Mar 19 2018

“Unconscionable" Claim Against Limitations on Liability Moves Forward against Yahoo! in California

A district judge of the United States District Court for the District of California has found that Plaintiffs have sufficiently pled that the limitations of liability clause in Yahoo’s email agreements was “unconscionable” such that the case can move forward.

The claim, one part of a motion to dismiss in the Yahoo! Inc. Consumer Data Security Breach Litigation surrounding three data security breaches between 2013-2016, included an allegation that Yahoo’s Terms of Service included an unconscionable liability limitation clause, which read, in pertainent part, as follows:

YOU EXPRESSLY UNDERSTAND AND AGREE THAT YAHOO!...SHALL NOT BE LIABLE TO YOU FOR ANY PUNITIVE, INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS, GOODWILL, USE, DATA, OR OTHER INTANGIBLE LOSSES (EVEN IF YAHOO! HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), RESULTING FROM:…UNAUTHORIZED ACCESS TO OR ALTERATION OF YOUR TRANSMISSIONS OR DATA…OR…ANY OTHER MATTER RELATING TO THE YAHOO! SERVICE

Plaintiff found that both substantive and procedure unconscionability were sufficiently pled.  The limitation of liability appeared “near the end of the 12-page legal Terms of Service document and where the Terms of Service are contained in an adhesion contract and customers may not negotiate or modify any terms.” As to substantive unconscionability, the Court found that these limitations involve “expansive liability limitation and preclusion of nearly every type of damages claim.”  The Court further found (in a strong finding on a motion to dismiss) that the “actual terms of litiations allow Defendants to evade important California common-law and statutory obligations, such as [California's Consumer Legal Remedies Act (the “CLRA”) and the California Customer Records Act (“CRA”)].

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