Retail can be defined as a cascade of a high volume of sales-based transactions or mini-contracts taking place between one company, the retailer, and many of its several customers. Any contract has a potential for resulting in a dispute hence retail, with its high volume of contracts has a very high propensity for disputes almost on a constant basis. The first aspect of jurisdiction is to determine how disputes shall be solved as and when they arise including avoidance of litigation. In spite of the outcome of litigation, the process itself can be very expensive, more so when cases are being held in a variety of locations. There is also the issue of geographical jurisdiction which is exponentially complicated in online retail as it differs sharply from the traditional brick and mortar retail. In online retails, a transaction can happen anywhere in the United States or even outside the country hence complicating the subject of jurisdiction. As this research paper will reveal, it is incumbent upon an online retailer to set definitive terms with regard to avoidance of litigation and geographical jurisdiction to avoid a litigation crisis based on having civil cases spread out all over the USA and beyond.
Overview of the Three Sets of Jurisdictional Terms
Evaluation of Amazon Inc., Walmart, and eBay can provide a good picture of how some of the most successful online retailers have been handling the issue of jurisdiction. Each of the three companies has included a precise and definitive clause relating to jurisdiction on their terms of use. As Appendix 2 clearly shows, Amazon Inc. has based its jurisdiction in the State of Washington but seeks to avoid litigation as much as possible by making express terms about arbitration. Walmart, another major online retailer works like Amazon but its geographical jurisdiction is in the State of California. Finally, eBay has the same terms regarding arbitration but its geographical jurisdiction is based on the state of Utah. It is worthy of notice that in all three terms of use, the congruent statement “any and all disputes” when it comes to arbitration on the one hand and “without regard to principles of conflict of laws” on the part of geographical jurisdiction is used.
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Pro Et Contra to the Customers
The two sets of jurisdictional terms can be said to be mainly a disadvantage to the customers than it is an advantage. As held in Mohamed v. Uber Technologies, Inc. , 848 F.3d 1201 (9th Cir. 2016), arbitration clauses are binding on all parties. For a start, almost all cases between retailers and customers pit a regular American against a massive corporation. In most cases, customers will only succeed if they join hands and create a class action suit. Limiting all disputes to arbitration means that each customer must raise their own individual disputes with the company without first going to court, a fact that complicates class action suits. However, this can also be seen as an advantage for customers who may be considering the filling of frivolous suits that may result in debilitating legal costs and other sanctions. The second main disadvantage relates to costs due to geographical jurisdictions. Most customers, more so those not domiciled in the selected state of jurisdiction will not risk going to court due to the costs of launching a suit in a different state.
Pro Et Contra to the Companies
Just as the terms and conditions are mainly detrimental to the customers, they are primarily advantageous to the retailers themselves. The first advantage relates to liming the costs of solving disputes. As outlined above, disputes are a commonality in all retailing, more so online retailing. Further, although most retailing fall under state laws, most commercial internet use laws are federal, hence disputes between online retailers and their customers will end up in federal courts as outlined in NEW WORLD INT'L v. FORD GLOBAL TECH., LLC , 859 F.3d 1032 (Fed. Cir. 2017). Normally, federal cases are very expensive to litigate. Avoiding court cases by opting for arbitration will save retailers a lot of money as the clause is binding as held in Mohamed v. Uber Technologies, Inc. , (supra). The second advantage is the mitigation of public relations adversities. Online retail is primarily based on marketing and a law that provides for arbitration before litigation provides companies with an opportunity to get ahead of a crisis before it escalates. Indeed, some marketers even settle class action suits they would have won in court just to avoid the public relations damage court cases cause as evidenced by In re ZAGG Inc. Shareholder Derivative Action , 826 F.3d 1222 (10th Cir. 2016). Arbitration saves online retailers from this plight. The third advantage relates to limiting the actual costs of any legal cases that may ensue in spite of the provision for jurisdiction. Having legal cases in the same state that the online retailer is domiciled will exponentially reduce the costs of the suit.
Recommendations
Jurisdictional Language Recommendation for Softiewear Limited’s terms of use
The Softiewear Limited’s terms of use must consist of the exact language that will convey the precise message that will protect the company from the vagaries that can be caused by disputes that may arise in the course of its online retail. The first important language is to ensure that whenever any aspect of state laws applies, the specific state laws prevalent in the state of Michigan are applied. Normally, when there is a dispute between different state laws on a matter that federal laws have no jurisdiction, state laws of the place where the cause of action took place can be said to apply. In such a situation, Softiewear might find itself sued under other laws apart from those of Michigan. It is on this basis that the use of the words “ The State Laws Applicable in the State of Michigan shall be applied, without regard to principles of conflict of laws” is critical in the terms of service.
Another important aspect of the terms and conditions is to avoid litigation as much as possible due to the potential damage it can occasion to the organization. Based on the examples above, the best way to avoid litigation is through the effective use of arbitration. Effective use of arbitration has three main components. The first is ensuring that all disputes end up in arbitration. To ensure this component the phrase “ The federal arbitration act, and Federal Arbitration laws, alongside the arbitration laws and practices prevalent in the State of Michigan, shall apply in all transactions undertaken with Softiewear Limited. Any and all disputes or claims relating in any way to your use of any Softiewear Limited platform shall be referred to binding arbitration and shall not be the subject of civil court cases. ”
The second component is ensuring that the right arbitrators are selected to ensure the judicious settlement of the dispute. Selecting the right arbitrator will avoid unfair and unfavorable eventualities such as judicial activism by a biased arbitrator. For the avoidance of doubt, the company should have the ability to pre-vet every arbitrator who handles its cases. To ensure the same, a clause should be added to the terms and conditions to the effect that “ The parties in every dispute shall agree on a list of three arbitrators from which a fair third party shall select the arbitrator who shall handle the dispute ”. The third component of effective use of arbitration is to ensure that the decisions made by the arbitrator are binding to both parties. The option of arbitration would be limited merely into preliminary procedure unless the decision made by the arbitrator is binding by all parties. To ensure the above, the clause “ The decision made by the lawfully appointed arbitrator shall be final and binding to all parties involved and shall not be subjected for any further litigation in a court of law. Any subsequent reviews of the said order based inter alia on availability of new evidence shall still be ventilated through further arbitration ”.
Finally, despite the provisions above, it is never possible to prevent some disputes from ever going to court, hence the need to be very specific on where such litigation should take place. It is for this reason that the terms should also include the clause that: “ In the event there is still valid grounds for litigation after the exhaustion of the arbitration process or if litigation arises regarding the arbitration process itself, such litigation can only be launched at the United States District Court for the Eastern District of Michigan .”
It is so recommended.
References
In re ZAGG Inc. Shareholder Derivative Action, 826 F.3d 1222 (10th Cir. 2016)
Mohamed v. Uber Technologies, Inc. , 848 F.3d 1201 (9th Cir. 2016)
New World Int'l v. Ford Global Tech., LLC , 859 F.3d 1032 (Fed. Cir. 2017)
Appendix 1: Amazon Inc.
Amazon Inc. jurisdictional terms and conditions as outlined in its website https://www.amazon.com/gp/help/customer/display.html/?nodeId=508088
Any dispute or claim relating in any way to your use of any Amazon Service, or to any products or services sold or distributed by Amazon or through Amazon.com will be resolved by binding arbitration, rather than in court , except that you may assert claims in small claims court if your claims qualify. The Federal Arbitration Act and federal arbitration law apply to this agreement.
There is no judge or jury in arbitration, and court review of an arbitration award is limited. However, an arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages), and must follow the terms of these Conditions of Use as a court would.
To begin an arbitration proceeding, you must send a letter requesting arbitration and describing your claim to our registered agent Corporation Service Company, 300 Deschutes Way SW, Suite 304, Tumwater, WA 98501. The arbitration will be conducted by the American Arbitration Association (AAA) under its rules, including the AAA's Supplementary Procedures for Consumer-Related Disputes. The AAA's rules are available at www.adr.org or by calling 1-800-778-7879. Payment of all filing, administration and arbitrator fees will be governed by the AAA's rules. We will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous. Likewise, Amazon will not seek attorneys' fees and costs in arbitration unless the arbitrator determines the claims are frivolous. You may choose to have the arbitration conducted by telephone, based on written submissions, or in person in the county where you live or at another mutually agreed location.
We each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. If for any reason a claim proceeds in court rather than in arbitration we each waive any right to a jury trial . We also both agree that you or we may bring suit in court to enjoin infringement or other misuse of intellectual property rights.
APPLICABLE LAW
By using any Amazon Service, you agree that the Federal Arbitration Act, applicable federal law, and the laws of the state of Washington, without regard to principles of conflict of laws, will govern these Conditions of Use and any dispute of any sort that might arise between you and Amazon
Appendix 2: Walmart.
Walmart Inc. jurisdictional terms and conditions as outlined in its website https://help.walmart.com/app/answers/detail/a_id/8/~/walmart.com-terms-of-use#19
PLEASE READ THIS SECTION CAREFULLY. IT MAY SIGNIFICANTLY AFFECT YOUR LEGAL RIGHTS, INCLUDING YOUR RIGHT TO FILE A LAWSUIT IN COURT. Using or accessing the Walmart Sites constitutes your acceptance of this Arbitration provision. Please read it carefully as it provides that you and Walmart will waive any right to file a lawsuit in court or participate in a class action for matters within the terms of the Arbitration provision.
EXCEPT FOR DISPUTES THAT QUALIFY FOR SMALL CLAIMS COURT, ALL DISPUTES ARISING OUT OF OR RELATED TO THESE TERMS OF USE OR ANY ASPECT OF THE RELATIONSHIP BETWEEN YOU AND WALMART, WHETHER BASED IN CONTRACT, TORT, STATUTE, FRAUD, MISREPRESENTATION, OR ANY OTHER LEGAL THEORY, WILL BE RESOLVED THROUGH FINAL AND BINDING ARBITRATION BEFORE A NEUTRAL ARBITRATOR INSTEAD OF IN A COURT BY A JUDGE OR JURY, AND YOU AGREE THAT WALMART AND YOU ARE EACH WAIVING THE RIGHT TO SUE IN COURT AND TO HAVE A TRIAL BY A JURY. YOU AGREE THAT ANY ARBITRATION WILL TAKE PLACE ON AN INDIVIDUAL BASIS; CLASS ARBITRATIONS AND CLASS ACTIONS ARE NOT PERMITTED AND YOU ARE AGREEING TO GIVE UP THE ABILITY TO PARTICIPATE IN A CLASS ACTION. The arbitration will be administered by Judicial Arbitration Mediation Services, Inc. (“JAMS”) pursuant to the JAMS Streamlined Arbitration Rules & Procedures effective July 1, 2014 (the “JAMS Rules”) and as modified by this agreement to arbitrate. The JAMS Rules, including instructions for bringing arbitration, are available on the JAMS website at http://www.jamsadr.com/rules-streamlined-arbitration. The Minimum Standards are available at http://www.jamsadr.com/consumer-arbitration.
The arbitrator will conduct hearings, if any, by teleconference or videoconference, rather than by personal appearances, unless the arbitrator determines upon request by you or by us that an in-person hearing is appropriate. Any in-person appearances will be held at a location which is reasonably convenient to both parties with due consideration of their ability to travel and other pertinent circumstances. If the parties are unable to agree on a location, such determination should be made by JAMS or by the arbitrator. The arbitrator’s decision will follow the terms of these Terms of Use and will be final and binding. The arbitrator will have authority to award temporary, interim, or permanent injunctive relief or relief providing for specific performance of these Terms of Use, but only to the extent necessary to provide relief warranted by the individual claim before the arbitrator. The award rendered by the arbitrator may be confirmed and enforced in any court having jurisdiction thereof. Notwithstanding any of the foregoing, nothing in these Terms of Use will preclude you from bringing issues to the attention of federal, state, or local agencies and, if the law allows, they can seek relief against us for you.
These Terms of Use will be governed by and construed under the laws of the United States (including federal arbitration law) and the State of California, without regard to conflicts of law principles.
Appendix 3: EBay
EBay jurisdictional terms and conditions as outlined in its website https://www.ebay.com/help/policies/member-behaviour-policies/user-agreement?id=4259#17.%20Legal%20Disputes
17. Legal Disputes
PLEASE READ THIS SECTION CAREFULLY. IT AFFECTS YOUR RIGHTS AND WILL HAVE A SUBSTANTIAL IMPACT ON HOW CLAIMS YOU AND EBAY HAVE AGAINST EACH OTHER ARE RESOLVED.
You and eBay agree that any claim or dispute at law or equity that has arisen, or may arise, between you and eBay (including any claim or dispute between you and a third-party agent of eBay) that relates in any way to or arises out of this or previous versions of this User Agreement, your use of or access to the Services, the actions of eBay or its agents, or any products or services sold or purchased through the Services, will be resolved in accordance with the provisions set forth in this Legal Disputes Section.
A. Applicable Law
You agree that, except to the extent inconsistent with or preempted by federal law, the laws of the State of Utah, without regard to principles of conflict of laws, will govern this User Agreement and any claim or dispute that has arisen or may arise between you and eBay, except as otherwise stated in this User Agreement.
B. Agreement to Arbitrate
You and eBay each agree that any and all disputes or claims that have arisen, or may arise, between you and eBay (including any disputes or claims between you and a third-party agent of eBay) that relate in any way to or arise out of this or previous versions of the User Agreement, your use of or access to the Services, the actions of eBay or its agents, or any products or services sold, offered, or purchased through the Services shall be resolved exclusively through final and binding arbitration, rather than in court. Alternatively, you may assert your claims in small claims court, if your claims qualify and so long as the matter remains in such court and advances only on an individual (non-class, non-representative) basis. The Federal Arbitration Act governs the interpretation and enforcement of this Agreement to Arbitrate.
