Earthlink dispute resolution clauses held unenforceable
A California appeals court has held that Earthlink's arbitration and forum selection clauses in its DSL click-thru agreement are unenforceable under California law. See Download file.
The ruling was made in connection with a class action suit. The suit was brought under California's Unfair Competition Law (UCL) (Bus. & Prof. Code, ยง 17200 et seq.) and alleges that Earthlink charged fees to DSL customers before providing them with the necessary equipment to use the service.
According to the Court:
"Under recent Supreme Court authority, provisions in adhesion contacts that preclude class actions are unconscionable where the case involves allegations that a large number of consumers have been cheated out of a small sum of money. Moreover, EarthLink sought an order specifying that arbitration of a minor monetary claim by a California resident take place in Georgia. A forum selection clause that discourages legitimate claims by imposing unreasonable geographical barriers is unenforceable under well-settled California law."
Web site operators should revisit their terms of use in light of this holding in order to craft dispute resolution terms that are favorable to them, while avoiding terms that could be found to be unconscionable.
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