Frequent readers of our blog will recall that in prior posts on companies such as Uber, Ashley Madison and Twitter, we have stressed the importance of having a robust terms of service (TOS) agreement. In many instances, TOS, if adeptly deployed, can limit a social media or gaming company’s liability to its users. We now see that TOS can also effectively limit the remedies available to these potential plaintiffs.
Recently, in an opinion published by the California Court of Appeal, the Court upheld the limitation of liability clause set forth in YouTube’s terms of service. In Lewis v. YouTube LLC, YouTube was able to use its TOS to prevent the plaintiff from seeking any remedy for allegedly deleting her YouTube channel. YouTube was further able to achieve this favorable result at a very early stage in the litigation. (For those civil procedure fans out there, the appellate court affirmed the trial court’s ruling that sustained a demurrer to the complaint, without leave to amend.)
In the Lewis case, the plaintiff created a YouTube channel on which she showcased various videos of her musical group. The plaintiff alleged that she obtained upwards of 500,000 views. She further alleged that YouTube wrongfully deleted her YouTube channel and account, even though she fully complied with all of the terms of service. In response to efforts by Lewis to determine why her channel had been deleted, YouTube allegedly took the “unfounded position that [she] had been soliciting other users for commercial purposes.” She brought an action against YouTube for breach of contract seeking damages and specific performance (i.e. restoration of her account and channel, including the deleted videos, view count, comments, and the urls of other users who had linked to it, exactly as it appeared before it was taken down by YouTube).
The plaintiff attached a copy of the terms of service to the complaint, and the Court noted that those terms were also posted on YouTube’s website. YouTube argued that the TOS precluded the plaintiff from obtaining any damages for the deletion of her channel, citing the following language from the limitation of liability clause (italics & boldface added by the Court):
IN NO EVENT SHALL YOUTUBE, ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, BE LIABLE TO YOU FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHATSOEVER RESULTING FROM ANY (I) ERRORS, MISTAKES, OR INACCURACIES OF CONTENT, (II) PERSONAL INJURY OR PROPERTY DAMAGE, OF ANY NATURE WHATSOEVER, RESULTING FROM YOUR ACCESS TO AND USE OF OUR SERVICES, (III) ANY UNAUTHORIZED ACCESS TO OR USE OF OUR SECURE SERVERS AND/OR ANY AND ALL PERSONAL INFORMATION AND/OR FINANCIAL INFORMATION STORED THEREIN, (IV) ANY INTERRUPTION OR CESSATION OF TRANSMISSION TO OR FROM OUR SERVICES, (IV) ANY BUGS, VIRUSES, TROJAN HORSES, OR THE LIKE, WHICH MAY BE TRANSMITTED TO OR THROUGH OUR SERVICES BY ANY THIRD PARTY, AND/OR (V) ANY ERRORS OR OMISSIONS IN ANY CONTENT OR FOR ANY LOSS OR DAMAGE OF ANY KIND INCURRED AS A RESULT OF YOUR USE OF AND CONTENT POSTED, EMAILED, TRANSMITTED, OR OTHERWISE MADE AVAILABLE VIA THE SERVICES, WHETHER BASED ON WARRANTY, CONTRACT, TORT, OR ANY OTHER LEGAL THEORY, AND WHETHER OR NOT THE COMPANY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF LIABILITY SHALL APPLY TO THE FULLEST EXTENT PERMITTED BY LAW IN THE APPLICABLE JURISDICTION.
The Court agreed with YouTube and found that YouTube’s “omission” in failing to maintain the “content” fell within the purview of the clause above. According to the Court, the plaintiff therefore could not obtain any damages from YouTube and thus could not state a claim for breach of contract.
In its analysis, the Court noted that limitation of liability clauses such as YouTube’s were appropriate and enforceable under California law where a party is offering a service free to the public. The Court also noted that enforcement of such clauses is especially important where the beneficiary of the clause (i.e. YouTube) is engaged in a “high-risk, low compensation” service.
On the latter point, it is interesting that the Court did not elaborate on how YouTube’s service, in this particular instance or more generally, is a “high-risk” service or how the Court determined that YouTube’s service is a “low compensation” service—after all, YouTube, according to the complaint, makes billions of dollars annually from advertisements, and may have, as alleged, benefited from the 500,000 views (presumably through ad revenue generated from the views). It seems that the Court was satisfied here that YouTube did not receive any “compensation” directly from the plaintiff in exchange for providing the service.
The Court also rejected the plaintiff’s argument that she was entitled to specific performance. As to that claim, the Court concluded that the terms of service did not include any specific terms requiring YouTube to maintain the plaintiff’s content, the view count, or the comments associated with the videos. Because the plaintiff could not identify any such specific provisions, the Court concluded that it could not order the specific performance that she requested.
One practical takeaway from this case is that a broadly worded limitation of liability clause can be upheld and should be included in a company’s terms of service agreement. Additionally, this case suggests that TOS should not include any specific obligations to continue to provide or maintain any part of the services. While nothing is guaranteed in litigation, the Lewis case demonstrates that, when well-drafted and thought-out, TOS can go a long way toward nipping these types of cases in the bud, especially for those companies that offer services free to users.