9th Circuit asks state high court guidance in bankruptcy lawyer’s suit

The 9th U.S. Circuit Court of Appeals asked the state Supreme Court on Thursday to take up a question that could be significant for businesses that sell goods and services online: What must an online consumer do to prove standing to file a discrimination claim under California's Unruh Civil Rights Act?

The case began when San Francisco bankruptcy attorney Robert E. White tried to sign up online for credit card services through Square Inc. The company provides products and services that allow vendors to take credit card payments without having their own accounts with major credit card companies. White v. Square Inc., 2018 DJDAR 5502.

White said he then read the company's online user agreement, which stated that by clicking yes, the signer confirms they "will not accept payments in connection" with business activities that include "bankruptcy attorneys or collection agencies."

White contacted an attorney with the claim that the user agreement violated the Unruh Act, which has been found to bar discrimination based on a person's type of employment.

Square got the claim dismissed by a district court judge by arguing that because White never followed through with his attempt to sign up for services, he lacked standing. Attorneys for Square cited Surrey v. TrueBeginnings, 168 Cal. App. 4th 414, 418 (2008), which found "mere awareness of" discriminatory policies is "insufficient to confer standing."

This meshes with other case law cited in the order finding "a plaintiff cannot sue for discrimination in the abstract" and the offending policies must be "applied to the plaintiff." Such rules are why brick-and-mortar discrimination cases involve plaintiffs who actually tried to purchase a service.

Arguing before the 9th Circuit on behalf of Square, attorney Colleen Bal told 9th Circuit judges the terms cover behavior, not status.

"This case doesn't say you have to affirm that you're not a bankruptcy lawyer," the Wilson Sonsini Goodrich & Rosati PC partner told the panel. "The terms ... restrict certain types of transactions."

But Myron Moskovitz, who argued for White, said his client faced another hurdle that doesn't typically come up in brick-and-mortar cases: Square's user agreement.

That agreement must be taken into account in determining whether a plaintiff legally "attempted" to buy a service, the Moskovitz Appellate Team partner said.

The terms require the signer to affirm they are not make any "fraudulent undertaking." They also state the signer waives "any right to have your case decided by a jury" and "any right to participate in a class action against Square."

This combination of factors placed White in an unreasonable legal bind, Moskovitz said. Just signing up would violate the terms of the agreement and force him into an expensive, hidden legal process, he argued.

"He would have to lie about his intent in order to sign up," Moskovitz said. "If they wanted to, they could say, 'No blacks, no Jews, no women.' They could say whatever they want because nobody would have standing."

As noted in White's complaint, another bankruptcy firm already tried signing up. It received a letter from Square stating that "signing up for Square's service with the intent to violate the applicable terms of service would be fraudulent." When it attempted to sue for discrimination, the court ordered arbitration. Shierkatz RLLP v. Square Inc., 15-545398 (S.F. Super. Ct., filed April 17, 2015).

Moskovitz added that once his side can show standing, proving the terms violate the Unruh Act should be fairly straightforward. In Marina Point Ltd. v. Wolfson, 30 Cal. 3d 721, 725 (1982) and subsequent cases, his team argued, California courts have found "the Unruh Act prohibits arbitrary occupational discrimination."

"Now it's up to the California Supreme Court," Moskovitz said. "I suspect they will [take the case] because it's such an interesting question."

Bal did not return a call seeking comment. Square did not reply to an email.