Antitrust Law Daily Wrap Up, RICO—10thCir: AT&T U-verse Forum Selection and Arbitration Clauses Were Enforceable; Customers’ RICO Claims Dismissed, (Dec 12, 2012)

By William Zale, J.D.

Federal RICO claims brought by AT&T U-verse customers who purchased telecommunications services in Florida or Oklahoma were properly rejected under forum selection and arbitration clauses in enforceable “clickwrap” agreements, the U.S. Court of Appeals in Denver has ruled (Hancock v. American Telephone and Telegraph Co., Inc., December 11, 2012, Matheson, S.). The court affirmed orders of the federal district court in Oklahoma City dismissing the claims.

U-verse is the brand name for telecommunications services that include digital television (“TV”), voice-over Internet protocol (“Voice”), and high-speed Internet (“Internet”). TV/Voice terms of service have a forum selection provision stating that, in the event of litigation, AT&T and U-verse customers “agree to submit to the . . . jurisdiction of the courts located within the county of Bexar County, Texas.” Internet terms of service include an arbitration provision stating that AT&T and the customer “agree to arbitrate all disputes and claims … based in whole or in part upon the [Internet service].”

AT&T uses “clickwrap” agreements as part of its standard practice for customer acceptance of the TV/Voice and Internet terms. Clickwrap is a commonly used term for agreements requiring a computer user to consent to any terms or conditions by clicking on a dialog box on the screen in order to proceed with a transaction.

The clickwrap agreements complied with the principles set forth in Specht v. Netscape Commc’ns Corp., 306 F.3d 17, 28-32 (2d Cir. 2002), the court determined. The agreements did not conceal the U-verse terms of service.

Under AT&T’s standard practice, technicians present customers with a Welcome Kit containing a printed copy of the TV/Voice terms and give customers an opportunity to review the terms. Before technicians proceed with installation, customers must agree to the TV/Voice terms by clicking on an “I Acknowledge” button in a web application, which is presented on the technician’s laptop. The web application displays a checkbox for “Terms Of Service” and a statement that the customer acknowledges that he has “read, understand[s], and agree[s] to the content of the documents checked above.”

Similarly, customers cannot access U-verse Internet service without going through a registration process on the customer’s computer. The process gives the customer an opportunity to review the Internet terms in a scrolling text box. The customer must click an “I Agree” button to manifest assent to the Internet terms and to continue with the registration process and activation of U-verse Internet service.

The clickwrap agreements were of the type that are routinely upheld. The court saw no reason that such clickwrap agreements would not be valid and enforceable under Florida and Oklahoma law.

The court also rejected additional challenges to standard AT&T practices. While the customers faulted AT&T for requiring U-verse customers to agree to separate TV/Voice terms and Internet terms at separate times, the customers cited no law indicating that customers cannot agree to two sets of terms of service presented at separate times. The customers’ argument that allowing only two hours is not enough for some installations was based on mere speculation. Contrary to the customers’ contention, AT&T’s e-mail notifying customers who signed up for Internet service before October 2008 did not bury notice of the arbitration clause.

The customers also unsuccessfully argued that AT&T standard practice created the reasonable impression that customers would suffer financial penalties if they declined to agree to the terms of service. Customers were allowed to cancel installation within three days. Customers were allowed to cancel all U-verse services within 30 days of activation and obtain a partial refund. Rather than impose a penalty, the refund provision allows the customer to continue with U-verse activation to determine whether the customer is satisfied with the service, the court said. The customers failed to demonstrate how these provisions can be reasonably read to impose penalties that force U-verse customers to accept the U-verse terms of service, the court concluded.

The case is No. 11-6233.

Richard A. Westfall (Hale Westfall LLP) for Gayen Hancock. Archis A. Parasharami (Mayer Brown, LLP) for American Telephone and Telegraph Co., Inc.

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