New York Business Lawyers

Live from New York It’s Social Media Friday—Clickwrap Agreement Lawsuit Edition

by / Friday, 30 July 2010 / Published in Technology & eCommerce

As the heart of any special media or e-commerce business is very much the “terms of service” clickwrap agreement (clickwrap as homage to the “skrinkwrap” agreements adorning many a product.)  That agreement sets the “ground rules” for the user relationship with the social media operation and pone of the critical terms is the “venue/forum/controlling law” selection clause.  That clause makes clear that if there is a lawsuit or other dispute proceeding under the Terms of Service; it will have to be held in a specific locale and under a particular state or nation’s laws.  For example, many of our clients select New York.  This is done to prevent possibly litigating thousands of disputes with large and geographically diverse user bases all over the world.  Imagine if the social media operation could be sued anywhere in the world?!

That is why the recent decision in Meier v. Midwest Recreational Clearinghouse, LLC, 2010 (E.D. Cal. July 12, 2010) is notable.  There the court whole heatedly endorsed the “forum” selection clause and even provided rationale for how the clause is good for commerce and society.  The court’s order and opinion can be read here.

Now the case involves the purchase of a Recreational Vehicle, the vehicles that have graced brochures advertising the truly American vacation for decades.  This is notable because an RV is a very big ticket item that can present a variety of thorny legal issues.  Nonetheless, the online vendor’s site had a terms of services agreement that made clear that all disputes “arising out of or related to the use” of the website be brought in Minnesota state court.

The disgruntled purchaser plaintiffs chose instead to file a lawsuit in California federal court, prompting the vendor defendant to file a motion to dismiss for improper venue. The court not only granted the motion, but offered compelling reasons as to why.  First, the court referred to the seminal Bremen case, which posits that these clauses are “prima facie” enforceable. The court then cited the  Carnival Cruise Lines case which makes clear that preprinted agreements carry a presumption of enforceability in connection with forum selection clauses.

The court noted that while it might be a burden for CA residents to litigate in MN, that outcome is a fair outcome of the transaction. And it ultimately did not buy the plaintiff’s argument that the clause robbed them of due process or that they didn’t get to bargain for it. Finally, borrowing from Carnival, the court took a pro business stance by reiterating the logic that these clauses save money and time for the business, which is ultimately beneficial to the consumer.

This case should be ready for quick reference by anyone operating a social media or e-commerce venture.

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