest of it as well. For a person or company to do that, there would need to be a similar product or service that doesn't have a EULA which creates similar problems. And that almost never happens. Because nearly every product or service does this now, it becomes untenable to live effectively - or work competitively or efficiently - in the world without accepting horrendous EULAs... one is then contracting under duress of sorts, and therefore indirectly compelled to contract.

Sources of data about bad company policies?

[Animats]

Is there any reliable source of data that rates company policies against some objective criterion? Something that's not just an unsorted collection of complaints or anecdotes? There's EULAlyzer, which tries to do this by recognizing stock phrases. Anything else?

Incidentally, Netflix won't even let you read their EULA unless you let them plant a cookie. That's tacky,

If I could find something like that, I'd put it in SiteTruth, and have it appear when you mouse over a link or search result. Currently we report the location of the business and, when available, the annual revenue and number of employees, with links to SEC and BBB reports. The goal is to provide consumers with data that allows them to tell how legitimate the company is. Data that doesn't come from the company. (Or from their social spammers. Most favorable crowd-sourced "reviews" are now solicited, if not outright fake.)

Re:Brokerage Industry in US has binding arb.

[Anonymous Coward]

"Stock borkers".

Indeed.

It's a trick, that's all it is.

[Weaselmancer]

You have it exactly right. You cannot enter into a legal agreement where you sign away one of your rights. For instance, I couldn't sign a binding contract that said "you may not vote". Courts would throw it out.

The reason why they add these clauses is because they are trying to trick people. Ever see the sign on the back of a large truck? "This Vehicle Not Responsible for Objects Coming from Road"? Or in parking lots at grocery stores. "Not Responsible for Damage Caused by Shopping Carts." Know why they have those signs? Because they hope you believe them. They're not true. It's up to the courts to make that determination after you bring suit. Of course the defendant is going to say "not guilty".

It's a bluff, that's all. They are just hoping you believe it.

Re:It's a trick, that's all it is.

[bill_mcgonigle]

You have it exactly right. You cannot enter into a legal agreement where you sign away one of your rights. For instance, I couldn't sign a binding contract that said "you may not vote". Courts would throw it out.

That's not what these clauses mean. They means that, under the terms of this contract, all disputes will be handled by an arbitrator.

You can of course go to court anyway, but then you're in violation of the contract. At this point, the party you've now chosen to sue is basically unbound from the terms of the contract, as you've voided it.

Arbitration is almost always vastly superior to the Court system in terms of cost, time, outcomes, and efficiency, for all parties. Most business contracts contain such clauses these days because nobody wants to wind up in court.

Go Google "Bill of Rights incorporation."

[unassimilatible]

The Bill of Rights were never intended to apply to the states. On the contrary, they were a follow-up to a promise by James Madison to the states rights guys (aka, Anti-Federalists) that if they ratified the Constitution, there would be some amendments that would limit on federal power (there were 12, ten were ratified).

While several of the Amendments (or parts thereof) in the Bill of Rights were later incorporated by SCOTUS pursuant to the 14th Amendment, the 7th Amendment right to jury trial in civil cases was never incorporated (the Re-Examination Clause was).