Arbitration & Mediation

eBay "Live Auction" Auction House's Terms and Conditions = "Block of Impenetrable Text"

By Christopher B. Hopkins, Esq.

We must confess our interest in eBay, which is not only the "world's largest online auction hosting service" but also the catalist of quite a bit of litigation. Some longtime readers might recall there are lawyers as far away as Tennessee at the ready to sue the California company.

The case of Michele Mazur v. eBay, Inc., Hot Jewelry Auctions.Com et al. appears to ultimately be more about the formation of a class action suit than the alleged misrepresentations over $4,000 worth of jewelry (which, it appears, could have been sent back under a 7-day return policy).

Mazur participated in an eBay Live Auction, which is different from the standard eBay transaction. Essentially, it allows the eBay user to participate in an auction house's live auction via online bidding. The user must agree to eBay's terms as well as eBay's Live Auction User Agreement (eBay Terms). Then, in this case, Mazur agreed to the auction house's terms, which included a pseudo-arbitration clause.

We say "pseudo" because the parties actually waive the right to mediation, arbitration, AND the use of attorneys. Instead, the parties submit their claim to In-House Attorneys, P.C. which the court described as a two-lawyer outfit in Los Angeles with a history of attorney discipline. Also, the claim is limited to ONE HOUR PER SIDE, no indication of the availability of discovery, and no witnesses. We tried to follow the court-provided links to www.in-house-lawyers.com but it was non-existent by the time we tried it. Needless to say, the court questioned In-House's duty of loyalty. Interesting, as the question of the neutrality of arbitrators is infrequently a winning argument (see the 5th Circuit's decision in Goins v Ryan's Steakhouse).

The California court went through the trouble of a procedural and substantive unconscionability challenge. What the court (and the parties?) completely overlooked is that... this is not an arbitration clause. The parties explicitly waived arbitration. Nonetheless, unconscionability appears to have reached the proper result in deeming that the auction house's preferred forum of "in house lawyers" was not enforceable.

Turning to the claims against eBay, we note that they were successful in using section 230 of the Computer Decency Act to assert that the claims were barred since eBay was an internet service provider and only exercising a publisher's traditional editorial functions. That said, eBay apparently claimed that its Live Auctions were "screened" and "safe." That was not a publication of other's opinions (such as feedback). It was a statement by eBay which apparently -- at least at the motion to dismiss stage -- was allowed to be subject to civil litigation. Moreover, eBay Terms released eBay from liability for a dispute with an auction house but (oops) didn't release eBay from a direct action.

Full post as published by Florida Arbitration Law on May 15, 2008 (boomark / email).