New Media and Technology Law Blog : Technology Lawyers & Attorneys : Proskauer Rose Law Firm : Trademarks, Patents & Copyright

When Cynthia Hines returned a vacuum cleaner to online retailer Overstock.com, she was reimbursed for the full amount of her purchase, but Overstock deducted a $30 restocking fee, citing a provision in its Web site Terms and Conditions. Hines filed a purported class action in federal court in the Eastern District of New York asserting that she had been advised that she could return the vacuum without incurring any charge, and that she was not aware that a restocking fee would be charged.

When Overstock moved to dismiss or stay the action, citing the arbitration provision in the same Terms and Conditions, Hines similarly argued that she was not aware of the arbitration provision. According to Hines, she was not on either actual or constructive notice of the Terms and Conditions because they were referenced only in a hyperlink in small type at the bottom of the page of the Overstock Web site, between the link to the privacy policy and the Overstock.com registered trademark. She argued: "I did not scroll down to the end of the page(s) because it was not necessary to do so, as I was directed each step of the way to click on to a bar to take me to the next step to complete the purchase."

In Hines v. Overstock.com, Inc., 2009 U.S. Dist. LEXIS 81204 (E.D. N.Y. Sept. 4, 2009), Judge Sterling Johnson, Jr., agreed with Hines, finding that under the law of New York (where Hines resides), or under the law of Utah (where Overstock.com is located), Overstock.com had not carried its burden of providing the existence of a valid arbitration agreement. There was no meeting of the minds sufficient to form a contract, Judge Johnson ruled, because Hines had neither actual nor constructive notice of the Terms and Conditions, as required by the Second Circuit ruling in Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002):

Notably, unlike in other cases where courts have upheld browsewrap agreements, the notice that "Entering this Site will constitute your acceptance of these Terms and Conditions," … was only available within the Terms and Conditions. Hines therefore lacked notice of the Terms and Conditions because the website did not prompt her to review the Terms and Conditions and because the link to the Terms and Conditions was not prominently displayed so as to provide reasonable notice of the Terms and conditions. Very little is required to form a contract nowadays – but this alone does not suffice."

Compare the result in Hines v. Overstock.com with the result in another recent ruling, PDC Laboratories, Inc. v. Hach Co., 2009 U.S. Dist. LEXIS 75378 (C.D. Ill. Aug. 25, 2009), a case involving a transaction between commercial parties. The court ruled that the incorporation of a limitation of damages clause in terms and conditions of sale available via a hyperlink displayed during an online ordering process was not procedurally unconscionable. Relying on Hubbert v. Dell Corp., 359 Ill. App. 3D 976, 835 N.E. 2D 113 (5th Dist. 2005), an opinion involving a consumer transaction, the court concluded that the terms and conditions were conspicuous within the meaning of the Uniform Commercial Code where the hyperlink leading to them was in underlined, blue, contrasting text and was displayed three times during the ordering process. The court further noted that attention was specifically brought to the terms and conditions by a reference in the directions for the "final order step" of the ordering process.

 

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Case law has developed over the years with respect to enforceability of Web site terms and conditions, and the general parameters are now pretty well understood. Courts will, in general, enforce online terms and conditions against consumer users, provided they are given adequate notice and an opportunity for review.

There are numerous exceptions to the general rule, however. Courts often refuse to enforce specific terms in Web site terms and conditions against consumers, particularly where those terms involve class action waivers, arbitration requirements, inconvenient forum choices, and like provisions.

The case of Burcham v. Expedia, involving a pro se attorney's challenge to the enforceability of the Expedia travel site terms and conditions, is not one of those exceptions.

The pro se attorney plaintiff in Burcham v. Expedia brought suit against the travel site under Missouri consumer law, claiming that Expedia knowingly misrepresented the hotel amenities for a room that he booked on the site. He sought $5 million in damages and class certification.

It didn't help the court's view of the case that the room was booked for a hotel in Missouri in November, and one of the amenities that Burcham claimed was absent when he and his children arrived at the hotel was an outdoor swimming pool. Fair enough, Burcham also claimed that the hotel lacked an indoor swimming pool, conference room, restaurant and bar/lounge. But the court pointed out that Burcham's complaint did not allege that he or his children wished to use any of the absent amenities.

Burcham was off to a bad start.

Expedia moved to dismiss Burcham's complaint, relying on the forum selection provision that specified Kings County, Washington as the proper venue. Expedia submitted evidence showing multiple versions of its terms of use, including the current and past versions, which the court concluded contained the same material terms.

Expedia also established by affidavit that Burcham's booking had been made by a process under which the user was presented with a legend stating: "By continuing on you agree to the following terms and conditions." Beneath the legend, the full text of the terms and conditions was displayed. In order to book a room, the user was required to click on the "continue" button.

Confronted with this evidence, Burcham argued that he simply did not remember seeing the terms and conditions when he used the Expedia site. He suggested that he may have used the site from a shared computer at his law office without checking to see if the prior user of the computer was already logged onto the site. Thus, he argued, the prior user may have clicked past the terms and conditions, but they were never presented to him.

The court briefly reviewed the relevant case law (e.g., Specht v. Netscape, Register.com v. Verio, ProCD v. Zeidenberg) and the distinctions between clickwrap, shrinkwrap and browsewrap agreements, and quickly concluded that Expedia had an "enforceable online clickwrap agreement" with Burcham. Burcham's argument that he never saw the terms and conditions was dismissed both on the facts and the law.

On the facts, the court found, Burcham offered no evidence to support his "clever theory" that someone else clicked past the terms and conditions, and the undisputed facts showed that the user account created at the time the terms and conditions were assented to was associated with Burcham's own e-mail address. On the law, the court concluded that if Burcham in fact had accessed the Web site under someone else's account, he was still bound by the terms and conditions to which that user had assented, citing, e.g., Motise v. America Online, Inc., 346 F.Supp. 2d 563 (S.D.N.Y. 2004) (individual using the online account of another user bound by the same terms and conditions as the account owner).

Burcham also tripped over the evidence he himself submitted to the court along with his brief. The court noted that the Expedia Web pages Burcham submitted as exhibits contained a hyperlink at the bottom to the full text of the Expedia terms and conditions. The court noted that the terms and conditions stated that users of the site consent to be bound by those terms and conditions by accessing and using the Web site. Thus, the court concluded, even if Burcham wasn't clickwrapped, he was browsewrapped.

Finally, the court quickly dismissed Burcham's arguments that the forum selection provision was unreasonable and in contravention of Missouri public policy and that the contract as a whole was one of adhesion.

The ruling in Burcham v. Expedia is a win for the enforceability of online agreements, and another loss for pro se attorney plaintiffs for whom courts seem to have little sympathy. See, e.g., Field v. Google, 412 F.Supp. 2d 1106 (D. Nev. 2006) (rejecting pro se attorney plaintiff's "manufactured" copyright infringement claim based on Google Web crawling and caching).

Burcham v. Expedia, Inc., 2009 U.S. Dist. LEXIS 17104 (E.D. Mo. Mar. 6, 2009)

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