ABC Real Estate Services and its co-plaintiffs are licensed real estate brokers that post apartment rental listings on the Craigslist.com Web site. One of their competitors, Rentasy Rentals, also posts listings on Craigslist. The plaintiffs claimed that Rentasy was violating the Craigslist ToU by "spamming" Craigslist, i.e., posting multiple repetitive advertisements for the same rental property. They filed suit against Rentasy claiming damage to their business as a result of the ToU violations. The complaint alleged multiple causes of action but the plaintiffs sought a preliminary injunction against the spamming on the theory that they were third-party beneficiaries of the Craigslist ToU.
The Craigslist ToU is a clickwrap agreement to which users must assent in order to post listings on the site. Among other prohibitions, the ToU provides that users agree not to repeatedly post the same or similar content on Craigslist, "or otherwise impose an unreasonable or disproportionately large load on our infrastructure." The ToU further provides that it is the entire agreement between the parties, and that a user’s "only recourse" for dissatisfaction with the service, "in any way," is to discontinue using the service. Finally, the ToU reserves to Craigslist the right, but not the obligation, to enforce the ToU and requests that users report violations to it by means specified in the ToU.
The court applied California law (without objection, and as specified in the Craigslist ToU) in concluding that the plaintiffs had failed to show a likelihood of success on the merits. California law requires a claimed third-party beneficiary to show that it was an intended beneficiary of the contract. The court looked to a number of elements in the ToU in concluding that the plaintiffs were not intended beneficiaries:
- The wording of the ToU as a contract between "you and craigslist" contemplated that the ToU was creating rights and duties only between the two contracting parties.
- The ToU indicated that a user’s "only recourse" was to terminate use of the service and thereby limited the user’s remedy accordingly.
- The ToU requested users to report violations to it and therefore "strongly" suggested an intent to preclude user resort to litigation to enforce the ToU.
- The specific provision which the plaintiffs claim was violated was intended for the benefit of Craigslist, not other users, as it prohibited any unreasonable or disproportionate load on the Craigslist infrastructure.
The court also rejected the argument that the specific limitations in the FAQ on repetitious postings were intended to benefit other users.
Given the unwanted publicity that Craigslist has garnered recently, this case is particularly interesting. A different result could potentially have opened Craigslist to third party claims from other users relating to the substance of user-posted ads.
Practitioners in this area should take note of this decision as it presents an issue that every Web site publisher should be concerned about. To avoid unforeseen potential liability, publishers should make sure that their ToU adopts the factors identified by the court, as well as other relevant considerations.