Hines v. Overstock.com

Citation: Hines v. Overstock.com, Inc., No. 09 CV 991 (E.D.N.Y. Sept. 8, 2009).

Factual Background
Plaintiff returned a vacuum purchased from defendant’s “closeout” retail website and received a full refund, minus a $30.00 restocking fee. According to the defendant, users of its site agree to this restocking fee, as well as an arbitration clause and forum selection clause when they access the site. According to the plaintiff, however, the only link to these terms was found at the bottom of the pages of the website, and it was not necessary for her to scroll to the bottom of any page she visited to complete her transaction.

Plaintiff Hines initiated a class action lawsuit against defendant Overstock.com alleging that defendant’s “restocking fee” amounted to a breach of contract, fraud, and a violation of New York General Business Law sections 349 and 350. Overstock.com made a motion to dismiss or stay for arbitration, or alternatively to transfer venue based on provisions found in the website's terms of use.

Trial Court Proceedings
The court concluded that the defendant had not carried its burden of demonstrating that plaintiff either had notice of the Terms and Conditions of the website, or that a reasonable user of the site would have. Nothing on the page directed plaintiff to review the applicable terms and she was not required to acknowledge that she had read them or was even aware of their existence at the time her purchase was confirmed. While it was undisputed that defendant’s Terms and Conditions contained a forum selection clause requiring any action to be brought in Utah, the court found this provision to be as unenforceable as the one requiring arbitration. Just like arbitration clauses, forum selection clauses require notice to be binding and as discussed above, there was no notice of any terms contained on the Overstock.com website.

As a result the court denied Overstock.com’s motion.