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Screenshot of Post Changing TOSToday, Second Life creator Linden Lab changed Second life’s Terms of Service regarding dispute resolution.

The move appears to be a direct result of the recent decision in the Bragg case finding the previous arbitration clause unconscionable. The new clause makes two significant changes, one that dramatically benefits small claimants, and one that makes it somewhat more expensive and burdensome to bring big claims.

First, the new Terms of Service (you can find the old version here) require that all actions against Linden Lab claiming more than $10,000 or seeking injunctive or other equitable relief (like account reinstatement) must be filed in California courts. Specifically, these actions must be filed in “courts located in the City and County of San Francisco, California.”

This part of the change benefits Linden Lab by reducing the likelihood that it will have to defend suits scattered around the country. It also puts lawsuits against Linden Lab in Linden Lab’s backyard, in front of generally tech-savvy judges who see a lot of consumer claims against technology companies, and who may be less sympathetic to consumers than judges elsewhere. If you file in the wrong place, you give Linden Lab the right to seek up to $1000 in attorney fees that they spend getting your case dismissed.

On the other hand, the new terms also create a special class of claims under $10,000 that are to be handled via non-appearance arbitration. This change is very good for users, as the new clause replaces one that required a full-blown arbitration proceeding before a three-person panel, which could easily cost more than $10,000 itself (that is essentially why the clause was declared unconscionable in the Bragg case). Non-appearance arbitration can actually be quite inexpensive, and, notably, it could even be conducted in Second Life. The arbitrator must be an established ADR provider, must have published guidelines for dispute resolution, and must be a “retired judge or attorney with legal expertise in the subject matter of the dispute.”

In a FAQ on the new policy, Linden Lab refers users to the National Arbitration Forum, an arbitration group that Linden Lab says charges consumers “at most $185.00 in disputes between consumers and businesses where the total amount of damages sought is less than $10,000.00 USD with the remainder of the cost to be carried by the business.”

Collectively, the changes make small claims against Linden Lab much easier (and given that they were essentially impossible before, that’s good news for users), but also make big claims somewhat more expensive. Overall, given the fairly small amounts of money involved in many disputes between residents and Linden Lab, it is probably a good change for Second Life users.

Hat tip to Second Life’s ‘Eric Reuters,’ who alerted me to the change, and who has also posted an article about it at

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8 Responses to “Linden Lab Changes Second Life Terms of Service: Non-Appearance Arbitration for Matters Under 10k, Must File Matters Over 10k in San Francisco”

  1. on 18 Sep 2007 at 3:55 pmBenjamin Duranske

    FYI – I’m seeing some headlines in my Google alerts that refer to this as mediation. It is not — mediation is a process where two parties try to reach agreement and a mediator facilitates the discussion and tries to move the parties to agreement. This is arbitration, where the arbitrator holds something like a mini-trial (or at least the parties submit briefs) with evidence, witnesses, etc. and then the arbitrator — basically the judge — decides who is right and who is wrong. The parties are then stuck with that decision, like it or not.

    Mediation is successful only if the parties reach an agreement that both support when they walk away, otherwise, nothing happens. An arbitrator, on the other hand, can decide for one party and against another, just like a judge.

  2. on 18 Sep 2007 at 4:23 pmTaran Rampersad

    They did change a few other things – I posted relevant text changes here:

    Of note – ‘Meta fonts’ cannot be used. I don’t know that anyone was using Linden Lab fonts, but…

    Linden Lab also put some more teeth into Section 4.2, it seems.

  3. on 18 Sep 2007 at 4:35 pmBenjamin Duranske

    Thanks for the heads up on those and the link. The fonts thing could be there because it hit their radar screen with the font lawsuit against Blizzard in China. Or to protect SL-like looks that don’t quite meet trademark tests. Or just general clean up; lawyers do that when we take a look at contracts.

  4. [...] A new Terms Of Service popped up today when people logged into Second Life. Of course, you had to click “I Accept” or risk losing access to your account, thus bringing up the same issues we’ve addressed before. Most will scroll past the mass of legalese unable to interpret any of it, but fortunately Virtually Blind has summarized the main points. [...]

  5. on 19 Sep 2007 at 12:01 amSecond Life TOS Update « The Grid Live

    [...] Linden Lab Changes Second Life Terms of Service: Non-Appearance Arbitration for Matters Under 10k, Must File Matters Over 10k in San Francisco Today, Second Life creator Linden Lab changed Second life’s Terms of Service regarding dispute resolution. [...]

  6. on 19 Sep 2007 at 5:01 amJessica Holyoke

    One thing I missed on initially reviewing the new ToS. A resident can only sue Linden Labs in San Francisco, California, but the Labs retain the right to sue a resident anywhere else, the any competant jurisdication part.

    In some ways, that sounds like a good consumer section, knowing that the Linden’s will not pull you into litigation in California. In others, it sounds like a bad move, saying that they can sue a resident anywhere, but that resident can only file suit in California. But realistically, it sounds like making sure that the Lindens can find personal jurisdiction over residents. Meaning if the Lindens sue a Japanese resident and a California court questions whether the resident has minimum contacts to be sued in California.

  7. on 19 Sep 2007 at 8:59 amTony

    Don’t people have the ability to go to arbitration anyways? As long as both parties want to I mean? The TOS makes the arbitration a choice by the “relief seeker”. Does that mean LL cannot back out of arbitration if they want to push it to court for some reason?

    I did a document compare and did find another change at the very end. The new version states that LL may give notice to you through the SL viewer at or after log-in to your account.

    I think they may have done that based on a story I saw a little while back where a judge ruled that changing a contract on a website alone wasn’t adequate notice (Douglas v. United States District Court for the Central
    District of California). I think they are trying to get this out now so that someone can’t say they didn’t “see” it because it was sent through the client.

  8. on 19 Sep 2007 at 9:32 amBenjamin Duranske

    Tony – My read on 7.2 in conjunction with 7.3 is that you have to file claims over 10k in San Francisco, in court, and that Linden Lab is saying here that they’re not interested in arbitrating those bigger claims. I suppose a user could always send a letter to Linden Lab before a lawsuit and ask if they’d be willing to arbitrate a bigger claim, but there’s a school of thought that says consumers should generally avoid arbitration and stick with the courts where possible anyway, because many believe there is an institutional bias in arbitration in favor of corporations (since corporations represent repeat business).

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