Whalen v. NBA Properties, Inc.

Background

James Whalen and Victor Fuentes filed a potential class action against NBA Properties, Inc. They alleged that NBA intentionally disclosed League Pass users’ personally identifiable information to third parties without consent, in violation of the federal Video Privacy Protection Act. NBA moved to transfer the case to the U.S. District Court for the Southern District of New York under a forum-selection clause. NBA separately moved to compel individual arbitration, but the court addressed only the transfer motion.

Both plaintiffs purchased League Pass subscriptions through NBA’s website. The sign-up page required users to create an account and provide payment information. Above the “Agree and Subscribe” button, the page stated that clicking the button meant the user had read and agreed to the Subscriber Agreement, with the agreement available through a hyperlink. The subscriber agreements also linked to NBA’s Terms of Use, which contained dispute-resolution provisions. Fuentes subscribed in November 2022, while Whalen subscribed in October 2023. NBA later emailed Fuentes about updated terms, and Fuentes continued using League Pass after the email. Neither plaintiff attempted to opt out of arbitration.

Contract Formation

The plaintiffs argued that no contract was formed and that they lacked adequate notice of the forum-selection and arbitration provisions. The court applied the rule that an online contract is enforceable when the website gives reasonably conspicuous notice of the terms and the consumer takes an affirmative action showing agreement.

The court found both requirements satisfied. The sign-up page identified the Subscriber Agreement, placed the notice directly above the button, and used underlined hyperlinks. Considering the ongoing nature of the paid subscription, the account-creation process, the payment information, and the plaintiffs’ continued use of the service, the court concluded that a reasonably prudent user would have been on notice of the subscriber agreement.

The court also held that the Terms of Use were effectively incorporated into the subscriber agreements. The agreements clearly stated that subscribers agreed to the Terms of Use and provided hyperlinks to them. The court concluded that the terms were sufficiently identified and accessible, even though a user had to follow more than one link to reach them.

Updated Terms for Fuentes

Fuentes subscribed when the operative Terms of Use contained an arbitration provision but not the later forum-selection clause. The court held that NBA’s email notifying Fuentes of the updated Terms of Use gave him constructive notice, meaning notice the law treats as sufficient even without proof that he actually read the terms. The email identified changes involving dispute-resolution procedures, linked to the updated terms, and explained that continued use of NBA’s services would constitute agreement.

The court further held that NBA’s evidence that it sent the email was sufficient to establish receipt, subject to the general rule that proof of mailing creates a rebuttable presumption of receipt. It also rejected Fuentes’s argument that the modification was unenforceable for lack of consideration. The court reasoned that Fuentes had an ongoing contractual relationship with NBA, continued using League Pass after notice of the changes, and received updated arbitration terms in addition to the new forum-selection clause.

Forum-Selection Clause and Disposition

The court held that the 2023 forum-selection clause was valid and enforceable. Because a valid forum-selection clause controlled the venue analysis, the court granted NBA’s motion to transfer the case to the Southern District of New York. The court stated that the motion to compel arbitration was not properly before it after the transfer and left the arbitration issue for the Southern District of New York to decide.

Judge Charles R. Breyer therefore granted NBA’s motion to transfer. The opinion did not grant or deny NBA’s separate motion to compel arbitration.