In recent weeks, class action plaintiffs have brought a new tranche of lawsuits challenging companies’ online terms and conditions. In them, plaintiffs allege that the terms violate California’s law prohibiting contracts for the sale or lease of consumer goods or services from including any provision waiving the consumer’s right to make any statement regarding the seller or its goods or services.
The statute, California Civil Code 1670.8, states that it is unlawful to “threaten or to seek to enforce a provision made unlawful under this section, or to otherwise penalize a consumer for making any statement protected under this section.”
California’s law is not new and is similar in many respects to the federal Consumer Review Fairness Act (CRFA). The CRFA prohibits including certain provisions in form contracts in the course of selling or leasing goods or services, including provisions that prohibit or restrict an individual’s right to publish a review or make other statements about the goods, services, or conduct of a seller. The CRFA is enforced by the Federal Trade Commission and does not include a private right of action.
By contrast, California law provides for lawsuits brought by consumers (or by the California attorney general and district attorneys) and allows for civil penalties up to $2,500 for the first violation and $5,000 for the second and for each subsequent violation.
Thus, these plaintiffs have alleged that seemingly harmless statements in terms and conditions violate the law, such as Zillow’s terms, which allegedly prohibit users from “[using] the Services in any way that harms the Zillow Companies, its service providers, suppliers [or] affiliates.” Zillow’s terms also allegedly require users to “agree to not . . . post, reproduce, publicly display, or otherwise make accessible any content, which we [Zillow], in our sole judgment and discretion, consider. . . offensive or objectionable including without limitation content that . . . disparages any individual.”
The cases are reminiscent of a wave of lawsuits brought years ago under the New Jersey Truth in Consumer Contract and Warranty Act, which prohibits a seller from offering or entering consumer contracts that contain any term that violates a “clearly established” New Jersey or federal law. After years of litigation, the New Jersey Supreme Court ultimately took the wind out of plaintiffs’ sails by ruling that only consumers who allege that they suffered actual harm from an allegedly unlawful provision in a contract or notice could maintain a lawsuit under the statute.
It is unclear whether California courts will take a similar position, for example, that a plaintiff must allege that a company sought to enforce the allegedly unlawful provision. In the meantime, given the uncertainty, it would be a good time to reevaluate your terms and conditions to reduce the risk of a challenge under California law.