Waters v. Earthlink

Citation: Waters v. Earthlink, Inc., 2006 WL 1843583 (Mass. Super. June 19, 2006).

Factual Background
In 1998 Mr. West Waters of Wellfleet, Mass. contracted for Internet services with Cape Internet, a local ISP. “For a monthly fee the plaintiff received internet access, email, and web hosting. He used the web hosting services to support a website for his business, Codder’s House of Furniture.” The parties did not sign a written contract; but Cape Internet’s user agreements were posted on its internet site. Waters claims that “his agreement with Cape Internet provided ‘unlimited Internet access.’”

In September 1999 OneMain.Com bought Cape Internet with its 18,000 customers. In the spring of 2000, OneMain “removed Cape Internet user agreements from the web and in their place posted a copy of the OneMain Agreement which included a Warranty Disclaimer and said that services were provided ‘as is.’ ” In September 2000 Earthlink acquired OneMain.com.


 * Neither OneMain nor Earthlink required the plaintiff [Waters] to sign an agreement. Neither OneMain nor Earthlink utilized a “click-wrap” or “browse-wrap” agreement, with which a user would have to indicate his assent to the contract before proceeding. At all times, the plaintiff paid a flat monthly fee in exchange for email and web hosting services.

In October, Earthlink integrated the former Cape Internet accounts (including Mr. Waters’) into its own system creating numerous problems, such as changing 2,000 customers’ passwords, and another 2,000 customers’ user IDs, and opening up the Cape Internet accounts to


 * a high volume of spam. Earthlink was not able to control the spam problem in late 2000 and early 2001. Customers endured eight months of impairment of their e-mail services. On May 2, 2001, Earthlink sent a memorandum to former Cape Internet web hosting customers giving them five weeks notice that their service would be terminated. Customers could download their former Cape Internet web page and upload that information onto an Earthlink server. The plaintiff claims that he was unable to access the content in order to upload it onto an Earthlink server. The plaintiff’s futon sales dropped 46% in 2001, a drop which he attributes to the difficulties he encountered with his web page.

Trial Court Decision
On August 1, 2001, Waters filed a class action in the Superior Court of Barnstable County, Massachusetts (commonly named Cape Cod) against OneMain and Earthlink for breach of contract and violation of Mass. General Laws, Chapter 91A (the Massachusetts version of Section 5(a)(1) of the Federal Trade Commission Act, prohibiting “unfair or deceptive acts or practices.” On November 5, 2001, defendants removed the action to the Federal District Court of the basis of diversity jurisdiction, and then moved to dismiss the case or stay it pending arbitration, claiming that the contract between them and Waters included an arbitration agreement. On March 23, 2002 the District Court Judge Keeton denied the order without prejudice, permitting discovery to proceed because defendants had not established that Waters had agreed to any arbitration.

Appellate Court Decision
Defendants appealed, arguing that Judge Keeton was wrong in “(1) concluding they had not established the existence of a binding [[arbitration agreement|agreement to arbitrate] between themselves and plaintiff and (2) ordering unlimited discovery.” The First Circuit, in an unpublished per curiam opinion, affirmed Judge Keeton’s orders.

The Circuit Court opinion states:


 * Even assuming we have jurisdiction to address it (an issue ignored by the parties), defendant’s second argument was not made with specific specificity in the district court to preserve it for appellate review. . ..

Turning to Judge Keeton’s conclusion that plaintiffs did not establish a binding arbitration agreement, the court notes that plaintiffs “submitted a copy of a OneMain license and service agreement that contains an arbitration agreement which purports to bind its customers, and an affidavit stating that links to the agreement were placed on the website of both the ISP with whom plaintiff had contracted and OneMain’s own website.”

However, the court continues:


 * Conspicuously absent, however, is any convincing explanation why we should conclude that plaintiff should have seen these links. Nor is there other compelling evidence that plaintiff was, of should have been, on notice that he was bound to arbitrate any dispute he might have with OneMain. Were OneMain customers only able to access the internet through these websites? How prominently were the links displayed? How were they labeled or explained? None of these potentially relevant issues is answered by the record. And absent a showing that it is reasonable to assume that plaintiff would have seen the links, we are at a loss to see how he could be found to have agreed to arbitrate any disputes with defendants.

The Circuit Court continues, expressing “serious doubts” that the case meets the amount-in-controversy requirements of $75,000:


 * [W]e do not presently see how plaintiff’s actual damages, even if multiplied under ch. 93A, could approach such a figure. After all, the amount in controversy must be satisfied independent of other plaintiff’s claims or any attorneys’ fees to which the class may be statutorily entitled.

Trial Court Proceedings on Remand
While the case was pending in the federal courts, the parties were also involved with discovery. On July 9, 2004, in a reverse twist, plaintiff Waters moved for class certification. However, Judge Keeton had retired without ruling on this issue. On June 17, 2005, Chief Judge Young of the federal district court remanded the case to the Barnstable Superior Court.

On October 27, 2005, Waters, still trying to show this litigation should be a class action, moved for certification of the class. Earthlink and OneMain.com opposed, “contending, inter alia, that (1) plaintiff’s claims are atypical, (2) individual issues predominate over common legal and factual issues, and (3) a class action would not be superior to other adjudicative methods.” Superior Court Justice Kane listened to the arguments on December 20th and rendered his initial decision on January 24, 2006, 2006 WL 696468 (Mass. Super. Jan. 24, 2006). stating that he had studied the copious filing and determined that


 * Despite the age of the action, there exists a need for further focused submissions on questions that may determine whether the Court holds an evidentiary hearing or takes alternative proof through the more economical procedure on the issues of typicality, predominance and numerosity.

As to “typicality,” Judge Kane noted that the federal and state courts have different standards. The Massachusetts standard is “(1) whether the claims and legal theories. . . are sufficiently related; and (2) whether there is a link among the defendants sufficient to permit the class action to proceed against all defendants.” He determined this challenge to be “without merit.”

As to the link among plaintiffs, known as “predominance,” Judge Kane notes that


 * Although Waters describes systemic failures in e-mail access and web hosting access that present common factual and legal issues, his proof raises the issue of whether individualized problems present the potential for a myriad of individualized determinations of whether defendants breached a customer’s contract. . . . With this concern in mind, the Court must understand what agreement applied to whom and what body of proof will obviate or ameliorate the need for individualized inquires [sic] or whether a customer’s contract was breached and in what pay period such a breach occurred. . . . As to the user’s inability to access web pages, again, the proof fails to demonstrate that the problem impacted each user for particular pay periods of time or to sufficiently explain how the proof will economically allow for identification of particular users who experienced problems in accessing their web pages and for what particular pay period.

And, to emphasize these requirements, the parties were ordered to identify each request made for information, provide a summary response with attachments showing the source, and, “[b]ecause of the age of this case and the need for prompt action, the court requires the submissions occur within 20 days of this order.”

Relying on the plaintiff’s statements that when Earthlink, on May 2, 2001, gave Cape Internet customers five weeks to connect directly to an Earthlink server, defendants moved for summary judgment, even though Waters claimed he was unable to access the content to upload it to Earthlink, as reported at the beginning of this article. In an opinion released June 19, 2006, Justice Connon found for the defendants.

With respect to the contract claims he wrote:


 * [P]laintiff has failed to show that he had an agreement with the defendants. . . . It is undisputed that when OneMain purchased Cape Internet, it removed the old contract from the website and published a new one on that website. Earthlink made a similar change of contract when Earthlink purchased OneMain and its interest in Cape Internet.


 * Plaintiff argues that the new contract did not take effect because it was merely published on the website and not presented through a “click-wrap” format, as had become the norm in the time since the events in this case occurred. A click-wrap agreement insures that a party clicks his agreement to a contract before proceeding to use certain electronic material. If the plaintiff’s argument succeeded, the absence of a click-wrap agreement goes only to the formation of the new contract between the defendants and the plaintiff. The absence of a clickwrap agreement does not impact the fact that the original contract ended. . . . Therefore, a showing that the plaintiff did not assent to the new contract is not the affirmative showing that defendants adopted the Cape Internet contract, an essential element of plaintiff’s case.

Turning to plaintiff’s claim for damages from unfair and deceptive practices (Chapter 91A), Judge Connon also found for the defendants. He first noted that plaintiff was an individual, and since his business was not a party, he had no standing because he failed to send a demand letter pursuant to Chapter 93A, § 9.

The judge then ruled that “defendants’ actions were not unfair or deceptive.” To be unfair it must be “immoral, unethical, oppressive, or unscrupulous; or within the bounds of some statutory, common-law or other established concept of unfairness,” citing a 1996 Massachusetts Appeals case. “The defendants’ conduct, as described by the undisputed facts, does not meet that standard.”

He then ruled that “technological problems with the computer systems were not the result of an unfair or deceptive trade practice by the defendants.” Noting the problem listed by plaintiff, and construing these in “the light most favorable to the plaintiff, a fact-finder might infer that, at most, the defendants were incompetent or possibly even negligent in their maintenance of their computer systems. . . . [Even if so] plaintiff would not be entitled to [Chapter 93A] damages because negligence is not an unfair or deceptive trade practice.”

He further ruled that Chapter 93A was not violated because defendants altered the contracts, or implemented the new contract just by posting it, and concluded:


 * The fact that a contract was merely posted on the site and not displayed in the click-wrap format does not, in itself, indicate an intention to deceive. . . . [T]here is no evidence on which a fact finder could conclude that the defendants were unfair or deceptive in the meaning of the statute. For the foregoing reasons, the Defendants’ Motion for Summary Judgment is ALLOWED.