As an article posted on Wired today illustrates, 'clickwrap' contracts are no cure-all for the companies that employ them -- especially large, consumer-oriented (versus B2B) ones. The title of this particular article--"Courts Turn Against Abusive Clickwrap Contracts," though, is somewhat ambiguous. While the article does highlight a few recent cases in which courts have delved beyond the prima facie validity of a clickwrap contract--turning a more critical eye toward its substantive terms, the reach of these cases is likely more limited than it first appears.
In the first case mentioned, Gatton v. T-Mobile, a California State Court of Appeal had recently found an arbitration clause in a T-Mobile clickwrap contract to be unenforceable; the plaintiff(s) had argued that the clause was, essentially, an end-run around California's more liberal class-action laws. The Court of Appeal agreed, finding a 'high degree' of substantive unconscionability in the arbitration clause. That the contract was a clickwrap one, then, provided the minimum degree of procedural unconscionability necessary to warrant the dismissal of T-Mobile's motion to compel arbitration. (By way of background, California law requires both an element of substantive unconscionability and of procedural unconscionability in order to support an overall finding of 'unconscionability'.)
While any victory over a clickwrap contract may be good news to consumers, what seems to be really 'doing the work' in this case, and its forerunners (see Dix v. ICT Group, Inc. (type "Dix and ICT" in the search field) and Aral v. Earthlink), is that the clickwrap contract at issue contained an arbitration (or forum selection) clause that, in essence, limited consumer class-action suits in states that have relatively pro-consumer statutes on their books (California and Washington). Similar cases brought in Maryland (Koch v. America Online, 139 F. Supp. 2d 690 (D. Md. 2000)) and Florida (America Online, Inc. v. Booker, 781 So. 2d 423 (Fla. Dist. Ct. App. 2001)) have failed to pass muster.
The Gatton case, may, however, provide some insight into how a clickwrap contract could be viewed as procedurally unconscionable. This, really, is the key, as most states will require both substantive and procedural unconscionability to support the defense. As the California Court of Appeal writes,
The element focuses on oppression or surprise. “Oppression arises from an inequality of bargaining power that results in no real negotiation and an absence of meaningful choice.” . . . Appellate courts considering unconscionability challenges in consumer cases have routinely found the procedural element satisfied where the agreement containing the challenged provision was a contract of adhesion. A contract of adhesion is “ ‘ “imposed and drafted by the party of superior bargaining strength” ’ ” and “ ‘ “relegates to the subscribing party only the opportunity to adhere to the contract or reject it.” ’ ” (emphasis added) [citations omitted].
That a contract of adhesion requires a stark inequality in bargaining power may make procedural unconscionability a particularly easy finding in cases against large consumer-oriented service and product providers. As you may have noticed, the above cases were brought against just this type of company--T-Mobile, AOL, and Earthlink. Further, because clickwrap contracts are, essentially, of a 'take-it-or-leave-it' nature, the procedural unconscionability is virtually built-in.
Now, it may be worth remembering that there is a long line of cases that support the clickwrap contract--arbitration/forum slection clauses included (see, e.g., Forrest v. Verizon Communications, Inc., 805 A.2d 1007 (2002), DeJohn v. .TV Corporation Int'l, 245 F. Supp. 2d 913 (C.D. Ill. 2003)). Larger companies that feel they are particularly at risk may want to take a suggestion or two from Ross Runkel, a professor at Willamette University College of Law, who puts forth the idea that companies might try to include some type of opt-out provision in their clickwrap contracts. A clickwrap contract containing this type of provision would be less likely to be deemed purely 'take-it-or-leave-it', therefore less likely a contract of adhesion, and also less likely, then, to be deemed procedurally unconscionable. Without procedural unconscionability, (at least, theoretically) the 'unconscionability' defense is taken off of the table.
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