Question: HARRIS v. BLOCKBUSTER, INC., 622 F. SUPP. 2D 396 (N.D. TEX. APR. 15, 2009)
FACTS Blockbuster Online is a service that allows customers to rent movies through the Internet. Blockbuster entered into a contract with Facebook that caused the movie rental choices of Blockbuster customers to be disseminated on the customers' Facebook accounts to their Facebook friends. Harris argued that this practice violated the Video Privacy Protection Act, which provides for liquidated damages of $2,500 per violation. In response to Harris' class action lawsuit, Blockbuster tried to invoke an arbitration provision in its "Terms and Conditions" document. This provision stated, in relevant part, that: "[a]ll claims, disputes or controversies ... will be referred to and determined by binding arbitration." The provision also provided that users of the service waived the right to file a class action. Before a customer could join Blockbuster Online, the customer was required to click on a box certifying that the customer had read and agreed to the Terms and Conditions. Under Texas law, a contract must be supported by consideration.
If there is no consideration, the contract is illusory and cannot be enforced. Harris argued that the arbitration clause was illusory because Blockbuster reserved the right to modify the Terms and Conditions, including the arbitration provision, "at its sole discretion" and "at any time," and provided that such modifications will be effective immediately upon being posted on the site. Under the heading "Changes to Terms and Conditions," the contract further stated: You agree to review these Terms and Conditions of Use periodically and your continued use of this Site following such modifications will indicate your acceptance of these modified Terms and Conditions of Use. If you do not agree to any modification of these Terms and Conditions of Use, you must immediately stop using this Site. DECISION The court concluded that the Blockbuster arbitration provision was illusory because there was nothing in the Terms and Conditions that prevented Blockbuster from unilaterally changing any part of the contract other than providing that such changes would not take effect until posted on the website. In particular, the court noted, "there is nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication." Thus, because Blockbuster had in no way limited its ability to unilaterally modify all rules regarding dispute resolution, the arbitration clause was illusory and unenforceable.