Website terms and conditions were unenforceable because of fraud

Duick v. Toyota Motor Sales, U.S.A., Inc., 2011 WL 3834740 (Cal.App. 2 Dist. August 31, 2011)

Someone signed plaintiff up through a Toyota website to take part in a “Personality Evaluation.” She got an email with a link to a website, and on the second page that she had to click through, she was presented with the well-known check box next to the words “I have read and agree to the terms and conditions.”

Later plaintiff started getting creepy emails from an unknown male calling himself “Sebastian Bowler” who indicated that he was on a cross-country road trip to come and visit plaintiff. He even listed plaintiff’s physical address. One of the emails had a link to Bowler’s MySpace page, which revealed he “enjoyed drinking alcohol to excess.” A few days later plaintiff got another email from someone purporting to be the manager of the hotel in which Bowler had trashed a room, and attempted to bill plaintiff for the damage.

As one would expect, plaintiff was disturbed by these messages. She finally got an email with a link to a video that said Bowler was a fictional character and that the emails were part of an elaborate prank, all to advertise the Toyota Matrix.

Plaintiff sued Toyota for, among other things, infliction of emotional distress. Toyota moved to dismiss the lawsuit, arguing that the online terms and conditions contained an arbitration provision, so the case did not belong in court but before an arbitrator. The court rejected this argument, finding that the terms and conditions were void, because plaintiff’s agreement to them was procured by “fraud in the inception or execution.”

The court found that the terms and conditions led plaintiff to believe that she was going to participate in a personality evaluation and nothing more. A reasonable reader in plaintiff’s position would not have known that she was signing up to be the target of a prank. For example, the terms and conditions were under the heading “Personality Evaluation Terms and Conditions” and made vague and opaque references to terms such as “interactive experience” and a “digital experience.” Simply stated, plaintiff, through no fault of her own, did not know what she was getting herself into.

For these reasons, the court held that the terms and conditions were void, and all the provisions contained in those terms and conditions, including the purported agreement to arbitrate any disputes, did not bind the parties.

Drunk reality show participant’s invasion of privacy claim stays in court, for now

Amirmotazedi v. Viacom, Inc., — F.Supp.2d —, 2011 WL 802134 (D.D.C. March 9, 2011)

Plaintiff sued the producers of The Real World (MTV, Viacom and Bunim-Murray Productions) for, among other things, invasion of privacy and intentional infliction of emotional distress over the way that the show portrayed her in an episode and in outtakes posted on the web. Defendants moved to dismiss, claiming that the plaintiff signed a release on the night she visited the Real World house, and that the release’s arbitration clause meant the case did not belong in court. The court denied the motion.

To argue against the enforceability of the arbitration provision, plaintiff asserted that she was so drunk on the night of the filming that she lacked the mental capacity to understand the significance of the arbitration provision. (This is called the voluntary intoxication defense.)

The court sided with plaintiff, finding that plaintiff’s mental capacity defense went to the question of formation, or the “making” of the agreement to arbitrate, thus under the Federal Arbitration Act, the question of the arbitration provision’s enforceability must be decided by the court. That’s not to say that the court won’t ultimately kick the case into arbitration. It’s just that the case stays before the court for now to determine whether plaintiff’s voluntary intoxication defense requires the agreement to be voided.

Related: California court invalidates Alienware arbitration provision in online terms and conditions

Facebook victorious in lawsuit brought by kicked-off user

Young v. Facebook, 2010 WL 4269304 (N.D. Cal. October 25, 2010)

Plaintiff took offense to a certain Facebook page critical of Barack Obama and spoke out on Facebook in opposition. In response, many other Facebook users allegedly poked fun at plaintiff, sometimes using offensive Photoshopped versions of her profile picture. She felt harassed.

But maybe that harassment went both ways. Plaintiff eventually got kicked off of Facebook because she allegedly harassed other users, doing things like sending friend requests to people she did not know.

When Facebook refused to reactivate plaintiff’s account (even after she drove from her home in Maryland to Facebook’s California offices twice), she sued.

Facebook moved to dismiss the lawsuit. The court granted the motion.

Constitutional claims

Plaintiff claimed that Facebook violated her First and Fourteenth Amendment rights. The court dismissed this claim because plaintiff failed to demonstrate that the complained-of conduct on Facebook’s part (kicking her off) “was fairly attributable to the government.” Plaintiff attempted to get around the problem of Facebook-as-private-actor by pointing to the various federal agencies that have Facebook pages. But the court was unmoved, finding that the termination of her account had nothing to do with these government-created pages.

Breach of contract

Plaintiff’s breach of contract claim was based on other users harassing her when she voiced her disapproval of the Facebook page critical of the president. She claimed that in failing to take action against this harassment, Facebook violated its own Statement of Rights and Responsibilities.

The court rejected this argument, finding that although the Statement of Rights and Responsibilities may place restrictions on users’ behavior, it does not create affirmative obligations on the part of Facebook. Moreover, Facebook expressly disclaims any responsibility in the Statement of Rights and Responsibilities for policing the safety of the network.

Good faith and fair dealing

Every contract (under California law and under the laws of most other states) has an implied duty of good faith and fair dealing, which means that there is an implied “covenant by each party not to do anything which will deprive the other parties . . . of the benefits of the contract.” Plaintiff claimed Facebook violated this implied duty in two ways: by failing to provide the safety services it advertised and violating the spirit of the terms of service by terminating her account.

Neither of these arguments worked. As for failing to provide the safety services, the court looked again to how Facebook disclaimed responsibility for such actions.

The court gave more intriguing treatment to plaintiff’s claim that Facebook violated the spirit of its terms of service. It looked to the contractual nature of the terms of service, and Facebook’s assertions that users’ accounts should not be terminated other than for reasons described in the Statement of Rights and Responsibilities. The court found that “it is at least conceivable that arbitrary or bad faith termination of user accounts, or even termination . . . with no explanation at all, could implicate the implied covenant of good faith and fair dealing.”

But plaintiff’s claim failed anyway, because of the way she had articulated her claim. She asserted that Facebook violated the implied duty by treating her coldly in the termination process, namely, by depriving her of human interaction. The court said that termination process was okay, given that the Statement of Rights and Responsibilities said that it would simply notify users by email in the event their accounts are terminated. There was no implied obligation to provide a more touchy-feely way to terminate.

Negligence

Among other things, to be successful in a negligence claim, a plaintiff has to allege a duty on the part of the defendant. Plaintiff’s negligence claim failed in this case because she failed to establish that Facebook had any duty to “condemn all acts or statements that inspire, imply, incite, or directly threaten violence against anyone.” Finding that plaintiff provided no basis for such a broad duty, the court also looked to the policy behind Section 230 of the Communications Decency Act (47 U.S.C. 230) which immunizes website providers from content provided by third parties that may be lewd or harassing.

Fraud

The court dismissed plaintiff’s fraud claim, essentially finding that plaintiff’s allegations that Facebook’s “terms of agreement [were] deceptive in the sense of misrepresentation and false representation of company standards,” simply were not specific enough to give Facebook notice of the claim alleged.

Customer violated software license by letting attorneys use application

The Compliance Store v. Greenpoint Mortgage Funding, — F.3d —, 2010 WL 4056112 (5th Cir. October 18, 2010)

A federal court in Texas has decided a case that could have notable implications for both providers and users of software. The court took a narrow view of the rights that licensees of software have to authorize third parties (i.e., independent contractors) to use software on behalf of the licensee.

Plaintiff software provider sued its customer for breach of the software license agreement after plaintiff learned that the customer allowed its attorneys to input data using the software. Plaintiff claimed that the use was not permitted by the terms of the license agreement.

Customer moved for summary judgment on the breach of software license claim and the district court granted the motion. Plaintiff software provider sought review with the Fifth Circuit Court of Appeals. On appeal, the court reversed.

The appellate court held that the license agreement should not be read to permit use of the software by a third party not expressly provided for in the agreement, even though such third party’s use of the software was on behalf of or for the benefit of the licensee.

The district court had relied on two earlier Fifth Circuit cases — Geoscan v. Geotrace Technologies and Hogan Systems v. Cybresource International — to look beyond the express language of the license agreement and hold that use of the software by defendant’s attorneys was permitted. The district court found such use to be permitted because it was done on behalf of or for the benefit of defendant.

But the appellate court distinguished Geoscan and Hogan Systems, finding that neither case stands for such an expansive proposition. Unlike the agreements in those cases, the license in this case contained no provision that permitted use by third parties on behalf of the licensee. Moreover, among other things, defendant was expressly prohibited from transferring or sublicensing the technology and was prohibited from assigning its rights under the license agreement. The software license agreement also contained a provision that served to excluse all third party beneficiaries to the agreement.

Photo courtesy Flickr user coiax under this Creative Commons license.

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