Discussions of terms and conditions for websites often represent a surefire cure for Insomnia. While this is understandable, it is also unfortunate as terms are an incredibly valuable tool online businesses can use to nip legal problems in the bud. JDate.com proved as much recently in neutering a lawsuit filed against it.
Dating sites are often targets for litigation. Not everyone is going to find a prince or princess charming. For some reason, disgruntled daters tend to believe the website operator is at fault for this failure.
JDate.com is a dating site catering to people of the Jewish faith, and it recently ran into one of these lawsuits. Lisa Zaltz, a former member of the site and New York resident, filed a lawsuit against the company in New York. Zaltz alleged JDate was liable to her for:
- Injuries from being physically and sexually assaulted by a member of the JDate.com site,
- Injuries from being subject to “prank and sexual calls” from the JDate.com site,
- Having her site hacked into, and
- Being billed monthly without her consent.
To say the claims are all over the place is a minor understatement. Fortunately, the scattershot approach of Ms. Zaltz didn’t matter as JDate put an end to the case by using a clause in its terms and conditions.
The terms for a website are designed to establish a contractual relationship between the online operator [you] and users. Given this, care should be given to creating terms that will protect the online operator as much as possible. In the above litigation, JDate successfully did this through a “venue” provision.
Also called a choice of forum clause, a lawyer inserts a venue clause into the terms of a website to specify where the court system where any litigation must occur. While not the sexiest of subjects, this single paragraph can stop a lawsuit cold.
In the JDate litigation, the company argued for the dismissal of the New York lawsuit based on incorrect venue. The terms for JDate contained a clause requiring users to pursue all legal actions in the Superior Court of Los Angeles County. Attorneys for JDate asserted the clause was binding on Zaltz, which meant:
- The New York court had no standing to hear the lawsuit,
- The lawsuit should be dismissed outright, and
- Zaltz should file her lawsuit in Los Angeles if she wanted to continue with the matter.
The judge agreed.
Although there are some minor issues still being considered in the New York litigation, that litigation is essentially over with JDate getting out of it early in the process before legal fees started to pile up. This result should be the goal of any online business and reveals just how important the terms and conditions of a site are these days.
Your immediate thought may be that Zaltz will just turn around and file a follow-up lawsuit in Los Angeles. Perhaps, but it seems unlikely. This case is hardly a slam dunk winner for Zaltz, so what chance is there she is going to be willing to spend the time and money to pursue the matter all the way across the country? She will need to fly out to Los Angeles for multiple depositions, hearings, and the ultimate trial. The costs alone might wipe out anything she would get out of the lawsuit.
A second, less obvious, reason exists as well. Zaltz’ attorney in New York most likely will be unable to act as her legal counsel in Los Angeles. Individual states, not the federal government, license lawyers. While I am licensed to handle legal matters in California, for example, I cannot handle disputes in other states such as Illinois. The attorney for Zaltz in New York most likely faces the same problem.
Lawsuits against dating sites are tough to win. They do, however, generate a significant amount of publicity for the suing party and their lawyer. If Zaltz is forced to refile her action in California and her attorney cannot handle it, something tells me that she will drop the matter. If I am correct in this regard, JDate avoids expensive litigation by simply having their terms written up by a knowledgeable attorney.
Example of Bad Terms
At this point, you are probably about to visit your site to take a look at the venue provision in the terms. While a smart move, you should review terms in their totality. A few poorly drafted clauses can sabotage the entire document. If the language is a big enough mess, a judge may throw them out entirely. Interestingly, it is often the large sites that crash and burn in this regard with the most infamous case being that of Zappos.com.
Zappos.com is a huge online retailer with legendary quality customer service. The company did so well after its launch that Amazon snapped it up for a tidy $880 million in 2009. Yes, the web is a beautiful business platform.
In 2011-12, Zappos was allegedly hacked, and with customer information stolen. As is apt in these situations, a herd of my fellow lawyers surrounded the company and filed a class action lawsuit on behalf of Zappos’ customers. Zappos responded by arguing a clause in its terms required customers to submit to arbitration, which would kill off the class action lawsuits.
There was just one problem.
Zappos incorrectly implemented the terms on its website. Instead of requiring Zappos members to check a box indicating agreement to the terms, Zappos created a link in the footer of the site that linked to a page with the terms on it.
The problem with just linking to legal language at the bottom of the website is the user never sees, much less reads or agrees to, the actual terms. The terms are supposed to be a contract. How can a person agree to the language in a contract if they never see it? An example shows just how ludicrous this situation can be.
Imagine going to a used car dealer, looking at a few cars and then being told that by merely looking at them, you had agreed to buy a car. Even worse, the price and legal duties are set solely by the dealer and are posted on the wall of the bathroom in the office of the sales manager. It is ludicrous to assert you should be legally bound in this situation.
This approach is pretty much the one websites take when trying to assert a link to the terms in the footer of a website are sufficient to bind all visitors. Judges almost universally reject this approach, known as a browsewrap agreement. Put another way, those terms are worthless.
This defect wasn’t the only problem. Zappos also included a clause indicating it had the right to amend the terms whenever it wanted, for whatever reason it wanted and without alerting the user to the fact a change had occurred.
Unless you are on top of your game, there is a very good chance your terms suffer from one or both of these problems. Most websites do. This shortcoming is unfortunate since either problem can invalidate the terms of a site as Zappos is painfully discovering.
And what about the amendment provision? Let’s assume you buy a home and take out a loan. The loan documents state the bank can change the terms of the loan:
- At any time,
- For any reason, and
- Without even alerting you.
A judge would never uphold such a contract because it is what is known as “illusory.” Illusory is a legal concept simply stating that a contract without fixed terms cannot be enforced. If a clause in the terms allows for the amendment of the terms without restriction, the clause is illusory and may be thrown out by a judge.
So, what happened to Zappos? The judge was so unimpressed with the terms; he completely ruled them invalid in their entirety. Zappos is now faced with spending millions in legal fees to defend class action lawsuits. This doesn’t include any additional millions it may be forced to pay out to settle the lawsuits as well.
Mind you, this is a company worth nearly a billion dollars and owned by another company worth many more billions. If they got it wrong, how confident are you about the terms of your site?
The terms and conditions of a website are incredibly important. As the JDate case reveals, they can short-circuit lawsuits when written correctly. Conversely, poorly written terms can be a complete disaster and lead to huge potential financial damages as Zappos is learning.
While I am the first to admit the terms of a lawsuit are not the sexiest of subjects, they often are the difference between the survival and death of an online business when faced with potential lawsuits. This is why customized terms should be a must for every website.
Richard A. Chapo, Esq.