The Ninth Circuit ruled in favor of PeopleConnect, Inc. in a significant case about the enforceability of online terms of service and agreements to arbitrate.
The question in Knapke v. PeopleConnect, Inc. was whether a plaintiff could be required to arbitrate her claims against PeopleConnect, Inc. if her attorney agreed to the terms of service on PeopleConnect's website while investigating and developing the plaintiff's claim.
The panel vacated the district court's denial of PeopleConnect's motion to compel arbitration and remanded for the parties to engage in discovery into facts that would be material to PeopleConnect's agency and contract law theories. In doing so, the Ninth Circuit clarified that under the Federal Arbitration Act courts should permit discovery to resolve disputes over contract formation whenever material facts are unknown or are disputed. The panel also rejected the argument that as a matter of state contract law an attorney cannot ever bind a client to an arbitration agreement by using a website for the client's benefit.
Partner Ian Heath Gershengorn who argued the case on behalf of PeopleConnect in the Ninth Circuit, called the result a "significant win for PeopleConnect, which confirms that long-settled principles of agency and contract law apply fully in the arena of Internet terms of service. We now look forward to developing the specific facts of this case, which we believe will show that the plaintiff's counsel did, in fact, act on his client's behalf and for her benefit when agreeing to our terms of service."
Read Bloomberg Law's coverage of the lawsuit here.
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