Zheng v. Live Auctioneers LLC

Background

Peiran Zheng brought a proposed class action against Live Auctioneers LLC for negligence and violation of Section 349 of New York’s General Business Law. The claims arose from a data breach allegedly carried out by a third party. Zheng alleged that hackers obtained users’ private personal information and that Zheng’s information was copied and offered for sale online. LiveAuctioneers disputed that complete payment-card numbers were accessed.

Zheng created an account on LiveAuctioneers’ website in 2017. In October 2019, the website displayed a banner stating that users agreed to the Terms & Conditions, Privacy Policy, and Cookie Policy by using the website. The policies were blue, underlined hyperlinks, and users could not have bids considered until they clicked an orange “AGREE” button. The linked Terms & Conditions contained a separately labeled, bolded section called “Arbitration.”

LiveAuctioneers moved under the Federal Arbitration Act to compel arbitration and stay the lawsuit. Zheng argued that the parties had not formed a binding contract and moved for discovery and to strike a supplemental declaration that LiveAuctioneers submitted with its reply.

Arbitration agreement

The court applied New York contract-formation principles. It explained that a website user may be bound by terms without reading them if the user had reasonable notice of the terms and assented through conduct that would reasonably communicate agreement. A “clickwrap” agreement is an online agreement in which a user must click an “I agree” button after being presented with contract terms or links to them.

The court concluded that the total circumstances gave Zheng reasonable notice of both the Terms & Conditions and the arbitration provision. The agreement appeared at the top of the page; the notice was concise; the policy links were capitalized, blue, and underlined; the “AGREE” button was visually distinctive; and clicking the button was required before Zheng could continue using the website to place bids. The arbitration provision was not hidden within the Terms & Conditions: it appeared under its own bolded, numbered heading, and its text was not smaller than the rest of the Terms & Conditions.

The court also noted that Zheng did not dispute that the lawsuit’s claims fell within the arbitration provision or challenge the provision itself. The court therefore held that the parties entered into a valid agreement to arbitrate when Zheng clicked “AGREE” and continued using the website.

Discovery and supplemental declaration

Zheng argued that LiveAuctioneers improperly submitted a screenshot and supporting supplemental declaration for the first time with its reply. The court rejected that argument because the materials responded to Zheng’s contention that a screenshot was necessary evidence and because Zheng could have sought permission to file a sur-reply or supplemental declaration.

Zheng also sought discovery, arguing that the screenshot was inaccurate because it showed 2021 auction listings and a test-page URL rather than the website as it appeared in 2019. LiveAuctioneers explained that the screenshot used the 2019 website code but 2021 auction content because recreating both the website code and auction content from 2019 would have required substantial additional effort. The court credited the sworn declarations stating that the screenshot accurately represented the clickwrap agreement shown when Zheng clicked “AGREE.”

The court found no genuine dispute of material fact. Zheng did not deny clicking “AGREE,” did not submit evidence showing that the clickwrap agreement looked different, and relied instead on an archived webpage that did not show the banner because no user was logged in. The court concluded that discovery was unnecessary.

Ruling

Judge Koeltl granted LiveAuctioneers’ motion to compel arbitration and stay the litigation pending mediation and arbitration. He denied Zheng’s motion to strike the supplemental declaration and motion for discovery. The court directed the Clerk to close Docket Numbers 18 and 33.