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Following the recent spree of data breaches at Sony, resulting in a bevy of class-action lawsuits, it has updated the Terms of Service to preclude future class action suits from being leveled. To be sure, Sony has had sleepless nights following the breaches, but they’d prefer not to deepen the stack of lawsuits if similar situations occur in the future.
So after the 15th, if you want to continue using the service, you would be agreeing to resort to arbitration, rather than a class action suit. This has some wondering whether this will stand legal tests, i.e. if a company produces an agreement that may seek to ban a class action suit, and later a judge rules a company can’t do that, what happens next?
On the other hand, companies are seeking ways to control costs following data breaches. Someone at Sony has been writing lots of checks lately for legal-related expenditures, which affects the bottom line, along with budget to create new products to compete in the marketplace. Arbitration is one way companies can avoid the sometimes staggering costs of going to court. Also, arbitration tends to be a less press-aware event than a more public courtroom. Companies involved in data breaches tend to prefer to quietly go about business, without the ongoing attention public legal battles tend to attract.
We’ll see how this affects future breaches, or really whether companies that add similar language to their Terms of Service agreements are able to prevail against future legal challenge, and whether mandatory arbitration will be able to address the angry users’ issues in a successful way.
Author Cameron Camp, ESET