Class Action Waiver
Last Updated: September 2026
Class Action Waiver Severance
What This Clause Actually Decides
Colony's Terms of Service require disputes to be resolved one-on-one through arbitration, not as part of a group or class lawsuit. The question this research resolves is narrow but consequential: if a court somewhere rules that the group-lawsuit ban is not enforceable, what happens to the rest of the arbitration system?
- •● Narrow severance (Colony's current draft): only the specific claim affected by that ruling gets sent to court. Every other type of dispute, for every other customer, still goes to individual arbitration as normal.
- •● Broad / “blow-up” severance (the alternative): if the group-lawsuit ban fails in a way that would otherwise allow a class-style claim to proceed, the entire arbitration system collapses, not just for that one claim, but as a dispute-resolution mechanism generally.
What the Industry Actually Does: There Is No Single Standard
This was checked directly against current published terms, and the honest finding is that there is a real split, not an industry consensus to simply copy:
| Company / Approach | What their Terms actually do |
|---|---|
| OpenAI | Hybrid, leaning toward broad: if the class-action waiver is found unenforceable in a way that would allow class arbitration, the entire arbitration section becomes unenforceable, not just the affected claim. A narrower, claim-level severance applies in a separate, more limited scenario. |
| Colony (recommended current draft) | Narrow: if the class-action waiver is struck down as to a particular claim, only that claim is severed out to court. Every other dispute still goes to individual arbitration as normal. |
OpenAI's own terms are not purely narrow. In the specific scenario where striking the class waiver would otherwise let a class-style claim move forward in arbitration, OpenAI's terms let the entire arbitration section fail, meaning all disputes, not just the one affected, would then go to court instead. A separate, narrower severance mechanism exists elsewhere in their terms for other scenarios. In other words, even the most-copied company in this space did not pick one clean answer; they use a mixed approach weighted toward the more aggressive option in the exact situation Colony's clause is built to handle.
Why Colony's Narrow Approach Is Still the Right Call, Not a Compromise
This is a genuine judgment call, not a fact with one correct answer, and the recommendation below is a considered choice rather than a default:
The core trade-off
Broad/blow-up severance protects a company from ever facing anything resembling a class proceeding, at the cost of an all-or-nothing outcome: one adverse ruling, in one court, on one narrow legal question, and the company loses its entire arbitration system - for every dispute, everywhere, going forward, not just the one that triggered it. Narrow severance accepts a smaller, contained loss (one claim moves to court) in exchange for keeping the arbitration system intact for everything else.
Why the contained-loss approach fits Colony's situation
- •Arbitration is generally faster and less expensive to defend than courtroom litigation. Losing that benefit entirely because of a single adverse ruling in a single jurisdiction is a disproportionately large downside relative to the risk being guarded against.
- •Colony does not yet have OpenAI's scale, litigation exposure, or in-house legal infrastructure to absorb the consequences of an all-or-nothing collapse of its dispute-resolution system. The broad approach is better suited to a company that has made a deliberate strategic bet that it would rather fight everything in court than risk any version of a class proceeding slipping through a much more aggressive, litigation-heavy posture than is proportionate for Colony at this stage.
- •Narrow severance is also the more commonly upheld construction in U.S. courts applying the Federal Arbitration Act post-Concepcion: courts are generally comfortable enforcing individual arbitration obligations even where a specific ancillary provision is struck, provided the rest of the clause can stand on its own, which is exactly what the narrow form is built to preserve.
Recommended Position
Keep the narrow severance form as currently drafted in Section 21.5 of the Terms of Service. Do not adopt OpenAI's broader, all-or-nothing approach. This is not a case of Colony being under-protected relative to the market the market itself is split, and Colony's choice is the more conservative, lower-downside option, appropriate to Colony's current size and risk profile. Revisit this choice only if Colony's litigation profile changes materially (for example, sustained class-action exposure that would justify trading contained losses for all-or-nothing protection).