Independent Contractor Arbitration Clause from Amazon

Contract Teardown

Few clauses create more friction than arbitration clauses—particularly arbitration clauses that end up in front of the Supreme Court of the United States.

In two cases, Amazon drivers sought reclassification as independent contractors in order to avoid an arbitration clause. Amazon’s ultimately unsuccessful struggle to enforce arbitration reveals how difficult these clauses can be to draft.

In this episode of the Contract Teardown show, attorney Margeaux Thomas pulls lessons from Amazon’s experience so that you can draft better contracts.

Attorney Margeaux Thomas breaks down the arbitration clause in the Amazon Flex Independent Contractor Agreement, touching on what arbitration means for the flex driver, and why it’s not ideal. #ContractTeardown Click To Tweet

Questions In This Episode

  1. What rights did Amazon’s drivers sign away in their Independent Contract Agreement?
  2. How conspicuous does an arbitration clause have to be?
  3. If an arbitration clause does not apply, what defaults are in place?
  4. Why do businesses want arbitration?
  5. Why did Amazon lose both cases?

K-Notes: Independent Contractor Agreement Download Now

Amazon Flex Independent Contractor Terms of Service – Arbitration Clause

Amazon, the online sales giant, delivers more than 2.3 billion packages every day in the U.S. About 23% of those packages are delivered by tens of thousands of Amazon Flex drivers: independent drivers using their own cars, vans, and trucks to take packages the last few miles from an Amazon warehouse or hub to your front door.

Flex drivers are not Amazon employees. They are independent contractors and agree to work under the Amazon Flex Independent Contractor Terms of Service.

"Arbitration is extremely favorable for Amazon" Margeaux Thomas

The drivers must download the Amazon Flex app, which is the tool Amazon uses to run the Flex delivery business. Drivers are instructed on where to pick up and deliver packages, and they must click through certain agreements before they see any of that information. The Terms of Service and the arbitration clause are in these click-through agreements. When several drivers sought damages in court, Amazon pointed to the agreements in the app. And that’s where the trouble began.

Amazon Lost Both Cases

Amazon was involved in two class-action lawsuits by attorneys representing these independent contractors. The attorneys argued that the independent contractors in this work arrangement should be treated as employees. Even though the agreement has an arbitration clause, the attorneys filed suit in court.

Before addressing the substance, Amazon pushed back on the courts’ power to adjudicate the matter. They pointed to the binding arbitration clause.

Amazon had the same basic argument in the First Circuit and the Ninth Circuit. Amazon argued that the Flex drivers were not transportation workers engaged in interstate commerce, and therefore fell under an exception to arbitration clauses like the one in the Flex agreement. This was the core of the contest. 

In short, if the drivers are engaged in interstate commerce, they are exempt from the Federal Arbitration Act and cannot be forced into arbitration; if they are not engaged in interstate commerce, then they can be forced to go to arbitration.

Case number for Amazon Flex Independent Contractor Terms of Service

So, are they engaged in interstate commerce? It’s debatable (and was hotly debated).

Flex drivers drive “the last mile” of the delivery chain from the local pick-up hub to your door.  Most of them never cross state lines to deliver products. So they’re not “interstate,” right?

Wrong. The two courts ruled that since the drivers were engaged in the movement of goods in interstate commerce, then the arbitration clause is not enforceable. Wherever the drivers were directed—whether intra- or interstate—they were part of a chain that crossed state lines. Amazon was engaged in interstate commerce, and they used these drivers to finish the job.

Amazon’s arbitration clause was deemed unenforceable. #ContractTeardown Click To Tweet

Amazon lost their cases in the district courts and then lost their appeals to the First Circuit and the Ninth Circuit. Amazon’s arbitration clause was deemed unenforceable.

What You Lose When Agreeing to Arbitration

Let’s generalize from the particular experience of Amazon’s drivers to discuss a pretty plain truth: you give up a lot when you agree to arbitration. Unsurprisingly, that makes judges pay close attention to the language of arbitration clauses.

When you sign an arbitration clause, you give up your right to bring any type of claim or lawsuit in open court. You waive your right to a trial by jury, and you can’t be part of a group or class action bringing suit. There is no judge. There is no public ruling, and there is no public record at all. If you know anything about American history, you know how significant these waivers can be.

"Arbitration is usually private and confidential and there is no transcript." Margeaux Thomas

Most arbitrations are private, which is why so many businesses prefer them. And when you agree to binding arbitration, the decision of the arbitrator is final. You give away your right to appeal

Amazon Makes the Clause Very Conspicuous

After seeing the flaws in its original arbitration clause, Amazon took the road of extreme clarity. In a second version of the Amazon Flex Terms of Service, Amazon made the Arbitration Clause extremely conspicuous. Unlike the previous version, Amazon put its arbitration language in twice. 


YOU AND AMAZON AGREE TO RESOLVE DISPUTES BETWEEN YOU AND AMAZON ON AN INDIVIDUAL BASIS THROUGH FINAL AND BINDING ARBITRATION, UNLESS YOU OPT OUT OF ARBITRATION WITHIN 14 CALENDAR DAYS OF THE EFFECTIVE DATE OF THIS AGREEMENT, AS DESCRIBED BELOW IN SECTION 11. If you do not agree with these terms, do not use the Amazon Flex app or participate in the Program or provide any services.

 

This conspicuousness would hopefully avoid contractors’ claims that they didn’t knowingly waive their right to trial. Amazon so wanted to underline the arbitration clause that they put a notice about it in paragraph 2 in all caps. The notice is blunt and to the point: if you don’t agree to final and binding arbitration then you can’t use the app or participate in the Flex Program. It then references Section 11, where the arbitration clause is described in great length and detail. 

Bottom line, if you don’t agree to arbitration, then you will not be a Flex driver. The company tried to shift signers from a simple click-through to a more conscious waiver.

Amazon Gets the Cost Right

Although Amazon may not have succeeded in enforcing this particular arbitration clause, attorney Margeaux Thomas believes that the company understood the gravity of the waived rights.

Take relative costs to enforce a claim, for example. In court, costs are usually low. The typical filing fee is generally $400 or less. But the filing fee in arbitration is on a sliding scale. The higher the amount in dispute, the higher the filing fee.

A judge is paid by the taxpayers in court. In arbitration, the arbitrators are paid by the parties. A single arbitrator may charge $400 to $500 for every hour. Many arbitrations have a panel of arbitrators, and each of them might be $400 to $500 per hour. That adds up fast.

"It could be triple what you would pay in court to go to arbitration." Margeaux Thomas

Amazon wants arbitration instead of court, so their agreement tries to address the cost disparities. They incentivize the waiver of rights by capping the driver’s arbitration fee at only $200. Amazon pays all other arbitration fees and costs. This creates a more equal footing to help allay drivers’ potential concerns, and to make an arbitration clause more agreeable.

Amazon Gets the Location Right

Continuing with the contract, Attorney Thomas sees positive signs from Amazon’s choice of jurisdiction.

Many times the drafting party will make the location of the arbitration close to the company, not close to the signing party. If you are a delivery driver in Maine, going to arbitration in Amazon’s home state of Washington would be costly, burdensome, and time-consuming. Amazon recognized that an arbitration clause might be more attractive if it addressed this disparity.


i) Demand for arbitration under this Agreement must be made in writing, must describe the demanding party’s claim, and must be delivered to the other party by hand or by first-class mail within the applicable statute of limitations. Any demand for arbitration made to Amazon must be directed to Amazon’s registered agent, Corporation Service Company, at 300 Deschutes Way SW, Suite 304, Tumwater, WA 98051. The arbitration will be conducted by the American Arbitration Association.

 

Section 11(i) of the agreement states that arbitration will be held in a mutually-agreed upon location within 45 miles of the last place where the driver delivered a package. Because these drivers generally live near their local deliveries, this means that the choice of location will default to a spot near their home. If the driver’s deliveries were in Bangor, Maine, for example, then arbitration will be within 45 miles of Bangor.

These conveniences allow Amazon to soften the blow of an arbitration clause that might otherwise turn off a driver looking to sign the agreement.

Amazon Drops the Ball on Choice of Law

However, according to Attorney Thomas, Amazon didn’t successfully address every potential concern. A confusing Choice of Law provision proved to be the death of Amazon’s arbitration clause in court.

Section 12 defines Amazon’s choice of law. It is only one sentence long. Amazon chose for the Agreement to be interpreted by the laws of the State of Washington. The only exception is Section 11, the arbitration clause, which is governed by the Federal Arbitration Act.

Sounds simple. Everything in the agreement is governed by Washington State law, except the arbitration clause, which is governed by the Federal Arbitration Act.

"So now we have an ambiguity and that's why these agreements have been deemed unenforceable." Margeaux Thomas

But what happens when the driver is exempt from the Federal Arbitration Act? What law governs then? If there is no clear understanding of what happens, is the arbitration clause even enforceable?

That is precisely the question that came up when the courts held that the drivers were exempt from the Federal Arbitration Act. 

Amazon Should Have Used A Gap Filler

Thomas says that Amazon should have put in a default clause that would hold if the drivers were exempted from the Federal Arbitration Act.

For example, Amazon could have used a state law that favors arbitration and has no exception for drivers classified as being in interstate commerce. Without such a default, courts found the clause unenforceable.

According to Thomas, a gap-filler clause would most likely have kept the Terms of Service from being ambiguous and courts would have found the arbitration clause enforceable.

Amazon got 2 things right and 1 thing wrong: arbitration clause breakdown. #ContractTeardown Click To Tweet

Once they defined the agreement as ambiguous, the courts ruled that the arbitration clause was unenforceable.

Three Takeaways 

When you draft arbitration agreements, you can apply Amazon’s experience to draft better. Attorney Thomas gave three simple tips after reviewing Amazon’s case and contract.

The number one takeaway, according to Thomas, is that Amazon correctly made the Arbitration Clause and language very conspicuous. You must do the same.

The drivers in this arrangement are asked to give up substantial rights. Amazon aimed to forestall any argument that the arbitration clause was hard to find. Rather than bury the clause at the end of a 15-page contract, Amazon successfully shined a light on the question of arbitration.

Amazon also did a good job leveling the economic playing field when it comes to paying fees, according to Thomas. The maximum arbitration fee paid by the driver is $200. Concessions like these make arbitration clauses more palatable.

"You've got to say that if the Federal Arbitration Act does not apply, this state law is going to apply. And that state law likely needs to be a state law that's going to enforce your arbitration provision." Margeaux Thomas

However, Amazon did a terrible job on the choice of law issue. They did not foresee what would happen if the drivers were exempt from the Federal Arbitration Act. The courts decided that the mistake made the agreement ambiguous and the arbitration clause unenforceable.

You would be wise to incorporate Amazon’s clear sign-posting of waived rights, as well as their effort to make the arbitration clause more appetizing; but definitely take their lack of default options as a huge red flag in your drafting.

The Supreme Court Ruling

Amazon wanted their case heard by the Supreme Court. However, in February 2021, the Supreme Court refused to review the decision of the U.S. Court of Appeals for the Ninth Circuit and that decision now stands. The Amazon Flex drivers in that case cannot be forced into arbitration and can proceed in taking Amazon to court.

K-Notes: Independent Contractor Agreement from Amazon Flex - Download Now

Show Notes

THE CONTRACT: Amazon Flex Independent Contractor Agreement (only available in the Flex app)

THE GUEST: Margeaux Thomas is an experienced attorney with a demonstrated history in financial dispute resolution. She is skilled in Commercial Litigation, Business Partnership Disputes, Breach of Contract matters, and Commercial Landlord Tenant law.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

Transcript

Margeaux Thomas [00:00:00] Amazon was involved in two cases, one in the First Circuit, one in the 9th Circuit, where class action attorneys were that were representing independent contractors, they were arguing that these people were misclassified and they should be employees. And they filed a class action lawsuit against Amazon in court. And there was a battle over the arbitration clauses, whether they could be in court or whether they could be an arbitration.

Intro Voice [00:00:22] Welcome to the Contract Tearddown Show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world.

Mike Whelan [00:00:35] In this episode, attorney Margeaux Thomas breaks down the Amazon Flex Independent Contractor Agreements arbitration clause. This is a hot subject right now as a case disputing this clause is likely to appear before the Supreme Court. Margeaux points out the presence of conspicuous language, the lack of clear jurisdiction and a drafting attorney’s duty to make sure parties signing these agreements are well informed. There’s a lot riding on how you draft the arbitration clause, so let’s tear it down.

Mike Whelan [00:01:06] Hey, everybody. I’m Mike Whelan. Welcome back to the Contract Teardown show. On this show we do what the title sounds like. We take contracts with smart friends and beat them up. We talk about the different sections and they’re what you should do as a drafting attorney, how you might improve it. Today, I’ve got my friend Margeaux Thomas. How are you today, Margeaux?

Margeaux Thomas [00:01:26] I’m doing good. How are you?

Mike Whelan [00:01:28] OK. It’s early. You made me wake up because you’re on Eastern Time, so I am here. I am marginally awake and alive. We are going to talk through some interesting documents. So what I want to do real quick, Margeaux, if you don’t mind, share my screen and I’m going to show people these two documents. There are two of them. This is the first one. It’s the independent contractor terms of service for Amazon Flex. And this is a later version that we’re going to talk about. What I want to ask you to do real quick for me, Margeaux, is tell me the difference between these two documents. What are they? Why are there two? Why do these documents matter to lawyers dealing with this kind of thing?

Margeaux Thomas [00:02:10] So the first document was the original terms of service that Amazon delivery drivers were required to sign to use the app to make local deliveries. And then recently, Amazon had updated terms of service, which is a longer document or in-depth, but they made delivery drivers agreed to so that they can in order to continue working for Amazon.

Mike Whelan [00:02:32] Well, and our smart guests will have probably seen the Pacer number at the, you know, the cause number at the top because it’s it’s in court. Tell me about that. What’s going on with this case that makes it really relevant to pay attention to right now?

Margeaux Thomas [00:02:46] So Amazon was involved in two cases, one in the First Circuit, one in the 9th Circuit, where class action attorneys were not were representing independent contractors, they were arguing that these people were misclassified and they should be employees. And they filed a class action lawsuit against Amazon in court. And there was a battle over the arbitration clause and whether they could be in court or whether they could be in arbitration. So Amazon lost in both of those courts on this issue. The arbitration clause was deemed unenforceable, which we’re going to talk about today. And Amazon has it teed up the 9th Circuit case to go to the Supreme Court, which, you know, we’ll we’ll find out soon whether the high court is going to give some guidance on this arbitration issue

Mike Whelan [00:03:29] with some new Amy Coney Barrett drama, which is exciting, exciting to a certain kind of person. Let’s be honest. So we’re going to start we’re going to focus on this. The second version, that’s the one that is really before the court. There’s a bit of a procedure that was required that we’ll talk about later to accept this particular one. But I want to stop start up at the top, because this is where the language gets super explicit. It says you and Amazon. This is the second paragraph of the whole agreement. You and Amazon agree to resolve disputes between you and Amazon on an individual basis through bold, final and binding arbitration. Talk to me about the language at this second paragraph and like the location of it.

Margeaux Thomas [00:04:16] Yes, we’re in the second paragraph of this 15 page document, and it’s all caps in bold talking about you are waiving your right to go to court, you are agreeing to go to arbitration. And the reason that this is in the second paragraph before we even get to the numbered paragraphs is because this is a substantial write that you are giving up by signing this agreement. And Amazon wants to head off the argument that this was inconspicuous and people didn’t see it and was buried in eight point, not on page 15. And a footnote. And they don’t want to hear that argument. When somebody says this clauses unenforceable, they want it to be up front and personal. And that’s why it’s here. That’s why it’s in the second paragraph. And that’s why it’s an upper case.

Mike Whelan [00:05:04] Right. So what we’ll do now is actually jump down to the arbitration clause. This is down in 11. And looking at a you’ve got a lot of prominent words. Again, you got this all cat. We’ve talked about this in previous episodes. You’ve got this language you’re trying to smack people with. And in a it talks about subject to your right to opt out of arbitration, which comes below the parties will resolve by final and binding arbitration rather than in court any dispute and or claim, whether based on contract, common law, statute, et cetera, et cetera. What about this first intro paragraph in the arbitration clause?

Margeaux Thomas [00:05:40] So they’re repeating what’s in the second paragraph, but now it’s in more, more in depth and it’s very broad. When they contract common law or statute, that’s basically everything, any kind of claim that you can bring, you’re going to arbitration and you’re giving up your right to go to court, have it decided before a judge, which would be public, a public record. Arbitration is usually private and confidential and there is no transcript of the proceedings or what happened. I mean, you’re just giving up a lot of rights for any claim that you want to bring. So they are making it. They’re repeating the language because it’s so important in this agreement. They don’t want it to be missed and they don’t want you know, they want to preempt the argument from attorneys that people did not consent, they didn’t understand and they didn’t see it.

Mike Whelan [00:06:32] Well, in jumping down to I in this same section, it talks about the process for if you want to do arbitration, these are all the steps you have to go through. It talks about making the demand in writing. You’ve got to describe the claim of first class mail. Here’s the address. There’s quite a long process for filing fees for the rules. Tell me about this paragraph that talks about what you have to do if you want to arbitrate.

Margeaux Thomas [00:06:58] So this paragraph is extremely interesting because it talks in detail about the fees and the reason that that’s important is because in court there’s usually a four hundred dollar or less filing fee in arbitration. There’s a sliding scale filing fee, which means the amount in dispute determines how much you have to pay to get there. So it could be triple what you would pay in court to go to arbitration and arbitrators in court. There’s a judge that’s usually paid by tax dollars, but an arbitration. There is a private arbiter who you’re paying per hour to be four hundred five hundred dollars an hour to hear your dispute. And sometimes they’re even panels of arbitrators. So there’s three people that you’re paying hourly to here dispute. Arbitration can be very expensive and a lot of class action attorneys were usually the ones arguing and battling with big business about the possibility of arbitration clauses. They argue that these type of arbitration is unconscionable, meaning people can’t afford it. It’s too expensive. So a way that Amazon is trying to craft around that in this language, they’re saying, you know, you only have to pay the first two hundred dollars of the filing fee and then we’ll pay the rest. So it makes it you’re not going to be priced out of getting this relief. And then another issue is a lot of arbitration clauses say we’re Amazon, we’re based in Washington. You need to arbitrate here where we are. And if you’re in Maine, that’s a huge inconvenience to have to litigate this case across the country. So Amazon is put in here that arbitration will take place at a mutually convenient location within forty five miles of the last location, which you provide a service. So you’re delivering packages in Maine. You don’t need to go to Washington to arbitrate the case. So they’re trying to make it fair for individuals that are forced into arbitration, which can be a significant burden and prohibit people from being able to use this remedy because of the cost and location. So they’re trying to even the playing field, even though, you know, a lot of people would argue that arbitration is not an even playing field. They’re at least trying to to to even the playing field on these two issues, which come up commonly when people are arguing that these provisions are uncomfortable.

Mike Whelan [00:09:12] Well, and just by way of background, that local ness is a huge issue because these drivers I mean, just in this program, just so people know, this program is the local drivers at the end. This is not a truck that’s traveling across the nation from Washington to Maine. Right. This is a local driver. All they’re doing is local deliveries. And so that that local ness is like fundamental to this case. And you had mentioned in an email to me a previous case, again, Amy Coney Barret’s relevant finding. Talk to me just a little bit by way of background that that local ness issue and how that’s coming up in this case.

Margeaux Thomas [00:09:50] So that issue is one of the main reasons why this arbitration clause was found unenforceable because under the Federal Arbitration Act, which is mentioned later on in paragraph J of this agreement, it says that this is governed by the Federal Arbitration Act and the Federal Arbitration Act has an exemption or transportation workers that are involved in interstate commerce, which means people driving the streets normally interpret as people driving goods across state lines. That’s what interstate commerce usually means. So these people are just driving in their neighborhood, their last mile delivery drivers. They’re not crossing state lines. They’re driving across the street, around the corner to deliver packages. So in that Amy Coney Barrett decision that had to do with GrubHub and in this Amazon and Amazon court case, the court has found that these delivery drivers are involved in interstate commerce because they look at the entire flow of commerce, like Amazon got this product from California, and then they shipped it to a warehouse in the middle of the country. And then it got shipped again to this last mile delivery driver. And despite the fact that they’re only delivering it around the corner, they’re part of this very long process that is a part of interstate commerce. So that’s really the big issue about the enforceability.

Mike Whelan [00:11:09] Yeah, and she talked about it. If you’re arguing that doing something local that might have had some tie to where this thing originated, that that theoretically dry cleaners could say, I’m cleaning a dress that came from Taiwan and therefore I’m dealing in interstate commerce when really they’re just like a local business down the street. So I actually I want to ask you to jumping down to J and then this relationship with well, this is actually you mentioned the basis upon which they decided that this thing was too vague. So J says the parties agree, the Federal Arbitration Act and all that apply. But then down in 12, it talks about the governing law. Talk to me about the relationship between those two sections.

Margeaux Thomas [00:11:52] So the way this is written, it’s as if the Federal Arbitration Act is going to apply and that there’s no exception that will ever be relevant to these deliveries. And I think that’s an error with this, because we’re talking about last mile delivery drivers. There should be a clause in here that says specifically about these last mile delivery drivers that this is tailored to people who are working locally. It doesn’t say that it is very broad and general to apply to anybody in any place, but it doesn’t say that we’re talking about local delivery. So if this is governed by the Federal Arbitration Act and then when you look at paragraph 12, it says the state of Washington laws will apply except for Section 11, which is the arbitration clause. So that means that if. There is an exception, which is what they argued in these cases and the Federal Arbitration Act does not apply, then what what fills the gap? We’re not going to Washington law because you just said that Washington law doesn’t apply. So now we have an ambiguity and that’s why these agreements have been deemed unenforceable. That’s why you should put into the agreement in any event. And this may be a very real possibility that the Federal Arbitration Act doesn’t apply. We need to have a gap filler. We need to know where we go to next. And preferably if you really want to go to arbitration, you’re going to put in a state law that’s favorable to arbitration. Either they have some arbitration laws that don’t have an exemption for interstate commerce or the drivers or class of people that you’re trying to send to arbitration or they have some type of contract principles that are going to interpret this agreement as binding arbitration. But that’s that’s what’s lacking.

Mike Whelan [00:13:36] Right. So if they had to have some some kind of backstop clause that said this is what’s going to happen in the event that the FAA does not apply, then this contract would have actually been OK. This arbitration clause would have actually been OK presumably.

Margeaux Thomas [00:13:51] It likely would have been enforceable.

Mike Whelan [00:13:56] Hey, everybody, I’m Mike Whelen, I hope you’re enjoying this episode of the Contract Teardown Show real quick. I want to ask you to do me you really a quick favor. Look down below. You’ll see a discount code to join the law insider premium subscription. When you do that, you get access to more content like this. You’ll see webinars, daily tips on contract drafting, not to mention access to the world’s largest database of sample contracts and clauses. It will help you write better contracts faster if you want to do it. Right now, there’s a code below. So get there. Also, if you’re part of a larger team, if you’re in-house or in a law firm, just email us. We’re at sales@lawinsider.com. Will make sure you get a deal as well. Come join us in the community. The code is below. Let’s get back to the show.

Mike Whelan [00:14:41] You know, a theme that sort of interesting to me is the distinction between the the legal effect of drafting a certain way and the nudge effect of drafting a certain way, because a lot of times, you know, contracts don’t come up in fights. You’re just trying to get people to behave a certain way. Right. And so I’m looking back at 12 and it sort of, again, this prominent language, all caps, it says, whether to agree to arbitration is an important decision. Then they talk about if you wish to opt out of this agreement, the arbitration agreement, here’s all the steps that you have to do. What’s interesting in this litigation and in this appeal is that the original document, the original agreement was once you sign up, you’re pushing through a bunch of buttons to sign up and you click a button to say, I agree to the old version, which was much shorter, far less substantive than this one is. And then with this one, you had like an affirmative duty to opt out. Right. If you don’t want this new version, if you want to stay on the old version, you have to push some specific buttons. And you and I were talking about this before the call. I’m I’m imagining I worked in logistics before going to law school. I’m imagining a local driver. They’ve got ten deliveries to do that morning. They’re a college student. You know what? Or they’re a family that’s got all other kinds of things going on. It’s twenty, twenty, for Pete’s sake. And they just want their deliveries. And now with this one, in order to go get your deliveries, you have to push through and accept again. I’m curious your take on arbitration clauses generally and the idea that I’m giving up a big substantive right. Therefore, as a drafter who’s coming up with a process that somebody has to affirmatively go through to waive that right to get rid of that right to a hearing. What do you think about this? Was this good enough? Did this do enough social nudging for you?

Margeaux Thomas [00:16:39] I think the issue really resolves around consent and whether people are knowledgeable about the rights that they’re giving up and Amazon is drafting in this way or making additional requirements for you not so free to opt out of this agreement if they’re making it more difficult for you to do that and they want everybody to opt in. I mean, that’s that’s the reason they want to be in arbitration. Arbitration is extremely favorable for them. So to make it more difficult for you to get your packages and go on your deliveries if you don’t agree to this, I mean, that’s exactly what this and the issue that I have with the underlying issue is do people really know what they’re consenting to anyway? Even if you were to read the 15 page document that includes this arbitration clauses and bold underlined highlighted. Do you really understand what rights you’re giving away? And I don’t think that it really addresses that. It doesn’t say you’re going to have every it doesn’t talk about the fact that this is going to be private versus public and there may be no transcript. And you’re not going to know what other decisions or how many cases in arbitration. Amazon has had with this particular arbitrator and whether they’re more favorable to Amazon, whether they’ve decided a thousand arbitration decisions on Amazon. You’re not going to know that. You know, you’re not going to have the rights that you would have in court. And I just don’t think that it’s detailed enough when you talk about consent and knowledgeable consent so that somebody can really. Analyze what they’re giving up by clicking,

Mike Whelan [00:18:17] yeah, and that might get to our closing section as we close up, we usually talk about general principles. You know, however, I feel about arbitration clauses, there are certainly a lot of companies that want lawyers in in the drafting position to make sure that that thing can be enforceable. So thinking about general principles, what kind of things can we take from this example? If we’re the drafting attorney that says I’m going to draft a good arbitration clause that I know is going to be enforceable? And part of that, by the way, might be answered by the end of this this, you know, going through the Supreme Court. Right.

Margeaux Thomas [00:18:52] Right. I think the takeaways are Amazon did a very good job of making this conspicuous. I think that you should put it on the first page and the first or second paragraph and then you can repeat it later on in the agreement. I think Amazon did a really good job of putting it in bold and uppercase, underlining it and and making it conspicuous in order to head off an argument that we didn’t see it. We didn’t know it’s not on the forefront of the document. So I think that that is a definite take away. And a lot of states jury trial waivers need to be conspicuous anyway, and they need to be in upper case or they need to stand out in the documents. So I think that’s the number one take away. The number two takeaway is I see a lot of cases where it doesn’t have a lot of causes, where it doesn’t say who’s going to pay for arbitration, where it’s going to take place. They usually say the governing body, it’s going to be triple-A or it’s going to be Jame’s, but it doesn’t say the details of the payments. And I think that if you are dealing with a company that’s in arbitration a lot, it’s probably a good idea to lay out those details like Amazon did here. You’re going to pay the first two hundred. We’re going to pay the rest of their admin fees. We’re going to pay those. If they’re arbitrator fees, we’re going to pay those. However you want to divvy that up, the more you can make that even and favorable to both parties. I think that’s a really good idea. I think you should put that on the document. But the the take away as far as the choice of law provision is really you need to put in something else, something more than what Amazon put in here about the either you need to craft it towards the specific group of people that you’re trying to get that are going to sign this agreement. You’ve got to talk about them, what they’re doing, what they’re not doing. You’ve got to put that in the agreement or you’ve got to say that if the Federal Arbitration Act does not apply, this state law is going to apply. And that state law likely needs to be a state law that’s going to enforce your arbitration provision. It brings up a kind of tangential issue about can you let’s say you’re in Ohio, in Ohio does not have our state arbitration law that’s favorable to you. And it’s not likely that if the Federal Arbitration Act doesn’t apply, that the state law is going to put you in arbitration. It raises the issue about whether you can say, OK, well, we want Michigan law to apply. There’s a lot of issues surrounding using case law or the laws of jurisdictions that aren’t directly connected to your contract. But that’s something you certainly have to research because you don’t want it to go to state law and then reach the same conclusion that arbitration doesn’t apply. So it’s something to look into. So I would say Amazon did a really good job on Conspicuous. They did a really good job on evening, the playing field on the fees and the location. But they didn’t do such a great job on this issue about choice of law.

Mike Whelan [00:21:48] Yeah, and this is a case of people paying attention to. So what we’re going to do if you go to lawinsider.com/resources, we’ll have show notes for this episode. You definitely want to look up this case and pay attention to it. It looks like it might be going to the Supreme Court. There’s a chance that it might not if they can resolve a couple of circuits that that seem like they’re contradictory but might be read as OK. So we’ll see what the Supreme Court does. So just go to lawinsider.com/resources for the show notes. Margeaux. If people want to get in touch with you to talk more about this case, but also the other work that you do in dealing with these kinds of clauses in litigation, what’s the best way to reach out to you?

Margeaux Thomas [00:22:27] So our website is thomaslawplc.com or they can shoot an email at mthomas@thomaslawplc.com.

Mike Whelan [00:22:35] That’s awesome. I appreciate it. And again, guys, go to lawinsider.com/resources to read about this case in the show notes. And also if you want to be a contributor to the Contract Teardown Show to be one of the nerdy friends that hangs out with me to talk about contracts clauses. You don’t get enough of this in your life. Just email us at community@lawinsider.com and we will see you guys next time on the show. Thanks again.

Margeaux Thomas [00:22:58] Thank you. Have a good one.

Contributors

Margeaux Thomas
Margeaux Thomas
Trial Attorney
Mike Whelan
Mike Whelan
CEO @Lawyer Forward

More Resources from Law Insider

Determining Accurate Purchase Prices in Mergers & Acquisitions

When a business sells shares, there’s an interesting space between when a deal is agreed upon and when it finally goes through. In that time, there can be significant changes in working capital and the overall valuation of the business.

The Power of Contracts in a Prize-Based Marketing Campaign

Online sweepstakes are a common technique for businesses to grow customers and brand awareness while also raising funds. Ideally, these are a win-win for all parties: the business has a fun and accessible marketing scheme, and consumers get the excitement of participating in (and maybe winning) a low-stakes, high-value contest. However, when setting up a sweepstakes, it’s necessary to follow certain legal procedures.