eBay Escapes Suit Over Automatic Bidding Service (Law360)

By Juan Carlos Rodriguez

A California federal judge on Monday dismissed a proposed class action alleging eBay Inc.'s automatic bidding service unfairly limits sellers' earning potential when they sell items on the website, saying the plaintiff misinterpreted eBay's user agreement.

Marshall Block alleged in his December complaint that eBay intentionally interferes with sellers' prospective economic advantage, breaches contract with users and violates California's Unfair Competition Law through its automatic bidding service.

EBay hosts online auctions that allow buyers to bid either by personally monitoring the auction or using eBay's automatic bidding system.

With automatic bidding, the buyer tells eBay the highest price he or she is willing to pay. Starting at the item's listed price, the automated system incrementally increases the buyer's bid as needed to maintain his or her status as high-bidder. The bids grow in increments ranging from 5 cents to $100, depending on the item's price, according to U.S. District Judge Charles R. Breyer's order granting eBay's motion to dismiss.

"Block says that this system transforms eBay into a buyer's agent because the buyer tells eBay how much he is willing to pay, and then allows eBay to bid on his behalf. This transformation, Block contends, is directly contrary to provisions of the user agreement with which eBay governs buyer and seller conduct," Judge Breyer said.

Block focused his arguments on the user agreement, which includes a "limitation of liability" section in which eBay states that "we are not involved in the actual transaction between buyers and sellers." Another section provides that "no agency, partnership, joint venture, employee-employer or franchiser-franchisee relationship is intended or created by this agreement," the judge said.

"In Block's view, those two provisions constitute express promises by eBay," Judge Breyer said.

The judge said the user agreement only binds the user, not eBay.

"When read in context, it is clear that eBay has not made a binding promise to avoid involvement in user transactions. Neither is eBay bound by the agreement's disclaimer against establishing agencies or partnerships," the judge said.

He said the declarations in the user agreement are only to limit eBay's liability.

"Likewise, the nonagency provision lacks any indication that it is meant to be an enforceable promise. Had the provision read, for example, ‘eBay shall not act as any user's agent,' Block might have an argument," Judge Breyer said. "This statement simply asserts that the agreement does not, or was not meant to, establish any agency. It therefore does not bind eBay."

The judge said the statements on which the entire lawsuit turns are not "worded consistently with its being intended to be enforceable."

As for Block's Unfair Competition Law claims, the judge said Block failed to state claim for interference with prospective economic advantage and failed to prove false advertising and fraud theories.

The judge tossed Block's interference with prospective economic advantage claims as well. He said he agreed with eBay that a breach of contract may not constitute the predicate "wrongful act" needed to support a tortious interference claim.

Block's attorney did not immediately respond to a request for comment Monday.

Block is represented by Roy A. Katriel of the Katriel Law Firm.

EBay is represented by Benjamin F. Chapman of Cooley LLP.

The case is Block v. eBay Inc., case number 5:11-cv-06718, in the U.S. District Court for the Northern District of California.

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