Litigation Law

Watch Out for Arbitration Clauses in the Terms of Service for your Mobile Apps

By: Clark, Campbell, Lancaster & Munson, P.A.

Q:  I recently downloaded a mobile app without reading the Terms of Service. What concerns should I have?

A: Although each set of Terms of Service will have its own unique issues, a common concern is what would happen if there is a dispute between the user and developer of the mobile app. A growing number of companies, including Uber and Pokémon Go, require the dispute to be resolved through arbitration according to their Terms of Service.

Arbitration is the process where a dispute between the parties will be resolved outside of the courtroom by a third party, the arbitrator. Although arbitration is conducted outside of the courtroom, it is not necessarily a form of mediation. The arbitration process is actually adversarial much like traditional litigation – one party will be deemed the “winner” and the other party will be the “loser” upon resolution of the dispute.

Some of the advantages of arbitration are as follows:

(1) Flexibility. Unlike traditional litigation, the parties to the dispute are often able to schedule arbitration at their convenience, including evenings and weekends. In contrast, with traditional litigation, the courts generally have overcrowded calendars, whereby the parties have to schedule trial whenever the court has availability.

(2) Simplicity. Discovery is the process where the parties to a dispute obtain information from one another. In arbitration, the scope of discovery is often determined by the parties or by the arbitrator. Unlike traditional litigation, which requires a strict procedural process for discovery, arbitration often results in the discovery phase being simplified or completely bypassed.

(3) Expertise. If effectively chosen, arbitrators tend to be more experienced and skilled in the particular subject matter at the heart of the dispute compared to a judge or jury in traditional litigation.

(4) Potentially Cheaper. Due to the simplification of the discovery phase and the potential for a quick resolution of the dispute, the arbitration process may be cheaper, but this is not guaranteed.

Some of the disadvantages of arbitration are as follows:

(1) Limited Recourse. In arbitration, a party’s ability to successfully appeal an arbitrator’s decision is extremely limited. An arbitration clause will often provide that the arbitrator’s decision is final and binding upon the parties, even if the resolution is unfair. In traditional litigation, a party generally has the option to appeal a court’s decision.

(2) Lack of Information. Since the discovery process is usually simplified or bypassed in arbitration, the parties may discover after the arbitrator’s decision that vital information to the dispute could have been obtained through traditional forms of discovery, such as depositions.

(3) Upfront Costs. In arbitration, the costs are often substantial from the outset, which may foreclose an early settlement to the dispute.

(4) Limitation on Class Actions. An arbitration clause may prevent a party from joining a class action against the other party.

I accepted the Terms of Service for a mobile app and now realize there is an arbitration clause with which I do not agree.  Is there anything that I can do?

Depending on the Terms of Service, a user may have the opportunity to opt out of an arbitration clause so long as the user provides adequate notice. For example, in Pokémon Go, the user may opt out of the arbitration clause if the user provides written notice within 30 days from the date the user accepted Pokémon Go’s Terms of Service. Further, a user may be able to seek remedy in the courts that the arbitration clause is unconscionable, but generally arbitration clauses are looked upon favorably by the courts. Due to the implications of arbitration, it is important for a user of a mobile app to read, or at the very least, skim over the Terms of Service before clicking “I accept.”

The October 20th edition of “The Law” will discuss so-called “vulnerable road user” hit-and-run laws.

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