Harris v. Blockbuster, Inc.
Harris v. Blockbuster, Inc. (622 F. Supp. 2d 396, N.D. Tex. 2009) set a significant legal precedent within the district, establishing that a contract clause permitting one party to alter the agreement without notifying the other renders the promise illusory, thereby invalidating the entire contract.
Background
Blockbuster LLC provided an online rental service known as Blockbuster Online, enabling users to rent films via the internet. The company entered into an arrangement with Facebook to share customers' movie selections on the social media platform. Under this agreement, when a user rented a video, Facebook would automatically broadcast that rental activity to the user's Facebook friends. The plaintiffs contended that this partnership breached the Video Privacy Protection Act, which forbids video service providers from revealing personally identifiable information without obtaining consent.
Blockbuster sought to enforce an arbitration clause embedded within its "Terms and Conditions," which customers accepted upon registering for Blockbuster Online. This clause waived users' rights to initiate class actions and granted Blockbuster the unilateral authority to amend the "Terms and Conditions" at any time without prior notice. The plaintiffs challenged the arbitration clause's validity, arguing it was both illusory and unconscionable. In response, Blockbuster filed a motion to compel individual arbitration.
Judgment
On April 15, 2009, the United States District Court for the Northern District of Texas denied Blockbuster's motion to compel arbitration. The court concluded that Blockbuster Online’s Terms and Conditions were unenforceable because they conferred excessive discretionary power on Blockbuster to modify contract terms unilaterally. Drawing on precedent from the Fifth Circuit in Morrison v. Amway Corp. and aligning with Ninth Circuit reasoning in Douglas v. U.S. District Court ex rel Talk America, the court determined that Blockbuster’s arbitration provision was illusory and thus unenforceable. The Terms and Conditions lacked any restriction preventing Blockbuster from altering any aspect of the contract "at its sole discretion" and "at any time."
Significance
When a company reserves the right to alter its "terms and conditions" at any moment without informing users or providing them an opportunity to decline the modifications, such agreements may be considered illusory and thus lack enforceability.
See also
- Electronic Privacy Information Center, which submitted an amicus brief related to this matter
Notes
External links
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