Where to sue: Internet transactions – read those hyperlinked terms

In our article Where To Sue: Part 2 [ETN April 3, 2014] we discussed the enforceability of forum selection and mandatory arbitration clauses in cruise passenger tickets, hotel registers and tour operator contracts. This week we continue our discussion of these often onerous contractual provisions that can make it difficult, if not impossible, for travelers to seek appropriate compensation for their injuries sustained while traveling abroad. This time we look at purchasing travel services on the Internet and whether or not Internet transactions increase the likelihood that forum selection, choice of law and mandatory arbitration clauses will be enforced.

Lurking In The Hyperlinks

We also noted in our article Jurisdiction and the Internet [ETN January 14, 2014] that the Internet has transformed the way in which travel services are marketed and may have made it easier to assert personal jurisdiction over foreign travel suppliers and ground operators whose only connection with a U.S. forum may be their virtual presence on a computer screen. However, while Internet transactions may increase the likelihood of haling foreign corporations into U.S. courts for travel accidents sustained abroad, the typical Internet transaction may involve “hiding” onerous terms and conditions such as liability disclaimers, forum selection and choice of law clauses in hyperlinks.

Starkey v. Gap Adventurers

In the recent case of Starkey v. GAP Adventures, Inc., Ms. Starkey, a New York resident, purchased a nine day tour of the Galapagos Islands provided by a Canadian tour operator. “The trip-‘Galapagos on a Shoestring’-was scheduled for October 2011 and cost $5,000…After she purchased her ticket, Starkey received a confirmation email, confirmation invoice and service voucher”, none of which contained any forum selection and choice of law clauses. However, each of these three communications stated “that in purchasing her ticket, Starkey read, understood and agreed to the contract’s ‘Terms and Conditions’” which were available for review by clicking on a hyper-link leading to a separate webpage. Starkey (as perhaps many consumers fail to do) did not click on the hyper-link. Assuming she had so clicked and, further assuming, that she read the first 31 paragraphs, she may have read “paragraph 32, entitled ‘Applicable Law’ which stated that “the ‘Terms and Conditions and Conditions of Carriage including all matters arising from it are subject to Ontario and Canadian Law and the exclusive jurisdiction of the Ontario and Canadian Courts”/

During the Galapagos tour Starkey claims that tour leader X sexually assaulted her in the early evening hours. Upon her return home Starkey complained to Gap Adventures (Gap) and underwent “psychological therapy”. In the subsequent lawsuit Starkey alleged that Gap was negligent in hiring and training X and “is liable under the tort laws of both the United States and Canada (and) requests one million dollars in compensatory damages plus attorneys’ fees”.

Enforcing Forum Selection Clause

As noted by the Court the central issue in the case was the enforceability of the Ontario, Canada forum selection clause which was lurking in the hyper-link accessible webpage which Starkey never read. “The legal effect of a forum-selection clause depends in the first instance upon whether its existence was reasonably communicated to the plaintiff” [Nettie Effron v. Sun Line Cruises, Inc.]. Starkey asserted that Gap should have set forth its “Terms and Conditions” including the forum selection clause up-front “in the body of the three relevant communications-the confirmation email, the confirmation invoice and the service voucher”. This argument was rejected by the Court which noted that it had already decided that “a hyper-link is a reasonable forum of communicating the ‘Terms and Conditions’ of a contract” [see Fteja v. Facebook, Inc. (when a corporation provides access to its contractual “Terms and Conditions” via a hyper-link and the consumer chooses not review the Terms and Conditions the consumer is still bound by those conditions including a forum selection clause)].

Time Barred In Canada

Starkey argued that to enforce the forum selection clause would be inconvenient and more importantly she may be time-barred “by the relevant Canadian statute of limitations”. The Court was unmoved noting that in bringing the lawsuit in New York rather than Canada, “Starkey chose to ignore the forum selection clause that she in effect agreed to when booking her trip. This court will not consider ‘any potential timeliness problems that this choice may have created’”. The court dismissed the Starkey complaint noting that if Starkey wishes to continue her litigation she must re-file in Canada.

Mandatory Arbitration Clauses

In Where To Sue: Part 2 [ETN April 3, 2014] we also discussed mandatory arbitration clauses in travel contracts which not only change the forum but the rules by which disputes are to be resolved. In reaching its result the Starkey Court referred to Fteja, supra, which itself referred to cases enforcing online mandatory arbitration clauses [see Guadagno v. E*Trade Bank (upholding an arbitration clause contained in the terms and condition “accessible via a hyperlink next to a button on a registration page…’[a] reasonably prudent offeree would have noticed the link and reviewed the terms before clicking on the acknowledgment icon’”); Hubbert v. Dell Corporation (“To make their purchases, each of the plaintiffs completed online forms on five…Web pages…On each of those pages, the ‘Terms and Conditions of Sale’ were accessible by clicking on a blue hyperlink (the Court reasoning) that ‘[t]he blue hyperlinks… should be treated the same as a multipage written paper contract”)]. The enforceability of online mandatory arbitration clauses, however, remains unsettled [see Specht v. Netscape Communications Corp. (Mandatory arbitration clause not enforced); Decker v. Circus Hotel (Nevada forum selection clause enforced); Scarella v. America Online, Inc. (Virginia forum selection clause not enforced); Full House Entertainment, Inc. v. Auto Life RX (Arizona forum selection clause not enforced); Jerez v. JD Closeouts, LLC (Florida forum selection clause not enforced)].

Liability Disclaimers Online

In Hofer v. The Gap, Inc. the traveler was injured at the Turtle Towers resort in Ocho Rios, Jamaica, “when a ‘flip-flop’ sandal that she was wearing broke while she was descending a stairway which…made her fall into an ornamental pond containing sharp rocks”. In the subsequent lawsuit against, inter alia, Expedia.com which had sold the tour online, the issue arose as to the enforceability of Expedia’s liability disclaimer that “‘[t]he…hotels and other suppliers providing services for Expedia, Inc. are independent contractors and not agents or employees of Expedia, Inc. (which) is not liable for the acts (of) negligence of any such suppliers”. Expedia’s “Terms and Conditions” containing the disclaimer were accessible in the sense that in order “to finalize the reservation (the purchaser) had to ‘click through’ Expedia’s Web Site Terms, Conditions and Notices which included the liability disclaimer’”. Of particular interest in Hofer is the fact that plaintiff never used the Expedia.com website since her companion made all the reservations. Nonetheless, the Court held that Hofer would be bound by the Expedia online disclaimer of liability. Whether non-signatories should be bound by the terms and conditions of travel contracts still remains unsettled [see D’Elia v. Grand Caribbean Company (Mexico forum selection clause inapplicable to another defendant); Bernstein v. Wysocki (forum selection clause not enforced as to non-signatories)].

Conclusion

It is fair to state that travelers are well advised to carefully review the hyper-linked “Terms and Conditions” that appear on the websites of travel suppliers and tour operators.