- Hubbert v. Dell Corp., 2005 WL 1968774 (Ill. App. Ct. 2005) (court upheld arbitration clause in Dell’s for cause regarding alleged false claims made by Dell to online purchasers of the computers. Court found different colored hyperlinks on each page like a multipage contract).
- Hines v. Overstock.com, Inc., 668 F. Supp.2d 366 (E.D.N.Y. 2009) (both arbitration and forum selection clause invalid due to no actual or constructive notice)
- Van Tassell v. United Mktg. Group, LLC, 795 F. Supp. 2d 770 (N.D. Ill. 2011) (holding arbitration provision was unenforceable where it was included website’s conditions of use but difficult to find, because users had to scroll all the way down home page, click on Customer Service link, then scroll down and click another link to find it).
- Friedman v. Guthy-Renker, LLC, 2015 US Dist LEXIS 24307 (C.D. Cal. Feb. 27, 2015) (where two plaintiffs clicked on checkbox that only referenced credit card terms prior to purchase, arbitration not binding; for plaintiff who clicked on checkbox which had a link to the terms the arbitration provision was binding)
Category: Contracts (Page 1 of 2)
In In re Facebook Biometric Information Privacy Litigation, 185 F. Supp. 3d 1155, 2016 U.S. Dist. LEXIS 60046, (N.D. Cal. 2016):
- A class action against Facebook was filed pursuant to the Illinois Biometric Informration Privacy Act (BIPA). Parties agreed to transfer case to N.D. California, but wanted Illinois law (and not CA law) to apply.
- Plaintiff’s alleged that facial and other recognition used by Facebook violated BIPA
- There were three plaintiffs at issue and court reviewed the sign up procedure for each (2005, 2008 and 2009).
- When Facebook updated its Terms it emailed a notice to all user’s email addresses and the next time each user logged on, they saw “jewel” notification in their personal newsfeed alerting to the change in such documents but no affirmative action was required by each user).BUT said the general and individualized notice was enough, that the agreement was effective, but that in the situation it would not apply CA law.
- The Court said that the notice provided by Facebook was enough to have a binding choice of law provision (seemed to like the “personalized” nature of the news feed notice).
- But the Court then still chose to apply IL law as opposed to CA.
In Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171 (9th Cir. 2012):
- Said “inquiry notice” turns on “design and content of the website and agreement’s webpage.”
- This case was followed by e.g., Long v. Provide Commerce, Inc. 245 Cal. App. 4th 855 (Cal. Ct. App. 2016) (refused to compel arbitration, stated that to put users on notice you need conspicuous hyperlink plus notice that it contains binding terms. A conspicuous notice alone is not enough).
In Jerez v. JD Closeouts, LLC, No. CV-024727-11, 2012 WL 934390 (N.Y. Dist. Ct. 2012):
–The court held that a terms of sale provision found on the “About” page of the website was not enough to enforce the forum selection clause.
- Plaintiff ordered products ($6,000 worth of tube socks) over the Internet, and sued claiming there were defects.
- Seller moved to dismiss claiming the forum selection clause required the dispute be heard in a Florida state court, and Plaintiff claimed he never saw clause.
–Court found the clause was not reasonably communicated where it was “buried” and “submerged” on the website, and could only be found by clicking on an “inconspicuous” link to the company’s About Us page. Seller’s attempt to have the terms incorporated by reference in a printed contract and letter agreement were not enough for the court.
- Court relied on Specht and Carnival Cruise Lines.
–Similar holding in Cvent, Inc. v. Eventbrite, Inc., 739 F. Supp. 2d 927 (E.D. Va. 2010).
In Ticketmaster Corp. v. Tickets.com, Inc., 2003 U.S. Dist. Lexis 6483 (C.D. CA., March 7, 2003):
–Relying on Register.com and Pollstar, the court held that a contract can be formed by use of a website, provided the user, at the time of use, has knowledge of the site’s terms and conditions that provide that such use constitutes an agreement to be bound.
- Court relied on “cruise ship” case law precedent. It analogized interior web pages to the back of a cruise ship ticket’s venue clause, where user has actual or presumptive knowledge.
–Court found that Tickets.com used Ticketmaster’s site with full knowledge of the terms, and upheld such terms in the breach of contract action.
In Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. CA 2000):
–Pollstar kept track of concert information on its website, which any user could download by accepting the terms of Pollstar’s license.
»License prohibited commercial use of information.
»License was not on Pollstar’s homepage, but on different page of its site.
»Visitor is alerted to existence of Pollstar’s license only by reason of a small grey print on grey background (with a link to terms, but other links on homepage were blue)
–Gigmania downloaded information from Pollstar’s site and used it on its own site for commercial purposes. Pollstar sued to enforce terms.
–The court refused to enforce the terms of the license agreement because it found that the link to the license was hard to read based on the way it was presented.
- Notably, the court did not rule that the license agreement was unenforceable, only that the website did not give users adequate notice of it.
Below is a brief overview of Register.com v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004):
–VERIO claimed there was no contract as it never agreed to the terms, and in any event any user of the WHOIS site could receive the information before seeing the terms.
- The court said that this argument may only have worked if Verio used the WHOIS database once, but Verio did it every day with full knowledge of the terms.
Here is a brief summary of the case In re Zappos.com, Inc. Customer Data Security Breach Litigation, 893 F.Supp. 2d 1058 (Dist. Ct. Nevada 2012):
–Users sued in multiple forums for damages due to a security breach.
–Zappos had a hyperlink on each page of its website to the terms but it was hard to see, being the same size and color as other insignificant links, and located ¾ of the way down the page. The website never prompted or directed a user to the terms even when purchasing a product or opening an account.
–Court concluded that the plaintiffs may have never seen the terms, so in no way could be deemed to have actually or constructively agreed to them. No assent, no contract.
- Sidenote: The Court also held the arbitration provision was an illusory contract (and therefore not enforceable) because Zappos was able to amend the Terms as it saw fit at any time. See Grosvenor v. Qwest Corp., 854 F. Supp. 2d 1021 (D. Colo. 2012) for this same holding.
This is a follow up post on our series of merger and acquisition issues. If you are selling your company you’ll be faced with the prospect of indemnifying the purchaser for any damages they suffer in connection with the sale. Now such indemnification may arise for a number of reasons, such as an unknown debt or lien that was on an asset you sold, a claim that an employee or third party made against the company or an asset which you did not inform the purchaser of, or a number of other issues. These are usually breaches of the representations and warranties that sellers have to make to the buyers in the asset purchase agreement. For example, the seller will represent (i.e. state as true at the time of signing or closing or both) that there are no debts owed by the company or liens on the company assets. If the deal closes and a lender or lien of the company did exist, its a breach of that representation, and the seller is liable to the buyer for any resulting damages.
This is a response to a post by Ken Adams of Adams on Drafting. In one of my earlier posts about the desires of certain clients to have as short a contract as possible, I stated that it was beneficial to draft an agreement a certain way, including certain terms and language, because judges have seen similar items before. Ken identified this and he reiterated his position that a contract drafter should not rely on what he deems “tested” contract language.