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To avoid class actions, start treating your website legal terms like real contracts.

Jul 14, 2016 1:33:50 PM

Your online business is humming along, people are signing-up and buying stuff online, all while you assume that the business is protected by the legal terms and conditions that you are (ideally) presenting via some clickwrap agreement.  Then POOF you get sued -- and not just any lawsuit -- but a dreaded class action lawsuit! You think "no problem, our terms and conditions have a class action waiver that requires arbitration."

Easy right?

WRONG!

Once again, the lack of any real record keeping practices has rendered a clickwrap agreement useless and allowed a class action to proceed.

In Bazemore v. Jefferson Capital Systems, LLC, Jefferson tried to prove the existence of a class action waiver by presenting a declaration of an employee:

The only evidence is a declaration of Gregory Ryan, an individual employed at the time Ms. Bazemore applied for her credit card by Atlanticus Services Corporation ("Atlanticus"), which maintained records for such credit cards on behalf of FBD. And while he stated in conclusory terms that Ms. Bazemore "accepted the terms governing her account and opened the account" on or about November 18, 2005, he did not assert that he has any personal knowledge on that score or produce any documents to support that assertion. And those failures are quite important.

Ok, so this is a pretty standard procedure.  Ignore for a minute how ridiculous it is to expend time and money creating a declaration that is intended to do the same thing as just providing a copy of a signed contract, this declaration didn't even attach any supporting documents.  What do you think...was the judge convinced?  

But there is no evidence of such an electronic exchange between Ms. Bazemore and either FBD or Atlanticus. In other words, there is no evidence that the Internet web page or pages that Ms. Bazemore viewed, or upon which she applied for her Imagine MasterCard, displayed or referred to any terms or conditions of the credit card she sought, much less that she was required to consent to any such terms in order to obtain her credit card.

That doesn't sound good.  No evidence?  You mean its expected that a company actually provide documentary evidence that a certain set of legal terms were presented and accepted on a certain date by a certain person?  Mr Ryan can't just swear under oath that she checked the box and accepted legal terms with, including an arbitration provision?

First, he states that he "was able to ascertain that Plaintiff had applied for the [credit card] over the internet" and that plaintiff "accepted the terms governing her account." But Mr. Ryan does not explain how he knows this, nor does he substantiate the claim with documentary proof. More fundamentally, there is no indication what "the terms governing her account" were, and there is no evidence concerning what, if any, clickwrap agreement appeared on plaintiff's computer screen when she applied for her credit card. 

Predictably, the judge here refused to accept Mr. Ryan's declaration as proof that any sort of legal agreement was created, and therefore Jefferson Capital Systems was unable to avail itself of the class action waiver / binding arbitration provision. That means, at a minimum, Jefferson is now faced with spending lots of cash fighting a class action, something that may have been avoided had they simply implemented a good record keeping system for their clickwrap agreements!  

With accurate, simple to produce records, clickwrap agreements should be as easy to enforce as a contract signed in ink and stored away.  Take a look around our blog for lots of posts containing tips and best practices in this area.  

But seriously, if you want your clickwrap agreements to mean anything...you need to treat them like real contracts!  If your customer signs your contract with ink or an electronic signature, don't you keep a copy of it?  Surely you don't just toss it in the trash and hope you can remember what it said!  Not keeping good digital records of acceptance, not employing solid version control for those agreements, and not time-stamping everything is like taking your clickwrap agreements and tossing them into a virtual garbage can.  And as more and more businesses are learning, the results can be disastrous.  

Brian Powers

Written by Brian Powers

PactSafe CEO & Founder