Posting Modified Service Contract on Website Not Sufficient Notice
In a brief but no less interesting per curiam opinion, the Ninth Circuit vacated an order compelling arbitration that was based on a modified service contract posted on the service provider's website without specific notice to the customer of the changes to the contract.
In Douglas v. United States District Court, the plaintiff contracted for long distance telephone service with America Online, which service was subsequently acquired by Talk America. After the acquisition, Talk America made four additions to the service contract, including additional service charges and an arbitration clause, and posted the revised contract on its website. According to the plaintiff, however, Talk America did not notify him that the service contract had changed. After the plaintiff learned of the changes, he filed a class action lawsuit in federal district court and Talk America moved to compel arbitration based on the modified service contract, which the District Court granted.
The Ninth Circuit disagreed with the District Court, however, concluding that Talk America could not unilaterally change the terms of the contract and that the plaintiff was not bound by the terms of the revised contract when he was not notified of the changes. Notably, merely posting the revised contract on the website was insufficient notice of the changes as "[p]arties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."
In Douglas v. United States District Court, the plaintiff contracted for long distance telephone service with America Online, which service was subsequently acquired by Talk America. After the acquisition, Talk America made four additions to the service contract, including additional service charges and an arbitration clause, and posted the revised contract on its website. According to the plaintiff, however, Talk America did not notify him that the service contract had changed. After the plaintiff learned of the changes, he filed a class action lawsuit in federal district court and Talk America moved to compel arbitration based on the modified service contract, which the District Court granted.
The Ninth Circuit disagreed with the District Court, however, concluding that Talk America could not unilaterally change the terms of the contract and that the plaintiff was not bound by the terms of the revised contract when he was not notified of the changes. Notably, merely posting the revised contract on the website was insufficient notice of the changes as "[p]arties to a contract have no obligation to check the terms on a periodic basis to learn whether they have been changed by the other side."
