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Specht v Netscape Communications Corp 306 F3d 17 2nd Cir 2002

Specht v Netscape Communications Corp 306 F3d 17 2nd Cir 2002

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Published by: Sam Han on Oct 23, 2008
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17
SPECHT v. NETSCAPE COMMUNICATIONS CORP.
Cite as 306 F.3d 17 (2nd Cir. 2002)
Appendix
—Continued VII. For any child placed and cared forin any home for children or healthcare facility, the sending districtshall make payments to the re-ceiving district
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Christopher SPECHT, John Gibson, Mi-chael Fagan, Sean Kelly, Mark Gru-ber, and Sherry Weindorf, individuallyand on behalf of all others similarlysituated, Plaintiffs–Appellees, v.NETSCAPE COMMUNICATIONS COR-PORATION and America Online, Inc.,Defendants–Appellants.Docket Nos. 01–7870, 01–7872, 01–7860.
United States Court of Appeals,Second Circuit. Argued: March 14, 2002.Decided: Oct. 01, 2002.Internet users and website operatorbrought putative class actions against com-puter software producer, alleging that‘‘plug-in’’ software program, created to fa-cilitate Internet use and made available onproducer’s website for free downloading,invaded plaintiffs’ privacy by clandestinelytransmitting personal information to thesoftware provider when plaintiffs em-ployed the plug-in program to browse theInternet. Defendants moved to compel ar-bitration and to stay court proceedings.The United States District Court for theSouthern District of New York, 150F.Supp.2d 585, Alvin K. Hellerstein, J.,denied motion. Defendants appealed, andappeals were consolidated. The Court of  Appeals, Sotomayor, Circuit Judge, heldthat: (1) users did not assent to terms of software license, including arbitrationclause; (2) claims relating to plug-in pro-gram were not subject to arbitrationagreement contained in license terms gov-erning use of separate browser software;and (3) legal doctrine requiring nonsigna-tories to arbitration agreement to arbitrate when they have received direct benefit un-der contract containing arbitration agree-ment did not apply to require website own-er to arbitrate. Affirmed.
1. Arbitration
O
23.25
District court’s denial of motion tocompel arbitration is reviewed de novo.
2. Arbitration
O
23.25
Determination of whether partieshave contractually bound themselves to ar-bitrate a dispute, a determination involvinginterpretation of state law, is legal conclu-sion subject to de novo review; however,findings upon which that conclusion isbased are factual and thus may not beoverturned unless clearly erroneous.
3. Arbitration
O
23.25
District court’s determination of scopeof arbitration agreement is reviewed denovo.
4. Arbitration
O
23.25
 Whether party may be compelled toarbitrate as result of direct benefits thathe or she allegedly received under contractentered into by others is issue of arbitra-bility that is reviewed de novo.
5. Arbitration
O
23.13
Court may not compel arbitration un-til it has resolved question of very exis-
 
18
306 FEDERAL REPORTER, 3d SERIES
tence of contract embodying the arbitra-tion clause.
6. Arbitration
O
1.1
 Arbitration is matter of contract andparty cannot be required to submit to arbi-tration any dispute which he has notagreed so to submit.
7. Arbitration
O
23.14
Unless parties clearly provide other- wise, question whether agreement createsduty for parties to arbitrate particulargrievance is issue for judicial determina-tion.
8. Arbitration
O
2.2Federal Courts
O
403
In deciding whether parties agreed toarbitrate certain matter, court should gen-erally apply state-law principles to issue of contract formation.
9. Federal Courts
O
612.1
 Appellant could not argue for firsttime on appeal that district court erred indeciding question of contract formation asa matter of law.
10. Federal Courts
O
611
 Appellate court will not consider issueraised for first time on appeal.
11. Federal Courts
O
698.1
District court had ample record todecide question of reasonable notice andobjective manifestation of assent as a mat-ter of law, including affidavits and exten-sive deposition testimony by each namedplaintiff, numerous declarations by counseland witnesses, dozens of exhibits, oral ar-gument supplemented by computer dem-onstration and additional briefs followingoral argument.
12. Contracts
O
15
Under California law, in order to be acontract, transaction requires manifesta-tion of agreement between the parties.
13. Contracts
O
15
Under California law, mutual manifes-tation of assent, whether by written orspoken word or by conduct, is touchstoneof contract.
14. Sales
O
1(1)
Sale of tangible goods over the Inter-net is governed by Article 2 of UniformCommercial Code (UCC). U.C.C. § 2–101et seq.
15. Contracts
O
22(1)
Under California law, offeree, regard-less of apparent manifestation of his con-sent, is not bound by inconspicuous con-tractual provisions of which he is unaware,contained in document whose contractualnature is not obvious.
16. Arbitration
O
6.2
Under California law, principle of knowing consent applies with particularforce to provisions for arbitration.
17. Arbitration
O
6.2
Under California law, if party wishesto bind in writing another to agreement toarbitrate future disputes, such purposeshould be accomplished in way that eachparty to arrangement will fully and clearlycomprehend that agreement to arbitrateexists and binds parties thereto.
18. Contracts
O
22(1)
California contract law measures as-sent by objective standard that takes intoaccount both what offeree said, wrote, ordid and transactional context in which of-feree verbalized or acted.
19. Arbitration
O
6.2
Under California law, Internet usersdid not agree to be bound by software’slicense terms, which included arbitrationclause, by acting upon invitation to down-load software free from producer’s web-
 
19
SPECHT v. NETSCAPE COMMUNICATIONS CORP.
Cite as 306 F.3d 17 (2nd Cir. 2002)
page, even though notice of existence of license terms was on next scrollablescreen; reasonably prudent Internet user would not have known or learned of exis-tence of license terms before responding toinvitation to download free software. West’s Ann.Cal.Civ.Code § 1589.
20. Notice
O
6
‘‘Inquiry notice’’ is actual notice of circumstances sufficient to put prudentman upon inquiry.
See publication Words and Phras-es for other judicial constructionsand definitions.
21. Contracts
O
93(2)
Under California law, party cannotavoid terms of contract on ground that heor she failed to read it before signing.
22. Contracts
O
22(1)
Under California law, when writingdoes not appear to be a contract and termsare not called to attention of recipient, nocontract is formed with respect to the un-disclosed term.
23. Arbitration
O
23.25
Scope of arbitration agreement is le-gal issue subject to de novo review.
24. Arbitration
O
7.1
 Any doubts concerning scope of arbi-trable issues should be resolved in favor of arbitration.
25. Arbitration
O
7.1
 Although Federal Arbitration Act(FAA) does not require parties to arbitrate when they have not agreed to do so, arbi-tration is indicated unless it can be said with positive assurance that arbitrationclause is not susceptible to interpretationthat covers asserted dispute. 9 U.S.C.A.§ 1 et seq.
26. Arbitration
O
23.10
 Where scope of arbitration agreementis broad, there arises presumption of arbi-trability.
27. Arbitration
O
7
In determining whether particularclaim falls within scope of arbitrationagreement, Court focuses on factual alle-gations in complaint rather than legalcauses of action asserted; if those allega-tions ‘‘touch matters’’ covered by agree-ment, claims must be arbitrated.
28. Arbitration
O
7.5
Internet users’ assent to license termsgoverning use of Internet browser soft- ware, which included arbitration clause,did not require them to arbitrate theirclaims regarding separate plug-in programoffered by software producer to enhancefunctioning of the browser program; un-derlying dispute involved matters collater-al to license agreement, allegations did nottouch matters covered by agreement,agreement governed disputes concerningbrowser programs only, not disputes con-cerning plug-in programs, and licenseterms included merger clause.
29. Evidence
O
397(2)
Merger or integration clauses are rec-ognized by California courts as means of excluding prior or contemporaneous parolevidence from scope of contract.
30. Arbitration
O
7.3
Under California law, theory thatowner of website visited by users of plug-in software which enhanced functioning of separate browser program benefited when-ever visitors downloaded certain files madeavailable on the website was too specula-tive and tenuous to require owner, a non-signatory to software license containingarbitration agreement, to arbitrate hisclaim that producer of the software elec-tronically spied on his website when such

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