TechLaw

To gather detailed and often hard-to-find information on attorneys, Avvo scoured state courts, bar associations and lawyers' websites to collect information on lawyers' experience, practice areas, professional achievements and disciplinary sanctions.

Avvo press release, June 5, 2007

In Illinois at least, Avvo's scouring days are over. Not only did the Illinois Attorney Registration & Disciplinary Commission succeed in blocking lawyer marketing site Avvo's request for the master list of state-licensed attorneys, the ARDC earlier this month also changed the terms of use on its Web site to forbid datamining.

It seems that ARDC officials were more than a little miffed at Avvo general counsel Josh King's June 11 boast about Avvo's data mining prowess ("Of course, we've got a little internet and data mining expertise here at Avvo, so we were able to access most of the attorney records in the ARDC site ...."), which he made at the same time Avvo was negotiating for official release of the ARDC's master roll. A few week's later, the ARDC added the following paragraph to its Web site terms of use:

5. NOTICE AND TERMS OF USE: You are not authorized to access or query our database through the use of high-volume, automated, electronic processes or for the purpose or purposes of using the data in any manner that violates these terms of use. The Data in the ARDC database is provided by ARDC for information purposes only, and to assist persons in obtaining information about or related to the registration and discipline of lawyers licensed to practice in Illinois. ARDC does not guarantee its accuracy. By submitting a query, you agree to abide by the following terms of use: You agree that you may use this Data only for lawful purposes and that under no circumstances will you use this Data for commercial purposes or to: (1) allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via direct mail, e-mail, telephone, or facsimile; or (2) enable high volume, automated, electronic processes that apply to ARDC (or its computer systems). The compilation, repackaging, dissemination or other use of this Data is expressly prohibited without the prior written consent of ARDC. You agree not to use high-volume, automated, electronic processes to access or query the ARDC database. ARDC reserves all rights and remedies it now has or may have in the future, including, but not limited to, the right to terminate your access to the ARDC database in its sole discretion, for any violations by you of these terms of use, including without limitation, for excessive querying of the ARDC database or for failure to otherwise abide by these terms of use. ARDC reserves the right to modify these terms at any time.

Illinois court rules forbid the use of the master roll of state-licensed attorneys for commercial uses except continuing legal education programs. Avvo argued, unsuccessfully, that the use it was making of the attorney records (basically a name and address used to create a skeleton Web page) was not a commercial use. Reading the ARDC's submission to the Illinois Supreme Court, I came away with the impression that the commission was peeved that Avvo had been helping itself to attorney registration information without permission. And not very impressed with the use Avvo was making of this information.

As far as I can tell, Illinois is the only jurisdiction to forbid datamining/spidering of their attorney registration data.

Most of the attorney registration Web sites I looked at contain no limitation whatsoever on use or automated access to their data. Looking at Web sites such as the California Bar Association, the Georgia Bar Association, the Massachusetts Board of Overseers, the State Bar of Michigan, the Pennsylvania Supreme Court Disciplinary Board, and the Washington State Bar Association, it is easy to see how a large database of attorney names and addresses could be quickly amassed. On nearly all of the Web sites I checked, querying the Web site with the character "S" in the last name field returned all attorneys whose last name begins with "S." A good Web spidering program ought to be even more efficient.

It is really tough to get a class arbitration waiver upheld in California. Maybe impossible. When the Ninth Circuit, in Shroyer v. New Cingular Wireless Services Inc., 498 F.3d 976 (9th Cir. 2007), held that the class arbitration waiver in Cingular (now AT&T)'s wireless terms of service was unconscionable, the company decided to "improve" the class arbitration waiver language rather than eliminate it.

AT&T added to the AT&T Mobility terms of service several incentives for plaintiffs to engage in individual arbitration. Chief among them:

If a person prevails on the merits at arbitration, and receives an award: (1) equal to or less than the greater of (a) $5,000 or (b) the maximum jurisdictional dollar amount for small claims actions in the county containing the person’s billing address; and (2) greater than AT&T’s last written offer prior to selecting an arbitrator; then AT&T will pay the greater of (1) or (2) instead of the award, and pay the person’s attorney double their fees and reimburse them for reasonable costs.

This isn't good enough, according to the court's decision in Steiner v. Apple Computer Inc., No. 07-4486 (N.D. Cal., March 12, 2008). The plaintiff sought class treatment of his claim that Apple unlawfully failed to disclose substantial expenses iPhone users would incur when replacing batteries on the device. The court ruled that, after Shroyer, AT&T needed to demonstrate that the individual arbitration remedy available under the terms of service "functions as well as a class action would, such that it has not insulated itself from hundreds of thousands, if not millions of iPhone users seeking recovery of the hidden $114.95 in annual battery-changing and related charges."

The court held that the benefits of pursuing individual arbitration were illusory in many instances; in any event, it said, the relevant inquiry is a comparison between the outcomes for all iPhone consumers under the arbitration agreement and under a class action suit. "In this regard, AT&T has not presented any evidence that all iPhone consumers would recover more, on average, if the Court let the Arbitration Agreement stand rather than allowing the Steiners' class action to proceed."

The court was not concerned with whether the plaintiff would receive a fair hearing on his claim. Rather, the inquiry was whether all iPhone users would do better in a class action. On the subject of attorneys' fees, the court wrote that reasonable attorneys' fees in arbitration were not be an adequate incentive to seek redress because what attracts attorneys to class actions is the prospect of lucrative attorneys' fees.

It is hard to imagine any class arbitration waiver that could withstand this sort of inquiry. The main purpose of an arbitration clause is to minimize exposure to litigation. After Shroyer, it appears, the fact a consumer will be able to receive a fair hearing in an individual arbitration proceeding does not save a class arbitration waiver from a finding of unconscionability. In cases like Shroyer and now Steiner, where the plaintiff alleges that the defendant has engaged in a fraudulent scheme by taking a little money from thousands or millions of consumers, any attempt to minimize liability via arbitration will be suspect.

A proposed class action lawsuit against Yahoo!/Overture Services Inc. picked up momentum April 21, when a federal trial court in California turned back a handful of grounds for summary dismissal of claims that Yahoo! misrepresented the quality of the online venues on which it would display the plaintiffs' advertisements. The plaintiffs alleged that Yahoo! promised to display advertisements on Web sites targeted to likely customers; instead, the lawsuit claimed, Yahoo! placed the plaintiffs' advertisements in low-quality locations: inside spyware programs, on typosquatting Web sites, and on domain parking and bulk registration sites.

Among Yahoo!'s arguments for dismissal was its contention that California's unconscionability doctrine does not apply to commercial contracts. There is some support for this argument. Nearly all cases describe the state's unconscionability doctrine using the term "consumer," and many characterize the unconscionability doctrine's rationale as one of rectifying the imbalance of bargaining power between consumers and businesses. For example, a leading case, Discover Bank v. Super. Ct., 36 Cal.4th 148 (2005), summarized the fact pattern there as one in which the defendants "carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money." Language like this limits the unconscionability doctrine to consumer cases, Yahoo! argued.

Here, the court rejected the view that commercial contracts are categorically outside the protection of the unconscionability doctrine:

[A]lthough Discover Bank's holding addresses only consumer contracts, nothing in that decision forecloses the possibility that a class action waiver in a commercial contract may be deemed unconscionable under certain circumstances. Defendants point to no authority to support the contention that class action waivers in commercial contracts should be treated differently than such waivers in consumer contracts, and the Court has identified ems.bna.com. Accordingly, there appears to be no basis for concluding that class action waivers in the commercial context cannot be found to be unconscionable and unenforceable.

The court permitted the case to go forward, allowing the plaintiffs to build a factual foundation for their unconscionability claim. Did Yahoo! have superior bargaining power over the plaintiffs? Could the plaintiffs have feasibly chosen other advertising services? Would it be practical for the plaintiffs to pursue individual remedies instead of a class suit?

Taking up another issue, the court ruled that the plaintiffs would be permitted to conduct discovery for extrinsic evidence indicating that -- notwithstanding the parties' written contract -- the defendants promised in their marketing materials that the plaintiffs would receive "highly targeted" advertising services.

The case is In re Yahoo! Litigation, No. CV 06-2737 (C.D. Cal., April 21, 2008).

By Thomas O'Toole

Several cases relevant to online contracting have been decided recently, and I think we've done a pretty good job covering them as they came in. Here are a handful worth mentioning again, all in one place.

Adware Vendor's EULA Holds Up in Court

In People v. Direct Revenue LLC, No. 401325/06 (N.Y. Sup.Ct., N.Y. Cty., March 12, 2008), a New York trial court dismissed the entirety of the state attorney general's deceptive and illegal business practices case against Direct Revenue, a distributor of software (a downloadable "adware" client) that displays pop-up advertising on Web browsers. The attorney general sought billions of dollars in penalties against Direct Revenue, seeking to assert the rights of millions of unidentified consumers across the country who installed the Direct Revenue adware client.

The state's undoing was Direct Revenue's end-user license agreement, a click contract, and Direct Revenue's agreement with its distributors, which called for fair and lawful distribution of the Direct Revenue adware client.

Twenty-nine transactions with Direct Revenue or its distributors were alleged. As for those transactions where the attorney general's investigator dealt directly with Direct Revenue, the installation of the adware client was preceded by a license agreement that explained how the adware client operated and how to uninstall it; the agreement also explained the limitations on Direct Revenue's liability. In each case, the investigator clicked "Yes" on a button, indicating assent to the agreement.

As for those installations that were initiated by Direct Revenue's third-party distributors, there were problems with some (for example, the license agreement and uninstall instructions were not always displayed prior to installation). However, the court held that Direct Revenue was protected by its Standard Distribution Agreement, a document that directed the third-party distributors to obtain legally valid affirmative consent and make all legally necessary disclosures prior to installation of the adware client.

Having turned back claims based on the 29 transactions engaged in by state investigators, the court said there was no basis to entertain the attorney general's claims on behalf of all other individuals who allegedly downloaded the Direct Revenue adware client. Finally, it held, disgorgement of profits would not be an appropriate remedy in this case, since Direct Revenue distributed its adware client for free and it took nothing of value from the consumers who downloaded it.

Human Intervention Complicates E-Contracting

Three cases demonstrate how the online contracting process can be undermined by the failure to have key contract terms available online for review at the time the consumer is asked to indicate assent. In all of these cases, the company offering the contract terms decided that it would be helpful to involve human beings in the contracting process. This was a poor decision in every instance.

Key Terms Not Available at Purchase Time

Trujillo v. Apple Computer Inc., and AT&T Mobility LLC, No. 07 C 4946 (N.D. Ill., April 18, 2008), involved a proposed class action lawsuit against Apple and AT&T Mobility over the lawfulness of Apple's battery replacement costs. AT&T Mobility filed a motion to compel arbitration of the plaintiff's claim against it individually, based on a clause forbidding class arbitration contained in the AT&T Mobility service agreement that the plaintiff. The plaintiff argued that the arbitration clause was, among other things, procedurally unconscionable.

Most people are familiar with the process of purchasing an iPhone. The phone is first purchased from Apple; in this case, the plaintiff purchased his iPhone at an Apple store in Illinois. At the time of purchase an iPhone is useless as a telephone until the purchaser obtains telephone service from Apple's exclusive provider, AT&T Mobility. The arbitration clause at issue here appears at the end of AT&T Mobility's service agreement.

The court declared: "The Court believes, based on its review of Illinois case law, that the availability of the AT&T Mobility service agreement to [the plaintiff] prior to his purchase of the iPhone may be a critical factor in determining the issue of procedural unconscionability."

AT&T Mobility responded with two arguments. First, the service agreement was available at the Apple store where the plaintiff purchased the iPhone. This contention was supported by an affidavit from an AT&T Mobility attorney. Second, the service agreement was available on the Internet, so again the plaintiff had access to it prior to purchasing the iPhone.

Neither argument persuaded the court. An AT&T Mobility attorney could not possibly have personal knowledge about the habit and practice of Apple stores regarding the display of the service agreement, the court said. Further, it wrote, AT&T Mobility failed to cite any Illinois cases "supporting the proposition that if an agreement is available prior to the customer's purchase of a product only if the customer goes and looks for it elsewhere (including on-line), that is sufficent under Razor v. Hyundai Motor Am., 854 N.E.2d 607 (Ill. 2006)."

The court decided to give AT&T Mobility another opportunity to present additional evidence indicating that the service agreement was available to the plaintiff prior to purchasing the iPhone. (An additional, albeit smaller, problem for AT&T Mobility here was the lack of evidence indicating whether the purchaser was informed about the consequences of rejecting the service agreement after having purchased the iPhone. This too is relevant to the procedural unconscionability question, it said.)

Note: Along the way, this court said that Hill v. Gateway 2000 Inc, 105 F.3d 1147 (7th Cir. 1997), an important contracting decision that interpreted Illinois law to permit the seller to add contract terms in shipping materials after the sale, had been cast into doubt by the Illinois Supreme Court's subsequent decision in Razor.

Plaintiff Rushed Through Contracting Process

In Reynolds v. Credit Solutions Inc., No. 07-AR-1516 (N.D. Ala., Feb. 26, 2008), the court -- although it ultimately decided the case on other grounds -- declared that "there should be something wrong with binding a person with her click to a lengthy electronically-displayed proposal after barely enough time to scroll to the clicking point, much less the time without which the read and comprehend it."

The plaintiff claimed that her clicked "signature" on an online contract was procured through fraud because the Credit Solutions agent, who was speaking to her on the telephone while she reviewed the contract on her computer screen, should have told her that the document was a contract. The Credit Solutions agent recorded the telephone call, which was introduced into evidence. The recording indicated that just 30 seconds elapsed between the time the 8-page PDF-formatted agreement was displayed on the plaintiff's computer screen and the time she clicked her assent to it. The agreement warned of the necessity to "read through this document carefully," but that message seemed to be undermined by the Credit Solutions agent's exhortation to scroll to the bottom and click where indicated. According to the court:

As far as the court can tell, [the plaintiff] was not limited to a set amount of time within which to read the contract. However, the court notes, as an aside, that someone who reads with the speed of a Jesse Owens in the 100 yard dash could not read the contract displayed on [the plaintiff's] computer screen in 30 seconds, particularly with [defendant's agent] salivating on the other send of the line.

The court's concerns about the contracting process here were not dispositive, however; it ultimately ruled that an arbitrator rather than the court must decide whether this contract was void due to fraud.

Key Terms Not Available, Human Contradicts Contract Terms

Feldman v. United Parcel Service Inc., No. 06 Civ. 2490 (S.D.N.Y., March 24, 2008), involved a challenge to the part of the UPS shipping contract that forbids the shipment of items exceeding $50,000 in value. If a person ships an item valued at more than $50,000, then UPS is not responsible for loss or damage during shipment. UPS clearly sets out this limitation in the "Articles of Unusual Value" provision, Item 460 on page 8 of the UPS Tariff Agreement. The plaintiff in Feldman shipped a diamond ring valued at $57,000, which was lost during shipment.

The Seventh Circuit, in Treiber & Straub Inc. v. United Parcel Service Inc., No. 05-3743 (7th Cir., Jan. 9, 2007), enforced the UPS ban on shipping articles of unusual value. In Treiber, however, the UPS terms and conditions and the "Articles of Unusual Value" provision it referenced were available online for review by the plaintiff. Also, the plaintiff clicked twice to indicate assent to the terms.

Feldman was different. In Feldman, the plaintiff used a UPS I-Ship kiosk within a UPS physical facility. A message on the kiosk screen advised the plaintiff: "Review everything carefully and then click Print to print your shipping request." Below the Print button was a "Terms of Service" hyperlink. When clicked upon, the hyperlink displayed a pop-up window indicating that shipments are subject to the UPS Tariff Agreement. The pop-up window also indicated that the tariff agreement was available at www.ups.com or from a UPS associate on the premises. There was no hyperlink to the tariff agreement -- just a mention of the UPS Web site.

The court found enough problems with this contracting process to preclude summary judgment in favor of UPS. Among them:

• No evidence in the record that the kiosk was connected to the Internet, so the tariff may not have been available to the plaintiff.
• Clicking on a button that says "Print" does not necessarily connote agreement or assent to a contract.
• No evidence in the record that the UPS counter associate actually had the tariff agreement available.

Finally, the human factor. The plaintiff testified that he sought the assistance of the UPS counter associate and that he told her the item he was shipping was worth $57,000. According to the plaintiff, the counter associate attempted to insure the package for $57,000 but was blocked by the UPS computer. "According to plaintiff, [the counter associate] then agreed to ship the diamond ring at his request," the court wrote. "These facts, if proved, implicate a substantial face-to-face communication, suggesting that the surrounding circumstances might have prevented the plaintiff from having adequate notice of the terms of the Tariff."

Lessons Learned

Contract Terms Should Be Available for Review. In Trujillo, and Feldman, the defendants made an insufficient effort to ensure that key contract terms were available to the consumer.

In Trujillo, AT&T Mobility's terms could have been in the box containing the iPhone. The sales slip could have contained a place for the consumer to sign, indicating receipt of and assent to the terms.

In Feldman, the I-Ship kiosk could have been connected to the Internet and the UPS Tariff Agreement available via a hyperlink displayed on the kiosk screen.

Clickable Buttons/Links Should Clearly Signal Assent. At this point there is a large body of case law upholding online contracts created with the click of an "I Agree" button. Counsel ought to have a darn good reason why anything other than "I Agree" is displayed on that button.

In Feldman, for example, the decision by UPS to display "Print" on the button -- which was its only means of proving assent to a lengthy, one-sided, non-negotiated deal -- needlessly gave the plaintiff an opportunity to challenge the validity of the contract. UPS appears to know better too: the assent button in the Web contract challenged in Treiber displayed "I Agree" and that contract was upheld.]

In Reynolds, the plaintiff claimed she did not know that the online document was a contract and that her click signaled assent to it. From what I could tell from the court's opinion, the plaintiff clicked on a checkbox next to the statement, "Click here to sign." Here again, indicia of assent could have been firmed up by the defendant, taking at least some of the steam out of her claim that she did not know that her click signaled assent to a contract.

Humans Are Not Helpful. All of the cases discussed above introduced human beings into the online contracting process. Big mistake.

In Trujillo, AT&T Mobility decided it was good enough to have its service agreement available in the Apple store. This decision created a huge can of worms. Where was the service agreement? Were there any in the store that day? What sort of training does Apple do to ensure that the availability of the AT&T Mobility service agreement is made known to each and every iPhone purchaser? Even if Apple/AT&T Mobility has all this nailed down, they are still left with a triable issue.

In Reynolds, few courts would have invalidated the agreement clicked by the plaintiff were it not for the presence of the Credit Solutions agent on the telephone with the plaintiff. The decision contract in this fashion created a record indicating just how long the plaintiff spent looking at the agreement, and it opened the door to the claim that the plaintiff was rushed through the contracting process or otherwise misled about the significance of her actions.

Finally, in Feldman, UPS's decision to involve a counter associate in the contracting process created extrinsic evidence about the contract process where ems.bna.com needed to exist. UPS may have believed that directing the shipper to a counter associate for a copy of the tariff agreement would have strengthened its case, but in fact it create a host of triable fact questions and, as happened here, gave the counter associate an opportunity to undermine the position UPS took in the contract. If UPS prohibits the shipping of items valued greater than $50,000 why did the counter associate take my package?

Just Asking for Trouble. Based on the evidence of the cases discussed above, a good argument could be made that an online contract should never depend on terms being available at a physical location or depend on assistance from a human being. Crossing the dividing line between the online world and the physical world just seems to be asking for trouble. Moreover, since courts rarely object to online contracts because they are too long or too densely written, and consumers are used to taking products and services subject to lengthy terms (which they never read anyhow), why don't businesses put all important contract terms in one place, online, available in advance of the sale? They wouldn't be losing sales, and they'd certainly be saving on attorneys' fees.

An opinion released a few days ago in the Turnitin.com lawsuit, A.V. v. iParadigms, No. 07-293 (E.D. Va., March 11, 2008), took up several issues of interest to cyberlaw attorneys. The court (1) enforced a clickwrap agreement, (2) declined to enforce terms of use that were viewable by clicking on a hyperlink at the bottom of a Web page, and (3) held that Turnitin.com's service (which consisted of maintaining a database of student papers used to discover and deter plagiarism) was a fair use of the student papers submitted to Turnitin.com.

Turnitin.com's operator, iParadigms, contracts with schools to provide a plagiarism-detection service. Student papers submitted to Turnitin.com are electronically evaluated against a database of papers written by others in order to determine if the submitted paper is original. This case involved a copyright infringement claim brought by four high school students who submitted papers to Turnitin.com. They registered with Turnitin.com and in the process clicked on an "I agree" button to indicate their assent to the Turnitin.com User Agreement. The User Agreement disclaimed any liability in connection with a registrant's use of the Web site.

Clickwrap Agreement Enforced, Against Minors

The court's discussion of the enforceability of the clickwrap contract looked a lot like the dozens of cases already decided in this area. Suffice it to say that the court found that the students had entered into a valid contract when they clicked on the "I Agree" button to indicate assent to the terms of the User Agreement. What was interesting, however, was the court's rejection of the students' claim that, because they were minors at the time they made the contract, the contract was voidable. In Virginia, contracts by minors are voidable when the minor reaches the age of majority. The court parried this doctrine with one of its own: Even an infant cannot take the benefits of a contract without taking the conditions or limitations as well. The court identified several benefits the students took from the Turnitin.com User Agreement:

They received a grade from their teachers, allowing them the opportunity to maintain good standing in the classes in which they were enrolled. Additionally, Plaintiffs gained the benefit of standing to bring the present suit. Plaintiffs cannot use the infancy defense to void their contractual obligations while retaining the benefits of the contract.

Some benefits. The benefit of bringing a lawsuit that the court is tossing, and the benefit of participating in a high school anti-plagiarism exercise. This seems to be an awfully low standard. Any Web site catering to children should be able to cite equally valuable "benefits" from using their online services, so you have to wonder how much use the infancy defense will be to future online plaintiffs.

Browsewrap Language Not Enforceable

Although Turnitin.com won on the clickwrap contract point, it was not able to get an indemnification clause in its Web site terms of use enforced against the students. Turnitin.com's argument, based on Register.com Inc. v. Verio Inc., 356 F.3d 393 (2d Cir. 2004), was that the students assented to the terms by continually using the Turnitin.com Web site. The court disagreed, finding that there was no evidence of assent to the terms. First of all, the agreement that the court did enforce -- the clickwrap agreement -- contained language indicating that that agreement constituted the entire contract between the parties.

Leaving that point aside, the court observed that there was no evidence that the students viewed or read the Web site terms, and no evidence that the students ever clicked on the terms of use hyperlink or were ever directed to do so by Turnitin.com. The court acknowledged prior decisions -- such as Register.com -- where knowledge of Web site terms was imputed to users by repeated visits to the Web site and repeated exposure to the terms. However, the court said here, "in this case ... such imputation is improper because there is no evidence indicating that Plaintiffs were exposed to the terms of the Usage Policy."

The court distinguished Register.com based on the fact that, each time the Register.com Web site was used the site caused a notice of its terms of use to be transmitted to the user. In this case, the court said, "There is no evidence that the terms of the Usage Policy were presented to Plaintiffs beyond the existence of the Usage Policy link the appeared on each page."

Even though Turnitin.com lost on the browsewrap point, it's easy to see how a little more effort on Turnitin.com's part could have produced a favorable outcome.

Student Papers' Inclusion in Database Held Fair Use

Finally, the court took up Turnitin.com's argument that its use of the student's papers was a non-infringing fair use. The court, borrowing heavily from the Ninth Circuit's ruling in Perfect 10 Inc. v. Google Inc., 487 F.3d 701 (9th Cir. 2007), held that it was. Turnitin.com's use of the student papers was "highly transformative," the court found, noting that Turnitin.com took a creative work and transformed it into an anti-plagiarism technology. Further, Turnitin.com made no use of the creative aspects of the students' work, and in fact it used their works to protect the originality of their expression by using it to deter plagiarism. The court also noted that, although Turnitin.com copied the entirety of the students' papers, this copying in no way caused harm to the market value of the papers. All in all, the court concluded, Turnitin.com's use of the students' papers was a fair and lawful one.

Yesterday was the deadline for countries to sign the 2005 United Nations Convention on the Use of Electronic Communications in International Contracts. Just 18 countries have signed the convention although, according to the UNCITRAL, the convention will remain open indefinitely for accession and ratification.

The countries signing the convention, in no particular order, are:

• Honduras
• Republic of Korea
• Saudi Arabia
• Colombia
• Montenegro
• Iran
• Panama
• Philippines
• Paraguay
• Sierra Leone
• Madagascar
• China
• Singapore
• Sri Lanka
• Lebanon
• Central African Republic
• Senegal
• Russian Federation

The purpose of the convention is to promote international trade by encouraging the development of uniform rules regarding the use of electronic communications in international contracts. It is curious to me why so many of the signatories are small potatoes economically; perhaps these countries are the ones with the most to gain from increased international trade and increased certainty in business contracts. Curious as well why the United States -- or Canada, or Japan, or all of western Europe -- have not signed the treaty yet either. The convention looks entirely unobjectionable, it has been reviewed and fretted-over by attorneys and uniform law drafters here in the United States, leading international companies support it, and in fact it looks a lot like the 1999 Uniform Electronic Transactions Act.

Information on the UNCITRAL Web site indicates that the convention will become effective six months after the third country has either ratified or acceded to it.

Yesterday's post about a woman who unwittingly executed an electronic signature by making an on-the-record statement in a courtroom reflected my surprise that an e-signature could be made in this manner. Apparently,  creating an electronic signature via voice recording is not all that uncommon. A Ninth Circuit case from earlier this summer, Shroyer v. New Cingular Wireless Services, No. 06-55964 (9th Cir. Aug. 17, 2007), involved a class of consumers who

executed an electronic signature over the telephone to assent to the terms of the Agreements. [The plaintiff] selected the answer "Yes" in response to the statement "You agree to the terms as stated in the Wireless Service Agreement and terms of service."

The court found unconscionable a clause waiving class arbitration, but it doesn't appear from the opinion that the plaintiff raised the issue of whether a valid contract containing the terms of service had been created over the telephone.

Here is a curious case. A divorce settlement calling for a transfer of real property is read into the record on the day set for trial. Both parties orally acknowledge the settlement in court, and the court's reporter duly transcribes their remarks. However, one party later refuses to sign the agreement. She claims, among other things, that enforcement of the settlement agreement would be unlawful because state law requires a writing to transfer real property.

The Kansas Court of Appeals recently entertained this argument and rejected it, remarking along the way  that an electronic signature was created in the trial judge's courtroom, thereby satisfying the state-law requirement of a writing for real property transactions.

The court said this was so because Kansas had adopted the Uniform Electronic Transactions Act. Under UETA -- with some exceptions that aren't relevant here -- qualifying digital records, sounds, symbols, you-name-it, will be treated as "writings" if a writing is required by state law. UETA, the court said, "probably" makes the electronically produced record of the divorce litigant's in-court statement the legal equivalent of a written signature:

The record does not disclose the type of equipment used by the court reporter, but it would be quite rare today for a court reporter's equipment not to at least require electricity. The UETA deems records generated by electronic means, including the use of electrical or digital magnetic capabilities, to be electronic records.

In order for a record to qualify as an electronic signature, a party must also adopt the record "with the intent to sign." The court doesn't make much of an effort to explain how the litigant in this case "adopted ... with the intent to sign" the court reporter's record of her remarks. Apparently, it was enough that the litigant uttered aloud her acknowledgment of the divorce settlement that had been recited in open court. "[A]ssuming that the court reporter's equipment was consistent with modern practice, it would appear that the electronic capture of Mieko's oral assent that this was the agreement would satisfy the statute of frauds."

The case is In re Marriage of Takusagawa, No. 95,508 (Kan. Ct.App. Sept. 7, 2007)

I ran across a case last week in which the court used an agency theory to bind an individual to terms and conditions in a click-wrap deal -- a deal entered into by an acquaintance. Before reading this case, I would have guessed that a Web site's terms and conditions would not be enforceable in this situation but, as is so often the case, I was wrong.

Several years ago a dental hygienist from Boston asked a friend (aka, the "agent") to book a hotel room for the both of them in Ocho Rios, Jamaica. The agent booked the room at the Turtle Beach Towers using Expedia.com and in the process agreed to a click-contract that disclaimed legal liability for

... THE ACTS, ERRORS, OMISSIONS, REPRESENTATIONS, WARRANTIES, BREACHES OR NEGLIGENCE OF ANY SUCH SUPPLIERS OR FROM ANY PERSONAL INJURIEIS [sic], DEATH, PROPERTY DAMAGE, OR OTHER DAMAGES OR EXPENSES RESULTING THEREFROM.

Well, wouldn't you know it, on her very first night in Ocho Rios, sometime around  11 p.m., the dental hygienist, not the agent, suffered a flip-flop malfunction while descending a flight of stairs on the Turtle Beach Towers premises, causing her to pitch forward into a turtle pond at the bottom of the stairway, resulting in a severe laceration to her leg.

Naturally, she sued Expedia.com. The Web site was negligent in not warning her that the Turtle Beach Towers stairway was poorly lit, that it lacked a handrail, and that the turtle pond at the bottom of the staircase was lethal, she claimed.

To Expedia.com's argument that it had disclaimed all liability for this sort of thing in its online terms and conditions, the hygienist replied that she had not assented to the terms and had not even read them because, she noted, her night at the Turtle Beach Towers had been booked by her friend. The trial court called the hygienist's argument "clearly without merit." The friend, it said, was acting as the hygienist's agent when booking the room.

"Family members, friends, and work colleagues routinely book travel plans for others, and it would be extraordinarily cumbersome to require that each traveler book his or her own ticket," the court said. "Each such arrangement is necessarily an agency relationship: the person booking the tickets is acting as an agent on behalf of the other members of the traveling party."

Implicit in that agency relationship, the court said, is the power to bind the hygienist (the principal) to contracts such as Expedia.com's liability disclaimer.

The court went on to explain that both principal and agent had adequate notice of the Expedia.com disclaimer language, relying on a series of harsh decisions involving accidents on cruise ships. As it turns out, there are many cases enforcing liability limitations printed on paper tickets against persons who traveled on cruise ships but who did not purchase the ticket themselves.  The rationale expressed in those cases was that the traveling companions were properly chargeable with notice of the liability limitation where they had even the most fleeting opportunity to look at the tickets but, for whatever reason, did not. In one case cited by the court here, DeCarlo v. Italian Line, 416 F. Supp. 1136, 1137 (S.D.N.Y. 1976), the person who purchased the cruise tickets actually died during the voyage. The plaintiff, who suffered a non-fatal injury, had about 30 days (from the time the tickets were purchased until the purchaser died on the ship) to learn of the liability limitations.

The case is Hofer v. The Gap Inc., No. 05-40170 (D. Mass. Sept. 28, 2007).

After long distance provider Talk America bought America Online's long distance business, it made several additions to the service contract: inserting a class action waiver, an arbitration clause, and a choice of law provision calling for New York law. Typical risk-shifting strategies.

The contract modifications were posted on Talk America's Web site -- but, one customer alleged, no additional notice of the modification was given. No e-mail notice, no mention stuffed into a monthly billing envelope. Only a modified contract posted to the provider's Web site.

The Ninth Circuit, in a case of apparent first impression at the circuit level, held that the Web posting alone was insufficient to bind the customer to the terms of the new deal. "Parties have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side," the court wrote.

The court said that it would be unreasonable to expect the customer to periodically visit the provider's Web site to inspect the contract for possible changes. "Without notice," the court wrote, "an examination would be fairly cumbersome, as [the customer] would have had to compare every word of the posted contract with his existing contract in order to detect whether it had changed."

So, in the Ninth Circuit, at least, online postings of contract modifications will be effective only when (1) the customer is informed of the change, and (2) the precise nature of the change is explained to the customer in the notice. Merely including language in the original contract informing the customer that the contract could be modified at some future date by posting changes to the Web would seem to fall short of the court's test.

The case is Douglas v. U.S. District Court for the Central District of California, No. 06-75424 (9th Cir. July 18, 2007).