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As part of the fallout from Facebook’s rollout of its Beacon ad service, some users of Blockbuster’s site sued Beacon-partner, Blockbuster, in the Northern District of Texas, for among other things, violations of the Video Privacy Protection Act. Blockbuster moved to compel arbitration of the dispute, relying on the Terms and Conditions on its site. On April 15, 2009, the district court denied Blockbuster’s motion to compel arbitration, holding that:

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there is nothing in the Terms and Conditions that prevents Blockbuster from unilaterally changing any part of the contract other than providing that such changes will not take effect until posted on the website. There [is] likewise… “nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication.”

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The court relied largely on the Fifth Circuit’s recent decision in Morrison v. Amway Corp., 517 F.3d 248 (5th Cir. 2008) (holding a similar arbitration provision illusory). The court’s decision here is reminiscent of the Ninth Circuit’s decision in Douglas v. District Court from 2007, where the court addressed whether a service provider may change the terms of its service contract by posting a revised contract on its website without providing additional notice. The Ninth Circuit held there that merely posting a revised contract to one’s website was inadequate notice and the service provider’s customers were not bound by the revised terms.

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This is an encouraging trend for website visitors who are increasingly offered extremely one-sided terms on a take-it-or-leave-it basis and then find themselves purportedly subject to terms that can be unilaterally changed with only website notice. At least in these instances, courts are demanding more from website operators.

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The case is Harris v. Blockbuster.

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