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Sony Sued Over 'No Class Action Lawsuit' Clause in Updated Terms of Service

Sony Sued Over No Class Action Law Suit ToS

As a result of the infamous PlayStation Network hack earlier this year, Sony has been forced to deal with multiple class-actions suits from its users. To try to prevent a similar scenario from occurring in the future, PlayStation 3 users were required this past September to agree to an updated version of the PSN Terms of Service, which forced users to give up their rights to enter into a class action lawsuit against Sony. This new provision was Sony's way to mitigate any future damages related to a PSN intrusion that was beyond its control. Ironically, this new attempt to cutoff future litigation has resulted in Sony being sued once again.

In November 2011, a Northern California man filed suit on behalf of all PSN users who purchased a PS3 and signed up for the PSN prior to the September Terms of Service update. The individual decided to sue because the change in the ToS effectively mandated that PSN users could not use an included service without giving up a legal right, i.e. the right to file a class action lawsuit. The specific offending language at issue was found in Paragraph 15 of the ToS Agreement:

ANY DISPUTE RESOLUTION PROCEEDINGS, WHETHER IN ARBITRATION OR COURT, WILL BE CONDUCTED ONLY ON AN INDIVIDUAL BASIS AND NOT IN A CLASS OR REPRESENTATIVE ACTION OR AS A NAMED OR UNNAMED MEMBER IN A CLASS, CONSOLIDATED, REPRESENTATIVE OR PRIVATE ATTORNEY GENERAL LEGAL ACTION, UNLESS BOTH YOU AND THE SONY ENTITY WITH WHICH YOU HAVE A DISPUTE SPECIFICALLY AGREE TO DO SO IN WRITING FOLLOWING INITIATION OF THE ARBITRATION. THIS PROVISION DOES NOT PRECLUDE YOUR PARTICIPATION AS A MEMBER IN A CLASS ACTION FILED ON OR BEFORE AUGUST 20, 2011....

IF YOU DO NOT WISH TO BE BOUND BY THE BINDING ARBITRATION AND CLASS ACTION WAIVER IN THIS SECTION 15, YOU MUST NOTIFY SNEI IN WRITING WITHIN 30 DAYS OF THE DATE THAT YOU ACCEPT THIS AGREEMENT. YOUR WRITTEN NOTIFICATION MUST BE MAILED TO 6080 CENTER DRIVE, 10TH FLOOR, LOS ANGELES, CA 90045, ATTN: LEGAL DEPARTMENT/ARBITRATION AND MUST INCLUDE: (1) YOUR NAME, (2) YOUR ADDRESS, (3) YOUR PSN ACCOUNT NUMBER, IF YOU HAVE ONE, AND (4) A CLEAR STATEMENT THAT YOU DO NOT WISH TO RESOLVE DISPUTES WITH ANY SONY ENTITY THROUGH ARBITRATION.

On its face, this new lawsuit appears to present a "Hobson's Choice" that was similarly present in the class-action suit over the removal of the Other OS from older PS3 models. In that case, users claimed that Sony disabled a promised feature, Other OS, with Firmware Update 3.21. This put users in the position of choosing to keep the Other OS feature and forego the PSN or vice-versa.

On December 8, 2011, the US District Court for the Northern District of California decided in Sony's favor and explained that the company did not breach any laws since the Other OS continued to work if users chose not to download the firmware update. While this would prevent users from utilizing the PSN, this particular service was separate and apart from the purchase of the PlayStation 3 itself. The Court then reached the following conclusion:

"The dismay and frustration at least some PS3 owners likely experienced when Sony made the decision to limit access to the PSN service to those who were willing to disable the Other OS feature on their machines was no doubt genuine and understandable. As a matter of providing customer satisfaction and building loyalty, it may have been questionable. As a legal matter, however, plaintiffs have failed to allege facts or to articulate a theory on which Sony may be held liable." (full opinion can be found here)

At first, one would expect a similar result in this most recent lawsuit, especially in light of the US Supreme Court's ruling in the case of AT&T Mobility LLC, v. Concepcion. There, the Court held that class action rights can be contracted away even if the contract appears one-sided, which Sony's new ToS certainly is.

However, there are some distinguishing facts that could muddy the waters for Sony. The suit makes specific mention of Sony's reluctance to inform its customers of the "no class action lawsuit" clause, which was found near the bottom of a 21-page document that was only viewable on the PS3. And unlike in the past, Sony did not post an online version beforehand. While there was a way to opt out of the clause by sending Sony a written letter within thirty days, there is a question as to whether Sony provided sufficient notice of this option and the waiver itself.

While we've certainly seen many frivolous lawsuits in the past, everything about Sony's approach to limit its legal liability feels wrong, especially when many users are likely unaware that the clause even exists. Even more disturbing is that this type of clause is spreading to other companies, including Microsoft which recently added a similar clause to its ToS.  If upheld as enforceable, these no-suit clauses may prevent consumers from seeking recourse even in those cases where a company legitimately mislead its consumers.

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Follow me on Twitter @AnthonyMole

Source: GameSpot

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