Arbitrary Sneakwrap Takes Some Hits

We get so used to the court rulings going in favor of big business and against consumer interests that it's almost stunning when a decision goes in the right direction. So it's all the more exciting to see two different judges at almost the same time rule against the one-sided terms of clickwrap/sneakwrap licenses. What's more, in both cases it's that most insidious of terms, the mandatory arbitration clause,

Which brings us to the Gateway case. The reason I find this current case so fascinating is not that it's breaking such new ground but that it actually brings on such a strong sense of déjà vu. For many years I've been writing about the Hill v Gateway case, one of biggest legal defeats American consumers ever suffered. Hill was one of many Gateway customers who had a purchased a particular model that turned out to contain significantly inferior components to the ones Gateway had advertised, but his attempt to sue Gateway was turned away by the courts due to a mandatory arbitration clause in a sneakwrap agreement that came in the box.

Although I don't have any way of knowing the merits of Sheehan's claims, the only real difference I see between his case and Hill's is that, so far at least, this time the court is using common sense. He should consider himself fortunate. Recently I heard from another reader who described his attempt to take Gateway to small claims court a few years ago. "The court was crowded and it was suggested that anyone who wanted to go to non-binding arbitration could go meet with an attorney who was a volunteer for the court. I asked Gateway, they declined. The judge kept my case until last. Gateway handed the judge a blown-up copy of the warranty, and the judge informed me that I was required by the warranty to go to binding arbitration. I told the judge I'd offered to go to arbitration and Gateway declined, but she just said Gateway didn't have to agree to anything because of the warranty."

If you're getting the idea Gateway is something of a serial offender when it comes to using mandatory arbitration clauses to protect itself from legitimate customer beefs, I think you're right. And that's another thing about these clauses that the judge in the Linden case pointed out that the Second Life TOS required the arbitration procedures to be kept confidential. Not only does it mean that each victimized consumer has to fight the company on his or her own, it makes hard to prove a pattern of intentional misconduct.

In the end, the main thing these two cases really have in common is the recognition by the judges that sneakwrap licenses in general and mandatory arbitration clauses specifically give the vendor too much power over the customer. We'd all like to think the free market can keep customers from being abused, but it can't if the only recourse abused customers have is to engage in long, expensive, and secret arbitration procedures. I don't know if Bragg or Sheehan deserve to win their cases, but I do know that they deserve their day in court.

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