Arbitration for Thee but Not for Me


It is common knowledge among lawyers that online platforms have broad leeway to enforce arbitration agreements in their online ToS.

But one wrinkle that is perhaps not as well known is that many companies selectively draft their online contracts to compel arbitration when they prefer it, while still allowing them to avail themselves of traditional courts it suits their preferences.

If you know the types of claims that your users will likely have against you, and you know the types of claims that you will likely have against your users and other third parties, it is possible to draft online agreements to limit your liability for class-action claims, eliminate the risk of a jury trial, and still allows your business to use the legal system to enforce its full range of rights in federal courts when necessary.

That’s as much of a heads-I-win-tails-you-lose legal scenario that the legal system allows. It’s a wonder that more companies don’t take advantage.

As an example, the following paragraph is from Meta’s Commercial Terms:

You agree to arbitrate Commercial Claims between you and Meta Platforms, Inc. This provision does not cover any commercial claims relating to violations of your or our intellectual property rights, including, but not limited to, copyright infringement, patent infringement, trademark infringement, violations of the Brand Usage Guidelines, violations of your or our confidential information or trade secrets, or efforts to interfere with our Products or engage with our Products in unauthorized ways (for example, automated ways). If a Commercial Claim between you and Meta Platforms, Inc. is not subject to arbitration, you agree that the claim must be resolved exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, and that you submit to the personal jurisdiction of either of these courts for the purpose of litigating any such claim.

Meta Commercial Terms

This is a brilliant bit of lawyering. Facebook has taken time to think through all the common claims it has against its commercial users, exempted those from arbitration, and then put all the other claims into the arbitration bucket, which significantly reduces their risk in the form of 1) class action lawsuits and 2) outsized jury awards. Meta regularly litigates against web scrapers and other companies that try to develop businesseses from its data. But if it makes a mistake or faces a legal claim from users, that’s likely to go to arbitration.

There aren’t a whole lot of free lunches in the law. Usually, every legal decision comes with hard trade-offs.

But not in this instance.

With the law of online contracts, you’re only limited by your imagination and basic standards of unconscionability (and you have to go pretty extreme to lose based on unconscionability).

An online legal agreement is a wish list that a court will enforce in your favor (if you do it right).

Every business should have an online terms of use, or the equivalent, that protects it like an Abrams tank. If you don’t, you’re leaving money on the table.