Contracts – Page 9 – Attorney Evan Brown

March 10, 2011 Contracts, Litigation

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.

November 2, 2010 Contracts, First Amendment, Fraud/Misrepresentation

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.

October 27, 2010 Contracts

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.

October 13, 2010 Contracts, Unfair Competition

Blog post violated nonsolicitation clause in Amway agreement

Amway Global v. Woodward, 2010 WL 3927661 (E.D.Mich. September 30, 2010)

Amway Global went after some of its former distributors in arbitration for, among other things, violating the “Rules of Conduct” which serve as an agreement as to how the distributors (formally known as Independent Business Owners or “IBOs”) operate. Amway claimed that the IBOs violated the Rules of Conduct by soliciting others to leave Amway and join competing enterprises.

The arbitrator found in Amway’s favor, and Amway filed a motion with the court to confirm the award. The court granted the motion.

One of the factual questions was whether one of the IBOs violated the rules against solicitation by blogging about his decision to leave Amway and join another company. One of his posts said “[i]f you knew what I knew, you would do what I do.”

The IBOs argued that this statement did not constitute actionable solicitation because the communication was passive and untargeted, and because there was no evidence that anyone responded to the solicitation by leaving Amway.

The court rejected these arguments. As to the “passive and untargeted” argument, the court observed that:

[C]ommon sense dictates that it is the substance of the message conveyed, and not the medium through which it is transmitted, that determines whether a communication qualifies as a solicitation. The [statement] is readily characterized as an invitation for the reader to follow his lead and join [Amway’s competitor], and this is true despite the diffuse and uncertain readership of the site.

As to the argument based on the fact that no one responded, the court found that the express language of the nonsolicitation clause which prohibited “encourag[ing], solicit[ing], or otherwise attempt[ing] to recruit or persuade any other IBO to compete with” Amway did not turn on the success of those prohibited efforts.

September 7, 2010 Contracts, Copyright

Software contractor not bound by EULA it clicked on behalf of client

BMMSOFT, Inc. v. White Oaks Technology, Inc., 2010 WL 3340555 (N.D.Cal. August 25, 2010)

Plaintiff, a software development company, sued defendant, a company that was performing software installation services for it client, the U.S. Air Force. Plaintiff alleged that defendant violated the End User License Agreement (“EULA”) for the software by copying and distributing the software in violation of the terms of the EULA.

Defendant moved for summary judgment, arguing that it should not be bound by the EULA, since when it purportedly clicked on the “I Agree” button during installation, it was doing so as an agent on behalf of a disclosed principal, namely, the federal government.

The court agreed, finding that the purchase orders clearly disclosed that defendant would be installing the software on behalf of its government client. And the terms of the EULA were clear in designating that the “You” authorized to use the software was not the defendant, but the government, at the location specified in the order.

So the court threw out the breach of license claim. One is left to wonder why facts that support copying and distribution of the Software in a manner prohibited by the terms of the EULA would not also support copyright infringement. But apparently there was no such claim in this case. Perhaps there are some nuances of the defendant’s conduct that would not necessarily violate a condition, but be merely a breach of covenant.

July 26, 2010 Contracts, Litigation

Forum selection clause in clickwrap agreement enforceable

Meier v. Midwest Recreational Clearninghouse, LLC, 2010 WL 2738921 (E.D. Cal. July 12, 2010)

Plaintiffs live in California and bought an RV online from a vendor in Minnesota. The vendor’s website terms of service had a provision requiring that all disputes “arising out of or related to the use” of the website be brought in state court in Minnesota.

When plaintiffs — who were unhappy about the RV — brought a lawsuit in federal court in California, defendants moved to dismiss for improper venue. The court granted the motion.

The court noted that under the Bremen case, forum selection clauses are prima facie enforceable. And the Carnival Cruise Lines case takes that notion even further, giving forum selection clauses this presumption of enforceability in preprinted agreements.

In this case, plaintiffs argued that the court shouldn’t enforce the forum selection clause because it wasn’t freely bargained for. And they claimed that enforcing it would effectively deny them their day in court.

But that did not sway the judge. The court found that there was no bad faith motive that put the forum selection clause in the clickwrap agreement. And even though litigating in Minnesota might be inconvenient for California residents, it was not enough to bar them from the judicial system.

Moreover, just like the Supreme Court noted in Carnival Cruise Lines, the presence of forum selection clauses can reduce the costs of litigation because they cut down on the number of pretrial motions arguing over venue. And they also help consumers — this cost savings should ostensibly be passed on.

New copyright lawsuit involves Creative Commons

GateHouse Media, Inc. v. That’s Great News, LLC, No. 10-50164 (N.D. Ill. filed 6/30/2010)

A lawsuit filed this past week in the Northern District of Illinois includes a claim that the defendant violated the terms of a Creative Commons license covering the plaintiff’s copyrighted works. GateHouse Media publishes a slew of local newspapers, including the Rockford Register Star in Rockford, Illinois. The Register Star provides premium online content to its subscribers, and makes that content available under a Creative Commons Attribution-NonCommercial-NoDerivs license.

GateHouse sued a company that sells reprints of articles — including articles from the Register Star — on fancy plaques to the people who are featured in those articles. Since GateHouse has its own reprint business, it views the defendant’s work as a competitive threat.

The complaint has all the claims you’d expect under these facts — copyright infringement, trademark infringement and various claims under Illinois unfair competition law. It also has a breach of contract claim, in which GateHouse invokes the terms of the Creative Commons license, going after the defendant’s commercial use of the licensed material.

Ponder if you will why GateHouse chose to pursue a violation of the Creative Commons license as a breach of contract claim and not as copyright infringement. The license terms are written as conditions and not covenants. So it seems like the defendant’s alleged use would be outside the scope of the license and therefore infringement. Any ideas why plaintiff is proceeding this way?

June 25, 2010 Contracts

Portability policies are an intriguing innovation

One of the fundamental and inherent technical shifts that are happening as computing moves to the cloud — for enterprise functioning and for more personal things like enjoyment of social media — pertains to the location of the user data being acted upon. Just think about how many different sites and providers across the web store and process and display uploaded user information.

The utility of this information is, in general, enhanced when there are well-understood ways that the uploaded data — whether as-uploaded or as-modified by the service or through user collaboration — can be moved to other computing environments. In some circumstances, easily-moved data is a good thing (think social networking profiles). In other circumstances, a user may want to know that his or her data will securely stay put (think medical information). The contours of the ability to move information is the subject of the notion of “data portability.”

It’s getting to the point where data portability is a real, practical issue. And it’s important enough that the topic should be addressed in terms of the legal relations between user and provider. Enter “portability policies.”

A portability policy — much like a website terms of service or privacy policy — serves to specify the understandings and the legal obligations between parties to a technological transaction. PortabilityPolicy.org is a new project from the DataPortability Project to make the portability policy drafting process easier, and the end results more standardized.

It looks intriguing. Here’s more information about the project from Techdirt.

Photo courtesy Flickr user Extra Ketchup under this Creative Commons license.

January 26, 2010 Computer Crime, Contracts, Litigation

Wait just a second . . . isn’t online gambling illegal?

Wong v. Partygaming Ltd., — F.3d —, 2009 WL 4893955 (6th Cir. December 21, 2009)

The Sixth Circuit’s recent opinion in the case of Wong v. Partygaming is interesting if you’re a civil procedure wonk and care about things like which law applies to determine the enforceability of forum selection clauses in website terms and conditions and what factors a court should consider when dismissing a case on the basis of forum non conveniens.

bling

The most intriguing part of the case, however, comes from Judge Merritt’s concurrence, in which he addresses the significance of the fact that the terms of service for an online gambling website are probably illegal.

The majority opinion painstakingly analyzed whether the district court abused its discretion in dismissing, of its own will (or “sua sponte” as stodgy lawyers like to say), the plaintiffs’ suit against an online gambling website. The plaintiffs had alleged that the site fraudulently misrepresented that there was no collusion among other online gamblers, and that the site did not target people with gambling problems. The website terms of service contained a forum selection clause naming Gibraltar as the jurisdiction in which disputes were to be heard.

The appellate court affirmed the lower court’s decision that the case should be dismissed and that Gibraltar (which follows English law) would be a suitable and not-too-inconvenient forum. But the majority opinion said nothing about the legality of online gaming.

That’s where Judge Merritt picked up in the concurrence. He agreed that the matter should have been dismissed in favor of it being heard in Gibraltar — that’s why he concurred and did not dissent. His reasoning differed from that of the majority.

View Larger Map

Judge Merritt observed that the plaintiffs’ logic was inconsistent. They had argued that Ohio law should apply to the terms of service. But under Ohio law (and federal statutes like RICO), the subject matter of the contract would probably have been illegal and therefore void. Not to mention the fact that the conduct could send the parties to jail.

The judge wrote that something analogous to the principle of lenity — and not necessarily a rigorous analysis of the forum selection clause and the doctrine of forum non conveniens — should underlie the dismissal of the lawsuit. Lenity requires that when the question of criminal liability is ambiguous, interpretation should be made in favor of the defendant (see McNally v. United States). Since online gambling presumably was not illegal under the law of Gibraltar, the more lenient stance would be to see the matter litigated there.

Bling photo courtesy Flickr user PhotoDu.de under this Creative Commons license.

January 5, 2010 Contracts

Browsewrap website terms and conditions enforceable

Major v. McAllister, — S.W.3d —, 2009 WL 4959941 (Mo. App. December 23, 2009)

The Missouri Court of Appeals has issued an opinion that reflects a realistic grasp of how people use the web, and also serves as a definitive nod to self-responsibility. The court refused to accept a website end user’s argument that she should not be bound by the website terms and conditions that were presented to her in the familiar “browsewrap” format.

Click

Ms. Major used a website called ServiceMagic to find some contractors to remodel her home in Springfield, Missouri. Each page she saw during the process had a link to the website terms and conditions. At the point where she submitted her contact information to facilitate the signup process, she was presented with a link to the website’s terms and conditions. We’ve all seen this countless times — the link read, “By submitting you agree to the Terms of Use.”

Major admitted she never clicked on the link and therefore never read the terms and conditions. But had she clicked through she would have read a forum selection clause providing that all suits against ServiceMagic would have to be brought in Denver, Colorado.

When Major sued ServiceMagic in Missouri state court, ServiceMagic moved to dismiss, citing the forum selection clause. The trial court granted the motion and Major sought review. On appeal, the court affirmed the dismissal.

Major relied heavily on Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002). The court in Specht held that end users of Netscape’s website who downloaded a certain application were not bound by the terms and conditions accompanying that download because the terms were not visible on the screen without scrolling down to see them.

But in this case the court found the terms and conditions (including the forum selection clause) to be enforceable. In contrast to Specht, the ServiceMagic site did give immediately visible notice of the existence of the terms of the agreement. Even though one would have to click through to read the terms, the presence of the link was sufficient to place the website user on reasonable notice of the terms, and subsequent use by the end user manifested assent to those terms.

Click image courtesy Flickr user smemon87 under this Creative Commons license.

Category: Contracts