Smartwool adds forced arbitration to EULA

On 29 March 2024, Smartwool e-mailed customers in their database, automatically opting them in to their new terms of use. These new terms of use contain a forced arbitration clause that requires significant effort to opt out of.

Smartwool is an American clothing company specializing in the sale of wool clothing. The incident described in this article is a example of post-purchase EULA (End User License Agreement) modification that includes a revised forced arbitration clause. Usually associated with software license agreements, an example of why a clothing company may want to do this is is to avoid paying damages through court if their clothing was defective or harmful.

In the updated terms, opting out of forced arbitration has been made more involved than before.

On 29 March 2024, Smartwool e-mailed a list of their account holders stating that they were opting them into forced arbitration^[1], and to opt out, they were required to send a letter "via USPS Priority Mail". Customers could not simply reply to the email to opt out.^[2] Priority Mail costs more than First Class mail^[3] that someone would commonly use to send such a letter.^{[citation needed]}

The original EULA before the wave of emails^[4] available on Smartwool's website contained:

1. An emphasis on contacting Customer Service first, but does not explicitly make it a prerequisite before arbitration.
2. No specification on who determines arbitrability.
3. AAA rules apply and outlines fee reimbursement if the claim is under $10,000.
4. A specific line reading: "Any dispute or claim relating in any way to the Website and our services, any representations made by us, and/or your use of our websites [...] will be resolved by binding arbitration, rather than in court..." This line does not specify products sold by the company, which would be a likely cause of a class-action lawsuit.

The new EULA terms lock down on the existing terms, and contains:

1. An informal dispute resolution process where the complaining party must send a written notice describing the dispute and allow 30 days for resolution before arbitration can begin.

   

   Your opt-out notice must be sent to General Counsel at the address below via USPS Priority Mail or hand delivery within 30 days of receiving this notice, and shall include your name, address, and the same email address you used to create an account with us and an unequivocal statement that you wish to opt out of the updated Terms of Use. Opt-out notices sent via email will not be effective.

2. The arbitrator has the authority to determine issues of arbitrability, including scope, validity, and enforceability.
3. AAA Consumer Arbitration Rules and Mass Arbitration Supplementary Rules.
   • If AAA is unavailable, parties must agree on another provider.
   • If a claim is deemed frivolous by either Smartwool or the arbitrator, the claimant must reimburse Smartwool for arbitration costs.
4. A re-worded line reading: "You and we agree to work together in an effort to resolve any dispute or claim between us relating to these Terms of Use, your account, purchases, or our products (“Dispute”)." This new line specifies 'purchases' and 'products', adding them under the dictation of forced arbitration.

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