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Friday, November 4, 2016

Tompkins vs. 23AndMe, Inc. affirms the enforceability of Terms and Conditions

Tompkins v. 23andMe, Inc., Court of Appeals, 9th Circuit, 2016

This case has a double interest for genealogists and for all of us who click through the Terms and Conditions on software and websites.

First it holds that the boilerplate Terms and Conditions on the website are enforceable and it also holds that the plaintiffs who claimed that they were damaged by the fact that Until 2013, 23andMe claimed that its service could be used to help customers manage health risks, as well as prevent or mitigate diseases such as diabetes, heart disease, and breast cancer had to go to arbitration. In November 2013, the Food and Drug Administration (FDA) told 23andMe to discontinue marketing its services for health purposes until the company obtained government approval. The company then ceased its health-related marketing.

This is a Federal District Court of Appeals case and could be used to argue in favor of any similar defendant or defendants in any similar case throughout the United States.

Here is the Court's summary of the case. You might need to know that the reference to "the panel" is to the three judges who sit as a "panel" to decide the appeal case.
The panel affirmed the district court's order enforcing the terms of a Terms of Service agreement, and granting 23andMe, Inc.'s motion to compel arbitration. 
Plaintiffs are a class of 23andMe customers who purchased a DNA test kit and assented to an online Terms of Service, and they challenged the 23andMe arbitration provision under the California doctrine of unconscionability. 
The panel held that none of the challenged portions of the arbitration provision, alone or in concert, rendered the arbitration provision unconscionable under current California law. 
The panel rejected the plaintiffs' challenges to the arbitration provision. First, concerning the arbitration provision's prevailing party clause, which provided that the arbitration costs would be borne by the losing party, the panel held that the plaintiffs did not carry their burden of demonstrating unconscionability of the clause where: the bilateral attorneys' fee shifting clause in the Terms of Service was not unconscionable under California law; and the arbitration fee-shifting provision was not unconscionable under the case-specific standard announced in Sanchez v. Valencia Holding Co., LLC, 61 Cal. 4th 899, 911 (2015). Second, concerning the arbitration provisions' forum selection clause, which stated that arbitration proceedings would be held in San Francisco, California, the panel held that the plaintiffs had not met their burden of proving that the clause was unreasonable. Third, concerning the clause excluding intellectual property claims from mandatory arbitration, the panel held that plaintiffs had not carried their burden of demonstrating that the exemption was unconscionable under current California law. The panel concluded that the arbitration agreement was valid and enforceable under the Federal Arbitration Act, 9 U.S.C. § 2. 
The panel also rejected plaintiffs' challenges to provisions in the Terms of Service not contained within the arbitration clause itself. First, the panel held that the agreement's one-year statute of limitations did not make the arbitration provision itself unconscionable under California law where California courts afford parties considerable freedom to modify the length of a statute of limitations, and the statute of limitations in the Terms of Service was not unfairly one sided. Second, the panel held that a provision giving 23andMe a unilateral right to modify the agreement did not make the arbitration provision itself unconscionable. Judge Watford concurred in the judgment. He agreed with the majority that the arbitration provision was valid and enforceable, albeit for different reasons.
Of course, the issue here is that the Plaintiffs had a claim against the company which ended up requiring them to go to arbitration rather than resort to the courts. But what should be disturbing is not the fact that these Plaintiffs have to go to arbitration to make a claim, but the fact that the Court specifically upheld the other provisions of the Terms and Conditions, such as the provision shortening the Statute of Limitations, or the time the Plaintiffs had to bring their lawsuit, to one year. Although, the Court does not discuss the issue, this part of the ruling may disqualify or bar some or all of the Plaintiffs from making a claim. The ruling also reaffirms the common court holding that these Terms and Conditions are enforceable in many cases.

So, the next time you click through the Terms and Conditions, you just might pause and realize that they really are enforceable and maybe you would like to know what they say.

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