Two Clickwrap Agreement Cases — Two Distinct Outcomes

The law governing clickwrap contracts was recently addressed in two U.S. cases with very different results: In Forrest v. Verizon Communication, the District of Columbia Court of Appeals examined the validity of a forum selection clause contained in a clickwrap agreement. The Court had to determine whether the appellant, Forrest, had demonstrated that the enforcement of the clickwrap forum selection clause was unreasonable under the circumstance. The forum selection clause mandated that claims be brought in Virginia. The state of Virginia is one of the only two states in U.S. that do not provide for a class action procedure. Forrest claimed that he would be denied his day in court due to his inability to file a class action suit. The court held that the appellant would still be entitled to his day in court and could still benefit from remedies that are available to individual plaintiffs. The clickwrap forum selection clause was held to be reasonable and enforced. In the second case, Craig Comb and Roberta Toher v. PayPal Inc., the California federal court came to the opposite conclusion in refusing to enforce an arbitration clause/no class action clause in a clickwrap agreement, which provided that any claim or controversy was to be arbitrated on an individual basis and not to be consolidated with a claim or controversy of any other party. PayPal brought forth motions to compel individual arbitration pursuant to the clickwrap arbitration clause, in efforts to set aside a class action lawsuit commenced by several users who refused to abide by the arbitration clause. The motions were denied. The court held that the clause was unconscionable at both the procedural and substantive level. The court held that agreement was a contract of adhesion and as such, it was deemed to be procedurally unconscionable. Furthermore, the court also held that by prohibiting the joinder of claims, PayPal was attempting to contractually insulate itself from any meaningful challenge. For a copy of the Court's decision in Forrest, visit: http://www.dcbar.org/dcca/pdf/01-cv-1101.pdf