Judicial Notice, Screenshot Evidence and On-line “Browsewrap” Contractual Arbitration Clauses – A Case Note

Judicial notice serves the salutary purpose of saving litigation time and expense.  It applies in situations where one party wants to establish a fact that’s not subject to reasonable dispute (e.g. Sacramento is the capital of California, for instance).  Judicial notice’s effect is that the party doesn’t have to endure the time and expense of calling a witness to testify or to marshal cumbersome documents to prove the generally known fact.

The rule is codified at Federal Rule of Evidence (and Illinois Rule of Evidence) 201.  Van Tassell v. United Marketing Group, LLC, 795 F.Supp.2d 770 (N.D.Ill. 2011) is a fairly recent case application of judicial notice in the context of a class action consumer fraud action versus various on-line vendors for unapproved credit card charges.

In addition to its clear judicial notice illustration, the case also has value for its discussion of the key factors governing on-line contracts that contain hard-to-find alternative dispute provisions.

Here’s some key judicial notice points, gleaned from the case (and others like it):

Under FRE 201, a court may take judicial notice of an adjudicative fact that is not subject to reasonable dispute;

– An adjudicative fact is one that applies specifically to the parties in a specific case (as opposed to “legislative facts” which involve more general facts that could apply across the board to any situation);

– A fact is not subject to reasonable dispute where (1) it is generally known within the territorial jurisdiction of the trial court; or (2) is capable of accurate and ready determination by resort to sources whose accuracy can’t reasonably be questioned.

One of the on-line vendor defendants moved to dismiss the complaint and attached screenshots of on-line enrollment forms, which contained pro-merchant disclaimer language.  The defendant asked the court to take judicial notice of the enrollment pages since they were printed off the Internet.

But the court refused to take judicial notice of the Web pages.  In their response to the motion, the plaintiffs filed affidavits stating they never viewed the enrollment pages.  They (the plaintiffs) also didn’t refer to the enrollment pages in their Complaint.  As a result, the Web enrollment pages weren’t properly before the court on a motion to dismiss since on a Rule 12(b)(6) motion, a court typically only considers the face of a complaint and any documents “central” to a complaint.

Next, the court addressed whether the various on-line contract’s arbitration provisions were enforceable against the consumer plaintiffs on an on-line merchant defendant’s motion to compel arbitration.

Cyberspace contracts don’t change the elemental rules of contract formation: a contract requires a meeting of the minds and a manifestation of mutual assent.  Two common Internet contracts are clickwrap agreements and browsewrap agreements.  In the former, the webpage user must take affirmative steps to accept on-line contract terms; usually by clicking “accept” or checking an “I agree” box.  With a browsewrap contract, though, no action needs to be taken to “accept” the on-line vendor’s contract terms.  Using the site equates to accepting the terms.

The contract here involved a browsewrap contract and so was subjected to closer court scrutiny.  Since the arbitration provision was couched in the site’s “Conditions of Use” section which could only be accessed via a multi-step process, the court found the provision wasn’t prominent enough to be enforced.  As a result, the court denied the merchant’s motion to compel arbitration.  (pp. 779-780, 789-791).

Take-aways:

1/ The case provides an interesting applications of judicial notice to computerized context.  While this court didn’t take judicial notice, I’ve found it to be an economical time-saving device as it eliminates the need to go through the cumbersome exercise of gathering evidence on issues for which there’s really no room for debate;

2/ Arbitration provisions buried in a maze of fine print or that can only be located through a tedious, multi-step process won’t be enforced;

3/ Browsewrap contracts that result in a user’s passive acceptance of contract terms are more stringently construed by a court than is a clickwrap contract.

Moving for Default Judgment In Federal Court – Plausible Claims and Damage Calculations (A Brief Case Note)

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(photo credit: sociallyclean.com (via Google Images – 5.15.15)

Malibu Media, LLC v. Funderburg, 2015 WL 1887754 (N.D.Ill. 2015) discusses the governing standards for obtaining a default judgment in Federal court in a decidedly post-modern fact context.  The plaintiff adult film producer sued the defendant for copyright infringement based on the viewer defendant’s unauthorized movie downloads.

Defendant orchestrated hundreds of movie downloads over a span of about three months through the BitTorrent file sharing system.  BitTorrent basically allows a user to download component parts or “bits” of a file, send them to others (“peers”) who then splice the bits together to make a cohesive whole file. When Defendant failed to respond to the Complaint, the plaintiff sought a default judgment of $27,000 – triple the sum of minimum statutory damages under the Copyright Act.  See 17 U.S.C. s. 504.

The court granted the motion for default but only awarded a fraction of the damages sought.  In doing so, the court stated the operative Federal court default rules:

Federal Rule of Civil Procedure 55 allows a court to enter a default judgment where a defendant fails to plead or otherwise defend a suit;

– On a default motion, the court takes as true, all well-pled allegations as to liability;

– A default judgment establishes as a matter of law that a defendant is liable for each of a plaintiff’s claims;

– A plaintiff seeking default judgment, must show a “plausible” claim;

If plaintiff’s damages are easily calculable, he can usually get a money judgment based on an affidavit alone;

– A default judgment can enter against a minor or incompetent person only if represented by a guardian, conservator or other fiduciary;

– Since minors frequently use the internet for downloading movies, a plaintiff usually must do more than offer blanket assurances that the defendant isn’t a minor.

(**1-3).

Here, plaintiff stated a plausible copyright claim: (1) that it owned the copyright in the 12 movies in question; and (2) that defendant infringed the copyright.  Courts distinguish between Internet subscribers and infringers: just because someone is an account holder of a given IP address doesn’t mean the account holder is the one downloading files.

Here, though, the court noted that defendant was connected to the infringing IP address and that there were hundreds of file downloads over a short period of time.  Considered with plaintiff’s unchallenged complaint allegations, the court found that the defendant, an adult, was the proper defendant.

The Court reduced plaintiff’s damage claim.  Under the Copyright Act, an infringer is subject to statutory damages raising from $750 to $30,000 for any single infringed work.  17 U.S.C. s. 504(c).  Here, the court found that while the plaintiff probably wasn’t a “non-producing troll” (someone who enforces copyrights just to extort money from people who are too embarrassed to fight a Federal porn suit), the court still found that a damage award that was three times the statutory floor was excessive.

The court ultimately awarded damages of $9,000 – $750 for each (all 12) movie that was downloaded in addition to attorneys’ fees of over $2,000.

Take-away:

This case provides a good summary of basic requirements for obtaining default judgments in Federal court.  In a default case where a statute provides a range of damages, a default-seeking plaintiff will likely need to show intentional conduct to get damages that eclipse the statutory minimum;

While being tied to a specific IP address, alone, isn’t enough to definitively identify a defendant, it will go a long way in doing so; especially if there is other evidence connecting a defendant to a given address and the IP account holder doesn’t put up a fight (as was the case here).

Pleading Fraud ‘On Information And Belief’ Fails Rule 9 Specificity Test

In Deschepper v. Midwest Wine and Spirits,2015 WL 1433230, the Northern District considered the necessary pleading allegations for claims based on the Illinois Wage Payment and Collection Act (“IWPCA”), common law fraud and successor liability in an employment dispute involving former salespersons of a liquor wholesaler.  The employer (and their principals) defendants moved to dismiss under FRCP 12(b)(6).  The court granted in part and denied in part the motion.

The Illinois Wage Payment and Collection Act Claim

Upholding the IWPCA claim, the Court held that to state a claim under the IWPCA, a plaintiff “must plead that wages or final compensation is due to him or her as an employee from an employer under an employment contract or agreement.” 820 ILCS § 115/5.  An employment contract or agreement under the IWPCA doesn’t have to be formal or even written.  Instead, employers and employees can manifest their assent to employment terms by conduct alone.

Here, while there wasn’t a formal written employment contract, the Court still sustained the IWPCA count since the plaintiffs alleged that they had a hybrid salary-plus-commissions arrangement.  This was enough to survive dismissal of the IWPCA claim.

Successor Liability

A plaintiff suing under a Federal statute (like the Fair Labor Standards Act here) can sue on a successor liability theory where (1) the successor had notice of the plaintiff’s claim prior to the acquisition; and (2) there was substantial continuity in the operation of the business before and after the sale/acquisition.

The plaintiffs stated sufficient factual allegations to support a successor liability claim against a corporate entity plaintiff said was formed for the purpose of continuing the employer defendant’s business while avoiding that first employer’s Federal overtime payments to employees obligations.

Fraud

Plaintiffs fraud claims failed because they pled the facts “on information and belief.”  Alleging fraud on information and belief is insufficient to state a fraud claim unless (1) the facts constituting the fraud are not accessible to the plaintiff and (2) the plaintiff provides the grounds for his suspicions.

The court found that the plaintiffs’ shotgun pleading, and generalized assertions of fraud weren’t specific enough to place the court and the defendants on notice of the alleged factual basis for the claimed fraud. As a result, the Complaint didn’t satisfy FRCP 9(b)’s  particularity requirement for alleging fraud.

The fraud claim was also deficient since plaintiffs didn’t allege that the underlying fraud facts weren’t accessible to them and also failed to plead the factual bases for their suspicions that defendants were setting up various business entities to evade paying overtime to the plaintiffs.

Afterwords:

– An actionable IWPCA claim doesn’t require a formal written agreement.  All that’s required is the employer and employee manifest assent to payment terms through their conduct;

– Fraud pleading must rise above notice pleading under FRCP 9(b).  Absent specific factual assertions to support the fraud, the claim will likely be dismissed;

– Successor liability applies where defendant forms an entity that is arguably set up to avoid predecessor corporate obligations.