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District Court Rules Online Agreement Does Not Bind Customers to Unknown Future Contract Terms
On December 10, the U.S. District Court for the Northern District of California granted plaintiff’s motion for partial summary judgment in a class action suit filed against a large grocery chain. Plaintiff claims that the grocer’s online prices for groceries were approximately 10 percent higher than those in its stores and alleged causes of action for breach of contract and under California’s Unfair Competition Law, Consumer Legal Remedies Act, and False Advertising Law. A class was certified for the breach of contract claim on March 9, 2014. In granting summary judgment on the breach of contract claim, the Court found that the grocer breached its agreement with consumers because its terms of use promised that the online prices and in-store prices would be identical. Furthermore, the Court rejected the grocer’s claims that class members should not be allowed to recover damages for the period after it made revisions to its terms of use where it noted the pricing disparities. The Court stated, “even in light of [customer’s] agreement to the Special Terms at the time of registration, customers’ assent to the revised Terms cannot be inferred from their continued use of the [grocer’s online service] when they were never given notice that the Special Terms had been altered.” Rodman v Safeway Inc., No 11-cv-03003-JST (N.D. Cal. Dec. 10, 2014).
Utah Federal Court Dismisses Putative Class's "True Lender" Claims Against Online Merchant
On May 23, the U.S. District Court for the District of Utah dismissed a putative class action filed against an ecommerce merchant for allegedly operating a financing program that violated various California laws, including the state's usury law. Sawyer v. Bill Me Later, Inc., No. 11-988, 2014 WL 2159044 (D. Utah May 23, 2014). The court explained that the customer chose to finance his online purchase and was required to sign a contract: (i) identifying a Utah-chartered bank as the lender and as the owner of the account; (ii) specifying that the customer was accepting the loan in Utah, credit was being extended from Utah, and an annual interest rate of 19.99% would apply to outstanding loan amounts; and (iii) disclosing a schedule for late fees. The bank funded the transaction by paying the merchant on the customer’s behalf and held the receivables for at least two days before selling them to the merchant. The customer sued after he failed to pay for the purchase within 30 days and the merchant applied the disclosed interest rate and assessed a late fee, which the customer claimed together exceeded the usury cap in California, where the purchase was made. The court rejected the customer’s claim that the merchant, rather than the bank, was the “true lender” or the real party in interest. The court determined that “the lending framework more closely resembles credit card programs than the circular payday loan structures” described by the customer. The court concluded that loans serviced through contracts with third parties such as the merchant in this case are included within the definition of “any loan” under Section 27 of the Federal Deposit Insurance Act and as such are expressly preempted by federal statute.
Nevada Federal District Court Stays Discovery Based On Lack Of Jurisdiction Over Foreign Website Operator
On May 15, the U.S. District Court for the District of Nevada granted a motion to stay discovery pending adjudication of the motion to dismiss on the grounds that it likely lacked personal and specific jurisdiction over the foreign operator of a passive website that conducted no act in Nevada other than the use of an allegedly infringing trademark, notwithstanding the website’s marketing claims of a significant U.S. presence. Best Odds Corp. v. iBus Media Ltd., No. 13-2008, slip op. (D. Nev. May 15, 2014). The court’s “peek” at the defendant’s pending motion to dismiss arguments led to the conclusion that it lacked personal jurisdiction over defendant despite plaintiff’s allegation, among others, that the defendant’s media kit stated that its website has a “significant U.S. presence” because that statement did not “approximate physical presence.” The court further concluded that it lacked specific jurisdiction, holding that the foreign operator’s site was passive and the operator did not purposefully direct its activities at the forum state or consummate a transaction within the forum state. The court rejected the plaintiff’s argument that the website was not passive because it allowed users to access third party travel websites to make reservations in the United States.
Michigan Federal Court Addresses Personal Jurisdiction Based On Online Sales Through Hyperlinked Third-Party Website
On April 15, the U.S. District Court for the Western District of Michigan exercised personal jurisdiction in a trademark infringement suit after determining that an out-of-state company’s website was sufficiently interactive such that the exercise of personal jurisdiction comports with Due Process. Mor-Dall Enters. v. Dark Horse Distillery, LLC, No. 1:13-cv-915, (W.D. Mich. Apr. 15, 2014). In assessing personal jurisdiction, the court relied on the sliding scale framework established in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997) to assess whether a website has minimum contacts with a forum state. The court determined that the company’s website, which does not allow customers to make purchases directly but rather links customers to a third-party vendor to complete a sale, is interactive and demonstrates that the company “clearly does business over the internet.” Because the website solicits customers from across the country, including Michigan, the company purposefully availed itself of the privilege of acting in Michigan, the court explained. In so holding, the court declined to follow a Northern District of Iowa decision that a company’s website’s use of a hyperlink to a third-party vendor does not give rise to personal jurisdiction over that company. Instead, the court relied on a Sixth Circuit copyright infringement case which held that a record label whose website directed customers to Amazon.com to make purchases availed itself of the privilege of acting in the forum state. The court further held that the cause of action arises in Michigan, and that the exercise of personal jurisdiction is reasonable given the quality and quantity of contacts. The court denied the defendant’s motion to dismiss.
Florida District Court Holds Property Buyer's Emails With Online Auction Company Are Not An Enforceable Contract
On April 7, the U.S. District Court for the Middle District of Florida dismissed a property buyer’s breach of contract and specific performance claims based on emails from an online auction company, holding that the emails alone did not create an enforceable real estate sales contract. Rouse v. Nationstar Mortg., LLC, No. 14-497, 2014 WL 1365420 (M.D. Fla. Apr. 7, 2014). The buyer, who won an online auction to purchase a property, sued the seller after the seller determined it did not wish to proceed with the sale. The buyer alleged breach of contract and sought specific performance, arguing that an email he received from the online auction company confirming his winning bid for the property and a subsequent email from the auction company indicating that the seller agreed to the terms of the purchase agreement memorialize all of the essential terms of the sale. The court held that even if the auction company’s emails satisfy the writing requirement of the statute of frauds as proper electronically signed documents, the confirmation email specifically stated that the seller’s acceptance of the bid and the purchase of the property was contingent not only on the seller’s approval of the purchase, but also on the execution of the purchase agreement by the winning bidder. Because the purchaser offered no evidence that he executed the purchase agreement, the court dismissed without prejudice the buyer’s breach of contract and specific performance claims. The court dismissed with prejudice the buyer’s equitable estoppel claim, but declined to dismiss the buyer’s unjust enrichment claim to recoup costs associated with repairs the buyer made to the property between the time of the auction and the seller’s decision not to proceed with the sale. The court held that the latter claim is dependent upon the seller’s actual knowledge of the repairs, which cannot be determined at this stage.
N.D. Cal. Validates Forum Selection Clause In Website's Hyperlinked Terms Of Use
On April 11, the U.S. District Court for the Northern District of California held that the forum selection clause within a website’s terms of use provisions, which an online customer had to accept in order to proceed with the transaction, is valid and supports a transfer of the case to another forum. Moretti v. Hertz Corp., No. 13-2972, 2014 WL 1410432 (N.D. Cal. Apr. 11, 2014). An online customer filed a putative class action in California state court against a car rental company and a travel website over a price disclosure dispute. The companies removed the action to federal court and sought to transfer the case to Delaware based on a forum selection clause included in the terms of use provisions on the travel website through which the car rental was arranged. In support of the motion to transfer, the travel website provided employee declarations establishing that the terms of use included a forum selection clause, and that the transaction could not have been completed unless the customer clicked a box to accept the terms of use. The court held that even though the terms of use were provided through a hyperlink on the site, in the absence of affirmative denial from the customer that he did not click to accept the terms of use, the customer had notice and consented to the terms and the forum selection clause contained therein. The court granted the defendants’ transfer motion and ordered the case transferred to the District Court of Delaware.
California Appeals Court Holds Injury Required For Standing Under State Shine The Light Law
Recently, the California Court of Appeals, Second District, held that a plaintiff must have suffered a statutory injury to have standing to pursue a cause of action under the state’s “Shine the Light Act” (SLA). Boorstein v. CBS Interactive, Inc., No. B247472, 2013 WL 6680796 (Cal. Ct. App. Dec. 19, 2013). The SLA requires businesses that collect California residents’ personal data and then share that data for marketing purposes to disclose or allow consumers to opt out of that sharing. Specifically, all businesses must make consumers aware of their SLA rights by (i) maintaining a disclosure on their website and providing contact information for consumers to make a request about information shared with direct marketers; (ii) requiring customer service agents to provide the contact information upon request; or (iii) making the contact information available at every place of business in the state. In recent years, consumers filed a series of class actions, including the instant case, alleging that companies failed to properly disclose their contact information on their websites. The class plaintiffs did not, however, allege that they had sought SLA disclosures or would have done so had contact information been available. Consistent with federal district courts that have considered these claims, the state appeals court here determined that a failure to timely, accurately, or completely respond to a disclosure request is a discrete event upon which a court could calculate a civil penalty for each violation, whereas a failure to post information on a website is a continuing event that cannot readily be quantified. The court held that such a continuing violation, without more, is not an actionable violation. The court rejected the plaintiff’s claim that he suffered an "informational injury” because he did not receive information to which he was statutorily entitled, and upheld the trial court’s holding that the alleged failure was merely a procedural injury insufficient to establish standing.
Louisiana Appellate Court Addresses Personal Jurisdiction Based On Out-Of-State Website Sales
On November 5, the Court of Appeal of Louisiana, Fourth Circuit, affirmed a trial court’s holding that it lacked personal jurisdiction over a dispute that involved only one sale of goods over the Internet to a Louisiana-based customer. BioClin BV v. MultiGyn USA, LLC, No. 2012-CA-0962, 2013 WL 5935233 (La. Ct. App. Nov. 5, 2013). A Dutch company appealed a trial court’s decision to dismiss for lack of personal jurisdiction the company’s suit against a Florida based web-retailer for infringement. On appeal, the court affirmed, holding that the company failed to establish that the defendant’s one-time sale of goods into Louisiana over the Internet subjected the defendant to that state’s courts, and that “extenuating personal jurisdiction would not comport with the notions of fair play and substantial justice.” Relying on the sliding scale established in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, to assess whether a website has minimum contacts with a forum state sufficient to invoke personal jurisdiction, the appeals court explained that the “mere creation of a website, does not constitute purposeful availment of the forum benefits,” nor does a one-time sale of goods through that website into the state.
New York Appellate Court Addresses Personal Jurisdiction Based On Online Contacts
Recently, the New York Appellate Division, Second Department, held that out-of-state defendants in a medical malpractice case were not subject to the New York courts personal jurisdiction based on an Internet advertisement viewed in New York and a subsequent series of email and phone contacts between the New York resident patient and the out of state defendants. Paterno v. Laser Spine Inst., No 2011-4654, 2013 WL 5629871 (N.Y. App. Div. Oct. 16, 2013). In this case, the New York trial court had dismissed a medical malpractice suit filed in New York against a Florida-based medical provider over services rendered in Florida, holding that the medical service provider did not transact business in New York. On appeal the Appellate Division agreed, holding that although a defendant need not be physically present in the state to transact any business there in satisfaction of New Yorks statutory requirements for personal jurisdiction, the totality of the circumstances presented did not provide a basis for exercising long-arm jurisdiction over the medical service provider. The appellate court rejected the patients argument that the provider had actively solicited business in New York through an online advertisement, holding that the providers website was passive in nature and that there was no indication it facilitated the purchase of any goods or services. The appellate court also concluded that a series of email and phone contacts between the patient and the provider did not constitute business activity and were not sufficiently purposeful for jurisdictional purposes.