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United States Court of Appeals for the Second Circuit
March 14, 2002, Argued ; October 1, 2002, Decided
Docket Nos. 01-7860(L), 01-7870(CON), 01-7872(CON)
[*20] SOTOMAYOR, Circuit Judge:
This is an appeal from a judgment of the Southern [**3] District of New York denying a motion by defendants-appellants Netscape Communications Corporation and its corporate parent, America Online, Inc. (collectively, "defendants" or "Netscape"), to compel arbitration and to stay court proceedings. In order to resolve the central question of arbitrability presented here, we must address issues of contract formation in cyberspace. Principally, we are asked to determine whether plaintiffs-appellees ("plaintiffs"), by acting upon defendants' invitation to download free software made available on defendants' webpage, agreed to be bound by the software's license terms (which included the arbitration clause at issue), even though plaintiffs could not have learned of the existence of those terms unless, prior to executing the download, they had scrolled down the webpage to a screen located below the download button. We agree with the district court that a reasonably prudent Internet user in circumstances such as these would not have known or learned of the existence of the license terms before responding to defendants' invitation to download the free software, and that defendants therefore did not provide reasonable notice of the license terms. [**4] In consequence, plaintiffs' bare act of downloading the software did not unambiguously manifest assent to the arbitration provision contained in the license terms.
We also agree with the district court that plaintiffs' claims relating to the software at issue -- a "plug-in" program entitled SmartDownload ("SmartDownload" or "the plug-in program"), offered by Netscape to enhance the functioning of the separate browser program called Netscape Communicator ("Communicator" or "the browser program") -- are not subject to an arbitration agreement contained in the license terms governing the use of Communicator. Finally, we conclude that the district court properly rejected defendants' argument that plaintiff website owner Christopher Specht, though not a party to any Netscape license agreement, is nevertheless required to arbitrate his claims concerning SmartDownload because he allegedly benefited directly under SmartDownload's license agreement. Defendants' theory that Specht benefited whenever visitors employing SmartDownload downloaded certain files made available on his website is simply too tenuous and speculative to justify application of the legal doctrine that requires a nonparty [**5] to an arbitration agreement to arbitrate if he or she has received a direct benefit [*21] under a contract containing the arbitration agreement.
We therefore affirm the district court's denial of defendants' motion to compel arbitration and to stay court proceedings.
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306 F.3d 17 *; 2002 U.S. App. LEXIS 20714 **; 48 U.C.C. Rep. Serv. 2d (Callaghan) 761
CHRISTOPHER SPECHT, JOHN GIBSON, MICHAEL FAGAN, SEAN KELLY, MARK GRUBER, and SHERRY WEINDORF, individually and on behalf of all others similarly situated, Plaintiffs-Appellees, v. NETSCAPE COMMUNICATIONS CORPORATION and AMERICA ONLINE, INC., Defendants-Appellants.
Subsequent History: Costs and fees proceeding at, Application denied by Specht v. Netscape Communs. Corp., 2005 U.S. Dist. LEXIS 46787 (S.D.N.Y., Apr. 20, 2005)
Prior History: [**1] Plaintiffs in this action brought suit, individually and on behalf of all others similarly situated, against a provider of computer software programs and its corporate parent, alleging that a "plug-in" software program, created by defendants to facilitate Internet use and made available on defendants' website for free downloading, invaded plaintiffs' privacy by clandestinely transmitting personal information to the software provider when plaintiffs employed the plug-in program to browse the Internet. Defendants moved to compel arbitration and to stay court proceedings, arguing that plaintiffs' claims were subject to an arbitration provision contained in license terms that plaintiffs allegedly had accepted when they downloaded the plug-in program. The United States District Court for the Southern District of New York (Alvin K. Hellerstein, J.) denied the motion. We affirm, holding that (1) plaintiffs neither received reasonable notice of the existence of the license terms nor manifested unambiguous assent to those terms before acting on the webpage's invitation to download the plug-in program; (2) plaintiffs' claims relating to the plug-in program are not subject to a separate arbitration [**2] agreement contained in license terms governing use of defendants' Internet browser software; and (3) the legal doctrine that requires nonsignatories to an arbitration agreement to arbitrate when they have received a direct benefit under a contract containing the arbitration agreement does not apply to a website owner who allegedly benefited when users employing the plug-in program downloaded files from the website.
Specht v. Netscape Communs. Corp., 150 F. Supp. 2d 585, 2001 U.S. Dist. LEXIS 9073 (S.D.N.Y., 2001)
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