Pichey v. Ameritech Interactive

Citation: Pichey v. Ameritech Interactive Media Servs., Inc., 421 F.Supp.2d 1038 (W.D. Mich. 2006).

Factual Background
In January 1998, Plaintiffs Robert and Patricia Pichey created Victorian Gallery, a furniture retailer. Victorian Gallery did a small amount of local business, but intended that most of their sales would be generated through Internet advertising and Internet contact. Plaintiffs spoke several times with Shawn McCracken, a representative of Defendants Ameritech Interactive Media Services, (“AIMS”) and Ameritech Interactive Media, Inc. (“AIM”). On or about February 19, 1998, Victorian Gallery entered into a series of agreements with AIMS and AIM for the design, registration and hosting of an Internet web site. A total of three agreements were signed, two with AIMS and one with AIM. One contract with AIMS was for the domain name registration fee, at a cost of $250, for which “Victorian Gallery was to receive $150 credit toward the price of the custom web site development.” The second contract with AIMS was for a text advertisement of the website. The contract stated that the cost for the services was included at no extra charge in the cost of the custom site design purchased in Contract No. 000033. The third contract was with AIM, and stated that AIM would provide a custom web site. In the special instructions, the AIM agreement referenced both of the AIMS contract numbers and showed a total charge of $1,350 for the AIM services, which reflected the $150 credit. All three contracts included limited liability clauses “barred liability over the amount of the contract. “

Plaintiffs claimed all information they received from AIMS and AIM showed no difference between the two entities and Plaintiff believed that they were contracting with one single company, “Ameritech.” Plaintiffs also alleged that in late 1999, they were contacted by their wholesale supplier. The supplier was concerned about the lack of Internet sales by Victorian Gallery. The Supplier also noted that it had been unable to locate the Victorian Gallery web page, despite searching on major Internet search engines.

On or about April 20, 2000, Patricia Pichey had a telephone conversation with Monica Watson of AIM. Watson purportedly admitted that the Victorian Gallery web site had never been registered with the major search engines. In a memorandum memorializing the conversation, Watson agreed that certain changes would be made to the web site, including the addition of a map, and that five specific site-related keywords would be submitted to five major Internet search engines. In addition, on May 3, 2000, Watson confirmed that, pursuant to her conversation with Patricia Pichey, the hosting account for “victoriangallery.com” would be extended for 18 months, or until November 1, 2001.

Despite this conversation, Plaintiffs assert that neither AIMS nor AIM registered the Victorian Gallery web site with any major Internet search engine. As a consequence of the failure to register, Plaintiffs allege damages exceeding $3,000,000 in the form of lost opportunity and exposure, out-of-pocket expenses, and lost profits.

Trial Court Proceedings
On motion for Summary Judgment, both Defendants argued that the relevant language of the limited liability clause barred Plaintiffs claim for expectation damages. Plaintiffs argued that the clause was both procedurally and substantively unconscionable.

The court entered summary judgment in favor of Defendants reasoning that the Limited Liability Clause and the damages allowed by the contract were sufficient to render the contract binding and fair.