Court Addresses Class Action Waiver in Commercial Contract

Plaintiff advertisers commenced a class action suit against Yahoo!, alleging that Yahoo! breached its advertising agreement in numerous ways. For example, plaintiffs alleged that Yahoo! promised to place plaintiffs' advertisements in a way that targeted plaintiffs' likely customers but, instead, Yahoo! placed ads in an untargeted way.

Yahoo! moved for summary judgment, pointing to a class action waiver in its standard form advertising agreement. The plaintiffs argued that this class action waiver was unenforceable. Yahoo! argued that the Discover Bank line of cases did not apply because the advertisement agreement was not a consumer contract but, rather, between two commercial entities. The District Court for the Central District of California held that "although Discover Bank's holding addresses only consumer contracts, nothing in that decision forecloses the possibility that a class action in a commercial contract may be deemed unconscionable under certain circumstances." The court then denied Yahoo!'s motion for summary judgment, holding that genuine issues of material fact existed concerning the enforceability of the class action waiver.

In re Yahoo! Litigation, __ FRD __, 2008 WL 1882786 (C.D. Cal. 2008)

[Meredith R. Miller]