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In July, a DC District Court ruled that eBay could not compel a user of its services to arbitrate a dispute, even though the user had agreed to by bound by eBay’s User Agreement. That Agreement stated that the company had a right to modify the terms, and eBay had later modified those terms to include an arbitration clause for purposes of dispute resolution. Specifically, the Court held that eBay’s act of posting the updated terms did not constitute sufficient notice, and that the company had not presented proof sufficient to show that it had notified the user via email. Although the result is troubling for many companies who approach changes to website terms in the same manner that eBay did, the decision does provide some hints for what companies can do to provide support for arguments that their changes are enforceable.

Read our article in Digital Business Lawyer to learn more about the case and what you can do to help ensure that your website terms will be deemed enforceable.

Remember that wave of class actions under New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A. § 56:12-14 et seq., that hit New Jersey courts earlier this year, claiming that website terms of use contained unlawful provisions?  The motion to dismiss briefing is well underway, and online merchants should soon have some clarity about what the TCCWNA actually requires.

The TCCWNA, a 1981 New Jersey statute now having its moment in the spotlight after a recent Third Circuit decision called attention to it, bars businesses from including terms in consumer contracts or “notices” that are unenforceable because they violate “clearly established rights.” It also precludes use of statements that contractual disclaimers may be void in “some states,” without specifying exactly which are void in New Jersey.  “Aggrieved consumers,” whatever that means, can sue for $100 each, making the statute very attractive to the class action bar.

Defendants in these cases have hit back with powerful, but different, motions to dismiss. The motions soon will be fully briefed, and courts then will wrestle with questions like these:

Can TCCWNA claims be forced into individual (non-class) arbitration? At least one TCCWNA defendant is relying on an arbitration agreement in its terms of use, which has a class action waiver.  The agreement also has a California choice of law clause, which the defendant contends precludes New Jersey consumers from pursuing TCCWNA claims at all.  The plaintiff is challenging application of the arbitration agreement on several grounds.

What does “aggrieved consumer” mean? None of the recent TCCWNA defendants actually sought to enforce website terms of use to the plaintiffs’ detriment.  The plaintiffs do not contend that the defendants ever have argued for the aggressive construction of their terms of use that the plaintiffs contend might violate “clearly established rights.”  Some plaintiffs do not even allege that they ever read the terms of use they are challenging.  So, are they “aggrieved consumers” within the statute’s meaning?  Every defendant is asking its court to address that issue.

Is Spokeo available as a defense?  Some defendants are arguing that their plaintiffs, in addition to not being “aggrieved,” did not suffer a “concrete and particularized injury” sufficient to confer Article III standing under the Supreme Court’s recent decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016).  The plaintiffs respond that their injury is “informational,” in that the TCCWNA entitled them to receive “clean” contracts or notices, which the defendants denied them.

Are website terms of use “consumer contracts” under the TCCWNA? The TCCWNA applies only to what the statute terms “consumer contracts,” defined as “written agreement[s] in which an individual purchases real or personal property.”  If a website’s terms of use only govern use of the website, and not “purchases,” are they cognizable under the TCCWNA at all?  The plaintiffs confronting this argument so far have tried to claim that the website terms of use actually do govern purchases.  That is another dispute courts will have to untangle.

Can non-New Jersey residents sue New Jersey-based companies under the TCCWNA? The plaintiff suing one New Jersey-based defendant lives in and made his online purchases from Connecticut.  Will that court rule that New Jersey-headquartered corporations face potential nationwide liability under the TCCWNA?

Are forum choice provisions enforceable? One judge already has transferred a TCCWNA case to California pursuant to the defendant’s forum selection clause.

Before year-end, we should have clarity on all or most of these issues. Until then, online merchants remain well advised to carefully scrub their website terms of use.  Prior cases decided under the TCCWNA have ruled, for example, that a liability disclaimer beginning with “to the fullest extent provided by law” does not violate the statute.  It should be possible, therefore, to retain relatively broad-gauge liability disclaimers without running a TCCWNA risk, even in the current uncertain climate.

 

The Fourth Circuit recently issued a decision affirming a district court’s order dismissing a false advertising claim against GNC and Rite Aid relating to several supplement products containing glucosamine and chondroitin, as well as other ingredients.  This case raises the bar for plaintiffs at the pleading stage because they now must allege that “all reasonable experts in the field agree that the representations are false.”  Without such an allegation, they face dismissal of their false advertising claims.

In 2014, a federal district court in Maryland dismissed a consolidated complaint containing claims for false advertising brought under the consumer protection laws of six different states.  The district court found that the plausibility standard established by Iqbal and Twombly required more than the conclusory allegations of falsity contained in the consolidated complaint.  Rejecting plaintiffs’ argument that the existence of a “battle of the experts” should permit their claims to survive, the district determined that, if one expert in the field would reasonably conclude glucosamine and chondroitin are effective for the treatment of non-arthritic consumers, plaintiffs’ complaint should be dismissed at the pleading stage.

Following the district court’s lead, the Fourth Circuit found that a plaintiff alleging false advertising must set forth a plausible claim for relief under the relevant state consumer protection statute and cannot simply recite the elements of the claim and then conclude that the representations are false.  The Fourth Circuit’s holding is worth noting: “[In order to state a false advertising claim on a theory that representations have been proven to be false, plaintiffs must allege that all reasonable experts in the field agree that the representations are false.  If plaintiffs cannot do so because the scientific evidence is equivocal, they have failed to plead that the representations based on this disputed scientific evidence are false.”