Social media sites are transforming not only the daily lives of consumers, but also how companies interact with consumers. Here at Morrison Foerster, across all of our practice groups, we are seeing complex, cutting-edge legal issues arising out of social media. As with the Internet boom during the mid-to-late 1990s, social media is generating new legal questions at a far faster pace than the law’s ability to provide answers to such questions. In an effort to stay on top of these emerging issues, and to keep our clients and friends informed of new developments, Morrison Foerster publishes this blog devoted to the law and business of social media.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.Aaron’s practice focuses on advising both established and emerging companies in a variety of data- and technology-intensive sectors, including software, SaaS, cloud-based technology, digital media (social media, AR/VR, gaming, streaming media, AdTech), AI, healthcare, consumer electronics, e-commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on branding and marketing, trademark licensing, and content-related transactions, as well as the intellectual property aspects of mergers, acquisitions, asset spin-offs, and private equity investments.He has represented clients such as Autodesk, Meta, OpenAI, Splunk, Konami, Kaiser Permanente, SoftBank, Visa, and Yahoo, among others.Aaron has been recognized by numerous publications for his work on market-defining technology transactions. He is currently ranked by Chambers USA for “Technology Transactions.”Aaron also serves as co-editor of Socially Aware, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics. Aaron is also a sought-after speaker on new and emerging areas of law, and is a frequent presenter and panelist at conferences and legal services programs. In addition to his active practice, Aaron regularly provides pro bono assistance to various nonprofit and charitable organizations such as Common Sense Media and the Starlight Children’s Foundation. He is a member of the board of directors of California Lawyers for the Arts.While in law school at the University of California, Berkeley, Boalt Hall School of Law, Aaron served as executive editor of the California Law Review and was elected to the Order of the Coif. Following law school, Aaron served as law clerk to the Honorable William H. Orrick and the Honorable Martin J. Jenkins, both United States District Judges for the Northern District of California.

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Aaron is the chair of our Technology Transactions Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals. Aaron’s practice focuses on advising both established and emerging companies in a variety of data– and technology–intensive sectors, including software, SaaS, cloud computing, AR/VR, AI, gaming, healthcare, consumer electronics, social media, e–commerce, other online business models, and mobile applications. He also maintains an active practice counseling companies on the intellectual property aspects of mergers, acquisitions, asset spin–offs, and private equity investments.

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Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.Lawrence focuses his practice on technology transactions and licensing matters. His diverse experience includes advising on SaaS agreements, cross-licensing agreements, research and collaboration agreements, development agreements, and distribution agreements. He counsels a broad range of companies across the software, hardware, life sciences, biotech and FinTech spaces, as well as other entities including universities.He advises clients in connection with general corporate matters including contract negotiations, and leasing and technology placement agreements.In 2023, Lawrence seconded at Amazon Lab126, where he led the negotiation of high-profile licensing deals for a variety of Amazon device teams. The secondment was an immersive opportunity to gain additional insights and experience from the perspective of in-house counsel. Lawrence also serves as co-editor of <a href="https://www.sociallyawareblog.com/" target="_blank">Socially Aware</a>, the firm’s award-winning newsletter and blog devoted to the law and business of social media, and regularly publishes on various IP and technology-related topics.Prior to joining the firm, Lawrence was counsel at another major law firm. Before earning his law degree, Lawrence was a web consultant, project manager, and web developer in Portland, Oregon, where he managed and consulted on projects using industry methodologies and performed custom development and integration of content management systems.Lawrence was named a Super Lawyers “Rising Star” in 2015 and 2018–2022, and is licensed in both California and New York. Lawrence earned his J.D. from the University at Buffalo School of Law, where he was the electronic systems editor for the Buffalo Law Review and awarded the ABA-BNA Award for Excellence in the Study of Intellectual Property Law.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster.Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions. His clients include technology, digital media and content for television and music, financial services, and communications companies with diverse intellectual property assets and issues.His practice focuses on the legal aspects of developing, licensing, and commercializing technology and intellectual property, as well as negotiating general commercial contracts, including outsourcing transactions, as well as content and data licenses. He regularly assists clients with legal issues relating to licensing and commercialization of digital media and content, digital content that is distributed over the Internet or streamed, mobile applications and social media, as well as the licensing of recorded music for distribution via digital platforms. Anthony is also experienced with issues relating to open-source software, software development, artificial intelligence and machine learning, cloud-based technology, and protection of proprietary information.Anthony has extensive experience working on matters involving disruptive technologies, such as blockchain. He has helped fintech clients with general intellectual property issues in connection with terms of service for online financial products and services.Anthony is an integral part of the outside pro bono legal team for nonprofit organizations based in New York, including advising clients on legal issues regarding entertainment, social media, privacy rights, and the negotiation of outsourcing and service agreements. Anthony received his J.D. from the University of Michigan Law School in 2009. He received his B.S. from Cornell University in 2004.

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Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. He advises clients on general commercial and transactional matters. His clients include technology, media, and communications companies with considerable intellectual property assets. His practice focuses on the legal aspects of licensing and commercializing technology and intellectual property, as well as negotiating general commercial contracts. He also regularly assists clients with legal issues relating to mobile applications and social media.

Anthony M. Ramirez

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SCOTUS Age-Gates the Internet: Free Speech Coalition v. Paxton and the Future of Adult Content Regulation

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OHIO SOCIAL MEDIA LAW STRUCK DOWNOn April 16, 2025, a federal judge in Ohio ended the state’s ambitious plan to severely limit social media access for minors. The court <a href="https://netchoice.org/wp-content/uploads/2025/04/Court-Permanently-Halts-Ohio-Age-Verification-Law_NetChoice-v-Yost_April-16-2025.pdf" target="_blank">permanently blocked</a> Ohio’s Attorney General from enforcing the <a href="https://codes.ohio.gov/ohio-revised-code/section-1349.09" target="_blank">Parental Notification by Social Media Operators Act</a>, effectively shelving the law.Passed with admirable optimism in July 2023 and <a href="https://www.ohioattorneygeneral.gov/Media/News-Releases/December-2023/Parental-Notification-by-Social-Media-Operators-Ac" target="_blank">set to roll out</a> in January 2024, the Act required social media platforms to make sure users were old enough to drive before letting them post memes and dance videos (unless their folks say it’s okay). The court saw through the state's well-intentioned lawmaking and called out the law for First Amendment violations. U.S. District Court Judge Algenon L. Marbley pointedly noted the state’s failure to clear the notoriously high bar of strict scrutiny, effectively dooming the Act from the start. Specifically, the judge felt the legislation cherry-picked which online platforms it wanted to target, essentially trying to referee a game it didn’t fully understand. “Ohio’s response to a societal worry that children might be harmed if they are allowed to access adult-only sections cannot be to ban children from the library altogether absent a permission slip,” Judge Marbley wrote in the decision.The court framed the situation as the classic standoff between two American sacred cows: the rights of kids to express themselves freely online and the rights of parents to raise their offspring without government micromanagement. Ultimately, the ruling reminded Ohio legislators that freedom of speech, even adolescent babble, is still constitutionally protected.This decision adds Ohio to a growing list of states being <a href="https://netchoice.org/litigation/" target="_blank">successfully challenged</a> by NetChoice, the tech trade association that’s rapidly becoming the grim reaper of underage social media control legislation.    ANOTHER ARKANSAS SOCIAL MEDIA LAW STRUCK DOWNArkansas has once again found itself on the losing side of a First Amendment battle. The state’s latest effort, the Social Media Safety Act (<a href="https://arkleg.state.ar.us/Home/FTPDocument?path=%2FACTS%2F2023R%2FPublic%2FACT689.pdf" target="_blank">Act 689</a>), met the same fate as its 2023 predecessor (<a href="https://arkleg.state.ar.us/Bills/Detail?id=sb396&ddBienniumSession=2023%2F2023R" target="_blank">SB 396</a>): <a href="https://netchoice.org/wp-content/uploads/2025/04/Court-Permanently-Halts-Arkansas-Age-Verification-Law_NetChoice-v-Griffin_Mar-31-2025.pdf" target="_blank">enjoined</a> as unconstitutional.The plaintiff in both cases, unsurprisingly, was NetChoice. Unless you’ve been living under a rock with no Wi-Fi, you know it from similar successful challenges in California, Utah, Maryland, Mississippi, Ohio, and Texas (not to mention extensive coverage in <a href="https://www.sociallyawareblog.com/search?q=netchoice" target="_blank">your favorite blog</a>). Courts across these states, as in Arkansas, have found these laws imposed undue burdens on free speech and were not properly tailored to address harms to minors. The Arkansas ruling marked the <a href="https://netchoice.org/netchoice-wins-court-declares-arkansas-age-verification-law-unconstitutional-permanently-halts-it-to-protect-arkansans-rights-privacy-online/" target="_blank">first time</a> NetChoice obtained a permanent injunction against restrictive social media laws, but it was quickly followed by <a href="https://netchoice.org/netchoice-v-yost/" target="_blank">another victory</a> in Ohio.The Social Media Safety Act would have required social media companies to verify that users were either at least 18 years old or had verifiable parental consent before creating an account. The law also mandated the use of third-party vendors to perform age verification, which could involve government-issued identification or other “commercially reasonable” methods. After granting access, platforms would be prohibited from retaining any identifying information, a provision that invited as much skepticism as it did compliance challenges.Although Arkansas’ latest statute has been struck down, the broader state-level push to regulate minors’ use of social media continues. Virginia is <a href="https://virginiamercury.com/2025/03/11/va-s-plan-to-restrict-social-media-for-minors-faces-pushback-and-calls-for-tighter-safeguards/#:~:text=Senate%20Bill%20854%2C%20sponsored%20by,ability%20to%20adjust%20that%20cap." target="_blank">considering</a> an amendment to its data privacy law that would restrict children under 16 to one hour of daily social media use, while also requiring age verification mechanisms. Arkansas has introduced additional legislation targeting social media companies, and Utah has <a href="/topics/utah-s-new-app-store-age-verification-law-what-s-b-142-means-for-kids-parents-and-tech" target="_blank">moved forward</a> with app store age restrictions that will be phased in between May 2025 and December 2026.Texas has introduced <a href="https://capitol.texas.gov/BillLookup/History.aspx?LegSess=89R&Bill=HB186" target="_blank">HB 186</a>, another attempt at mandating age verification, despite previous setbacks. Not to be outdone, Florida has proposed <a href="https://www.flsenate.gov/Session/Bill/2025/868/BillText/e1/HTML" target="_blank">SB 868</a>, which would authorize law enforcement to access minors’ messages during investigations, grant parents full access to a minor’s communications, and prohibit the use of accounts featuring disappearing messages.The trend is clear. States remain committed to policing minors’ online activity, but so far their efforts have largely faltered under constitutional scrutiny. NetChoice, it seems, will continue to have no shortage of work.X SUES MINNESOTA OVER DEEPFAKE LAWX has filed a federal lawsuit against Minnesota Attorney General Keith Ellison, challenging the constitutionality of a <a href="https://www.revisor.mn.gov/statutes/2023/cite/609.771" target="_blank">state law</a> aimed at combating election-related deepfakes.Passed with bipartisan support in 2023, the law makes it a crime to post fake videos intended to influence elections, with penalties including fines or even prison time. Legislators were understandably concerned about the growing potential for AI-generated misinformation to distort political campaigns. X, however, argues that the statute’s language is so vague that no reasonable platform could confidently determine what it allows.According to <a href="https://www.courthousenews.com/wp-content/uploads/2025/04/X-lawsuit-minnesota-deepfake.pdf" target="_blank">the lawsuit</a>, the risk of criminal penalties would force platforms to err on the side of caution, pulling down anything that even faintly resembles a deepfake. In X’s view, this would chill lawful political speech—precisely the kind of “<a href="https://www.aclu.org/documents/aclu-history-robust-uninhibited-and-wide-open-meaning-first-amendment" target="_blank">uninhibited, robust, and wide-open</a>” debate the First Amendment was built to protect.X also points out that it already maintains internal mechanisms, such as the “Community Notes” feature, to address misleading content without heavy-handed censorship. The platform is asking the court to, among other things, declare the statute in violation of both the Minnesota and U.S. Constitutions, nullify it, and prevent its enforcement.Supporters of the law are unsurprised by the challenge. State Senator <a href="https://www.senate.mn/members/member_bio.html?mem_id=1271" target="_blank">Erin Maye Quade</a>, one of the bill’s sponsors, defended the statute as narrowly tailored to prevent voter deception. In remarks that left little room for ambiguity, she <a href="https://senatedfl.mn/senator-erin-maye-quade-responds-to-failed-election-manipulator-elon-musks-lawsuit/" target="_blank">suggested</a> X’s motives might be less about free speech and more about preserving the ability to influence elections through technology. As for Attorney General Ellison’s office, the response so far has been measured: officials say they are reviewing the lawsuit and will respond “in the appropriate time and manner.” THE NINTH CIRCUIT’S EXPANSIVE TAKE ON INTERNET JURISDICTIONOn April 21, 2025, the Ninth Circuit, sitting en banc, delivered a <a href="https://cdn.ca9.uscourts.gov/datastore/opinions/2025/04/21/22-15815.pdf" target="_blank">10-1 decision</a> reviving Briskin v. Shopify, a class action accusing e-commerce platform Shopify of violating privacy laws through the use of internet cookies. The court adopted a notably broad view of specific personal jurisdiction over online businesses—a development likely to raise eyebrows across the tech and legal communities.The case arose when California resident Brandon Briskin alleged that Shopify surreptitiously installed tracking cookies on his iPhone after he made a purchase through Shopify’s platform. According to the complaint, the cookies monitored Briskin’s movements and online behavior without his consent, violating a host of California privacy statutes, the state constitution, and even the Fourth Amendment.Both the <a href="https://scholar.google.com/scholar_case?case=12735640797001602544&hl=en&as_sdt=6&as_vis=1&oi=scholarr" target="_blank">district court</a> and a <a href="https://scholar.google.com/scholar_case?case=1011294239889633344&hl=en&as_sdt=6&as_vis=1&oi=scholarr" target="_blank">Ninth Circuit panel</a> initially dismissed the claims for lack of jurisdiction. Shopify is headquartered in Canada, and none of its U.S. subsidiaries are based in California. However, the en banc majority reversed the panel, concluding that Shopify had “purposefully directed” its conduct at California consumers by allegedly monetizing their personal data.Judge <a href="https://appellate.courts.ca.gov/district-courts/3dca/bio/consuelo-maria-callahan" target="_blank">Consuelo Callahan</a>, the sole dissenter, warned that the majority’s reasoning effectively creates a “traveling cookie” doctrine, suggesting that if a company’s tracking software attaches to a consumer’s device, jurisdiction follows that individual wherever they go.The decision opens the door to broader assertions of jurisdiction, with potentially far-reaching consequences for social media, online commerce, and any platform that uses cookies. Given the stakes, we’ll be watching this one closely.UTAH CRACKS DOWN ON “FAMILY VLOGGING” AFTER HIGH-PROFILE ABUSE CASEIn a state where family vlogging is practically an industry, Utah has become the latest to step into the legal void around child influencers. Gov. Spencer Cox signed a <a href="https://le.utah.gov/Session/2025/bills/enrolled/HB0322.pdf" target="_blank">new law</a> aimed at protecting minors who appear in online content; a move that follows the child abuse conviction of former YouTube creator Ruby Franke.The new legislation gives adults the right to scrub content they were featured in as minors and requires parents to set aside earnings for child participants. Specifically, online creators who earn more than $150,000 annually from child-centric content must deposit 15% of those earnings into a trust, accessible when the child turns 18. The protections extend beyond YouTubers and TikTokers, applying also to child actors in film and television.<a href="https://www.cnn.com/2023/08/16/tech/kid-influencer-law/index.html" target="_blank">Illinois</a> and <a href="https://www.house.mn.gov/sessiondaily/Story/18352" target="_blank">Minnesota</a> have already adopted laws allowing children to sue for their share of online profits, but Utah’s approach goes further by offering a right to erasure. This is a notable shift for a state with deep roots in family-focused social media culture.The legislation arrives against the backdrop of the <a href="https://apnews.com/article/youtube-child-abuse-ruby-franke-jodi-hildebrandt-b237eb83bb592bbc3b1a3c3757b1263d" target="_blank">Franke scandal</a>, where the once-popular “8 Passengers” YouTube channel crumbled amid allegations (and admissions) of severe child abuse. Franke’s ex-husband told lawmakers earlier this year that he regretted allowing their family to be filmed for profit, warning that “children cannot give informed consent to be filmed on social media, period.”Utah’s family-centric online economy, buoyed by groups like the so-called “<a href="https://www.theatlantic.com/culture/archive/2024/10/momtok-secret-lives-of-mormon-wives-review-feminism-beauty-domesticity/680410/" target="_blank">MomTok</a>” community, has long flourished in the absence of meaningful regulation. Now, amid growing public discomfort with the commodification of children’s lives, lawmakers are trying to put some guardrails in place. As Eve Franke, the youngest of the Franke children, wrote in testimony supporting the law: “Kids deserve to be loved, not used by the ones that are supposed to love them the most.”

Lawrence Gallick is of counsel in the firm’s Austin office and a member of the Technology Transactions Group.

Anthony Ramirez is a partner in the Technology Transactions Group in the New York office of Morrison Foerster. Anthony advises clients on general commercial and transactional matters. He regularly advises companies on the IP aspects of their M&A transactions.











Anthony Ramirez

Aaron is the chair of the firm’s Technology Transactions Group and co-chair of the Interactive + Digital Media Group. He advises clients on a wide range of complex transactions involving intellectual property and technology, including structuring and negotiating strategic licensing, development, collaboration, procurement, and distribution deals.

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On August 8, 2024, the U.S. District Court for the Eastern District of Virginia in <a href="https://scholar.google.com/scholar_case?case=17363838191298839802&q=Lovinfosse+v.+Lowe%27s+Home+Centers,+LLP&hl=en&as_sdt=20006&as_vis=1" target="_blank">Lovinfosse v. Lowe’s Home Centers, LLP</a> addressed the enforceability of an arbitration clause in Lowe’s terms of service, serving as a reminder of the problems that may arise from terms of service (TOS) language allowing unilateral modifications. The plaintiff, Eleanor Lovinfosse, alleged that the retailer’s use of <a href="https://www.gov.uk/government/publications/online-choice-architecture-how-digital-design-can-harm-competition-and-consumers" target="_blank">Online Choice Architecture (OCA)</a> led her to purchase a water hose labeled as “Required for Use” while buying a washing machine online. Lovinfosse later discovered the washing machine came with all necessary parts, rendering the additional purchase unnecessary. She subsequently filed a class action lawsuit against the retailer, alleging deceptive practices.Lowe’s maintained the dispute is subject to the arbitration requirement in its TOS; arguing that Lovinfosse agreed to the terms by clicking the “Place Order” button during checkout.Directly below the “Place Order” button, hyperlinked text states: “By placing an order, I agree to Lowe’s Terms and Privacy Statement.” This allows users to reference the <a href="https://www.lowes.com/l/about/terms-and-conditions-of-use" target="_blank">full text of the terms</a> if they click the link. Lovinfosse did not click on the hyperlinked terms and asserted that she was not aware of their contents, including the arbitration clause.The court agreed with the defendant on this point, reasoning that based on the layout and language of the website, Lovinfosse had constructive notice of the terms and had manifested assent by moving forward with the order.The court then turned its analysis to the unilateral modification clause within the TOS, which stated:“You agree that Lowe’s may change, terminate, modify, add, end or delete any of these terms and conditions (including, without limitation, the Terms) under which the Site is offered at any time and without notice to you. Lowe’s, in its sole and absolute discretion, reserves the right to update, change, terminate, suspend, modify, add, end or delete any of these Terms . . . , in whole or in part, at any time with or without notice.”Although the arbitration clause existed as part of the TOS at the time Lovinfosse agreed to them, the unilateral modification clause purported to allow the retailer to change its terms at any time and without notice. The court concluded that, while Lovinfosse may have agreed to the TOS, the unrestricted ability to modify the terms without notice made the arbitration clause illusory and unenforceable.The court further reasoned that a customer who makes a single transaction would have no way of knowing if the terms had changed unless they constantly checked the website, highlighting that the lack of required notice distinguished this case from others where unilateral modification clauses were upheld.The court’s reasoning in Lovinfosse is reminiscent of the conclusions drawn in <a href="https://casetext.com/case/harris-v-blockbuster-inc" target="_blank">Harris v. Blockbuster Inc.</a>, a Northern District of Texas decision from 2009. In that case, the court similarly held that the unilateral modification clause in Blockbuster’s online terms of use rendered the arbitration clause illusory and unenforceable. The court reasoned that Blockbuster could, in theory, unilaterally modify the arbitration provisions and apply those modified provisions to earlier disputes.The case law regarding unilateral modification in online terms has shifted over the years. After Harris, unilateral modification requirements appeared to loosen, as evidenced by the 2014 San Francisco Supreme Court decision in <a href="https://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1656&context=historical" target="_blank">Rodriguez v. Instagram</a>. In Rodriguez, Instagram’s terms stated that users would be notified of material changes to the terms, and the meaning of “material change” would be determined at Instagram’s sole discretion.Though Instagram had sole discretion to determine when to give notice of a change in its terms, the court upheld the unilateral modification of its terms of use – noting that Instagram had in fact provided reasonable advance notice via email and that continued use of the service constituted Rodriguez’s acceptance of the new terms.More recently, decisions like <a href="https://casetext.com/case/sifuentes-v-dropbox-inc-1" target="_blank">Sifuentes v. Dropbox</a> have permitted unilateral modification but made it much harder to meet the requirement for giving notice. In Sifuentes, the United States District Court for the Northern District of California reviewed Dropbox’s ability to enforce amendments to its terms, which contained a notice provision that was similar to Instagram’s. The court held that Dropbox could not enforce its amended TOS because it failed to show that the plaintiff’s continued use of the service was conditioned on agreement to the amendments.The court found that the plaintiff also didn’t have actual notice of the modified terms because Dropbox did not show that the plaintiff had read the email notifications of the amendments. The Sifuentes court further characterized the provision as “essentially disavow[ing] any obligation to alert [users] to changes.” This decision underscored practical challenges of meeting the necessary notice standard, but these cases did not focus on or require the Harris standard of only enforcing unilateral amendment provisions where the terms themselves required the provider to give notice (presumably in addition to such notice being given where applicable to the case’s facts).Lovinfosse appears to mark a return to the stricter stance seen in Harris, serving as a reminder of the limitations and potential pitfalls of unilateral modification clauses in TOS. While the court acknowledged that the plaintiff had agreed to the terms, the ability to change those terms without notice made the arbitration clause illusory and unenforceable.In many ways, this is a frustrating standard for companies that have followed best practices when implementing enforceable terms, only to face the risk that agreed upon contractual terms which have not changed might be declared unenforceable simply because they could change. As companies navigate the complexities of digital contracts, Lovinfosse underscores the necessity of transparency in consumer agreements.

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Associate

Tricia Matibag is an associate in the Boston office of Morrison Foerster and a member of the firm’s Technology Transactions Group.

Tricia Matibag

Lose Your Illusion: District Court Holds that Unilateral Modification Clause Makes ToS Unenforceable

Arbitration

Terms of Use

Social Links is our ongoing series here at Socially Aware that rounds up current developments at the intersection of social media, policy, research, and the law.Embedding social media posts can be considered copyright infringement…but is it?A Manhattan federal judge <a rel="noopener" target="_blank" href="https://www.rangefinderonline.com/news-features/industry-news/judge-sides-with-photographer-in-instagram-embed-lawsuit/">ruled in August</a> 2021 that the practice of embedding social media posts on third-party websites, without permission from the content owner, could violate the owner’s copyright.The case centered around a 2017 video of a starving polar bear that nature photographer Paul Nicklen took and posted on his Instagram and Facebook accounts. Its purpose was to highlight the effects of global warming. When the image went viral, Sinclair Broadcasting Group published an article about it and embedded Nicklen’s post without obtaining his permission.In reaching his decision, U.S. District Judge Jed Rakoff <a rel="noopener" target="_blank" href="https://www.reuters.com/legal/transactional/manhattan-judge-rejects-server-test-internet-copyright-infringement-2021-07-30/">rejected the “server test” from the 9th Circuit Court of Appeals</a>, which generally holds that embedding content from a third party’s social media account only violates the content owner’s copyright if a copy is stored on the defendant’s servers.A recent decision on this very topic, however, reveals a different perspective on embedding practices and the “server test.” Reuters reports that a <a rel="noopener" target="_blank" href="https://www.reuters.com/legal/transactional/instagram-dodges-photogs-copyright-lawsuit-over-embedding-feature-2021-09-20/">San Francisco federal court rejected a group of photographers’ claim</a>s that Instagram’s embedding tool infringed on their copyrights. <a rel="noopener" target="_blank" href="https://fingfx.thomsonreuters.com/gfx/legaldocs/egpbkyoxrvq/IP%20INSTAGRAM%20COPYRIGHT%20order.pdf">Judge Charles Breyer of the U.S. District Court for the Northern District of California ruled that</a> “the Instagram feature doesn’t violate the photographers’ exclusive right to display the pictures publicly because third-party websites that embed the images don’t store their own copies of them.” This decision is second in a series that rejects the “server test” cited above.Photographers Alexis Hunley and Matthew Brauer led the <a rel="noopener" target="_blank" href="https://fingfx.thomsonreuters.com/gfx/legaldocs/bdwpkwbmepm/frankel-instagram--classcomplaint.pdf">class action complaint</a> in May, followed by Instagram’s <a rel="noopener" target="_blank" href="https://fingfx.thomsonreuters.com/gfx/legaldocs/lgvdwkozypo/IP%20INSTAGRAM%20COPYRIGHT%20mtd.pdf">move to dismiss in July</a>. According to Reuters, Judge Breyer noted that “Because they do not store the images and videos, they do not ‘fix’ the copyrighted work in any “tangible medium of expression…. Therefore, when they embed the images and videos, they do not display ‘copies’ of the copyrighted work.”These decisions will most likely end in appeals. We will continue to monitor the developments as they unfold.Harnessing the wisdom – and skills – of the crowd to combat social media’s trust issuesElections, COVID-19 vaccinations, Gabrielle Petito and Brian Laundrie’s disappearance, conspiracy theories about other missing persons: each represents a category that has cast social media platforms under intense scrutiny about their handling of the information – or misinformation – that is published and appears across the social media landscape.While social media platforms employ fact checkers to validate the veracity of posts, the staggering volume of posts on any given day makes it impossible for them to employ enough people to confirm or reject every entry on every channel globally, 24/7. Scale, not to mention cost, remains the central issue.A <a rel="noopener" target="_blank" href="https://www.wired.com/story/could-wisdom-of-crowds-help-fix-social-media-trust-problem/">recent Wired article</a> suggests that using the “wisdom of the crowds” – groups of lay people – often matches or surpasses the accuracy that professional fact checkers provide. In addition to cost savings, <a rel="noopener" target="_blank" href="https://www.science.org/doi/10.1126/sciadv.abf4393">this model also offers something that professional fact checker programs do not: scalability</a>.These issues around trust and misinformation on social media platforms will continue to dominate headlines across technological, legal, and public opinion forums.Social media algorithms result in surprising and unexpected moments for those grieving lost loved ones and friendsMany of us have experienced moments when social media serves up posts, memories, or birthday reminders of those who have passed. <a rel="noopener" target="_blank" href="https://www.wired.com/story/social-media-algorithms-are-controlling-how-i-grieve/">A recent Wired article</a> explores the emotional and psychological effects of those on the receiving end of such social media notices. Particularly in the COVID-19 era, when many have experienced sudden losses of loved ones, friends, and family members, social media platforms have provided much-needed forums for those wanting to share news, information, tributes, memorials, and memories of those who have passed. Many of the major social media outlets have mechanisms and settings to help family members and friends manage their deceased loved ones’ accounts in respectful ways. Facebook offers both <a rel="noopener" target="_blank" href="https://www.facebook.com/help/1017717331640041/">memorialized accounts</a> and <a rel="noopener" target="_blank" href="https://www.facebook.com/help/1568013990080948">legacy contact settings</a>; Instagram provides similar <a rel="noopener" target="_blank" href="https://help.instagram.com/231764660354188">memorialization settings</a>; and Twitter has <a rel="noopener" target="_blank" href="https://help.twitter.com/en/rules-and-policies/contact-twitter-about-a-deceased-family-members-account">processes in place</a> to work with an authorized estate representative to deactivate an account. Google <a rel="noopener" target="_blank" href="https://www.cnbc.com/2019/05/28/how-to-set-google-to-delete-everything-after-i-die.html">provides a similarly robust program</a>, allowing individuals to designate “digital beneficiaries” who will act on their behalf to manage their accounts once they’ve passed.While none of us wants to think about end-of-life directives, taking into consideration the digital footprint that we leave behind on social media as part of our legacy is another factor in the technological landscape where we live today.Young people, social media, and emerging from COVID-19Much has been written in the last 18 months about the effects that COVID-19 has had on all of us, but in particular, on the youth in the United States. Common Sense, Hopelab, and the California Healthcare Foundation published Coping with COVID-19: How Young People Use Digital Media to Manage Their Mental Health earlier this year. It examined how youth used social media and other online tools to cope with the separation and isolation from friends and other social structures that are vital to their intellectual, social, and emotional development.While depression is on the rise among young people (as this infographic explains), there’s good news on the horizon. Recent analyses have noticed <a rel="noopener" target="_blank" href="https://onezero.medium.com/maybe-social-media-isnt-making-teens-depressed-after-all-and-here-s-what-likely-is-bb49651cda16">positive trends among young people with decreased levels of depression</a> and cited two major factors that occurred during the pandemic: teens are getting more sleep, and they’re spending more time with family.In addition, GLAAD (formerly known as the Gay and Lesbian Alliance Against Defamation) recently published its first-ever Social Media Safety Index report that examined social media platforms and LGBTQ+ youths’ involvement and usage. While the report cited an <a rel="noopener" target="_blank" href="https://www.glaad.org/smsi">increase in hate speech and other hostile forums</a> on social media, other analysts provided a more nuanced interpretation, citing that <a rel="noopener" target="_blank" href="https://onezero.medium.com/social-media-when-youre-queer-hazard-or-haven-ab01dfc53611">social media platforms provide a much-needed lifeline for LGBTQ+ youth as they seek information and support</a>.

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Clients seek out Julie because of her practical advice on cutting-edge issues at the intersection of privacy and consumer protection laws. She provides clients with practical solutions to compliance c

Julie O'Neill

Clients seek out Julie because of her practical advice on cutting-edge issues at the intersection of privacy and consumer protection laws. She provides clients with practical solutions to compliance challenges around a wide variety of both online and offline privacy issues, including tracking, interest-based advertising, geo-targeting and other mobile tracking, personalization, and cross-device tracking. Recognized in The Legal 500 US 2014, 2016, 2019, and 2020 and Chambers USA 2021 for her exceptional legal work, her clients praise her saying, “She is really good at giving practical, targeted advice and taking stock of what the risk profile of the client is, so that the advice is holistic.” (Chambers USA 2021).

Social Links: Embedding social media posts can be considered copyright infringement…but is it?

Social Links is our ongoing series here at Socially Aware that rounds up current developments at the intersection of social media, policy, research, and the law

Social Links: Embedding social media posts can be considered copyright infringement…but is it?

Advertising

Big Data

Copyright

As consumers increasingly communicate and interact through social media platforms, courts have had to grapple with how to apply existing laws to new ways of communicating, as well as disseminating and using content. Sometimes, however, traditional legal standards apply to these new platforms in a straightforward manner. At least, that is what the court found in <a href="https://cases.justia.com/federal/district-courts/illinois/ilndce/1:2018cv02027/350557/118/0.pdf?ts=1551783529" target="_blank" rel="noopener">Dancel v. Groupon, Inc.</a>, a putative class action against Groupon, Inc., alleging that Groupon’s use of images originally posted on the social media site Instagram violated users’ rights under the <a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=2241&ChapterID=62" target="_blank" rel="noopener">Illinois Right of Publicity Act</a> (IRPA).Groupon, a website that offers consumers deals on goods and services, built a widget intended to provide its users a window into businesses for which Groupon offered deals. The widget used Instagram’s API to find photos that Instagram users had taken at particular locations, and then displayed those images under the deals offered on Groupon’s own website.  When a visitor to the Groupon page hovered his or her mouse over the Instagram images, the Groupon user could see the username of the person who posted the photo on Instagram and an associated caption, if there was one.Dancel, who maintains an Instagram account with the username “meowchristine,” took a selfie of herself and her boyfriend in front of a restaurant and posted it on Instagram with a <a href="https://www.lifewire.com/define-tagging-3486207" target="_blank" rel="noopener">tag</a> noting the name of the restaurant. Groupon later displayed this photograph, among others, in connection with its deal for the same restaurant.Dancel moved to certify a class of all persons in the United States who maintained Instagram accounts and whose photographs were acquired and used on a Groupon webpage for an Illinois business, and a subclass of all members whose likeness appeared in any such photograph.  The court, however, denied Dancel’s motion for class certification pursuant to <a href="https://www.law.cornell.edu/rules/frcp/rule_23" target="_blank" rel="noopener">Federal Rule of Civil Procedure 23(b)(3)</a>, which requires a plaintiff seeking certification to demonstrate that common questions of law or fact predominate in the class (as opposed to questions affecting individual members of the class).According to the court, there was no single, common answer as to whether Instagram usernames could establish the identity of a particular person under the IRPA. The use of an “identity” under the IRPA requires that the use be sufficient to identify the person to a reasonable audience, but the court found that the answer to this question was an individual one, making the claim inappropriate for a class action.While this ruling is informative with respect to the relatively narrow issue of class actions alleging violations of the IRPA based on the use of social-media handles and related images in a commercial context, the result might be different in other jurisdictions or with slightly different facts. State law governs the right-of-publicity, and variations in state statutes and state courts’ interpretations of common law rights could impact the outcome of a similar claim in another jurisdiction. For example, in California the common law right of publicity broadly interprets “identity” to mean anything that evokes a person’s identity. In addition, the court in Dancer dismissed without explanation the idea that a photo of a person would clearly “identify” that person under the IRPA for purposes of class certification, though it is not obvious that another court would reach the same conclusion.Moreover, the court’s ruling concerned the issue of class certification, but did not directly address the merits of the underlying right of publicity claim itself. While class actions present potentially greater liability for companies, even individual claims can be problematic. Accordingly, companies that use user-generated content in connection with their social media posts should take note of this case for the questions it did not answer, and assess their use of such content with an eye to the potential for publicity-rights-related claims.More generally, Dancel is a good reminder that user-generated content posted on social media platforms is not necessarily freely available for use in other contexts. We saw this in the well-known case <a href="//casetext.com/case/agence-france-presse-v-morel" target="_blank" rel="noopener">AFP v. Morel</a>, in which a wire service and photo agency were held to have infringed the copyright in photographs taken from Twitter without the permission of the photographer who posted them. And another recent case, <a href="https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2017cv03144/473371/169/" target="_blank" rel="noopener">Goldman v. Breitbart News Network, LLC</a>, <a href="https://www.sociallyawareblog.com/2018/03/12/social-links-inline-linking-to-tweet-containing-photo-could-constitute-copyright-infringement-proposed-california-legislation-could-restrict-website-operators-efforts-to-have-minors-consent/" target="_blank" rel="noopener">held</a> that merely embedding a tweet (i.e., linking to a tweet) containing a photograph without the photographer’s permission constitutes infringement.

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What’s in a (User)Name?

As consumers increasingly communicate and interact through social media platforms, courts have had to grapple with how to apply existing laws to new ways of com

What’s in a (User)Name?

Right of Publicity

Companies that offer services, whether online or offline, to consumers on a subscription or other automatic renewal basis should be aware that such offers are heavily regulated at both the federal and state levels. A recent <a href="https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201720180SB313" target="_blank" rel="noopener">amendment to Section 17602 of California’s Business and Professions Code</a> provides a good opportunity for businesses that make subscription offers to review their practices. As of July 1, 2018, the obligations under California law will expand in two ways that may require businesses to update those practices.The first change relates to the information that businesses must provide to consumers regarding the terms of a subscription offer. The current law already requires a business to provide certain information about the renewal process—such as the amount of the recurring charges, the length of the renewal period, and the cancellation policy—both before the consumer accepts the agreement, and afterwards in an acknowledgement. The amendment provides that, as of July 1, 2018, if the offer includes any free trial or gift component, the information provided to consumers must also include a “clear and conspicuous explanation of the price that will be charged after the trial ends or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial.”The second change relates to the types of cancelation mechanisms that a business must make available. Under the current law, businesses must provide a cancelation mechanism that may include a toll-free phone number, email address, postal address, or another “cost-effective, timely, and easy-to-use” mechanism. The amendment provides that, as of July 1, 2018, consumers who accept a subscription offer online must have the option to terminate it exclusively online (instead of, for example, being required to call a toll-free number or send a written notice by postal mail).Accordingly, businesses that offer consumer subscriptions should take steps before July to ensure that:<ul><li>if the consumer receives a free or discounted trial, the consumer also receives clear and conspicuous notice of the price to be charged, or any changes to the price being charged, after the trial ends; and</li><li>if the consumer originally entered into a subscription online, the consumer also receives an entirely online mechanism for canceling the automatic renewal.</li></ul>Local district attorneys in California have recently sought to enforce California’s automatic renewal law, and plaintiffs’ attorneys have also attempted to bring class actions against companies related to alleged violations of the law, in some cases framed as a violation of California’s unfair competition law.In addition to the obligations under the California law, businesses should also be aware of other legal considerations affecting subscription programs and free-trial offers. For example, certain states require that a business provide a reminder notice to a subscription customer before charging him or her, if the renewal period exceeds a certain length of time—typically six months. The federal <a href="https://www.ftc.gov/enforcement/statutes/restore-online-shoppers-confidence-act" target="_blank" rel="noopener">Restore Online Shopper’s Confidence Act (ROSCA)</a>, which is enforced by the Federal Trade Commission (FTC), also imposes certain obligations. The FTC recently obtained a <a href="https://www.ftc.gov/news-events/press-releases/2017/11/online-lingerie-marketer-prohibited-deceiving-shoppers-about" target="_blank" rel="noopener">$1.3 million judgment against AdoreMe Inc.</a>—an online lingerie marketer that allegedly failed to provide a simple mechanism to stop recurring charges. The defendant had allegedly made it hard for consumers to cancel memberships, including by limiting the mechanisms for cancelation requests, and inadequately staffing its customer service department.The revisions to the California law, along with the patchwork of other applicable federal and state laws—and the attention from regulators, state attorneys and plaintiffs’ counsel—make it crucial for any business offering consumers a subscription or similar auto-renewal product or service to review its practices to ensure compliance.

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Amended California Law Expands Requirements for Consumer Subscriptions

Amended California Law Expands Requirements for Consumer Subscriptions

Companies that offer services, whether online or offline, to consumers on a subscription or other automatic renewal basis should be aware that such offers are h

Litigation

Last year, this blog raised concerns regarding the TCCWNA, its growing popularity with plaintiffs’ lawyers and the implications for online retailers. At a high level, the TCCWNA is a New Jersey consumer protection law that focuses on contractual terms (including online terms of service) governing transactions between sellers/service providers and New Jersey consumers. It prohibits sellers/service providers from including certain common provisions in their contracts with New Jersey consumers, and provides aggrieved New Jersey consumers with the right to recover from the seller/service provider a civil penalty of not less than $100 per violation. The TCCWNA applies even if the relevant contractual terms are expressly governed by the laws of a state other than New Jersey.The application of the TCCWNA to online retailors initially looked to be a boon to the plaintiff’s bar, based on a simple formula:  (1) assemble a class comprised of New Jersey consumers who have used an online retailer’s website that has terms of service alleged to be in violation of the TCCWNA; (2) file a class action lawsuit in New Jersey state or federal court; and (3) collect at least $100 for each affected New Jersey consumer.However, this approach now appears to have hit a serious speedbump, at least with respect to TCCWNA disputes filed or removed to federal court.In a March 29, 2017 decision in <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/3:2016cv02167/332108/26/" target="_blank" rel="noopener">Rubin v. J. Crew Group, Inc.</a>, Judge Wolfson of the U.S. Court for the District of New Jersey dismissed a putative TCCWNA class action claim against the retailor J. Crew. The plaintiff claimed that the terms and conditions on J. Crew’s retail website included a limitation of liability provision that violated the TCCWNA. The plaintiff, however, could not point to specific harm that she suffered as a result of the alleged TCCWNA violation. Instead, she argued that the violation of her rights under New Jersey law is, itself, the underlying harm.Judge Wolfson rejected the plaintiff’s argument. Relying on the U.S. Supreme Court’s <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltdcce7bda080639e7/62731974deee7329767e7760/160516spokeo.pdf" target="_blank" rel="noopener">recent decision</a> in <a href="https://supreme.justia.com/cases/federal/us/578/13-1339/" target="_blank" rel="noopener">Spokeo, Inc. v. Robins</a>, Judge Wolfson held that a bare violation of a right granted by a statute is not enough under Article III of the U.S. Constitution to provide a plaintiff with standing to sue in federal court; in order to have standing, the violation must result in a concrete harm. Because the plaintiff could not show that she suffered any concrete harm as a result of the offending provisions in J. Crew’s online terms and conditions, the court dismissed her claim.Judge Wolfson also took the opportunity to directly address the recent flood of TCCWNA lawsuits against online retailors:The Court is aware that there are numerous class actions filed in this district based upon similar TCCWNA violations alleged in this case. While the intent of the New Jersey legislature in enacting the TCCWNA is to provide additional protections for consumers in this state from unfair business practices, the passage of the Act is not intended, however, for litigation-seeking plaintiffs and/or their counsel to troll the internet to find potential violations under the TCCWNA without any underlying harm. In such instances, standing would be lacking.Not long after the J. Crew ruling, Judge Hillman, also a judge of the U.S. Court for the District of New Jersey, echoed Judge Wolfson’s decision in a separate case. The fact pattern in <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2016cv05016/336530/16/" target="_blank" rel="noopener">Murray v. Lifetime Brands, Inc.</a> is similar to that in J. Crew: the plaintiff brought a putative class action suit against an online retailer alleging that the retailer’s online Terms of Use violate the TCCWNA. Noting that this case is one of several putative class action suits filed in District Court of New Jersey “all asserting basically the same claim against various sellers,” Judge Hillman dismissed the plaintiff’s claim under Spokeo for failure to plead that the plaintiff suffered a concrete harm from the online retailer’s purported violation of the TCCWNA.Although the J. Crew and Lifetime Brands decisions should come as some relief for online retailers, it remains important for retailers to be aware of the TCCWNA and to determine whether they are in compliance with the statute. Notably, the reasoning behind these recent retailer-friendly decisions may not be applicable to TCCWNA actions brought in New Jersey state courts, because Spokeo’s concrete harm requirement is tied to jurisdictional limits placed on federal courts under Article III of the U.S. Constitution, and thus specific to actions pursued in federal courts.Online retailers who are subject to suit in New Jersey state courts, and who do not succeed in removing such actions to federal court, could still be subject to the potentially substantial civil penalties afforded to plaintiffs under the TCCWNA. Accordingly, it is still too early to tell whether federal court decisions like J. Crew and Lifetime Brands, Inc. will ultimately reduce the volume of TCCWNA lawsuits brought against unsuspecting e-commerce providers, or merely shift the action primarily to New Jersey state courts going forward.*        *       *For our earlier Socially Aware article on New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act, please see Controversial New Jersey Consumer Protection Law Creates a Potential “Gotcha” for E-Commerce Companies. For more on the U.S. Supreme Court’s Spokeo decision, please see the following Morrison & Foerster client alert: <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltdcce7bda080639e7/62731974deee7329767e7760/160516spokeo.pdf" target="_blank" rel="noopener">The Supreme Court’s Spokeo Decision: Concrete Shoes for Consumer Class Actions?</a>

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E-tailers Rejoice as Decisions Limit Suits in Federal Court for Alleged Violations of N.J.’s Controversial Consumer Protection Law

E-tailers Rejoice as Decisions Limit Suits in Federal Court for Alleged Violations of N.J.’s Controversial Consumer Protection Law

Last year, this blog raised concerns regarding the TCCWNA, its growing popularity with plaintiffs’ lawyers and the implications for online retailers. At a high 

E-Commerce

If your company is involved in selling products or services to consumers in New Jersey over the web or through mobile apps, you’ll want to read this blog post.In what amounts to a feeding frenzy, plaintiffs’ lawyers are working overtime bringing class action suits against e-commerce companies, alleging that their online terms and conditions violate New Jersey’s unusual <a href="http://www.gannlaw.com/OnlineApp/dtSearch-Data/TextFiles/Condominium/App-32.pdf" target="_blank" rel="noopener">Truth-in-Consumer Contract, Warranty and Notice Act</a> (“TCCWNA”). Some of the online retailers to have been sued include Victoria’s Secret, <a href="https://topclassactions.com/lawsuit-settlements/lawsuit-news/332489-toys-r-us-bed-bath-beyond-class-actions-filed-over-website-terms/" target="_blank" rel="noopener">Bed Bath & Beyond and TOYS ‘R’ US</a>, with more suits being filed every day.Unlike most consumer protection laws, the TCCWNA focuses specifically on the contractual terms governing certain transactions with consumers, imposing limitations on such terms even if such contractual terms are governed by the law of a state other than New Jersey—creating a potential gotcha for e-tailers who are based outside of New Jersey and who traditionally have their online terms and conditions reviewed only by lawyers admitted to practice in the state whose laws govern such terms and conditions.Although the TCCWNA was enacted in 1981, it has only recently achieved notoriety, as more and more plaintiffs’ lawyers have embraced the statute due to its broad scope and its statutory penalty of not less than $100 per violation without the need to prove actual harm.Overview of the TCCWNA New Jersey adopted the TCCWNA over 30 years ago not to create new rights for consumers, but rather <a href="http://law.justia.com/cases/federal/appellate-courts/ca3/13-1359/13-1359-2014-11-07.html" target="_blank" rel="noopener">to “bolster[] rights and responsibilities established by other laws</a>,” particularly those established by New Jersey’s Consumer Fraud Act (“CFA”). <a href="http://legalnewsline.com/stories/510704501-hertz-class-action-among-latest-in-rising-number-of-new-jersey-tccwna-cases" target="_blank" rel="noopener">Observers have noted</a> that the number of TCCWNA cases has been increasing in the last few years, particularly since 2013 when the Supreme Court of New Jersey in <a href="http://caselaw.findlaw.com/nj-supreme-court/1638020.html" target="_blank" rel="noopener">Shelton v. Restaurant.com, Inc.</a> found that online certificates or coupons were subject to TCCWNA rules and opened the door to TCCWNA class actions stemming from e-commerce.The TCCWNA applies where a company is a “seller, lessor, creditor, lender or bailee,” offering its services to a “consumer” or “prospective consumer” in New Jersey. A “consumer,” under the TCCWNA, is defined as “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.” Indeed, <a href="http://caselaw.findlaw.com/nj-supreme-court/1638020.html" target="_blank" rel="noopener">courts</a> have emphasized that the TCCWNA is inapplicable unless the plaintiffs are consumers.The text of the TCCWNA prohibits three types of provisions in consumer contracts, warranties, notices and signs.First, it prohibits provisions violating “clearly established” legal rights of a consumer or responsibilities of a seller, lessor, creditor, lender or bailee. These rights and responsibilities may arise from federal or state law. For example, one court found that provisions restricting limitations periods for initiating lawsuits, asserting counterclaims or raising affirmative defenses violate consumers’ rights under federal and New Jersey procedural rules.Second, the TCCWNA prohibits provisions waiving a consumer’s rights under the TCCWNA. In <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2012cv00079/268859/25/" target="_blank" rel="noopener">Johnson v. Wynn’s Extended Care, Inc.</a>, for example, the U.S Court of Appeals for the Third Circuit held that a provision in a service contract that prevented the recovery of attorneys’ fees and costs constituted a waiver of a consumer’s rights under the TCCWNA, and was therefore prohibited.Note, however, that at least two cases have found that a claim under the TCCWNA cannot be based merely upon an omission. As <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/2:2016cv01506/330981/11/" target="_blank" rel="noopener">one court</a> noted, the statute’s use of the term “includes” suggests that only a statement affirmatively “included” in the consumer contract, warranty, notice or sign should give rise to liability; in addition, the legislative history does not include any examples of an omission triggering liability.Third, the TCCWNA prohibits blanket “inapplicable in some jurisdictions” savings clauses (e.g., phrased “void where prohibited”)—though, notably, it does not prohibit such savings clauses in any warranty. In order for a savings clause to be acceptable under the TCCWNA, the statute requires the clause to specify which provisions, if any, are unenforceable in New Jersey.In one recent case, Martinez-Santiago v. Public Storage, the following language was found to be in violation of the TCCWNA’s prohibition against overly broad savings clauses: “If any provision of this [agreement] shall be invalid or prohibited under [the law of the state where the applicable premises are located], such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions.”Certain courts, however, have refused to find such a violation of the TCCWNA when the consumer contract, notice or sign is <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2014cv06446/310478/24/" target="_blank" rel="noopener">only available within New Jersey</a>, or when the clause uses the alternative “to the extent permitted by law” phrasing, as discussed below.TCCWNA’s Potential Danger to Online CompaniesThe TCCWNA is potentially dangerous for companies operating online for at least three reasons.First, plaintiffs’ lawyers are pushing for an extremely broad application of the statute. They argue that the TCCWNA applies to almost every company providing consumer products online that are available to New Jersey residents, and to any “written consumer contract” and “written consumer warranty, notice or sign” made available to these residents—presumably encompassing nearly all material displayed or offered by a company online.Second, as noted above, the TCCWNA may expose companies located outside of New Jersey (but whose online websites can be accessed within the state) to claims stemming from any applicable “clearly established” federal or New Jersey state right or responsibility, effectively requiring companies based outside of New Jersey to develop expertise on all potentially applicable New Jersey laws (even if their website terms of use purport to be governed by another state’s laws and have been carefully drafted and reviewed by lawyers admitted to practice in such state).Think about it: If every state had a law similar to the TCCWNA, every e-tailer would need to have its online Terms of Use reviewed by as many as 50 different lawyers. The result would essentially be a full employment act for attorneys across the country.Third, the TCCWNA is potentially dangerous for companies because it provides an “aggrieved consumer” with the option to seek recovery of a civil penalty of not less than $100. This means the penalties in class actions—especially the penalties in class actions over online terms and conditions—could add up quickly. The text of the statute also allows for actual damages, reasonable attorneys’ fees and court costs in addition to the civil penalty, and further states that such remedies are cumulative and do not preclude recovery available under other laws.Some Guidance for Online Companies From Emerging TCCWNA Case LawBecause claims arguing that online terms and conditions violate the TCCWNA have been filed only recently, there is only sparse guidance from the courts on how online companies selling into New Jersey can protect against these lawsuits.Moreover, any such company, if it has not already done so, should promptly contact New Jersey counsel for advice on how to ensure its online terms and conditions are compliant with the TCCWNA.With those important caveats in mind, recent court decisions applying the TCCWNA do highlight some potential precautionary measures for website operators.For example, as a first line of defense, it may be prudent for companies to include, and seek to bolster the enforceability of, an arbitration provision and a related class action waiver clause in their online terms and conditions. As an example, <a href="http://caselaw.findlaw.com/nj-supreme-court/1678725.html" target="_blank" rel="noopener">in one TCCWNA case</a>, the Supreme Court of New Jersey indicated that an arbitration provision would have been enforceable if it had clearly and unambiguously notified the consumer that she was waiving her statutory right to seek relief in the court of law. While there is no prescribed wording for a valid arbitration provision, <a href="https://www.courtlistener.com/opinion/1545878/griffin-v-burlington-volkswagen/" target="_blank" rel="noopener">one New Jersey court</a> found the following arbitration notice to be acceptable:The parties to this agreement agree to arbitrate any claim, dispute, or controversy, including all statutory claims and any state or federal claims, that may arise out of or relating to the [subject matter of the agreement]. By agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes.As a second line of defense, it may be prudent for companies, working with New Jersey counsel, to review and potentially revise their online contracts, warranties and notices in light of TCCWNA cases to date. One approach suggested by existing TCCWNA case law is that businesses can avoid violating the TCCWNA’s prohibition on blanket “inapplicable in some jurisdictions” savings clauses by using different language in their savings clauses to achieve the same result. As noted above, the text of the TCCWNA prohibits savings clauses that state that certain terms “may be void, unenforceable or inapplicable in some jurisdictions” if such clauses do not identify which terms are or are not void, unenforceable or inapplicable in New Jersey. In <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/3:2015cv06098/323286/28/" target="_blank" rel="noopener">Kendall v. CubeSmart L.P.</a>, however, the United States District Court for the District of New Jersey found that companies could use savings clauses that “attempt…to conform to New Jersey law.” Citing several cases, it held that the phrases “to the extent permitted by law,” “in the manner permitted by applicable law,” “allowed by applicable law” and “or as otherwise permitted by applicable law” were acceptable in savings clauses under the TCCWNA.Even if companies adjust their savings clauses as suggested by TCCWNA case law, it may still be prudent to pay particular attention to any language in their online contracts, warranties and notices that may violate “clearly established” legal rights, with particular attention to language that:<ul><li>Waives a consumer’s right to recover attorneys’ fees or requires litigation costs to be split. Current TCCWNA case law indicates that companies should be careful of clauses that explicitly waive a consumer’s right to recover his or her attorneys’ fees, or state that “<a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2012cv00079/268859/25/" target="_blank" rel="noopener">[e]ach party shall pay the fees of its own attorneys</a>.”</li><li>Limits liability of the company for personal injuries or property damage. The enforceability of such limitations will vary based on the situation, including variance from industry to industry. For example, on one hand, <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2014cv06446/310478/24/" target="_blank" rel="noopener">a limitation of liability in a rental agreement for storage space</a>, which released the storage company from liability “for any personal injuries or property damage sustained by Customer and/or Customer’s guests while on” the company’s property, was found by a court to violate the TCCWNA because, under applicable New Jersey law, storage companies are under a duty to maintain their premises for consumers. On the other hand, a similar limitation of liability in a gym membership agreement was found by a court not to violate the TCCWNA because, the court reasoned, consumers are deemed to have assumed certain risks for personal injury on gym premises under New Jersey law.</li><li>Indemnifies the company against losses resulting from the company’s own negligence. <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/1:2014cv06446/310478/24/" target="_blank" rel="noopener">For example</a>, a rental agreement offered by a storage company that included consumer indemnification of the company for “any and all manner of claims for damages or lost property or personal injury” was found by a court to violate the TCCWNA.</li><li>Restricts claim limitation periods. <a href="http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/2:2013cv00929/285237/66/" target="_blank" rel="noopener">At least one court</a> has reasoned that the Federal Rules of Civil Procedure and New Jersey Court Rules dictate statutes of limitation on claims, from which companies cannot derogate, and therefore any attempt to shorten a consumer’s claim limitation period would violate the TCCWNA.</li><li>In addition to the above, current TCCWNA case law suggests that companies should present disclaimers and limitations of liability, in particular, conspicuously to consumers (e.g., use capital letters).</li></ul>The Spokeo, Inc. v. Robins Decision and Its Potential Impact on TCCWNA LitigationAlthough, as noted, the TCCWNA allows aggrieved consumers to elect a $100 civil remedy instead of their actual damages, the recent U.S. Supreme Court decision in <a href="https://supreme.justia.com/cases/federal/us/578/13-1339/" target="_blank" rel="noopener">Spokeo, Inc. v. Robins</a> may make it more difficult for plaintiffs to maintain TCCWNA class actions in federal court where concrete and particularized harm has not been established.The Spokeo case arose out of a claim by Robins that Spokeo, an operator of a “people search engine” that gathers and provides personal information about individuals to users, sold inaccurate information in violation of the Fair Credit Reporting Act. The U.S. Supreme Court held that standing to sue in federal court, even in the context of a statutory violation, requires proof of “concrete and particularized” harm inflicted on each individual plaintiff. It also held that “particularized” harm means “personal and individualized”—a relatively high threshold for class action plaintiffs claiming statutory violations. In fact, the First Circuit recently held in <a href="http://law.justia.com/cases/federal/appellate-courts/ca1/15-1446/15-1446-2016-05-23.html" target="_blank" rel="noopener">Hochendoner v. Genzyme Corp.</a> that plaintiffs did not satisfy the “particularized harm” requirement because the plaintiffs’ alleged injuries due to a shortage of a drug could not be linked to any specific plaintiff, and therefore the class actions were dismissed. At least one company has even submitted the Spokeo decision in support of its motion to dismiss in a case filed by a New Jersey consumer in federal court alleging that the company’s online terms and conditions were in violation of the TCCWNA.As it is too soon to definitively conclude how Spokeo will affect TCCWNA class actions, e-commerce companies will want to closely monitor TCCWNA developments, including any legislative initiatives that may result from recent <a href="http://legalnewsline.com/stories/510723798-new-jersey-civil-justice-institute-concerned-about-consumer-lawsuit-spike" target="_blank" rel="noopener">lobbying efforts</a>. In the meantime, companies would be well advised to review their online terms and conditions carefully with qualified counsel—indeed, the sharp increase in TCCWNA cases presents an opportunity for all website operators and mobile app developers to take a look at their terms and conditions and make sure that they are up to date.

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Controversial New Jersey Consumer Protection Law Creates a Potential “Gotcha” for E-Commerce Companies

Controversial New Jersey Consumer Protection Law Creates a Potential “Gotcha” for E-Commerce Companies

If your company is involved in selling products or services to consumers in New Jersey over the web or through mobile apps, you’ll want to read this blog post. 