A disclaimer can be worth its weight in lawyers

Doe v. SexSearch.com, 551 F. 3d 412 (6th Cir. 2008).

Plaintiff John Doe, filing under a pseudonym, appealed the dismissal of his complaint against defendant, SexSearch.com (“SexSearch”), an online adult dating service that facilitates sexual encounters between its members.  In October 2005, John Doe became a “Gold Member” of SexSearch, which required him to pay $29.95 per month and agree to the site’s Terms and Conditions, including a promise on Doe’s behalf that he was at least eighteen years old. Using the service, Doe met Jane Roe, who likewise had become a “Gold Member” after agreeing to SexSearch’s Terms and Conditions and warranting that she was at least eighteen.  In her profile, Jane Doe stated that she was born June 15, 1987. After meeting online, Roe invited Doe to her home on November 15, 2005, at which point they had sexual relations.  At some point thereafter, Roe, who was actually fourteen, told the police about her encounter with Doe. On December 30, 2005, police surrounded Doe’s home, arrested him, and charged him with three counts of engaging in unlawful sexual conduct with a minor, a third-degree felony. For reasons that are not stated, the charges were later dismissed and Doe’s records were sealed. Doe claimed, however, that the arrest and prosecution – and the publicity that accompanied them – caused lasting harm to his reputation, family life, and employment prospects.

In what the Court of Appeals called, in a model of understatement, “an unusual case of first impression,” Doe filed suit against fifteen corporate and individual defendants, whom he believed were the owners of SexSearch. The complaint contained fourteen causes of action, which, as the district court noted, “boil down to either (a) Defendants failed to discover [that] Jane Roe lied about her age to join the website, or (b) the contract terms are unconscionable.”  To cut to the chase, neither the district court nor the court of appeals had much sympathy for the plaintiff.

Breach of Contract

Count One of the complaint alleged that SexSearch breached its contract with Doe by permitting minors to become members of its service.  The court said that a contract between Doe and SexSearch was formed when Doe checked a box indicating that he was over eighteen and had read and agreed to SexSearch’s “Terms and Conditions” and privacy policy and that the “Terms and Conditions” constituted the content of the contract.

Doe alleged that SexSearch failed to fulfill its obligations by “permitt[ing] minors to become paid members” and by “deliver[ing] a minor to Plaintiff for the purpose of sexual relations.”  But as the court pointed out, the terms and conditions state that SexSearch “cannot guarantee, and assume[s] no responsibility for verifying, the accuracy of the information provided by other users of the Service.”  The contract did require that members be “eighteen or over to register,” but nowhere did SexSearch promise to prevent minors from registering or to monitor members’ profiles for accuracy.  Therefore, the court held that the complaint did not state a breach-of-contract claim because Doe had not alleged that SexSearch had breached any promise that was actually part of the contract.

Breach of Warranty

Count Five of the complaint alleged a breach of warranty, based on the warning about users being over eighteen. Under Ohio’s version of the Commercial Code, “[a]ny affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.” The section only applies to the sale of goods, not to services.  Because SexSearch is a service and Doe had not alleged that the dispute concerned the sale of goods, the court held that he had not stated a claim for breach of warranty.

Unconscionability

Counts Eleven through Thirteen of the complaint alleged common-law unconscionability in the Terms and Conditions.  At common law, unconscionability is a defense against enforcement, not a basis for recovering damages. If Doe were seeking a declaratory judgment or reformation of the contract, the court noted that unconscionability could form the basis of a cause of action.  But he was not requesting either of these remedies, and the court found the doctrine of unconscionability inapplicable to a claim for affirmative relief.

The plaintiff also alleged a number of tort claims, based on fraud, negligence, unfair business practices, but the court gave them all short shrift.

Lessons Learned

Although this case does not resemble the typical dispute between businesses, there is nonetheless an important point to take away from it. It pays to have disclaimers.  SexSearch’s disclaimer that it “cannot guarantee, and assume[s] no responsibility for verifying, the accuracy of the information provided by other users of the Service” was helpful in defeating a claim of reliance by its customer.

An example of when this kind of disclaimer could be helpful can be found in personal guaranties. It is common for a creditor to require the owners of a closely-held business to provide personal guaranties. If one of the owners fails to provide a guaranty, the other owners who did so could claim that they were defrauded into giving their personal guaranties on the basis all owners would provide guaranties.  A disclaimer to the effect that the personal guaranty is effective without regard to whether any other party gives a personal guaranty would go a long way, if not be conclusive, on such a claim.