Topsteptrader, LLC v. Oneup Trader, LLC, Case No. 17 C 4412

TOPSTEPTRADER, LLC, Plaintiff, v. ONEUP TRADER, LLC and SATTAM ALSABAH, Defendants.

Case No. 17 C 4412

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

April 18, 2018

Judge Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court are OneUp Trader's Motion to Dismiss the Second Amended Complaint for failure to state a claim [ECF No. 35] and Alsabah's Motion to Dismiss for lack of personal jurisdiction and failure to state a claim [ECF No. 48]. For the reasons stated herein, both Motions to Dismiss are granted in part and denied in part.

I. BACKGROUND

The following facts are taken from TopstepTrader's Second Amended Complaint ("Complaint") and are presumed true for the purpose of this Motion. See, Munson v. Gaetz, 673 F.3d 630, 632 (7th Cir. 2012). TopstepTrader is an Illinois-based company that operates a website platform that trains its users to trade via simulations and then (if they are successful in training) allows them to trade in the market using TopstepTrader's capital. (Compl. ¶¶ 9-14.) The eventual profits made by the users are split with TopstepTrader. (Id.) Saddam Alsabah ("Alsabah") is a resident of Kuwait who signed up for an account with TopstepTrader in the fall of 2015 with the alleged purpose of copying its intellectual property and business model and creating his own copycat business using the copied material. (Id. ¶¶ 3, 35-51.) Alsabah created Defendant OneUp Trader ("OneUp") as the copycat business. (Id.) TopstepTrader alleges that by copying its materials, Alsabah and OneUp breached its Terms of Use ("Terms") and infringed its copyrighted material. The Complaint brings four counts against Defendants: copyright infringement (Count I), breach of contract (Count II), unjust enrichment (Count III), and fraud (Count IV). Both Defendants move to dismiss the Complaint under Rule 12(b)(6) for failure to state a claim and Alsabah individually moves to dismiss under Rule 12(b)(2) for lack of personal jurisdiction.

II. ANALYSIS

A. Alsabah's 12(B)(2) Motion to Dismiss

1. Personal Jurisdiction

a. 12(b)(2) Standard

A motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) tests whether a federal court has personal jurisdiction over a defendant. A complaintneed not include facts alleging personal jurisdiction. However, once the defendant moves to dismiss under Rule 12(b)(2) for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating the existence of jurisdiction. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003) (citations and quotations omitted). Where personal jurisdiction is decided on the papers as opposed to after an evidentiary hearing, the plaintiff "need only make out a prima facie case of personal jurisdiction." Hyatt Int'l Corp. v. Coco, 302 F.3d 707, 713 (7th Cir. 2002). Although the Court must accept the plaintiff's uncontroverted allegations as true, if "the defendant has submitted affidavits or other evidence in opposition to the exercise of jurisdiction, the plaintiff must [then] go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction." Purdue Research, 338 F.3d at 783. All disputes concerning relevant facts are resolved in the plaintiff's favor. Id. at 782-83.

TopstepTrader asserts personal jurisdiction under two independent theories: first, that Alsabah consented to jurisdiction by agreeing to the Terms, which contained a forum selection clause, and second, that Alsabah's minimum contacts with Illinois are sufficient for personal jurisdiction. We address each contention in that order.

b. Forum Selection Clause

A valid forum selection clause is sufficient to establish personal jurisdiction. See, TruServ Corp. v. Flegles, Inc., 419 F.3d 584, 589 (7th Cir. 2005). Alsabah argues that TopstepTrader's Terms (and the forum selection clause within them) are unenforceable because the agreement lacks consideration. This argument is meritless. The consideration exchanged was access to the website. See, LKQ Corp. v. Thrasher, 785 F. Supp. 2d 737, 742 (N.D. Ill. 2011) ("Under the traditional rule, consideration is relatively easy to show. As long as the person receives something of value in exchange for her own promise or detriment, the courts will not inquire into the adequacy of the consideration.") Alsabah rebuts by pointing out that the website was publicly available via YouTube, but the import of this is an enigma. A YouTube video does not allow a user to actually use the website, nor does it include the website's full content. (Compl. ¶ 19.) TopstepTrader gave Alsabah the ability to use TopstepTrader's website and access its full content, which is sufficient for consideration. Id.; see, Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 766 (7th Cir. 2010) (quoting Mid-Town Petroleum, Inc. v. Gowen, 611 N.E.2d 1221, 1227 (Ill. App. Ct. 1993)) ("A peppercorn can beconsidered sufficient consideration to support a contract in a court of law.") (as amended (Dec. 16, 2010)).

Alsabah's next argument carries more weight. He contends that he never accepted the Terms by creating an account because: (1) he never agreed to a clickwrap agreement, and (2) under a browsewrap agreement, he lacked notice of the Terms. TopstepTrader attempts to evade this argument by merely concluding that "Alsabah accepted the Terms and its forum selection clause when he created an account on TopstepTrader's website. In doing so, he consented to this Court's jurisdiction over him." (Mem. in Opp'n to Alsabah's Mot. to Dismiss at 2, Dkt. 72.) This argument does not address Alsabah's argument that he never agreed to the Terms in the first instance. The only case TopstepTrader cites involving a website agreement is Productive People, LLC v. Ives Design, No. CV 09 1080, 2009 WL 1749751, at *1 (D. Ariz. June 18, 2009), but in that case, it was undisputed that defendants agreed to plaintiff's terms of service agreement. That is not the case here. Thus, the Court must determine whether Alsabah agreed to the Terms when he created an account on TopstepTrader's website.

Although contracts formed by creating an account on a website are a "newer form[] of contracting," the same common law contract principles apply:

In Illinois, as in many states, the law governing the formation of contracts on the Internet is still in the early stages of development. But there is no reason to think that Illinois's general contract principles do not apply. Formation of a contract requires mutual assent in virtually all jurisdictions; Illinois courts use an objective approach to that question.

Sgouros v. TransUnion Corp., 817 F.3d 1029, 1034 (7th Cir. 2016); see also, Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004) ("While new commerce on the Internet has exposed courts to many new situations, it has not fundamentally changed the principles of contract."). In translating the principles of contract formation to the internet, the relevant inquiry is (1) "whether the web pages presented to the consumer adequately communicate all the terms and conditions of the agreement," and (2) "whether the circumstances support the assumption that the purchaser receives reasonable notice of those terms." Sgouros, 817 F.3d at 1034. Such an inquiry is "fact-intensive." Id.

Given the fact-intensive inquiry, the exact wording and layout of the TopstepTrader website in the fall of 2015 is relevant here. In September 2015, Alsabah was presented with a webpage that stated "Join Now for Free." (See, Ex. D to Mem. in Supp. of TRO, Dkt. 8-5; Testimony of Rudman at TRO Hearing (July 13, 2018) Dkt. 18 at 73:14-24, 80:21-81:7, 90:23-91:18.) The webpage had boxes to fill in personal information. Id.Right below this form for personal information was a fairly large button with large, white print labeled "Sign Up." Id. The phrase "I agree to the terms and conditions" appeared directly under the "Sign Up" button in small print. Id. This phrase was hyperlinked, meaning that clicking on the phrase produced a copy of the Terms. Id. An image of the layout is replicated below, id.:

Image materials not available for display.

The parties dispute whether the alleged contract before the court is a "clickwrap" or "browsewrap" agreement. A "clickwrap" agreement is formed when website users click a button or check a box that explicitly affirms that the user has accepted the terms after having the opportunity to view or scroll through the terms posted on the website and this type of agreement is generally enforced. Sgouros v. TransUnion Corp., No. 14 C 1850, 2015 WL507584, at *4 (N.D. Ill. Feb. 5, 2015), aff'd, 817 F.3d 1029 (7th Cir. 2016) (citing Nguyen v. Barnes & Noble, 763 F.3d 1171, 1175-76 (9th Cir. 2014)); see also, Van Tassell v. United Mktg. Grp., LLC, 795 F. Supp. 2d 770, 790 (N.D. Ill. 2011) (courts "regularly uphold" clickwrap agreements when structured properly). A "browsewrap" agreement, on the other hand, is an agreement where users are bound to the website's terms by merely navigating or using the website; the user is not required to sign an electronic document or explicitly click an "accept" or "I agree" button. Sgouros, 2015 WL 507584, at *6 (citations and quotations omitted). "Courts enforce browsewrap agreements only when there is actual or constructive knowledge of terms." Id. Of course, human ingenuity and the constant development of technology means that not all interfaces fit neatly into one of these two categories. Meyer v. Uber Techs., Inc., 868 F.3d 66, 75-76 (2d Cir. 2017).

Such is the case here. The type of agreement that Alsabah encountered in September 2015 appears to fall in-between these two forms—a middle ground that has been termed a "hybrid" or a "sign-in-wrap." Id.; Nicosia v. Amazon.com, Inc., 834 F.3d 220, 235-36 (2d Cir. 2016). "Sign-in-wrap" agreements never have the user take an affirmative action to explicitly agree to the terms of the site, but it does require some...