GoDaddy Mismanages Its User Agreements–Crabb v. GoDaddy

By Eric Goldman

Crabb v., Inc., 2:10-cv-00940-NVW (D. Ariz. Sept. 27, 2011)

As online user agreements become longer and more byzantine, it’s become common for a “master” user agreement to incorporate numerous other documents by reference. For example, stylistically, many websites put the user agreement and the privacy policy into two separate documents and then incorporate the privacy policy into the user agreement by reference. In most cases, the privacy policy doesn’t have to exist separate from the user agreement; but it’s so common nowadays that I bet many websites don’t consider any other approaches.

Having legal terms sprinkled throughout different documents on the site is legally acceptable if–and only if–the documents link together properly. The flagship online contracts case, Specht v. Netscape, is a good example of how this linking process can fail (it would have been trivially easy for the drafters to cross-link the EULAs in that case). Here, GoDaddy gets a hard lesson in its failure to properly cross-reference documents, and its mistake could lead to a cash payment.

This case is another lawsuit against a registrar for parking ads on undeveloped domain names. Personally, I think it’s scummy of registrars to do this because it sets up significant conflicts of interest between registrars and registrants. But if the registrant is told that their undeveloped domain name will be used for ad parking and the registrant can avoid this outcome, then caveat emptor, and may the best registrar win in the marketplace.

In this case, GoDaddy claims it told registrants about the ad parking in its “Universal Terms of Service,” which purported to incorporate by reference a “Parked Page Service Agreement.” However, the cross-reference in the TOS said the parking agreement applied “only to customers who have purchased those referenced Services.” But the registrants didn’t “purchase” the ad parking service; rather, GoDaddy imposed it on them for free (or, more precisely, against their will). With the botched cross-reference, the contracts the registrants actually agreed to didn’t adequately disclose the ad parking. As a result, GoDaddy can’t claim the registrants contractually authorized the parking. GoDaddy still has plenty of other defenses, but it must sting to lose its preferred defense–especially when it had complete control over the situation. WHOOPS.