The fundamental role of an attorney is to represent and advise a client. Throughout any representation, an attorney, by virtue of his or her education and experience, will act on behalf of a client to navigate complex legal issues that a client may not be equipped to handle, and it is often essential for an attorney to make decisions and come to agreements with adversaries to ensure the best possible outcome for a client.

But how far does this representation go, and how far is too far outside the scope of authority granted to counsel? Can an attorney’s assent to an online terms of service agreement bind his client? Can an employee’s absent-minded internet browsing bind a company to these agreements? According to the Ninth Circuit, the answer is not necessarily no. 

In two recent cases, based on nearly identical facts, the Ninth Circuit faced the question of whether a plaintiff could be compelled to arbitrate because its attorney had previously assented to the defendant’s terms of service agreement while conducting a pre-suit investigation on the defendant’s website.

In both cases, plaintiffs sued PeopleConnect, Inc. claiming that PeopleConnect misappropriated the plaintiffs’ names and likenesses in its Classmates.com school yearbook database. Prior to the filing of the plaintiffs’ lawsuits, their attorneys each created a Classmates.com account and searched for the plaintiffs on the site. In creating the account, the attorneys agreed to Classmates.com’s terms of service, which contained an arbitration provision. 

PeopleConnect moved to send plaintiffs’ lawsuits to arbitration, arguing that the arbitration clause covered the disputes and that the plaintiffs were bound by the arbitration clause because their counsel had agreed to the terms of service (which included the arbitration provision) while acting as their agent.

Applying a different state’s laws in each decision, the Ninth Circuit came to different conclusions about the viability of PeopleConnect’s motion to compel arbitration.

In the first decision, Callahan v. PeopleConnect, Inc., 2022 WL 823594, the Ninth Circuit held that the plaintiffs could not be compelled to arbitrate because their counsel did not have implied actual authority or apparent authority to bind his clients to arbitration.  While an attorney has some implied actual authority to act on behalf of his clients, the Ninth Circuit held that under California Supreme Court precedent, an attorney does not have implied or apparent authority to bind his client to an arbitration agreement; he needs express authorization, which was lacking in Callahan.

In the second decision, Knapke v. PeopleConnect, Inc., 38 F.4th 824, the Ninth Circuit held that under the state of Washington’s law on agency, the attorney, acting as an agent of his client, could bind his client to a website’s terms of service agreement if he had actual (express or implied) or apparent authority to do so.  On the record before the court, however, it was not clear whether “. . . Knapke and Reilly had an agency relationship when Reilly agreed to the Terms of Service; if they did have an agency relationship, whether and how Knapke limited Reilly's authority as her agent; and whether Knapke ratified Reilly's agreement to arbitrate even if Reilly initially lacked authority to bind her to the agreement.”  Accordingly, the Ninth Circuit vacated the district court's denial of the motion to compel arbitration and remanded the case for the parties to conduct discovery regarding those issues.

Interestingly, the Ninth Circuit did not take into account that Washington law, like California’s, limits an attorney’s implied and actual authority to waive a client’s substantial rights. See Graves v. P. J. Taggares Co., 616 P.2d 1223, 1227 (Wash. 1980) (“an attorney is without authority to surrender a substantial right of a client unless special authority from his client has been granted him to do”).  It will be interesting to see how this case ends up if discovery reveals that the Knapke’s attorney had no express authority to bind his client.

These decisions serve as an important warning to counsel: think twice before assenting to online agreements when serving clients.  Attorneys should consider the scope of their authority to act on behalf of clients under the relevant state’s laws, and the circumstances of their attorney-client relationship.  An attorney also might consider including limitations on the attorney-client relationship that restrict the attorney’s authority to bind the client to online terms of service agreements, keeping in mind that including limitations may also affect the scope of the attorney-client relationship, including privilege. Also, use of investigators should be considered.

More broadly speaking, business owners should be cautious of their employees’ on-the-clock internet browsing.  A seemingly innocuous click to an online service providers’ terms of use may occasion grave consequences for the business.  Businesses should endeavor to appropriately limit the authority of their employees, or any other agents acting on their behalf.