Related Industries
Related Practices
Case Studies
Duane Morris Helps eBay Define Emerging Internet Law
Due to its revolutionary business model, eBay is a pioneer as to Internet law. When an eBay seller sued the company for fraud and breach of contract, among other causes of action, there was little precedent relating to retracted bids on an online auction site. To defend itself from these claims, eBay turned to Duane Morris.
In Bergraft v. eBay, the plaintiff accused eBay of consumer fraud, common law fraud, misrepresentation, breach of contract and breach of the covenant of good faith and fair dealing. The plaintiff placed its luxury resort for sale on eBay, with a published minimum bid asking of $1 million, and an undisclosed minimum acceptance price of $3.9 million. Bidding on the resort reached $3.9 million, and the seller's previously undisclosed reserve price was revealed. But when the winning bidder retracted its bid, the auction did not conclude to the plaintiff's satisfaction. The next highest bid was substantially less than the plaintiff thought its property was worth, and no other bids were offered. The resort was not sold, and the seller felt it had suffered damages for which eBay was liable.
Eric J. Sinrod, a partner in Duane Morris' San Francisco office and author of weekly cyberlaw columns for CNET News.com and findlaw.com, successfully represented eBay and won a complete dismissal of the lawsuit. Sinrod's argument focused on eBay's user agreement and the Communications Decency Act (CDA). eBay's user agreement, which the plaintiff had executed, refuted the plaintiff's claims. In particular, eBay's governing rules stated that eBay was only a forum for bringing buyers and sellers together, and that eBay was not responsible in any disputes that arose between buyers and sellers. Further, real estate transactions such as the seller's resort property auction are subject to a non-binding bid policy, unlike other kinds of auctions hosted on eBay.
Beyond eBay's user agreement, Sinrod looked to apply existing federal law in eBay's defense. Sinrod argued that the immunity provisions of the CDA applied to eBay. The provisions afford Internet service providers protection from having to regulate or police activities on their sites because it is not possible to reasonably do so. Ensuring that no users were improperly retracting bids could require eBay to instantaneously make a determination as to the truthfulness of communications coming from 50 million users regarding 11 million items available for bid daily, clearly an impossibility.
The Sussex County Superior Court of New Jersey agreed with both of Sinrod's arguments. Dismissing the lawsuit, the Court observed that "sellers suffer no harm when users retract non-binding bids because such bids never were binding or enforceable in the first place. [N]on-binding bids are simply a way for interested buyers and sellers to exchange contact information for further discussions about the sale item."
Our success on eBay's behalf is an example of Duane Morris helping a new technology company meet the challenges that arise when an emerging technology and a new business model meet existing laws.
