Masry v. Lowe's Companies, Inc.

Background

Omar Masry and Elliot Mass brought a putative class action against Lowe’s Companies and Lowe’s Home Centers. They alleged that Lowe’s website terms prohibited users from posting content that defamed, misrepresented, or disparaged Lowe’s, its products, or other people, products, services, or companies. The terms also allowed Lowe’s to suspend or terminate a user’s access if a statement was harmful to Lowe’s interests.

The plaintiffs alleged that these restrictions violated California Civil Code § 1670.8, sometimes called California’s “Yelp” law, and California Business and Professions Code § 17200, California’s Unfair Competition Law. They sought damages, restitution, and injunctive relief. Lowe’s moved to dismiss for lack of personal jurisdiction and failure to state a claim, and alternatively sought transfer to North Carolina under a forum-selection clause in the website terms.

Personal Jurisdiction

The court rejected the defendants’ challenge to personal jurisdiction. It found that the plaintiffs had not alleged facts establishing general jurisdiction because Lowe’s California retail presence and advertising did not show that Lowe’s was essentially “at home” in California. The court nevertheless found specific jurisdiction. The plaintiffs alleged that Lowe’s conducted substantial business with California consumers through its website, targeted California consumers, operated more than 100 California retail locations, and profited from a California audience. The court also found that the claims arose from those California-related activities and that exercising jurisdiction was reasonable.

The court therefore denied the motion to dismiss for lack of personal jurisdiction.

Forum-Selection Clause and Transfer

The website terms required disputes relating to the agreement, the website, or its use to be brought in courts and other dispute-resolution organizations in Charlotte, North Carolina. The court determined that the terms were a “browsewrap” agreement because they were available through a hyperlink at the bottom of the website and did not require users to click an “I agree” box.

The court held that such terms are enforceable only if the user had actual or constructive notice. It found that the plaintiffs had not alleged that they saw, understood, or agreed to the terms, and that merely accessing the website did not establish notice or assent. Because the forum-selection clause was not enforceable, the court denied the motion to transfer.

California Civil Code § 1670.8 Claim

Section 1670.8(a)(1) prohibits a contract for the sale or lease of consumer goods or services from waiving a consumer’s right to make statements about the seller, its employees or agents, or the goods or services. Section 1670.8(a)(2) prohibits threatening or seeking to enforce such a provision, or otherwise penalizing a consumer for making a protected statement.

The court concluded that the plaintiffs did not sufficiently allege that the website terms governed purchases of consumer goods or services. The terms applied regardless of whether users were merely visiting the website or were purchasers or registered members. The court found that the plaintiffs did not explain why terms applying to website use generally constituted a contract “for the sale” of goods or services. It also concluded that, for the same reason, the plaintiffs did not plausibly allege that Lowe’s threatened or sought to enforce a provision covered by § 1670.8.

The court granted the motion to dismiss the § 1670.8 claim for failure to state a claim, but granted leave to amend. The plaintiffs could amend by alleging sufficient facts showing that the terms were a contract for the sale or lease of goods or services and that Lowe’s threatened, sought to enforce, or otherwise penalized consumers for violating a provision covered by § 1670.8.

Unfair Competition Law Claim

The plaintiffs’ Unfair Competition Law claim was derivative of their alleged § 1670.8 violation. Because the court dismissed the underlying § 1670.8 claim, it also granted dismissal of the Unfair Competition Law claim. The court granted leave to amend that claim in light of any amendment to the § 1670.8 claim.

Disposition

The court granted both requests for judicial notice. It denied the motion to dismiss for lack of personal jurisdiction, denied the motion to transfer, and granted the motion to dismiss for failure to state a claim, with leave to amend. The plaintiffs could file a first amended complaint within 21 calendar days of the order’s issuance.