Mazur v. eBay Inc., 2008 WL 618988, 2008 US Dist. LEXIS 16561 (N.D. Cal. Mar. 4, 2008).
Factual Background Edit
Co-defendants, eBay and HJA, are involved in online auction services that allows eBay users to place bids on HJA’s live auctions and compete with floor bidders. If an eBay users wishes to bid on one of HJA’s auctions, it is automatically presented with a copy of HJA’s Terms and Conditions, which must be accepted prior to placing their bid. In addition to the auction house's Terms, each eBay user must agree to and accept eBay’s Terms and Conditions and eBay’s Live Auction user Agreement as a prerequisite to using the service.
HJA’s Terms and Conditions state, “the parties agree and acknowledge that they are completely waiving their rights to have the dispute heard in a conventional manner including the use of attorneys, arbitration, mediation and any civil court in California having jurisdiction over the dispute.” Further, the Terms state that the decision made by In-House Attorneys, P.C., the “judge” in any dispute arising from the Terms, will be binding on the parties.
Trial Court Proceedings Edit
Plaintiff, Michele Mazur, is an eBay user. On August 2, 2007, plaintiff brought suit, alleging that eBay and HJA were involved in shill bidding, the practice of entering fake bid with the intent to inflate the price of the item being auctioned off. At the time of the suit, Mazur had agreed and accepted all the necessary Terms and Agreements that were required to use the service.
The plaintiff, on behalf of all people similarly situated, claims that HJA made misrepresentations regarding the nature of its auction service and that eBay falsely claimed the live auctions were safe and involved carefully screen reputable auction houses.
eBay filed a motion to dismiss all claims that alleged [[misrepresentation]s pertaining to its Live Auction service.
The court determined that HJA Terms and Conditions involving dispute resolution were unconscionable, thus allowing the plaintiff to bring a class action suit under the circumstances. In arriving at this decision, the district court looked at whether the provision in question was both procedurally and substantively unconscionable.
In determining procedural unconscionability, the court looked at two factors. First was the terms of the contract were oppressive and second, whether there was an element of unfair surprise. The court found that the terms were “unquestionably oppressive” since the plaintiff lacked the opportunity to negotiate any of the provisions of the contract. In addition, the court found that the terms amounted to an unfair surprise since the format in which the Terms were presented only allowed for a few single-spaced lines of block text to be visible at a time. Further, the Terms were not broken up into paragraphs, sections, or headings that would aid in the comprehension of the Terms. Since both oppression and surprise was present, the court determined that the Terms were procedurally unconscionable.
The court's substantive unconscionability analysis focused on whether the terms led to overly-harsh, one-sided results. The court found that HJA’s reliance on decision maker, In-House Attorneys, a law firm specializing in corporate clients, in addition to the inability of either party to utilize witnesses adversely affected the plaintiff since they have the burden of proof. The lopsided adverse consequences of the clause led the court to find a high degree of substantive unconscionability. Since both procedural and substantive unconscionability were present, the court determined that the arbitration provision was invalid and that the plaintiff could proceed with a class action suit.
In reviewing eBay’s motion to dismiss allegations that the company misrepresented Live Auctions in order to intentionally attract and defraud customers, the court granted the motion in part and dismissed the motion in part.
The court denied the defendant's motion to dismiss the plaintiff’s allegations that eBay made material misrepresentations in regard to its Live Auction Service. The court reasoned that eBay’s Live Auction User Agreement, which acts to absolve liability by stating that “[eBay] does not have control over the quality, safety or legality of the items advertised” with auction houses, does not undermine eBay’s representations that all live auctions are safe. Therefore, the Agreements release of liability is inapplicable since the plaintiff’s claim is an independent dispute with eBay based on misrepresentations pertaining to the Live Auction service, not third-party auction houses.
The court granted the motion to dismiss plaintiff's claim alleging “eBay knew or should have known about the sellers’ illegal conduct [and] failed to prevent it by withdrawing or altering the fraudulent content.” In reaching this conclusion, the district court determined that eBay’s representation that the company “carefully screen[ed] reputable” auction house amounted to opinion (since the words “carefully” and “reputable” were used) and therefore, is not actionable.
In addition, the court also granted the motion to dismiss plaintiff’s claim that sought to hold the defendant liable for failing to verify the accuracy of the listings, thus failing to perform its duties as publisher of the auction. The district court concluded that eBay did not make assurance of accuracy or promise to remove unauthorized auctioneers, rather they promised to prove “safe” Live Auctions.