Microsoft Tells Its E-Mail Users Lawsuits Probably Won't Be an Option if they are Disgruntled

By Ed Silverstein August 31, 2012

It’s now a lot harder for individual consumers to sue Microsoft or join in a class action lawsuit against the giant company.

This week, Microsoft let many of its customers – who use its online products and services (such as e-mail) – know that it added a class action waiver and binding arbitration clause to its customer service agreement.

The announcement came in an e-mail to some customers on Thursday.

Image via Shutterstock

It is an apparent effort by the company to lessen the cost and number of court-imposed damages that Microsoft pays out to litigants.

“We have added a binding arbitration clause and class action waiver that affects how disputes with Microsoft will be resolved in the United States,” the Consumer Product and Service Agreement Updates said.

Arbitrators have the reputation among trial lawyers not to be as generous as jurors hearing those cases involving consumer litigants.

A formal notification about the new procedures was announced by the company in May.

Back then, Tim Fielden, assistant general counsel at Microsoft, wrote in a company blog post, “When a customer in the United States has a dispute about a Microsoft product or service, many of our new user agreements will require that, if we can’t informally resolve the dispute, the customer bring the claim in small claims court or arbitration, but not as part of a class action lawsuit.”

“Many companies have adopted this approach, which the U.S. Supreme Court permitted in a case it decided in 2011. We made this change to our terms of use for Xbox LIVE several months ago, and we will implement similar changes in user agreements for other products and services in the coming months, as we roll out major licensing, hardware or software releases and updates,” he added.

Fielden claims the new approach benefits consumers, as well as the company. Under the new regulations, Microsoft has incentives to resolve a dispute to the “customer’s satisfaction” before it gets to arbitration, he said.

In addition, the company’s arbitration provisions “will be among the most generous in the country. For instance, we permit arbitration wherever the customer lives, promptly reimburse filing fees, and, if we offer less to resolve a dispute informally than an arbitrator ultimately awards, we will pay the greater of the award or $1,000 for most products and services—plus double the customer’s reasonable attorney’s fees. Most important, this approach means customer complaints will be resolved promptly, and in those cases where the arbitrator agrees with the customer’s position, the customer will receive generous compensation, and receive it quickly.”

“When we do have a dispute, we commit to resolving it quickly and fairly,” he added in the blog post. “We believe this policy reflects that commitment.”

But not everyone likes the new policy.

In December, in response to the company’s move toward arbitration, U.S. Sen. Richard Blumenthal (D, Conn.) announced in an online statement that, “Microsoft has included a highly objectionable binding arbitration clause in their new terms of service. Seemingly, Microsoft is following Sony’s tack and attempting to prevent preemptively any liability in case it experiences a security breach.”

“Microsoft is refusing to allow consumers to opt-out of the new clause in their terms of service,” Blumenthal added in the December blog post. “This blatant corporate strong-arming indicates that Microsoft is trying to force its customers to waive their right to hold Microsoft accountable for any future injuries they sustain.”

More recently, there were some online comments appearing on an IGN message board in response to Microsoft’s latest announcement.

“Hooray *absenceoflegal* Responsibility!,” wrote TurnipTrader.

“They'll probably send you another email...suing you for $100 million...for illegally downloading the game Pong,” wrote Mornez.

Sony opted for a similar clause inits  terms of service last September.

To see the new Microsoft Services Agreement, please click here.

The agreement says in part, “If you and Microsoft don't resolve any dispute by informal negotiation or in small claims court, any other effort to resolve the dispute will be conducted exclusively by binding arbitration … You are giving up the right to litigate (or participate in as a party or class member) all disputes in court before a judge or jury. Instead, all disputes will be resolved before a neutral arbitrator, whose decision will be final except for a limited right of appeal under the Federal Arbitration Act. Any court with jurisdiction over the parties may enforce the arbitrator’s award.”

Edited by Brooke Neuman

TechZone360 Contributor

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