A recent decision by the United States District Court in Robert E. White v. Square, Inc., (N.D. Cal. 2016) provides an interesting discussion of the standing requirements for the assertion of discrimination claims against online businesses pursuant to the California Unruh Civil Rights Act.

Key Facts

The defendant provided point of sale processing of debit and credit card transactions on smartphones and computer tablets. The service allowed individuals and businesses to accept electronic payments without directly creating and maintaining merchant accounts. In order to subscribe to these services, users were required to create an online account pursuant to a seller agreement, which required specific confirmation that no payments would be processed for certain business activities, including transactions with bankruptcy attorneys or collection agencies engaged in the collection of debt.

The plaintiff, a bankruptcy attorney, filed a class action suit against the card processor for unlawful discrimination after learning of the specific prohibition against bankruptcy attorney transactions. The class action complaint was brought under California’s Unruh Civil Rights Act, which generally prohibits arbitrary occupational discrimination.

The bankruptcy attorney did not attempt to subscribe to the service by creating an online account, nor was he denied the service after attempting to process payments for his bankruptcy services. Instead, the attorney alleged that he was dissuaded from seeking to become a customer based on his awareness of the card processor’s prohibition against the processing of payments to bankruptcy attorneys.

Procedural History

The suit was filed after the court had dismissed an earlier suit brought by a different bankruptcy law firm. In that earlier suit, the law firm had signed up for the card processing service, but the account was terminated after the card processor learned that the firm was violating the service agreement. The court dismissed that suit and sent the parties to arbitration because the online subscriber agreement contained an arbitration clause requiring the parties to arbitrate their dispute.

In the new suit, the bankruptcy attorney alleged that he was a personal friend and colleague of the two partners of the law firm that had commenced the first action. He further alleged that he had read the court’s file for the first action and learned of the card processor’s allegedly discriminatory practices. He also alleged that he had visited the processor’s website on several occasions with the intent of subscribing, but refused to click on the link to open an account based on his knowledge of the processor’s prohibition against bankruptcy attorney transactions..

California Unruh Civil Rights Act

The suit was filed pursuant to the California Unruh Civil Rights Act, which guarantees “full and equal accommodations, advantages, facilities, privileges, or services in all business establishments” regardless of race, color, religion, ancestry, national origin, disability, medical condition, marital status or sexual orientation. The Act also specifically provides that no business establishment shall discriminate against or refuse to contract with persons who have one or more of these characteristics. Courts have interpreted this Act as also generally prohibiting any arbitrary occupational discrimination.

The Act imposes actual damages for each offense, along with possible treble damages, but not less than $4,000 for each violation, plus attorney’s fees.

Key Arguments

The processor moved to dismiss the new suit arguing that the attorney was a mere bystander who had not suffered any asserted discrimination because he had not attempted to create an online account, and thus was never rejected or terminated pursuant to the allegedly discriminatory policy. The processor also alleged that the suit was an improper attempt to sidestep the arbitration requirement which was a stated term of the subscriber agreement that must be executed as a condition to creating the online account.

The bankruptcy attorney urged the court to reject the processor’s “no click/no standing” defense asserting that he had at least attempted to subscribe to the card processor’s service within the meaning of the law. The attorney also argued that that he should not be required to engage in the “futile gesture” of subjecting himself to the actual discrimination, i.e. refusal of service or termination of the online account, as a condition to bringing the suit.

Court’s Ruling

The court dismissed the suit for lack of standing after finding that the attorney had not suffered a cognizable injury under the statute because he had not tendered the purchase price to the processor and was not refused service. The court followed a California state appellate decision upholding the dismissal of discrimination claims by a male plaintiff against an internet dating service that offered certain free services to woman, but not to men, after finding that the male plaintiff lacked to standing to sue because he had never subscribed to the dating service.

The court also rejected application of the “futile gesture rule” to California’s Unruh Act.

The bankruptcy attorney has recently moved for reconsideration based on certain newly discovered evidence.