Dropbox’s TOS Amendment Fails (And If This Opinion Stands, Yours Will Too)–Sifuentes v. Dropbox
This is a troubling ruling on TOS amendments. 🚨🚨🚨 It apparently requires clickthroughs to form TOS amendments, regardless of what the TOS specifies as the amendment process. Given how rarely TOS amendments use clickthroughs, this opinion could anticipate the widespread failure of TOS amendments if it’s the final word on the topic. I hope it’s not.
* * *
The Court Opinion
Sifuentes got a Dropbox account in 2011. The court says Dropbox properly formed the TOS. In 2020, Sifuentes sued Dropbox for a 2012 data breach. (Why so long? Does that create statute of limitations problems?). Dropbox tried to send the case to arbitration per its TOS. However, the arbitration clause wasn’t in the TOS when Sifuentes signed up (this is a legacy pre-Concepcion issue). Dropbox says it has amended its TOS twelve times since 2011, including adding the arbitration clause in 2014.
[NB: there always should be someone at the company who can easily answer just how many times the TOS has been amended and provide definitive copies of each amendment and the date they occurred. If your company doesn’t have that, or it would take lots of labor hours to figure it out, YOU ARE DOING IT WRONG.]
The court explains Dropbox’s 2014 amendment process to add the arbitration clause:
Dropbox asserts that it notified users, including Plaintiff, of this change in an email, with hyperlinks leading to the new terms of service and Defendant’s blog, as indicated by differently colored text. The email also included multiple bullet points describing changes being made to the TOS, including:
We’re adding an arbitration section to our updated Terms of Service. Arbitration is a quick and efficient way to resolve disputes, and it provides an alternative to things like state or federal courts where the process could take months or even years. If you don’t want to agree to arbitration, you can easily opt-out via an online form, within 30-days of these Terms becoming effective. This form, and other details, are available on our blog.
Dropbox appeared to follow best practices for TOS amendment (so long as it’s consistent with how the TOS describes the amendment process). Nevertheless, the court is not impressed:
Plaintiff denies that he ever agreed to arbitrate, read any updated terms of service, or opened any emails from Defendant about these issues. Defendant explains that it had a policy of mass emailing its many subscribers about updated terms of service, but there is nothing in the record to suggest that Plaintiff saw or read the email, such as a read receipt reflecting that Plaintiff opened the email. The Court finds that Defendant has not shown by a preponderance of the evidence that Plaintiff had actual notice of the updated terms of service…
There is nothing in the record to suggest that Plaintiff could not use the service until he indicated his assent, that he would have been advised of new terms and conditions while using Defendant’s services, or that Defendant ever tracked whether Plaintiff had opened its email. Even if the email alone could be considered “reasonably conspicuous notice,” Plaintiff took no action to unambiguously manifest his assent…
Given the complete lack of evidence of notice within Defendant’s service itself, Plaintiff’s ongoing use of the service is irrelevant to determining whether he had actual or constructive notice of the post-2011 terms of service
Like many TOSes, Dropbox’s TOS said that it could use email to notify its users of any amendments. (“If a revision, in our sole discretion, is material we will notify you (for example via email to the email address associated with your account.”) The judge shrugs his shoulders: “Ninth Circuit law is clear that it is a website owner’s duty to show clear notice and assent.”
As a result, Dropbox’s arbitration motion fails because the arbitration clause never became part of the Dropbox TOS for Sifuentes.
While the opinion resolves whether Sifuentes must arbitrate, it has much broader implications for Dropbox and potentially industry practices about TOS amendments.
For Dropbox: the court suggests that all of Dropbox’s TOS amendments will fail unless Dropbox can show plaintiffs affirmatively assented to them, which it’s unlikely to be able to do. Dropbox still benefits from the TOS terms it initially agreed to with each user, but not any terms added via purported amendment after initial formation. That includes no arbitration clause with pre-2014 users. UGH.
What’s so odd about this opinion is that it treats TOS amendment as an unprecedented question. However, many opinions have permitted TOS amendments without requiring mutual assent, at least when the TOS specified that amendments could proceed a different way (and the business followed the specified procedures). Furthermore, consistent with prevailing best practices, Dropbox gave users a meaningful way of opting-out of the arbitration clause, which the court could have treated as assent. (That would be a legal fiction, but most online contract formation law is predicated on similar fictions). Instead, the court took the seemingly dramatic step of saying that TOS amendments require more rigorous assent (such as a clickthrough) than Dropbox’s opt-out.
Even if this case doesn’t stand for the principle that TOS amendments require clickthroughs, it’s still troubling. The court indicates that a business must prove that every user received its emails announcing the amendment. I can’t think of a similar case making that requirement, and it’s an impossible standard. Email addresses become defunct; emails go into spam folders; recipients delete emails without opening them; recipients can open emails with images-off (that’s how I do it), so the read-receipt or other trackers don’t work. So requiring a business to prove that recipients read the email is tantamount to saying that it’s not possible to notify users. This would also necessitate mandatory clickthroughs. For a service like Dropbox, it can impose an interstitial/bootscreen clickthrough when users return to its service. The court’s opinion essentially leaves it no other valid option to implement TOS amendments.
Because this ruling seems to blaze new trails on TOS amendment, and does so with inadequate support from the precedent, this opinion seems like a good candidate for an appeal. There’s no guarantee the Ninth Circuit will correct the ruling. Still, given that the court just invalidated all of its TOS amendments, Dropbox doesn’t have much to lose by appealing (even if it almost certainly can win this case without arbitration).
So what should other businesses do? If you want to absolutely ensure that the TOS amendment sticks, you need users to click in assent. Good luck with that; but any lighter process is taking your chances. Also, you should hope the Ninth Circuit fixes this ruling.
Case Citation: Sifuentes v. Dropbox, Inc., 2022 WL 2673080 (N.D. Cal. June 29, 2022)
Related Blog Posts
* Continued Access to Service Not Sufficient to Bind User to New Terms of Service–Stover v. Experian
* “Modified Clickwrap” Upheld In Court–Moule v. UPS
* Anarchy Has Ensued In Courts’ Handling of Online Contract Formation (Round Up Post)
* Safeway Can’t Unilaterally Modify Online Terms Without Notice
* The “Browsewrap”/”Clickwrap” Distinction Is Falling Apart
* 23andMe’s Browsewrap Fails, But Its Post-Purchase Clickthrough Works Anyway–Tompkins v. 23andMe
* Court Blesses Instagram’s Right to Unilaterally Amend Its User Agreement–Rodriguez v. Instagram
* Second Circuit Says Arbitration Clause in Terms Emailed After-the-Fact Not Enforceable – Schnabel v. Trilegiant
* Users Can’t Sue Sony for Changing Online Terms to Require Arbitration – Fineman v. Sony Network Entertainment
* No Breach of Contract Claim from Mid-Stream Change of WSJ Online Pricing – Lebowitz v. Dow Jones
* Qwest Gets Mixed Rulings on Contract Arbitration Issue—Grosvenor v. Qwest & Vernon v. Qwest
* Zynga Wins Arbitration Ruling on “Special Offer” Class Claims Based on Concepcion — Swift v. Zynga
* Another Ruling Challenging “Check the Website for Amendments” Contract Provisions–Roling v. E*Trade
* Stop Saying “We Can Amend This Agreement Whenever We Want”!–Harris v. Blockbuster
* Douglas v. Talk America Revisited
* Ninth Circuit Strikes Down Contract Amendment Without Notice–Douglas v. Talk America