A lot of California companies are observably paying attention to Patreon’s legal shenanigans and are attempting to avoid being caught in a similar trap of their own device. Unfortunately, instead of taking an honest and legally valid approach, many of the scions of the Silicon Valley corpocracy are attempting to stack the deck even further in their Terms of Use, as can be seen in the example of Square’s newly announced terms that mandate arbitration, but only after attempting to force the claimant to divulge anything and everything that Square can use against him.
Pre-Filing Requirement to Attempt to Resolve Disputes. Before an arbitration is commenced, you or Square agree to attempt to avoid the costs of formal dispute resolution by giving each other a full and fair opportunity to address and resolve a Dispute informally. Both parties recognize that this is an important requirement, and that breach of this requirement would be a material breach of the Terms. To provide this opportunity, before commencing any arbitration or suit, each party agrees to send to the other party a written Notice (“Notice”). Any Notice to Square should be sent by mail to Square, Inc., Attn: Arbitration Provision, PO Box 427069, San Francisco, CA 94142. Any Notice sent to you will be sent to the address on file for your account. The Notice must: (i) include your name and account number; (ii) provide detailed information sufficient to evaluate the merits of the claiming party’s individualized claim and for the other party to determine if an amicable resolution is possible; and (iii) set forth the specific relief sought, including whatever amount of money is demanded and the means by which the demanding party calculated the claimed damages. Both parties agree that they will attempt to resolve a dispute through an informal negotiation within sixty (60) days from the date the Notice is sent. After that sixty (60) day period and not before, either party may commence arbitration. Each party agrees that state courts in the City and County of San Francisco, California, or federal court for the Northern District of California, referenced below, may enter injunctive relief to enforce the pre-filing requirements of this paragraph, including an injunction to stay an arbitration that has been commenced in violation of this paragraph.
The purpose of this is to attempt to build an “extortion” case out of nothing to provide an excuse for playing the victim and establishing a false narrative. The correct thing to do is to tell the company absolutely nothing and to make no settlement demands, because anything you say can and will be folded, spindled, mutilated, and then used against you in front of an arbitrator who is sympathetic to the corporation. Just file the arbitration and do the absolute minimum required by the contract. Notice in particular that Square actually gives themselves the right to go to court in order to stop you from going to mandated arbitration. I doubt this requirement holds up in court.
Scope of Arbitration. If we are not able to resolve the Dispute by informal negotiation or, as provided below, in a small claims court, all Disputes will be resolved finally and exclusively by binding individual arbitration with a single arbitrator (the “Arbitrator”) administered by the American Arbitration Association (https://www.adr.org) according to this Section and the Commercial Arbitration Rules for that forum, except you and Square will have the right to file early or summary dispositive motions and to request that the AAA’s Expedited Procedures apply regardless of the claim amount. Except as set forth above, the Arbitrator shall be responsible for determining all threshold arbitrability issues, including issues relating to whether the General Terms and/or Additional Terms (or any aspect thereof) are enforceable, unconscionable or illusory and any defense to arbitration, including waiver, delay, laches, or estoppel.
This is flat-out illegal and will not even hold up in arbitration, let alone court. Square is shamelessly attempting to force the consumer to agree to the Commercial rules, instead of the Consumer rules that provide the consumer with some level of protection in order to level the playing field. This is completely illegal, as it directly violates both black-letter and California case law, but the vast majority of consumers won’t know that.
Fortunately, the attempts of the corporations to work their way around the consumer protection laws won’t work at all. The California legislature is very much aware of their shenanigans, as it is already in the process of passing laws to tighten up the terminology and eliminate the ambiguities in the existing laws to which companies like Patreon and Square are appealing in order to attempt to avoid being held accountable to their own contracts.
It’s clear that some Silicon Valley executives are beginning to correctly perceive the legal positions of their organizations vis-a-vis their customers as an existential threat. But it is absolutely idiotic for them to turn to the very same inept lawyers who created the existential threat in the first place in the hopes of somehow escaping it.