Barnes & Noble Loses in Court for Lack of Notice on Terms of Service

Barnes & Noble logoVenkat Balasubramani over at Eric Goldman’s Technology & Marketing Law Blog talks about a defeat for online retailer Barnes & Noble in their attempt to enforce a terms-of-service arbitration clause.

The case is interesting to any bloggers wondering what they can and can’t get away with by linking to a page of “Terms of Service.”

The plaintiff in Nguyen v. Barnes & Noble 12-cv-0812-JST (RNBx) (C.D. Cal.; Aug. 28, 2012) sued because after he purchased two HP TouchPad tablet computers at a price he was happy with, Barnes & Noble e-mailed him saying they had cancelled the order.

Before getting to the merits – whether Nguyen be able to get his tablets at the price at which he allegedly purchased them (and of course he should!) – B&N moved to enforce an arbitration clause in the B&N terms of service.

An arbitration clause allows a party – generally a huge corporation – to prevent a plaintiff – usually a consumer – from being able to litigate in court and get a trial by jury. Instead, the case goes to arbitration, where one or more arbitrators decide the case wholly outside the court system.

Corporations love arbitration in consumer disputes because arbitration alleviates the possibility of huge jury verdicts. It also can force plaintiffs to withdraw from the fight, because in the typical arbitration, both sides must pay the arbitrators fees, which can be too steep for a consumer to bear (in the thousands of dollars), especially when the potential recovery from an arbitration is likely to be low (maybe just in the hundreds or even less in a typical consumer dispute). Corporations also love arbitration because it prevents class-action litigation, which makes it economical to sue companies for having ripped off large numbers of people where any given individual’s loss was small. (It will come as no surprise that Nguyen’s suit was brought in a such a way that it could have blossomed into a large class action if the facts warranted.)

So B&N lost its bid to put Nguyen’s case into arbitration. Why? B&N couldn’t show that Nguyen had notice of the terms.

B&N buried the arbitration clause in terms of service that were linked to at the bottom of the bn.com pages. B&N could have had a pop-up “I agree” window or even just a box that Nguyen had to check saying he agreed to and had read the terms of service. They also could have written on the checkout screen about the transaction was subject to terms of service. But they didn’t do any of that. So, as a result, it looks like Nguyen will get his day in court.

Sounds like a win for consumers, huh? Balasubramani says not so fast:

It’s temping to see this case as a pushback on terms of service that contain arbitration clauses. However, it’s more likely an outlier in the sense that B&N’s terms of service implementation was so shoddy that it’s not likely representative of the typical terms of service case. If B&N had provided ample notice, the court would have probably enforced the terms and, as in the Slide and Zynga cases, required the consumer to arbitrate his claims.

Balasubramani sarcastically calls Nguyen’s claim “a tragic and sad story,” but says, “It’s tough to have much sympathy for B&N here … there’s zero excuse for not requiring the consumer to check the box and indicate assent to the terms as a condition of completing the transaction.”

Well, I think it’s hard to feel much sympathy for Barnes & Noble for the simple reason that they ripped Nguyen off. I say, give the man his tablets at the price he bought them! Barnes & Noble even sent an e-mail confirming the order … before they cancelled it. B&N has seller’s regret. Too bad. A deal’s a deal, I say. Cough up the tablets.

Unfortunately, you can bet Barnes & Noble will get their terms-of-service assent right next time.

Big online retailers like Barnes & Noble, eBay, and Amazon have consumer reviews and ratings to help consumers avoid getting ripped off when buying unfamiliar products or purchasing from a third-party seller. That’s great – ratings and reviews have been a positive innovation for consumers.

But clickwrap arbitration clauses have been a bad technological development for consumers. The portal entities – such as Barnes & Noble, eBay, and Amazon – have privileged positions in a not-so-competitive marketplace. There are few players, making choice limited. Consumers ought to be able to take these online companies to court when warranted. Unfortunately, the twin innovations of clickwrap agreements and arbitration clauses all too often make big corporate online players answerable to no one.

 

Tags: , , ,

Comments are closed.