Second Life Arbitration Clause Unenforceable

NewYorkCountryLawyer writes "In a decision that could have far-reaching implications, a federal court in Pennsylvania has held that the California arbitration clause in the 'take it or leave it' clickwrap agreement on the Second Life website is unconscionable, and therefore unenforceable. In its decision (pdf) in Bragg v. Linden Research, Inc., No. 06-4925 (E.D. Pa. May 30, 2007), the Court concluded that the Second Life 'terms of service' seek to impose a one-sided dispute resolution scheme that tilts unfairly, 'in almost all situations,' in Second Life's favor. As a result, the case will stay in Pennsylvania federal court, instead of being transferred to an arbitration forum in California."

Comments

Re:Precedent?

[nomadic]

Persuasive authority is a lot more useful than most people realize, especially federal court decisions.

Re:this seemed to be the important one for most ga

[Liberaltarian]

Sadly, no! The most that will happen, save it reaching the Supreme Court, is that the decision will apply to the users/companies in the 3rd Circuit court's jurisdiction alone.

A majority of Federal courts have ruled that shrinkwrap licenses are in general unenforceable, though a minority have affirmed that it is indeed a legally-binding document.

However, we're dealing with what's called a "clickwrap" license, which hasn't nearly the legal history that shrinkwrap licenses have. This decision, if upheld (I guarantee it's going to be appealed), is certainly an important early move in the right direction.

The difference doesn't matter

[rewt66]

IANAL.

But the judge didn't rule it unenforceable because there was no law stating that clickwrap agreements were valid. He ruled that the terms were so one-sided that it was "unconscionable" (horribly one-sided), and therefore invalid. If the same terms were in a shrinkwrap license, or even a signed contract, the same terms would have had the same problem.

The statement that it doesn't apply everywhere until upheld by the Supreme Court is, however, quite correct.

Re:Precedent?

[NewYorkCountryLawyer]

You are absolutely correct, nomadic. Those who say it's not a precedent do not understand how the common law system works.

Judges are looking for reasoning that helps them to resolve the case that is before them. When they find that another judge has thought these issues through carefully, and has fashioned an eminently sensible and just conclusion, they will usually go for it.

Of course it's easier for a judge if there's an appellate decision from his circuit telling him what he must do, but many, perhaps, most, litigated issues don't have the benefit of that kind of binding 'precedent'.... otherwise the issue would not even be in litigation. The lawyers would have read the binding precedent and followed it rather than frivolously ignore it.