It’s Hard to Bind Former Subscribers to TOS Amendments–Brooks v. WarnerMedia
This is a VPPA case over Meta Pixels. 🙄🙄🙄 Everyone agrees this lawsuit will be going to arbitration per the HBO Max TOS. However, in 2022, HBO Max swapped arbitration providers from AAA to NAM. The opinion doesn’t clearly explain HBO Max’s motivation for the swap. It implies that NAM had more defendant-favorable terms, including procedural hurdles to mass-arbitration (it stages them in batches) and a provision that may shift fees to subscribers in some circumstances. Still, it would have been helpful to know more about HBO Max’s motivation for the swap.
HBO Max is now trying to get the case sent to NAM instead of AAA. The arbitration service provider swap required a TOS amendment. Despite an all-out effort, HBO Max wasn’t able to convince the judge that its amendment worked. The court orders more discovery to sort through it.
The TOS Amendment
HBO Max made purported TOS amendment switching from AAA to NAM on December 20, 2022. That day, HBO Max emailed all current and former subscribers with a subject line “HBO Max has updated Terms of Use” and the following text:
Updated Terms of Use
HBO Max has updated our Terms of Use (“Terms”). The updates contain important information about your legal rights, including updates to the arbitration clause and other rules and procedures that govern the resolution of disputes between you and HBO Max. The updates won’t affect the way you use HBO Max.
These updated terms will apply as of today for new subscribers. For prior and existing subscribers, like you, the terms apply beginning on the date your subscription renews or 30 days from today, whichever comes first. You can review the new updated Terms here.
Your continued subscription to and/or access of HBO Max will confirm that you have reviewed and agreed to the updated Terms of Use.
Thank you for being part of HBO Max!
A visual representation of the notification:
In addition to the email, HBO Max displayed a pop-up notification to site visitors, saying:
We’ve updated our Terms of Use.
These updates contain important information about your legal rights, including an updated arbitration clause. By continuing to subscribe to and/or access HBO Max, you agree to be bound by the updated Terms. Read the updated Terms at www.hbomax.com/termsof-use/en-us.
A visual representation of the pop-up:
HBO Max could have easily turned the pop-up into a mandatory clickthrough screen, but this court would not have required that extra step.
On May 23, 2023, HBO Max switched web platforms (to become just Max). Subscribers were forced to login, after which they saw “a stand-alone screen that contained a hyperlink to the new Max terms of use” designating NAM as the arbitration service provider. The standalone screen indicated that “[b]y selecting ‘Start Streaming’ you agree to the [May 2023 Terms] and acknowledge you have read the Privacy Policy.” To continue, subscribers had to select “start streaming.”
The court says “each Petitioner used the HBO Max website after they received notice of the December 2022 Terms to, at a minimum, review the December 2022 Terms.”
In July 2023, the plaintiffs initiated a mass arbitration demand (1,030 requests) at AAA. HBO Max responded that NAM was the only arbitration service it was using.
Did the TOS Amendment Work?
(Note: The court never discusses the amendment provision in the original TOS. Instead, it analyzes the TOS amendment as if HBO Max were forming a brand-new contract–but clearly that’s not the case because the parties agreed to the AAA arbitration).
The court says: “a contract may be formed where users receive sufficient inquiry notice of a website’s terms of use via email and thereafter continue to use the site” (cite to Sadlock v. Disney and others. Elsewhere, the court references the Schnabel opinion). The battle is over the purported assent.
Viewing the 2022 Terms. HBO Max argued that the subscribers assented to the amended TOS by clicking over to read those terms, which constitutes a “use” of its website. This sounds like a failed LSAT logic game, and the court doesn’t buy it:
To find that Petitioners assented to the December 2022 Terms by clicking the hyperlink in the NAM Email, then, would be to find that Petitioners assented to the December 2022 Terms before they were even able to read them (and long before the terms purportedly came into effect).
Compounding the problems, HBO Max claimed that the NAM swap was effective the moment it posted the terms to its website, even though the language expressly said it wouldn’t be effective for at least 30 days.
This argument was never a good one, but I guess it was the only chance for binding some of the former subscribers? Three of the plaintiffs didn’t interact directly with HBO Max after December 20, 2022 other than to view the TOS, so putatively they are governed by the AAA version of the TOS.
As a last-ditch effort, HBO Max claims these plaintiffs used HBO Max through other people’s accounts. The court orders discovery to see if HBO Max can back up the facts.
Maintaining a Subscription. One plaintiff kept an HBO Max subscription through June 1, 2023. However, she
neither logged into her account, nor streamed any content, nor clicked a button “accepting” the December 2022 Terms, nor made any payments to Respondent following her receipt of the NAM Email; that is, she took no action at all. For this reason, the Court finds that Respondent has not demonstrated that Ortiz is bound by the December 2022 Terms.
Logging In. One plaintiff kept an HBO Max subscription through May 27, 2023 but only logged into her inactive account on June 22, 2023. The court says she would be bound by the new terms only if she clicked the “start streaming” button, a fact question that gets sent to discovery.
Rejection Letters. The plaintiffs sent letters to HBO Max within 30 days of the purported amendment from AAA to NAM. The court says the letters were inconsequential. (Some TOS amendments give consumers a period of time to opt-out of the amendments, but the court doesn’t mention that here).
Unconscionability
The TOS amendment was a contract of adhesion, but the subscribers got sufficient notice of the terms. The court also says that it’s OK HBO Max swapped arbitration service providers after the legal claims had accrued. The court wasn’t bothered by the differences between AAA and NAM’s rules.
Implications
Choosing Among Arbitration Services. I don’t keep up with the latest developments in arbitration services’ policies, but surely they are rapidly iterating their policies to address the risk of weaponization of mass arbitration demands. It’s interesting that HBO Max was so convinced of NAM’s superiority that it’s fighting vigorously to pick NAM over AAA. I’d welcome your thoughts about which services are handling mass arbitration demands the best.
Mixed Arbitration Results. This ruling sets up the possibility that some HBO Max subscribers will be governed by AAA and others by NAM. What then? Will the parties proceed in the two different venues simultaneously? Will they work out a deal to pick one, even if it’s suboptimal for one side? What a mess.
What Could HBO Max Have Done Better? The court omitted the most crucial piece of information: how HBO Max had promised subscribers it would amend the TOS. Without knowing that, we don’t know what options HBO Max had to make the amendment. (Of course, if they didn’t comply with their own terms, then they have bigger problems).
With respect to current subscribers, HBO Max seemed to do OK. (I’m sure we could nitpick). However, services always struggle with getting departed subscribers onto new TOS terms. If the former subscribers took no affirmative action, the court isn’t willing to bring them along. (Again, I wonder if the prior TOS amendment provision contemplated ways to uplevel the former subscribers). Having classes of subscribers stuck on different generations of TOS terms is a very, very hard outcome to avoid.
Case Citation: Brooks v. WarnerMedia Direct, LLC, 2024 WL 3330305 (S.D.N.Y. July 8, 2024).