The alleged VPPA violation arose out of Blockbuster’s participation in Facebook’s Beacon behavioral advertising initiative. This program allowed companies partnered with Facebook to advertise by posting notices in Facebook users’ “news feeds” when the applicable Facebook user took an action, such as making a purchase, playing a game or posting a product review on a third-party website that participated in Facebook’s Beacon program. When initially launched, Facebook users had the right to opt-out of Beacon, but, in response to consumer complaints, Facebook later changed Beacon from an opt-out to an opt-in system. Apparently, Harris did not wish for her video rental data to be broadcast to her Facebook friends, and brought an action, seeking $2,500 per VPPA violation for herself and for a class of similarly situated individuals.
Court Determines Unilateral Right to Modify Terms is Problematic
Blockbuster’s user agreement that was in effect at the time was displayed as a “clickwrap” style agreement. Significant to the issue at hand, the agreement included clauses providing for binding arbitration and a waiver of any class action litigation against Blockbuster. Blockbuster filed a motion to compel arbitration based on the arbitration clause in its terms of service. Denying the motion, Judge Barbara M.G. Lynn ruled the arbitration provision of the terms of service an unenforceable illusory contract because Blockbuster had reserved to itself the right to change the terms at any time. On this issue of modification, the Blockbuster agreement provided:
In reaching its decision, the Harris court followed closely the recent decision of Morrison v. Amway Corp., 517 F.3d 248 (2008). In Morrison, the U.S. Court of Appeals for the Fifth Circuit held that the arbitration provision of Amway’s contract with its distributors was illusory because Amway reserved to itself the right to unilaterally modify all aspects of its deal with the distributors by publishing notice of the changes. It was important to the Morrison court that the Amway contract did not include language precluding retroactive modification of the arbitration provision with respect to disputes that arose prior to the date of modification.
The court found the Morrison reasoning to be convincing and concluded that the Blockbuster provision was illusory for the same reason it was in Morrison. The court contended that “other than providing that such changes will not take effect until posted on the website,” there is nothing in the Blockbuster agreement that would prevent Blockbuster from unilaterally changing any part of the contract. The court also seemed to be concerned that changes made to the arbitration clause in the user agreement may not only be prospective in nature. The court concluded that the limitation that the changes would not come into effect until posted online was not enough to save the arbitration clause. Because the court concluded that the agreement was illusory and thus unenforceable, it did not address the plaintiff’s argument that the arbitration clause was also unconscionable.