The Anti-Deficiency Act Implications of Consent by Government Employees to Online Terms of Service Agreements Containing Open-Ended Indemnification Clauses
Background
- ADA implications of government consent to online TOS with open-ended indemnification clauses
- Consent standard for online TOS adheres to traditional contract law requiring reasonable notice and manifested assent
- Two Department scenarios: (i) employee downloaded images from MorgueFile, Dreamstime, Stock.xchng and consented to indemnification terms via clickwrap TOS; (ii) employee with watershed.ustream.tv account with indemnification clause; in both, employee lacked clear contracting authority
- Question whether such consent creates binding government obligations under the ADA differs by contracting authority status
- Open-ended indemnification clauses generally violate the ADA when the government is bound, but unauthorized consents do not bind the government; nonetheless, agencies may need to mitigate violations and consider quantum meruit where appropriate
- The opinion concludes the ADA is violated when a contracting-authority employee agrees to an open-ended indemnification clause; it discusses mitigation and potential quantum meruit recoveries for benefits conferred when such agreements are unenforceable
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Consent standard for online TOS | Commerce argues traditional contract assent applies | GSA/agency contends browsewrap could be enforceable | Traditional assent governs; enforceability depends on notice and assent |
| ADA violation by contracting-authority employee | Open-ended indemnification should bind government | Open-ended indemnities violate ADA and lack statutory authority | ADA violated when contracting-authority employee consents to open-ended indemnification |
| ADA violation by non-authorized employee consenting | Unauthorized consent may bind government | No binding government obligation without authority | No ADA violation; unauthorized consent cannot bind government though may create non-binding moral obligation |
| Practical consequences and mitigation | Violation requires action by agency to remedy | Mitigation may involve ratification or payment considerations | Department must mitigate, may renegotiate or cancel enrollments; quantum meruit may apply in some cases |
Key Cases Cited
- Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) (notice and assent crucial for browsewrap enforceability)
- Van Tassell v. United Mktg. Group, LLC, 795 F. Supp. 2d 770 (N.D. Ill. 2011) (browsewrap restraints depend on reasonable notice of terms)
- Hines v. Overstock.Com, Inc., 668 F. Supp. 2d 362 (E.D.N.Y. 2009) (enforceability depends on actual/constructive knowledge of terms)
- Hubbert v. Dell Corp., 835 N.E.2d 113 (Ill. App. Ct. 2005) (notice through multiple web pages and references to terms supports enforceability)
- Total Med. Mgmt., Inc. v. United States, 104 F.3d 1314 (Fed. Cir. 1997) (requirements for contract with United States including assent and consideration)
- Hercules, Inc. v. United States, 516 U.S. 417 (1996) (open-ended indemnity generally barred by ADA; need express statutory authority or limitation)
- Leiter v. United States, 271 U.S. 204 (1926) (government not bound by unauthorized commitments under ADA)