Harris v. Blockbuster Inc

Filing 15

MOTION to Compel Individual Arbitration filed by Blockbuster Inc. (tln)

Harris v. Blockbuster Inc

Doc. 15

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION CATHRYN ELAINE HARRIS, MARIO HERRERA, and MARYAM HOSSEINY on behalf o f themselves and all others similarly situated, Plaint iff, v. BLOCKBUSTER INC. Defendant. § § § § § § § § § § § §

CIVIL ACTION NO. 2:08-cv-00155

MOTION TO COMPEL INDIVIDUAL ARBITRATION Defendant Blockbuster Inc. ("Blo ckbuster" or "Defendant") hereby mo ves to compe l individual arbitrat ion of plaint iffs Cathryn Elaine Harris, Mario Herrera, and Maryam Hosseiny's claims in this case and would respect fully show the Court as fo llows:1 I. SUMMARY OF ARGUMENT In this case, plaint iffs' claims arise fro m their use of Blockbuster's website and their participat ion in Blockbuster's online DVD subscript ion service, Blockbuster Online. Specifically, plaint iffs challenge a program that allows Blockbuster Online customers to share informat ion wit h their friends through the social networking site, Facebook.com. Plaint iffs allege that this program vio lates the Video Privacy Protection Act ("VPPA"), 18 U.S.C. § 2710. These claims, however, are covered by an individual arbitration agreement that plaint iffs accepted when they became registered users of Blockbuster's website and members o f Blockbuster Online. That agreement, which broadly covers all claims relat ing to use of

Blockbuster's website and its handling o f personal informat ion, explicit ly prohibit s plaint iffs
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In support of this motion, Blockbuster has submitted the Declaration of Jennifer L. Dineen ("Dineen Decl.") attached as Exhibit A.

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Dockets.Justia.com

fro m pursuing their claims through a class act ion or classwide arbitration. Numerous courts have confirmed that such agreements are binding, valid, and fully enforceable. Accordingly, plaint iffs should be co mpelled to individual arbitration. II. BACKGROUND A. Overview of the Case According to the First Amended Co mplaint ("FAC"), plaint iffs are registered users o f Blockbuster's website and members o f Blockbuster Online. See FAC at ¶¶ 2-4. Blockbuster Online is a DVD rental subscript ion program in which members pay a flat mo nthly rate to receive DVDs through the mail. See Dineen Decl. ¶ 3. To select the DVDs they wish to receive, Blockbuster Online members use Blockbuster's website to create and manage their own "mo vie queue," removing or adding movies as they choose. Id. ¶ 4. As Blockbuster Online members, plaint iffs' use of the Blockbuster website, including their management of their mo vie queues, is governed by a privacy po licy, which contains the fo llo wing provisio ns: Third Party Features. Fro m time to time Blockbuster may include addit ional features and funct ionalit y fro m third parties on our Web Sites. Certain of these features and functions, may require Blockbuster to send selected information about you, such as information about your movie queue, to the third party. If you do not wish for Blockbuster to share this information, you will have a reasonable opportunity to opt-out of these third party features and functions.... Public postings. If you disclose your personal informat ion in a manner that will be posted publicly such as in a product review your posting will be seen by others. In addit ion, if you elect to participate in certain co mmunit y features offered from t ime to time, selected informat ion about you, including informat ion about your mo vie queue, may be shared wit h other participants in these communit y features. Also, Blockbuster may make it possible for certain third party web sites to be accessed directly from our Web Sites and for selected information about you to be provided to these third party web sites if you are also a user of these third 2

party web sites. If a third party web site allows other users to view information about you (e.g., through posting to a publicly available profile page), the information provided by Blockbuster will be visible to other users of the third party web site. See Ex. 3 to Dineen Decl. (emphasis added). This privacy po licy is part of the terms and condit ions that plaint iffs agreed to when they became registered users of Blockbuster Online. Dineen Decl. ¶ 9; FAC ¶¶ 2-4. Despite this privacy po licy, plaint iffs allege that Blockbuster improperly allowed them to share movie queue information wit h their friends and family through Facebook, in supposed vio lat ion of the VPPA. FAC ¶¶ 25-26, 28-31. B. Plaintiffs' Individual Arbitration Agreement with Blockbuster All Blockbuster Online registered users sign-up for the program through Blockbuster's website, www.blockbuster.com. Dineen Decl. ¶¶ 5-6. Early in the sign-up process, prospective members are asked to provide basic informat ion (e.g., name, email, selected password, etc.) that enables Blockbuster to open an account for them. Id. ¶ 6. Before they submit this informat ion, all prospect ive members must "click" on a box that appears next to the fo llowing statement: I have read and agree to the blockbuster.com (including Blockbuster Online Rental) Terms and Conditions and cert ify that I am at least 13 years of age. Id. ¶ 7. By fo llowing the Terms and Conditions hyperlink,2 prospective members are taken to a page containing the full Terms and Condit io ns governing membership in Blockbuster Online and use of the Blockbuster website. Id. ¶ 8. These Terms and Condit io ns include the privacy polic y ment ioned above as well as an individual arbitrat ion agreement, which provides the so le method for resolving disputes relating to the use of Blockbuster's website and Blockbuster Online:

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A "hyperlink" is "an electronic link providing dir ect access from one distinctively marked place...to another in the sa me or a differ ent document." See Merria m-Webster Online Dictionary, www. merria mwebster.com/dictionary/hyperlink. Here, the hyperlink to the Blockbuster website Ter ms and Conditions is underlined and in blue type, obviously identifiable as a hyperlink to any computer user.

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DISPUTE RESOLUTION All claims, disputes or controversies (whether in contract or tort, pursuant to statute or regulat ion, or otherwise, and whether preexist ing, present or future) arising out of or relating to: (a) these Terms and Condit ions of Use; (b) this Site; (c) any advertisement or promotion relating to these Terms and Condit ions o f Use or this Site; or (d) transactions effectuated through this Site, or (e) the relat ionship which results fro m these Terms and Condit ions of Use (including relat ionships wit h third part ies who are not party to these Terms and Condit io ns o f Use) (collect ively "Claims"), will be referred to and determined by binding arbitratio n governed by the Federal Arbitrat ion Act and administered by the American Arbitration Associat ion under its rules for the resolut ion o f consumer-related disputes, or under other mutually agreed procedures. Because this method of dispute resolution is personal, individual and provides the exclusive method for resolving such disputes, you further agree, to the extent permitted by applicable laws, to waive any right you may have to commence or participate in any class act ion or class-wide arbitrat ion against Blockbuster related to any Claim. This provisio n shall survive the terminat ion of your right to use this Site. See id. ¶ 8; Ex. 2 to Dineen Decl. If prospect ive members do not click the box, they are not allowed to continue wit h the sign-up process; instead, they are shown the same screen again, this time wit h the message, "Please review and accept the terms and conditions" appearing in red type at the top of the screen. Dineen Decl. ¶ 10. Once prospective members click the Terms and Condit ions box and co mplete the sign-up process, they receive a confirmat ion email from Blockbuster. That email contains another hyperlink to the Terms and Condit io ns­the same ones they read and accepted during the sign-up process. Id. ¶ 11. In addit ion, the Terms and Condit io ns are always accessible by hyperlink at the bottom on the Blockbuster website. Id.

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III. ARGUMENT AND AUTHORITIES. By its terms, the individual arbitration agreement between plaint iffs and Blockbuster is governed by the Federal Arbitrat ion Act ("FAA"), 9 U.S.C. § 1 et seq. See Ex. 2 to Dineen Decl. ("All claims, disputes, and controversies...will be referred to and determined by binding arbitration governed by the Federal Arbitrat ion Act[.]"). The FAA creates a "body o f federal substant ive law of arbitrabilit y, applicable to any arbitration agreement within the coverage o f the Act." Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). As the Fift h Circuit has recognized, the FAA establishes "a strong presumption in favor of arbitration," and "individuals seeking to avo id the enforcement of an arbitration agreement face a high bar." Carter v. Country wide Credit Indus., Inc., 362 F.3d 294, 297 (5th Cir. 2004).3 In determining whether to compel arbitrat ion, courts applying this test need look only to "(1) whether there is a valid agreement to arbitrate between the parties; and (2) whether the dispute in quest ion falls within the scope of that arbitration agreement." Personal Sec. & Safety Sys., Inc. v. Motorola Inc., 297 F.3d 388, 392 (5th Cir. 2002); Walker v. Countrywide Credit Indus., Inc., 2004 WL 246406, at *2 (N.D. Tex. Jan. 15, 2004) (Godbey, J.). Here, the undisputed evidence

demonstrates that there is a binding, valid, and fully enforceable individual arbitrat ion agreement and that the agreement covers plaint iffs' claims. A. There is a Binding, Valid, and Fully Enforceable Individual Arbitration Agreement Between Plaintiffs and Blockbuster. The first part of the analys is under the FAA and Fift h Circuit case law looks to whether there is a valid arbitration agreement between the parties. This invo lves two issues: whether a binding agreement exists and whether that agreement is valid and enforceable. Here, an

arbitration agreement was formed during the Blockbuster Online sign-up process when plaint iffs
Arbitration is similarly favor ed under Texas law. See, e.g., Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) ("Federal and state law strongly favor arbitration.").
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clicked on the box indicat ing that they had reviewed and accepted the Terms o f Condit io ns, including the individual arbitration agreement. Under applicable law, Blockbuster's agreement is valid and fully enforceable as written, including its prohibit ion on participat ion in class actions and classwide arbitrat ions. 1. Plaint iffs clearly manifested their acceptance of Blockbuster's Terms and Condit ions, including the individual arbitrat ion agreement.

Plaint iffs entered into a binding individual arbitratio n agreement with Blockbuster during the sign-up process for their Blockbuster Online memberships. As explained above and in the Declaration o f Jennifer L. Dineen, plaint iffs could not have co mpleted that process without clicking on the box next to the statement: I have read and agree to the blockbuster.com (including Blockbuster Online Rental) Terms and Conditions.... See Dineen Decl. ¶¶ 7-8, 10-12; Ex. 1. This t ype of agreement, often referred to as a "clickwrap agreement," was described several years ago by Judge Fitzwater, who explained: A "clickwrap agreement" allows a customer to assent to the terms of a contract by select ing an "accept" button on the website. [citation omitted] If the consumer does not accept the terms o f the agreement, the web site will not complete the transaction. American Eyewear, Inc. v. Peeper's Sunglasses & Accessories, Inc., 106 F. Supp. 2d 895, 904 (N.D. Tex. 2000); see also Southwest Airlines Co. v. Boardfirst, L.L.C., 2007 WL 4823761, at *4 n.4 (N.D. Tex. Sept. 12, 2007) (Boyle, J.) (dist inguishing "clickwrap" agreements from "browsewrap" agreements, where user does not have to click "yes" or "I agree");4 Recursion Software, Inc. v. Interactive Intelligence, Inc., 425 F. Supp. 2d 756, 782-83 (N.D. Tex. 2006) (Boyle, J.) (discussing caselaw and concluding that "clickwrap licenses, such as at issue here, are
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As noted above, in a ddition to the "clickwrap agreements" that plaintiffs accepted during the sign-up process, they also received a confirmation ema il containing the Ter ms and Conditions. Dineen Decl. ¶ 11. Further mor e, they ma nifested their acceptance of Blockbuster's Terms and Conditions, including the individual arbitration agreement, through their continued use of the website. See Dineen Dec. Ex. 2 at 5.

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valid and enforceable contracts"). As Judge Bo yle recent ly noted, "at least one Texas appellate court has upheld the enforceabilit y o f a [clickwrap] agreement." See Recursion, 425 F. Supp. 2d at 782-83. In that case, Barnett v. Network Solutions, 38 S.W.3d 200, 204 (Tex. App.--Eastland 2001, pet. denied), the court enforced a clickwrap agreement, stating that "[i]t was [the plaint iff's] responsibilit y to read the electronically-presented contract, and he cannot complain if he did not do so." Id. at 204. Courts outside Texas, applying Texas law, have come to the same conclusio n. Just a few mo nths ago, a New Jersey federal court held that, under Texas law, "a part y ma y manifest assent to a contract by clicking on an "I Accept" button in connect ion wit h an internet transact ion." Davis v. Dell, Inc., 2007 WL 4623030, *4 (D. N.J. Dec. 28, 2007). This decisio n was in accord with an earlier decis io n by an Illino is appellate court, Hubbert v. Dell Corp., 835 N.E.2d 113 (Ill. App. Ct. 2005), which also analyzed the enforceabilit y o f a clickwrap agreement under Texas law. The Hubbert court noted that the co mpany's terms and condit ions appeared via hyperlink during the ordering process. Id. at 121. It also observed that a computer user would have known to click on the hyperlink to access the terms and condit io ns. Id. In light of these cases, plaint iffs are bound by Blockbuster's Terms and Condit io ns, including the individual arbitration agreement, which they read and accepted before beco ming registered users of Blockbuster's website and members of Blockbuster Online. 2. The arbitration agreement is valid and fully enforceable as written, including the prohibit ion on participat ion in class act ions and classwide arbitrat ions.

The arbitration agreement that governs plaint iffs' claims in this case is valid and fully enforceable, as it provides a fair and efficient method to resolve individual consumer disputes such as this one. The Fift h Circuit has recognized that the FAA sets a "high bar" for plaint iffs seeking to avoid the enforcement of their arbitration agreements, even where, as here, "the

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claims subject to arbitration are statutory in nature." Carter, 362 F.3d at 297. Indeed, the FAA was intended "`to reverse longstanding judicial hostilit y to arbitration agreements . . . and to place [them] upon the same footing as other contracts.'" Id. (quoting Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 89 (2000)). Accordingly, such agreements are suscept ible only to general contract defenses such as fraud, duress, or unconscio nabilit y, and only to the extent that those defenses would apply to all contracts generally; arbitration agreements may not be singled out for heightened scrutiny. See Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87 (1996) (invalidat ing state law that singled out arbitration agreements for suspect status). The "part y seeking to invalidate an arbitration agreement bears the burden of establishing its invalidit y." Carter, 362 F.3d at 297. This is not one of the limited circumstances in which a general contract defense can be used to invalidate an otherwise enforceable arbitration agreement. Plaint iffs' acceptance of the arbitration agreement was not obtained by fraud or duress. Moreover, there is no basis for a finding of unconscio nabilit y--the doctrine mo st often used (albeit unsuccessfully) by plaint iffs seeking to avoid the enforcement of arbitration agreements. In Texas, the doctrine o f unconscio nabilit y has two components--procedural and substant ive--and the plaint iff must establish both. In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002); AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 198 (Tex. App.--Houston [14th Dist.] 2003, no pet.). Procedural unconscio nabilit y "refers to the circumstances surrounding the adoption o f the arbitration provisio n," whereas substant ive unconscio nabilit y "refers to the fairness of the arbitration provisio n itself." Halliburton, 80 S.W.3d at 571. Here, plaint iffs cannot show either element. The arbitration agreement was clearly presented to them,

conspicuously ident ified in the Terms and Condit io ns that each o f them claimed to have read.

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See Dineen Decl. ¶¶ 7-8, 10-11. Both the Texas Supreme Court and the Fifth Circuit have found that, under Texas law, such agreements are enforceable regardless o f whether there is a disparit y in bargaining power or whether the plaint iff actually read or understood the agreement. See, e.g., In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 679 (Tex. 2006) ("The principles o f unconscio nabilit y do not negate a bargain because one party to the agreement may have been in a less advantageous bargaining posit ion . . . The agreement before us is clearly labeled as an agreement providing that disputes will be settled by arbitration."); In re U.S. Home Corp., 236 S.W.3d 761, 764 (Tex. 2007) (noting that arbitration agreements in contracts of adhesio n are not automat ically unconscio nable); see also Carter, 362 F.3d at 301 (reject ing reliance on superior bargaining position to establish procedural unconscionabilit y, noting that such an argument "has no support in Texas law"). Plaint iffs also cannot make the necessary showing of substant ive unconscio nabilit y. The agreement between plaint iffs and Blockbuster is fair and reasonable. The designated arbitration rules, the American Arbitration Associat ion's ("AAA") Consumer Rules, are well tailored to individual disputes such as this one. Under these rules, Blockbuster bears the burden of paying nearly all o f the arbitration fees. Because their individual claims should not likely exceed $10,000, each plaint iff's share of the arbitrator's fees would be limited to $125--less than the filing fee they paid in this case. See Carter, 362 F.3d at 300 (holding that it was "impossible" for plaint iffs to demonstrate prohibit ive costs under arbitration agreement where their fee burde n was limited to $125). Nor can plaint iffs contend that the agreement's prohibit io n on participat ion in class actions and classwide arbitrations renders the agreement unconscio nable, as the precedents ho ld that it does not. In AutoNation, a Texas appellate court rejected a plaint iff's challenge to an

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individual arbitration agreement, noting that class treatment of claims was merely a procedural device, which must bow to the FAA's mandate "to ensure that private agreements to arbitrate are enforced according to their terms." AutoNation USA Corp., 105 S.W.3d at 199-200. As the AutoNation court recognized, "there is no entit lement to proceed as a class action." Id. at 200. The Fift h Circuit has reached the same conclusion. See Carter, 362 F.3d at 298-300 (reject ing argument that arbitration agreement's class waiver deprived plaint iffs o f substant ive rights under federal law). So has the Northern District of Texas. See Marsh v. First USA, N.A., 103 F. Supp. 2d 909, 922-24 (N.D. Tex. 2000) (Malo ney, J.) (reject ing argument that federal statute's remedial purpose would be frustrated by enforcement of class waiver). Furthermore, courts across the country, applying Texas law, have uniformly held that individual arbitrat ion agreements like Blockbuster's are valid and fully enforceable. See Davis, 2007 WL 4623030, at *6 ("[T]he Court finds that class act ion waivers are not unconscio nable under Texas contract law."); Omstead v. Dell, Inc., 473 F. Supp. 2d 1018, 1024 (N.D. Cal. 2007) ("Under Texas law, an arbitrat ion clause wit h a class act ion waiver is not substant ively unconscio nable; rather, it is likely to be enforceable."); Sherr v. Dell, Inc., 2006 WL 2109436, at *7 (S.D.N.Y. July 27, 2006) ("[p]laint iff is not entit led to a class act ion suit or class-wide arbitration to vindicate the rights of everyo ne else with a similar problem. "); Provencher v. Dell, Inc., 409 F. Supp. 2d 1196, 1204 (C.D. Cal. 2006) ("AutoNation is illustrative of how Texas courts are unwilling to strike down an arbitration provisio n and class act ion waiver on the ground of unconscio nabilit y."); Fiser v. Dell Computer Corp., 165 P.3d 328, 339 (N.M. Ct. App. 2007) ("[W]e look to Texas law, and conclude that the arbitration clause is not unconscio nable merely because [plaint iff] is precluded fro m bringing his claim as a class act ion."); Hubbert, 835 N.E.2d at 126 (relying on

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AutoNation in reject ing argument that individual arbitrat ion agreement was substant ively unconscio nable).5 Based on this overwhelming authorit y, it is clear that the arbitration agreement between plaint iff and Blockbuster, including the agreement's class waiver, is valid and fully enforceable. B. The Individual Arbitration Agreement Covers Plaintiffs' Claims In This Case. Having established the existence of a valid arbitratio n agreement between the part ies, the only remaining issue is whether the agreement covers plaint iffs' claims. In light of the FAA's strong pro-arbitration policy, "all doubts concerning the arbitrabilit y o f claims should be resolved in favor of arbitration." Primerica Life Ins. Co. v. Brown, 304 F.3d 469, 471 (5th Cir. 2002). Here, the arbitrat ion agreement is extremely broad, covering "all claims, disputes or controversies," including statutory claims like plaint iffs', "arising out of or relating to" any of the fo llo wing: (a) these Terms and Condit ions o f Use; (b) this Site; (c) any advert isement or promotion relat ing to these Terms and Condit io ns of Use or this Site; or (d) transactions effectuated through this Site; or (e) the relat ionship which results fro m these Terms and Condit ions o f Use (including relat ionships wit h third part ies who are not party to these Terms and Condit io ns of Use).... See Dineen Dec. ¶ 8; Ex. 2 (emphasis added). This broad agreement easily covers plaint iffs' claims in this case. All o f the plaint iffs ident ify t hemselves as registered users o f the

Blockbuster website and Blockbuster Online. See FAC ¶¶ 2-4. Their claims arise fro m their use of the Blockbuster website and the way in which Blockbuster permits them to share informatio n with third parties, namely Facebook and their Facebook communit y. Moreover, this case

challenges Blockbuster's privacy po licy and its compliance with that policy, which is part of the
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Even if T exas had a policy aga inst class waivers in arbitration agr eements, that policy would b e preempted by the F AA's strong pro-arbitration policy. See, e.g., Gay v. CreditInform, 511 F.3d 369, 39495 (3d Cir. 2007) (holding that FAA preempts state la w doctrine invaliding individual arbitration agreements).

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Terms and Condit ions referred to in the arbitrat ion agreement. In covering all claims, including statutory claims, relat ing to those Terms and Condit ions, website transact ions, and relat ionships with third parties, the arbitration agreement covers plaint iffs' claims in this case. IV. CONCLUSION In short, plaint iffs should not have filed this case in court and should not be pursuing class treatment of their claims at all. By do ing so, they have breached their individual arbitrat ion agreements wit h Blockbuster. Because these agreements are binding, valid, and fully

enforceable, all three plaint iffs should be co mpelled by the Court to resolve their disputes through individual arbitration under the AAA's Consumer Rules. Pending that resolut ion, this case should be stayed.

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Respect fully submitted,

/s/Michael L. Raiff Michael L. Raiff State Bar No. 00784803 Frank C. Brame State Bar No. 24031874 Vinson & Elkins L.L.P. 2001 Ross Avenue, Suite 3700 Dallas, TX 75201 214.220.7705 214.999.7705 (fax) ATTORNEYS FOR DEFENDANT BLOCKBUSTER INC.

CERTIFICATE OF CONFERENCE I hereby certify that, in accordance with Local Rule CV-7(h), counsel for Blockbuster has complied wit h the meet and confer requirement contained therein and that Blockbuster's Motion to Compel Individual Arbitration is opposed. I certify that on July 29th, 2008, I personally conducted a telephone conference with Jeremy Wilson o f the Corea Firm, counsel for Plaint iffs, and that counsel were not able to reach agreement on the Motion, result ing in an impasse, and leaving the issue for the Court to resolve.

/s/ Frank Brame w/permissio n Michael L. Raiff ___ Frank Brame

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CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing Motion to Compe l Individual Arbitration was served by ECF on the 30th day of July, 2008 on counsel o f record for Plaint iffs.

/s/ Michael L. Raiff __________________________ Michael L. Raiff

1406673v.2

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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION CATHRYN ELAINE HARRIS, MARIO HERRERA, and MARYAM HOSSEINY on behalf of themselves and all others similarly situated, Plaint iffs, v. BLOCKBUSTER INC. Defendant. § § § § § § § § § § § §

CIVIL ACTION NO. 2:08-cv-00155

ORDER GRANTING BLOCKBUSTER'S MOTION TO COMPEL INDIVIDUAL ARBITRATION Before the Court is Defendant Blockbuster Inc.'s ("Blockbuster's") Motion to Compel Individual Arbitration together with the supporting affidavits and documentation. Having

reviewed the Motion, the responses, and all o f the attached materials, pleadings, and papers, and the arguments of counsel, the Court finds that the Motion is well taken and should be GRANTED. It is therefore ORDERED, ADJUDGED, AND DECREED: 1. Blockbuster's Motion to Compel Individual Arbitration is hereby GRANTED.

Dallas 1438075v.1