[Post by Venkat Balasubramani]

Mendenhall v. Hanesbrands, 2012 WL 1230743 (M.D.N.C.; Apr. 12, 2012)

This case has it all: Twitter, a pro football player, terrorism, Osama bin Laden and contract law geekiness!  

Background: Rashard Mendenhall plays professional football as a running back for the Pittsburgh Steelers. Mendenhall entered into an endorsement contract with Hanesbrands, which owns the Champion brand. The agreement between Hanesbrands and Mendenhall had a “morals clause,” which originally said that Hanesbrands could terminate the agreement if Mendenhall was arrested, charged with, or indicted for a felony or a crime involving moral turpitude. This clause was later amended to provide that Hanesbrands could terminate the agreement if, in addition to being charged with or indicted for a crime, Mendenhall:

[Became] involved in any situation or occurrence . . . tending to bring Mendenhall into public disrepute, contempt, scandal, or ridicule, or tending to shock, insult, or offend the majority of the consuming public . . . . [Hanesbrands’] decision on all matters arising under [this section] shall be conclusive.

Mendenhall’s Tweets: Mendenhall is an avid user of Twitter (@R_Mendenhall) and describes himself as a “Conversationalist and Professional Athlete.” In the wake of President Obama’s announcement of Osama bin Laden’s assassination, Mendenhall posted a series of Tweets decrying the joy that people expressed about this incident (a link to the first tweet in the series):

What kind of person celebrates death? It’s amazing how people can HATE a man they never even heard speak. We’ve only heard one side . . .

I only believe in God. I believe we’re ALL his children. And I believe HE is the ONE and ONLY judge.

Those who judge others, will also be judged themselves.

For those of you who said we want to see Bin Laden burn in hell and piss on his ashes, I ask how would God feel about your heart.

There is not an ignorant bone in my body. I just encourage you to #think

Not surprisingly, Mendenhall’s tweets generated a negative reaction. Mendenhall issued an explanation, saying that he was encouraging people to think; his tweets were meant to “generate conversation.”

Hanesbrands issued a public statement to ESPN distancing itself from Mendenhall’s statements and saying that his statements were inconsistent with the Champion brand. It said it was terminating the endorsement contract. Mendenhall sued, asserting that Hanesbrands’ termination was a breach.

The Court’s analysis: Hanesbrands says the contract vested it with discretion to terminate the agreement, and this decision shouldn’t be second guessed by the court. The court disagrees and says that this discretion is constrained by Hanesbrand’s duty of good faith and fair dealing. (The court doesn’t explicitly say that the contract would suffer from illusoriness if Hanesbrand could terminate it for any reason, but this is the same reasoning we’ve seen in other agreements that give one party a free hand to alter the terms.)

Does Mendenhall get past the good faith hurdle—can he show that Hanesbrands’ actions were unreasonable or in bad faith? At the pleading stage, the court says yes: and points to Hanesbrands initial public statement said that it “disagreed” with Mendenhall’s statements. In contrast, the agreement requires that Mendenhall make a statement that brings him into disrepute or shocks the majority of consuming public.

Hanesbrands responded that there was no dispute Mendenhall’s statements caused a public outcry and this backlash justified its termination of the agreement. The court says there is a factual dispute about the extent of the backlash. Mendenhall submitted evidence that although many people freaked out, he received supportive tweets and some people even changed their minds, thanking Mendenhall for making them think about the situation.

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Celebrities and athletes getting into hot water over incendiary tweets that are sent in the heat of the moment. Sound familiar?

I do think there’s more to the story here, though. I don’t deal with morals clauses with much frequency, but it’s interesting to see that even a morals clause has to be constrained by some standard. If the brand reserves for itself the right to freely terminate the contract any time the endorser says something the brand disagrees with, this raises the problem of the contract being illusory.

Unlike the government, which has to comply with First Amendment constraints, private employers and brands can freely restrict the speech of their employees or endorsers. (Employers have to deal with NLRB guidelines, but those were not implicated here.) The challenge is to come up with a standard that doesn’t tie the hands of the brand but at the same time provides some metric that is not totally subjective and does not give the brand unbridled discretion.

Mendenhall’s path to victory will not be an easy one. He has a pretty tough hurdle to prove that either (1) Hanesbrands tolerated his own previous statements and this established some sort of course-of-dealing, or (2) Hanesbrands tolerated similar statements of other endorsers. As to the underlying issue of whether his tweets were offensive to a large segment of the population, the parties will probably both present competing evidence, but Hanesbrands probably has a lot to drawn on from an evidentiary standpoint here. (It’s unclear as to whether use of the term “majority” in the agreement will come back to haunt Hanesbrands.)

In the meantime, Tweeters beware. We don’t need another cautionary tale to remind us that the ability to instantly publish our often emotional reactions to the current goings on is a double edged sword, but regardless of how it plays out, this case serves that purpose.

The takeaway: (1) if you are subject to a morals clause, watch what you tweet, and consider building in some sort of social media exception; (2) if you are the brand or the company negotiating a clause, consider what sort of metrics you want to include for when something is so offensive as to warrant termination.

[Post by Venkat Balasubramani]

Bland v. Roberts, 2012 US Dist. Lexis 57530, 4:11cv45 (E.D. Va.; Apr. 24, 2012)

Bland and his cohorts worked in the Hampton Sheriff’s Office, under B.J. Roberts. Roberts ran for re-election against Jim Adams, and the plaintiffs were lukewarm in their support of Roberts. In fact, three of the plaintiffs went so far as to “like” Adams’ Facebook page. Roberts won the election, and he decided to not retain the plaintiffs. He justified the terminations on cost-cutting and budgeting grounds, but plaintiffs argued that their termination violated their First Amendment rights. The court grants Roberts’ motion for summary judgment.

Plaintiffs alleged they engaged in a variety of protected activities, such as placing a bumper sticker on one of their cars and attending an Adams-sponsored cookout, but the court says there is no evidence that Roberts was aware of these activities. The one activity that Roberts knew about was “the presence” of two of the plaintiffs on his opponent’s Facebook page. However, with respect to this activity, the court says that plaintiffs did not point to any specific statements they made on Adams’ Facebook page. One plaintiff claimed he posted a comment to Adams’ page, but he later took it down, and the comment wasn’t presented to the court. Plaintiffs “liked” Adams’ Facebook page, and there was no dispute that Roberts was aware of this, but the court says this is insufficient:

[Roberts'] knowledge of the posts only becomes relevant if the court finds the activity of liking a Facebook page to be constitutionally protected. It is the court’s conclusion that merely “liking” a Facebook page is insufficient speech to merit constitutional protection. In cases where courts have found that constitutional speech protections extended to Facebook posts, actual statements existed within the record.

[emphasis added; citing Mattingly v. Milligan] The court declines to “infer the actual content of [plaintiff’s] posts from one click of a button on Adams’s Facebook page.”

The court also says that plaintiffs don’t adequately state a freedom of association claim. The court cites to the standards for when it’s permissible to terminate public employees for their political affiliations, but it doesn’t engage in any analysis because, in the court’s view, plaintiffs have not produced any evidence of association with Adams’ campaign that Roberts knew about–and any Facebook association is insufficient:

[a]side from the Sheriff’s admission that he knew [two of the plaintiffs] had been on Adams’s Facebook page, there is little to no evidence that rises to the level of a genuine dispute about whether the Sheriff actually know about the Plaintiffs’ support of Adams.

Even assuming plaintiffs could point to statements or association that the Sheriff knew about and that played a part in his decision to terminate plaintiffs, the court says Roberts is protected by qualified immunity. The Sheriff had not “transgressed [any] bright lines.”
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Gak!

The court’s conclusion on qualified immunity may or may not be defensible, but the court veered off course in concluding that a Facebook like is not speech. Maybe the court slept through Arab Spring and the many other instances of online activism in the past five years. Maybe the court is unaware of the robust body of First Amendment precedent which says that protection for expression is not limited to just actual words. Hello, Tinker (black arm bands) and Texas v. Johnson (flag burning)! More likely, the practical implications of a “like” threw the court for a loop.

It’s easy to dismiss Facebook “likes” as one of those mindless knee-jerk online activities we all routinely engage in that have little or no societal value. Courts can discount Facebook friendships in other contexts (see, e.g., Quickly v. Karkus, discussed here: “It’s Officially Legal: Facebook Friends Don’t Count”), but it’s well off the mark to say in this case that “likes” were not speech for First Amendment purposes. As menial as a Facebook like may be in the overall scheme of life, it’s an announcement to your Facebook friends that you support something, whether it’s a cause, a candidate, a company, or another person. A like also promotes a particular page or newsfeed to your friends, which sounds like quintessential expressive activity.

While I remain leery of Facebook’s “like” ecosystem, I “dislike” this ruling.

Related posts:

Is the Florida Bar Taking Facebook Friendship Too Seriously?

[Post by Venkat Balasubramani]

I’ve blogged a couple of times about PhoneDog v. Kravitz, the lawsuit over a Twitter account Kravitz used while he was working for PhoneDog. The court initially declined to dismiss PhoneDog’s claims for misappropriation of trade secrets or its claims for conversion. This means that the lawsuit moves forward. The court did dismiss PhoneDog’s claims for “interference with economic relationships.”

PhoneDog amended its economic interference claims, and this time the court says they are sufficient. (You can access a copy of the short four page ruling here.) This doesn’t mean that PhoneDog will necessarily win, just that PhoneDog can include these claims in its lawsuit, conduct discovery around these claims, and try to argue facts around them at trial. I thought the court took a pretty lenient look at PhoneDog’s claims — is Kravitz continuing to use a Twitter account really interfering with the economic relationship between PhoneDog and its advertisers? This seemed like a stretch.

In any event, the lawsuit continues on. I’m certain it will settle sooner rather than latter. One question is, how will the parties deal with Kravitz’s followers — which have increased dramatically in the course of the lawsuit — in the settlement?

The court’s latest rulings do not offer any clear lessons. I guess it reaffirms that having an agreement around these issues avoids litigation, which can be costly. Even discussing the issue informally helps.

Previous posts:

• “Company Sues Former Employee Over Ownership of Twitter Account” (November 13, 2011)
• “An Update on the PhoneDog v. @noahkravitz — The Battle Over the Employee Twitter Account” (January 18, 2012)

[Post by Venkat Balasubramani]

Kwan v. Clearwire Corp., C09-1392JLR (W.D.Wash.; Jan. 3, 2012)

In a case involving Facebook, a court enforced the company’s terms of use and, based on a venue clause in Facebook’s terms, transferred a dispute from New York to California. The court delved into the distinctions between “clickwrap” and “browsewrap” agreements while eventually concluding that the plaintiff was apprised of the terms (or should have been), so there was no reason not to enforce the contract.

Kwan v. Clearwire doesn’t involve strictly online terms, but Clearwire wasn’t so lucky — it botched its terms of use. (Judging from the court’s order, it also botched its customer service efforts). End result: It can’t summarily move the dispute to arbitration and has to undergo discovery around whether its customers agreed to the terms.

The court was fairly skeptical of Clearwire’s position, so its chances of success on the arbitration front don’t seem great.

Background

Kwan brought a lawsuit against Clearwire and collection agents for the company alleging that she was harassed in an effort to reach a Clearwire customer (which wasn’t her). Among other claims, she asserted claims under the TCPA, the Fair Debt Collections Practices Act, and Washington’s Consumer Protection Statute. Her complaint was amended to add Brown and Reasonover, both of whom tried – or attempted to try — Clearwire services for a short time. Clearwire’s terms contained a class action waiver and an arbitration clause, and the company sought to have the dispute arbitrated pursuant to those terms.

Brown signed up for a 14-day trial of Clearwire and received a confirmation email one week prior to receiving her modem. She unsuccessfully tried to connect her modem and alleged she was not required to click any sort of acknowledgement before her attempts. She called the company to cancel her service, but was persuaded by Clearwire to renew her trial period.

Although a service technician was sent to check on the modem (a roommate let the tech work unattended while Brown was at work), Brown was still unable to get the device running later. After going back and forth with Clearwire, the company finally agreed she could cancel her service. Shipping labels were sent for the return of the modem, but Brown says they had “expired” by the time of their arrival. After more back-and-forth with customer service, she was ultimately able to return the modem.

Reasonover’s experience with Clearwire wasn’t much better. She signed up for a seven-day trial period, but was not home when the package was shipped. Since she was unable to pick up the modem from Federal Express within her trial period, Reasonover was worried about being able to cancel. When she finally had it plugged in, she was only able to obtain “one green bar” from an “inconvenient location in her house.” Before connecting to the Internet, she was presented with an “I accept” screen for Clearwire’s terms, but bailed. Clearwire apparently told her that she could not cancel her service. She had some less-than-friendly exchanges with the company and reported their actions to her credit card. Reasonover alleges she paid ultimately paid for the modem, but Clearwire disputes this.

Discussion

The court notes that the Federal Arbitration Act provides for arbitration of disputes that are subject to arbitration clauses. While the FAA sets forth a policy in favor of arbitration, it first requires a determination of whether the parties entered into an agreement to arbitrate their dispute. That’s the hitch for Clearwire.

The court canvasses the law on browsewrap and clickwrap agreements (citing to Specht, Register v. Verio, Hines v. Overstock, and Southwest Airlines v. Boardfirst, among other cases). While Washington courts have not upheld the enforceability of clickwrap or browsewrap agreements, the court notes that shrinkwrap agreements are enforceable under Washington law. The prevailing case in Washington relied on Hill v. Gateway and ProCD v. Zeidenberg. In both these cases, “the terms and conditions at issue were included with the product purchased by the consumer.” This is consistent with the court’s inquiry in Specht as to whether the customer had notice of the contractual terms.

The court holds that, on the record before it, Clearwire is not entitled to enforce its arbitration clause. Clearwire pointed to the email confirmation sent to customers, but the court notes that the confirmation email did not contain a direct link to Clearwire’s terms. (The link pointed to Clearwire’s home page, and Brown would have to “negotiate her way through two more hyperlinks” in order to arrive at the terms.) Clearwire also argued that Brown was aware of the terms and used the product in question. With respect to this argument, the court says:

The breadcrumbs left by Clearwire to lead Ms. Brown to its TOS did not constitute sufficient or reasonably conspicuous notice of the TOS.

In any event, the court notes that Brown returned the modem.

Clearwire fared no better against Reasonover’s claims. It could not rely on the terms on its website because Reasonover testified that she “abandoned the page.” It also couldn’t rely on the confirmation email that was sent because the email did not contain a readily accessible link to the terms. (As in Brown’s situation, Reasonover would have had to click through a couple of different links to arrive at Clearwire’s terms.) Finally, Clearwire relied on the material that it had sent with the modem. These materials unfortunately suffered from the same flaws:

At the bottom of one of the pages included in the modem packaging was a reference to the TOS and to where the TOS could be located on [Clearwire’s] website. The statement actually contain[ed] two different hyperlinks. Neither link . . . immediately display[ed] the TOS.

D’oh.

As a final bonus, the court also denied the collection agency’s request to arbitrate finding that there was a dispute as to whether it was an agent (with a close relationship to Clearwire) that could enforce the terms, or an arms-length independent contractor, who would not (citing Swift v. Zynga).

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Apart from the numerous alleged customer service debacles detailed in the complaint, Clearwire dropped the ball in several ways:

1. It did not have a ‘leakproof’ clickwrap agreement that users had to agree to before they activated the modem or signed on. Clearwire could have forced its users to scroll through and click on an “I agree” button as a prerequisite to activation. (This may not have helped with respect to Brown’s claims since a technician activated the modem, but I assume this was an aberration. Most users probably plugged in the modem and signed on without the help of a technician; Clearwire could have forced them to click through and agree to terms.)

2. To the extent it tried to rely on paper terms, which it sent to customers along with the modems, it could have at least included the terms themselves as part of the package. I get the feeling the judge in this case would have worked hard to find a way around enforcing the terms in this scenario, but it would have been harder. (Again, the fact that the customers returned the modems would have affected the analysis. They could have argued that their acceptance of the terms was premised on them keeping the modems, and, since they didn’t, they should not be bound by the terms.)

3. There’s the email debacle. I’m not sure the email would have helped since it came after the fact and would be categorized in the same manner as paper terms (i.e., if the customer returns the item, they can argue they should not be bound by the terms). But the email didn’t even include the terms!

This decision is largely consistent with previous online contracting cases. If you can’t easily show the court that the terms were readily accessible, you’re going to have a long road to travel down. It also demonstrates that if you can make a compelling case to the court that there’s something inequitable afoot (whether in the form of seriously egregious, one-sided terms, or botched customer service, as was alleged in this case), courts will work to find a way around enforcing terms that they may otherwise enforce.

[Post by Venkat Balasubramani]

Many different statutes regulate the collection and use of personal information, but a key question is whether a certain category of information falls under the statute or a privacy policy’s definition of “personal information.” The California State Supreme Court concluded last year that a ZIP code qualifies as personal information under that state’s statute which regulates the collection and retention of such information by retailers. A federal court in Massachusetts recently came to the same conclusion although for different reasons.

The court in California concluded that the statute in that case was enacted to prevent retailers from collecting information from customers and using it for marketing purposes. The court said that retailers could use the name and ZIP code of customers to then match them in a database and locate them.

In Massachusetts, the court concluded that the Massachusetts legislature enacted the statute to protect against fraud and identity theft. Nevertheless, the court concluded that a ZIP code qualifies as personal information because the ZIP code can be used along with card or account information to effect the transfer of funds.

Even though the court concluded that the statute covered the collection of ZIP codes by retailers, the court dismissed the lawsuit on the basis that the plaintiff failed to allege actual harm.

The case is: Tyler v. Michaels Stores, Inc., 2012 WL 32208 (D. Mass.; Jan. 6, 2012).

For a more detailed look: check out my post at the International Association of Privacy Professionals: “Mass. Court: ZIP Code is personal identification info under credit card statute but plaintiff must still allege harm.”