February 22, 2023

Ninth Circuit Upholds Dismissal of Autorenewal Lawsuit, Finds Disclosure, Consent, and Acknowledgment Sufficient

3 min

In January, the Ninth Circuit agreed with a California district court's finding that a software company's autorenewal practices did not violate California's autorenewal law. The decision reflects a win for companies offering automatic renewal services despite the onslaught of lawsuits and challenges by the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) on negative option offers due to so-called dark patterns.

In 2021, the plaintiff filed a case against TeamViewer, which sells remote-access software that allows control, management, monitoring, and repair of computers and other devices remotely. In the complaint, the plaintiff alleged that he purchased a year-long subscription, which automatically renewed after one year at a higher price.

The district court reviewed TeamViewer's website enrollment funnel and post-purchase acknowledgments and found that the company did not, as a matter of law, violate California's autorenewal law (ARL). First, it found a disclosure on the "checkout summary" sufficient. Directly above the "Continue to Payment" button, the disclosure stated (partially in bold): "Your subscription will automatically renew every 12 months, unless you terminate your contract at least 28 days before the end of the initial term or any renewal term."

Second, the court held that the company obtained adequate consent because the plaintiff checked a box stating that his order was subject to the company's end user license agreement (which was hyperlinked) and completed his purchase after being presented with the bolded automatic-renewal warning on the "Summary" page. (Unfortunately, the court did not clarify whether either of these alone would constitute sufficient consent.)

Next, the court found defendant's post-purchase acknowledgment sufficient the company sent the plaintiff an invoice reminding the plaintiff in bold font that "The license term of the subscription is automatically extended for another 12 months if not cancelled in written form 28 days prior to expiry." It sent another two months before plaintiff's renewal, informing the plaintiff of the renewal and providing a link for him to cancel.

The Ninth Circuit agreed, finding the plaintiff was on notice of the automatic renewal and terms of the autorenewal offer; and he was informed of the software subscription price, the price increase upon renewal, the cancellation policy, and the cancellation process. The Ninth Circuit agreed that the plaintiff consented to the terms of the purchase, which were presented in a clear and conspicuous manner, and authorized TeamViewer US to renew his software subscription automatically.

(Interestingly, the plaintiff also brought a claim for violation of California's Consumer Privacy Act, alleging that the company stored his information in a "nonencrypted and nonredacted fashion." The court rejected these claims.)

The case provides helpful authority for companies whose autorenewal practices are challenged under California law, as well as guidance on ways to create enrollment paths and user experiences in a way to reduce the risk of a challenge.

If you would like to learn more about this case (including images that the court reviewed) or other recent cases involving automatic renewal programs, join Ellen Berge, Shahin Rothermel, and Ari Rothman for a webinar discussing these topics on March 1, 2023 from 2:00 to 3:00 p.m. ET. Click here to register.

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