Ashley Madison Lawsuits - Florida's Abolition of the Economic Loss Rule Makes Them Possible

A popular topic of the news recently has been the filing of at least $500 million in lawsuits against website Ashley Madison, a site frequented by users seeking to enter into extra-marital relationships with other like-minded people.  The popularity of this news topic provides me with a great opportunity to discuss "Con-Torts", a branch of civil litigation where the lines between pure Contract Law and pure Tort Law (Negligence) blur.

Wait a Second, Contracts on the Internet?
One might wonder, why would contract law come up in an Internet setting?  I never signed anything and I never even got a piece of paper.  Contractual agreements can arise even from purely electronic transactions between parties.  With the use of Ashley Madison and other similar websites, the branches of contractual law called browse-wrap and click-wrap come into play.  Browse-wrap is a contract or licensing agreement whereby a user, simply by using a website, agrees to abide by the site's terms of use or conditions of use.  Hines v. Overstock.com, Inc., 668 F.Supp.2d 362, 366 (E.D.N.Y. 2009).  Similarly, clickwrap agreements arise when a user clicks on an "I Agree" button in order to use a website, often with the terms of use listed above in a window or as a hyperlink that the user is instructed to read carefully before signifying agreement.

Going back to the classic elements of a contract (offer, acceptance, consideration), the offer from the website is to allow you to use the site pursuant to its terms and conditions; the clicking of "I Agree" or use of the site signifies a meeting of the minds on the terms of the offer; consideration is found through the benefits gained by the user of the site through use of the site/detriment to the provider of loss of bandwidth or the detriment of the user giving up their right to use the site as they wish/benefit of the site's increased traffic.

OK, So I "Signed" a Contract, Didn't the Website Breach?
Ashley Madison users been identified by email address, credit card information, name, and sexual proclivity in the data dump of user data made public by hackers.  Didn't Ashley Madison have an obligation to keep this information secret?

Looking at the site's Terms and Conditions (TAC) and Privacy Policy, Ashley Madison does not make an affirmative pledge to safeguard user information from potential hackers.  Rather, under the TAC, the site "cannot ensure the security or privacy of information you provide through the Internet and your email messages... You agree to release us, our parent, subsidiaries and affiliated entities and ours and their shareholders, officers, directors, employees and agents, successors and assigns from all claims, demands, damages, losses, liabilities of every kind, know and unknown, direct and contingent, disclosed and undisclosed, arising out of or in any way related to the release or use of such information by third parties."  If effective, this waiver would seem to preclude simple contractual claims against Ashley Madison.

Further, the site (since it is a product sold to users) also expressly disclaims warranties in Sales Law and limits liability to $5,000 per user.  The disclaimer is achieved through an "allocation of risk" whereby the user takes on all risk in exchange for the service being made available (it otherwise would expressly not be made available).

If effective, both the waiver of remedies for breach and the disclaimer of warranties would preclude recovery for injured parties in Contract Law and Sales (UCC) Law.

But They Were Negligent in Securing the Data!
Maybe Ashley Madison did have a duty to protect the information and maybe they did breach that duty (neither of which is clear until the litigation sorts out the respective duty and standard of care).  But before we can even consider negligence as a theory of recovery, we need to examine the Economic Loss Rule.

Economic Loss Rule Precludes Tort Recovery for Parties to a Contract in Some Cases
The Economic Loss Rule is "the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby discourages [parties] to avoid causing physical harm to [other parties]."  Casa Clara Condominium Ass'n, Inc. v. Charley Toppino and Sons, Inc., 620 So.2d 1244, 1246 (Fla. 1993).  The rule was created by the courts to preclude recovery in tort (negligence) when the only damages suffered were purely economic damages (money).  Parties in privity to a contract were generally prohibited from recovery in tort for damages caused during performance of the contract.  Laufen, Inc. v. Andrew, 83 So.3d 898 (Fla. App. 2012).

Economic Loss Rule Abolished in Florida
In a landmark case, the Florida Supreme Court found the Economic Loss Rule to have expanded to the point of being "unwise and unworkable in practice", especially with its numerous exceptions.  Tiara Condo. Ass'n, Inc. v. Marsh, 110 So.3d 399, 407 (Fla. 2013).  Departing from prior precedent, the Florida Supreme Court held that "the application of the economic loss rule is limited to products liability cases."  Id.

Ashley Madison-type Cases in Florida Going Forward
So with the abolition of the Economic Loss Rule in Florida, parties to a contract are free to attempt to recover damages, even purely economic damages, in both tort and contract law.  But in the Ashley Madison claims, the contract expressly limited damages to $5,000 per user and attempted to disclaim all liability for breach due to data hacking by third parties.  Is that enough to preclude tort damages as well?

The Florida Supreme Court has yet to decide whether a party, through contract, can effectively preclude tort damages that were previously barred by the Economic Loss Rule.  One can surmise that, without express language to the contrary, a party could be liable in tort for damages flowing from the contract.  But what language is effective in barring tort liability?  Can any contractual language bar negligence?  Can contractual language establish the duty of care and limit tort damages (probably)?

While I do not have a clear answer to these questions yet, at least the abolition of the Economic Loss Rule will allow parties to seek these answers in future cases like Ashley Madison.

Neither Congress Nor the President Can End Birthright Citizenship

Yesterday, Republican presidential candidate Donald Trump announced that he, if elected President, would end birthright citizenship.  Birthright citizenship is the principle that a child, even if born to illegal immigrants, automatically is bestowed with U.S. citizenship if that child was born while on U.S. soil (including overseas military bases, territories, and the like).  So the question arises: Can Congress through statute or the President through executive action end birthright citizenship?

A quick look at the history of birthright citizenship is necessary to provide context to the eventual answer to this question.  Originally, there were two schools of thought on birthright citizenship in pre-America Europe.  Roman law, in an effort to perpetuate the feudal system, stated that citizenship followed the status of the parent.  Thus, the child through descent and blood gained his/her citizenship and nationality just like any other physical trait.  This served to ensure that the king and his vassals had a dedicated and loyal feudal base upon which to build long-standing kingdoms.

England, on the other hand, diverted from this practice. In 1700, the British statute of 11 & 12 Wm. III enacted that "all and every person or persons, being the king's natural-born subject or subjects, within any of the king's realms or dominions,' might and should thereafter lawfully inherit and make their titles by descent to any lands 'from any of their ancestors, lineal or collateral, although the father and mother, or father or mother, or other ancestor, of such person or persons, by, from, through or under whom' title should be made or derived, had been or should be 'born out of the king's allegiance, and out of his majesty's realms and dominions,' as fully and effectually, as if such parents or ancestors 'had been naturalized or natural-born subject or subjects within the king's dominions.'" 7 Statutes of the Realm, 590.  In short, the statute established birthright citizenship.  France soon codified a similar statute and by the time of the adoption of the 14th Amendment to the U.S. Constitution, "civilized" countries were split on the issue.

Article I, Section 8 of the U.S. Constitution gives Congress plenary power to enact laws related to immigration.  Congress has acted to establish a very detailed and comprehensive immigration scheme, so why couldn't Congress simply eliminate birthright citizenship?

Favoring a policy of birthright citizenship (probably due to exploding immigration and an increased need in low-skilled labor), the 39th Congress passed the Civil Rights Act of 1866. The law stated, "all persons born in the United States, and not subject to any foreign power, excluding Indians not taxed, are hereby declared to be citizens of the United States...."  14 Stat. 27-30.  The same Congress later enacted a joint resolution to amend the Constitution with the same birthright citizenship provisions (probably fearing the repercussions if a later Congress were to repeal the Civil Rights Act of 1866).  That language was formally ratified by the states and added to the U.S. Constitution as the 14th Amendment in 1868.

The Citizenship Clause of the 14th Amendment states: "All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside."  If the plain language of the Amendment was not enough evidence that birthright citizenship is protected by the U.S. Constitution, the Supreme Court put to rest any lingering doubts in United States v. Wong Kim Ark, 169 U.S. 649 (1898).  The question considered by the court was whether a child born on U.S. soil to parents who were in the U.S. illegally becomes a U.S. citizen by birthright citizenship under the 14th Amendment.  Id. at 653.

After analysis that mirrors the above paragraphs in this post, the court held in the affirmative that birthright citizenship was protected by the 14th Amendment.  Id. at 705.

Back to the initial question: Can Congress through statute or the President through executive action end birthright citizenship?  The plain language of the Citizenship Clause of the 14th Amendment, the historical context of English common law (from which many U.S. legal principles derive their beginnings), and the Congressional intent of the 14th Amendment as indicated by the Civil Rights Act of 1866 are all clear—there is a Constitutional civil right of birthright citizenship for all people born on U.S. soil regardless of the immigration status of the parents.

Under the Supremacy Clause of the U.S. Constitution, Congress cannot subvert a constitutional right via statute and the President cannot subvert a constitutional right via executive action.  Therefore, for Mr. Trump's goal to be achieved, either the States through conventions or Congress through joint resolution must amend the U.S. Constitution as prescribed therein.

Same-Sex Discrimination by Florida Businesses

                Ever since the U.S. Supreme Court decided in June that “same-sex couples may exercise the fundamental right to marry in all States” and “there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character”, media outlets have been reporting regularly on bakeries and other establishments being fined or sued for refusing to provide services to same-sex couples (Oregon; Louisiana; Colorado).  Obergefell v. Hodges, No. 14–556, slip op. at 28 (U.S. 2015).  So the question naturally follows: do Florida businesses have the right to refuse service to same-sex couples solely because they are members of the same sex?  For the reasons below, it is my conclusion that current Florida and federal law does not include sexual orientation or same-sex marriage as protected classes under their respective civil rights acts.  Neither Florida law nor federal law specifically mandates that same-sex couples be provided services without discrimination.  Likewise, Florida and federal law does not affirmatively protect businesses seeking to discriminate against same-sex couples.

Businesses, however, should proceed with extreme caution.  In addition to the charter counties that have passed their own civil rights protections against discrimination based on sexual orientation (Orange County Ord. 22-42; Miami-Dade County Ord. Sec. 11A-19; etc.), federal law (if it were to change) may apply if the business is engaged in interstate commerce.  Further, this issue is an emerging issue that is certainly going to be debated by both the judiciary and the legislature in the coming months.  As such, the law will be very fluid and is subject to rapid change in the coming year.

Florida Civil Rights Act Applicability Generally

            The Florida Civil Rights Act of 1992 (FCRA) was enacted to establish state civil rights “for all individuals within the state freedom from discrimination because of race, color, religion, sex, pregnancy, national origin, age, handicap, or marital status and thereby to protect their interest in personal dignity, to make available to the state their full productive capacities, to secure the state against domestic strife and unrest, to preserve the public safety, health, and general welfare, and to promote the interests, rights, and privileges of individuals within the state.”  Fla. Stat. § 760.01(2) (2015).  Notice the absence of the language sexual orientation.  Comparable civil rights acts in other states specifically include that language (as do the charter county ordinances above).  For comparison, the Colorado statute specifically includes sexual orientation and marital status.  Colo. Rev. Stat. § 24-34-601 (2014).  The Colorado court decision linked in the initial paragraph of this blog imposed a civil fine on a bakery specifically because of their state’s statute; there is no comparable language in FCRA. 

Under the expressio unius est exclusio alterus canon of statutory interpretation, Florida courts can be expected to hold that the inclusion of several protected classes in FCRA necessarily excludes those classes not listed.  Further, the Florida Legislature just added a new class to FCRA this past legislative session (pregnancy).  2015 Fla. Laws Chapter 2015-68.  Florida courts will be reluctant to read a new class for sexual orientation into FCRA given that the Legislature just debated the area.

FCRA does create an autonomous Commission on Human Relations who receives all initial claims of discrimination from aggrieved parties.  Fla. Stat. §760.03–07 (2015).  The Commission has a broad charge to “promote and encourage fair treatment and equal opportunity for all persons regardless of… religion… sex… or marital status and mutual understanding and respect among all members of all economic, social, racial, religious, and ethnic groups; and shall endeavor to eliminate discrimination against, and antagonism between, religious, racial, and ethnic groups and their members.”  Fla. Stat. §760.05 (2015).  While the Commission could conceivably be a catalyst for convincing the Legislature to broaden existing restrictions on public accommodations, sexual orientation is again notably absent from the list of protected parties.

For FCRA to apply, the Commission must make a reasonable cause finding of a violation of FCRA.  Fla. Stat. §760.11(4) (2015).  Upon such a finding, the complainant can elect to proceed to state court or have an administrative hearing.  Fla. Stat. §760.11 (2015).  Places of public accommodation are covered by FCRA.  Fla. Stat. §760.08 (2015).  Those places include “lodgings, facilities principally engaged in selling food for consumption on the premises, gasoline stations, places of exhibition or entertainment, and other covered establishments.”  Fla. Stat. §760.11(11) (2015).  The statute goes on to list examples such as hotels, motels, restaurants, on-premises food providers, theaters, sports arenas, and stadiums.  Id. 

Even if a business is a “public accommodation” under FCRA, a violation exists only when that business discriminates on the basis of “race, color, national origin, sex, pregnancy, handicap, familial status, or religion.”  Fla. Stat. §760.08 (2015).  Again, sexual orientation is conspicuously absent.  Therefore, FCRA does not penalize a business for discriminating on the basis of sexual orientation.

Regulation of Florida’s Lodging Establishments & Restaurants

            It comes as no surprise that Florida’s hotels and restaurants are regulated in other areas of Florida law other than FCRA.  Thus, an examination of these regulations is also required before reaching the conclusion that discrimination based on sexual orientation or same-sex marriage status is not actionable under present law.

            Oversimplified for space, Florida law regulates hotels, motels, restaurants, and places where food is “prepared, served, or sold for immediate consumption on or in the vicinity of the premises; called for or taken out by customers; or prepared prior to being delivered to another location for consumption.”  Fla. Stat. §509.013(5)(a) (2015).  Exclusions include fraternal orders, common carriers (places, trains, ferries), hospital cafeterias, farms, theater snack bars, and vending machines.  Fla. Stat. §509.013(5)(b) (2015).  It is here, for the first time in this analysis, that the hypothetical wedding bakery popularized by the media is first implicated.

            Florida public lodging establishments and public food establishments, as defined, have “the right to refuse accommodations or service to any person who is objectionable or undesirable to the operator, but such refusal may not be based upon race, creed, color, sex, pregnancy, physical disability, or national origin. A person aggrieved by a violation of this section or a violation of a rule adopted under this section has a right of action pursuant to [FCRA].”  Fla. Stat. §509.092 (2015).  Again, there is a conspicuous absence of sexual orientation as a protected class.  Under the FCRA analysis above, I come to the same conclusion: Florida’s regulatory scheme affecting hotels, motels, restaurants, bakeries, and the like does not preclude discrimination of same-sex couples based on sexual orientation or the same-sex nature of their marriage.

            The prudent lodging or restaurant operator should be mindful of posting any restrictions against providing services to same-sex couples in accordance with Fla. Stat. §509.101(1) (2015) [English language, prominent posting, etc.] and should be mindful of the ejection/refusal of admission requirements of Fla. Stat. §509.141 & 509.142 (2015).

Federal Law

            The Civil Rights Act of 1964 entitles people to the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation… without discrimination or segregation on the ground of race, color, religion, or national origin.”  42 U.S.C. §2000a.  The covered establishments mirror the requirements of FCRA [hotels, motels, restaurants, on-premises food, theaters, etc.].  Id.  In order for the federal law to apply, a business must be primarily engaged in the business of interstate commerce [even minimal contacts or potential contacts with out-of-state customers or must be supplying services to the State government.  Id.  This is purposefully broad and has been interpreted as broadly as possible by the U.S. Supreme Court.  Suffice to say, federal law would cover the vast majority of businesses providing services to the public.

            Again, there is a conspicuous absence of sexual orientation or same-sex couple from the protected classes.  Therefore, I come to the same conclusion as above: federal law does not preclude a business from refusing to provide services to a couple based on their sexual orientation or the same-sex nature of their marriage.

Strong Caveats

            Lest Florida businesses run out and begin openly discriminating against same-sex couples without fear, let me provide the following advice.  First, it is no small point that the U.S. Supreme Court has found a fundamental right for members of the same sex to marry.  Fundamental rights are among the most bedrock principles protected by the U.S. Constitution.  Many states have found a fundamental right to be protected by the government from discrimination based on sexual orientation.  The U.S. Equal Employment Opportunity Commission has already found it illegal for an employer to discriminate against a worker based on transgender, lesbian, gay, or bisexual identification.  Veretto v. U.S. Postal Service, EEOC Appeal No. 0120110873 (July 1, 2011),http://www.eeoc.gov/decisions/0120110873.txt; Castello v. U.S. Postal Service, EEOC Request No. 0520110649 (Dec. 20, 2011),http://www.eeoc.gov/decisions/0520110649.txt; Macy v. Department of Justice, EEOC Appeal No. 0120120821 (April 20, 2012),http://www.eeoc.gov/decisions/0120120821%20Macy%20v%20DOJ%20ATF.txt.  It is highly likely that the U.S. Supreme Court will consider whether gender identification and/or sexual orientation should be protected by the government from discrimination as a class (similar to race and national origin protections).

            Second, Florida law does not preclude charter counties (basically the largest counties in the state with some exception; see this table) from passing ordinances precluding businesses from discriminating against people based on their sexual orientation or the same-sex nature of their marriage.  I listed two county ordinances above as examples; there are others who have passed or are considering to pass similar ordinances.

            Finally, this issue is certain to gain traction for debate and change in Florida.  Just this month, a Longwood, FL bakery was targeted by an opponent of same-sex marriage for their refusal to print “We do not support gay marriage” on a cake.  I think that the incident was the first of many to come in Florida.

Conclusion

            In sum, while local laws by Florida charter counties may preclude businesses operating within the county from doing so, Florida law and federal law are silent as to whether businesses can refuse to provide services to couples solely because of their sexual orientation or the same-sex nature of their marriage.  Businesses that choose to discriminate against same-sex couples in non-charter counties or in counties whose laws are silent on the issue do so at their own risk.  The issue is certain to attract more debate and interest in the coming months as the issue increases in visibility and businesses and couples alike seek to force courts to consider the issue directly.