REVIEW OF COURT DECISIONS - Dispute Resolution Journal - Vol. 55, No. 3
Originally from Dispute Resolution Journal
A district court in Illinois held that an electronic agreement containing an arbitration clause satisfied the “writing” requirement for an enforceable arbitration agreement under the Federal Arbitration Act.
Users of Realnetworks, Inc.’s internet site download certain software after accepting the terms of a license agreement appearing on their computer screen. This agreement calls for the application of Washington law and for disputes to be submitted to arbitration in the state of Washington. In an earlier decision the court granted Realnetworks’ motion to stay the plaintiffs’ class action and compelled arbitration. In this case, the court rejected an intervener’s contention that the arbitration clause was unenforceable because, inter alia, it did not constitute an agreement in writing.
The court noted that dictionary definitions of the term “written” do not exclude representations of language on other media and that electronic communications can be letters or characters that record or communicate ideas and can represent words and letters as well as form the conveyance of meaning. This led the court to conclude that “the word ‘written’ does not exclude all electronic communications,” but it did not hold that all electronic agreements are written.
Next, the court found that because the electronic contract at issue was easily printable and storable, it satisfied the requirement of a written agreement for purposes of the FAA. The fact that Realnetworks did not provide a “print” and “save” button on the pop-up license agreement window did not alter its conclusion because there were other ways to print the agreement. The court observed that recent Congressional discussions about electronic communications did not evidence Congressional intent in 1925 to exclude electronic communications from the FAA.
The plaintiffs argued that 9th Circuit decisional law applied, not 7th Circuit case law, relying on the provision consenting “to jurisdiction in the state and federal courts in Washington.” But the court found this was a forum-selection clause, not an express choice-of-law clause designating 9th Circuit decisional law.
Plaintiffs argued the arbitration clause was procedurally unconscionable because it was buried in the license agreement and substantively unconscionable because it designated a distant forum. And did not allow class arbitration the court found that the arbitration clause was not buried in the license agreement since it was in the same size font as the rest of the contract and was in an attention-getting spot at the end of the agreement. Moreover, the user could scroll through the license agreement all day and thus had a reasonable opportunity to understand the arbitration clause.
The court held that the distant forum, lack of class arbitration and the potential arbitration costs did not render the clause substantively unconscionable.
In re Realnetworks, Inc. Privacy Litigation, No. 00 C1366 2000 WL 631341 (N.D. Ill.)