Yahoo Has Released the New Terms of Service with the Most Confusing Arbitration Provision Yet!

Yahoo released its latest terms of service (ToS), dated May 15, 2025. For arbitrations initiated in the U.S., the ToS provide for individual arbitration through National Arbitration and Mediation (NAM), applying New York law. Claims below $10,000 are, for the most part, to be decided on the documents alone. Arbitrations are private and confidential and their results are sealed, except for the purposes of getting a court to enforce the arbitral award. Filing and hearing fees can be capped at $250 if the claimant can prove that costs would otherwise be prohibitive, but that cap will be lifted if the arbiter determines that the claim is frivolous.

The ToS provides for batch arbitration in case 25 or more “similar arbitration demands” are filed. If I am reading this correctly, the ToS empower NAM to change (reduce) the fee structure for batch arbitrations, which clearly removes a weapon from the arsenal of the plaintiffs’ bar. Forcing the vendor to pay arbitration fees up front gives the plaintiffs’ attorneys a lot of leverage in forcing vendors to the negotiating table.

The batched demands are to be arbitrated in groups ranging from 25 to 100 at a time, and no fees on a particular demand are due until that demand is included in a batch arbitration. The batch arbitration provision is not severable. If a court invalidates the batch arbitration provision, the entire arbitration agreement is invalid. In other words, the FAA, which is supposed to facilitate individual arbitrations, will now be used, if Yahoo’s ToS are upheld, to force claimants to choose between batch arbitration, which is not individual arbitration, or a class-action lawsuit, which is also not individual arbitration. In short, Yahoo is trying to use courts’ interpretation of the FAA to prevent exactly the adjudicative procedure that the FAA was designed to facilitate.

Mass Arbitration, image by Microsoft Copilot

After the first batch arbitration is completed, the rest of the demands are to proceed to mediation. If mediation is ineffective, claimants can either go to court on an individual basis or continue with the batch procedures. It seems that the selected mediator will be informed of the outcome of the original batch mediation. It is not clear whether that information is shared with the remaining claimants or how doing so would be consistent with the earlier provisions for confidentiality. If it is not provided to them, it is hard to understand how they could engage in mediation on a level playing field with Yahoo, which knows the outcome of the batch arbitration. Note that a seemingly similar information asymmetry was one of the reasons why the Ninth Circuit concluded that LiveNation’s batch arbitration scheme was unconscionable “to an extreme degree.” 

Reasonable consumers of Yahoo’s services who does not want to be bound by its arbitration provision can just avail themselves of the 30-day opt-out provision within 30 days of notice of the updated terms or within 30 days of use of the services. That opt-out is handily located in Paragraph 14(2)(b)(ix). You can’t miss it. But make sure you keep up-to-date on the ToS because they can be changed at any time and without provision of notice under Paragraph 14(2)(b)(x). You would accept any changes by continuing to use the services.

Thanks to Stephen Ware for alerting me to these terms.