Instagram Inc v Dialogue Consulting Pty Ltd

Link copied
Case Copied 46 min read

FEDERAL COURT OF AUSTRALIA

Instagram Inc v Dialogue Consulting Pty Ltd [2022] FCAFC 7

Appeal from: Dialogue Consulting Pty Ltd v Instagram, Inc [2020] FCA 1846
File number: VID 42 of 2021
Judgment of: JAGOT, LEE AND STEWART JJ
Date of judgment: 4 February 2022
Catchwords: ARBITRATION – international commercial arbitration – appeal from refusal to stay proceeding in favour of arbitration under s 7 of the International Arbitration Act 1974 – where respondents filed stay application one year after proceeding was instituted – whether right to arbitration was waived – whether the primary judge’s discretion miscarried in determining the question of waiver rather than referring it to an arbitrator – whether the applicant suffered prejudice by reason of the respondents’ conduct 
Legislation:

International Arbitration Act 1974 (Cth) s 7

Federal Court Rules 2011 (Cth) rr 16.45, 20.31
Cases cited:

Cabinetree of Wisconsin Inc v Kraftmaid Cabinetry Inc, 50 F 3d 388 (7th Cir, 1995)

Dialogue Consulting Pty Ltd v Instagram, Inc [2020] FCA 1846

Fisher v AG Becker Paribas Inc, 791 F 2d 691 (9th Cir, 1986)

Hancock Prospecting Pty Ltd v Rinehart [2017] FCAFC 170; 257 FCR 442

House v The King [1936] HCA 40; 55 CLR 499

Newirth v Aegis Senior Communities, LLC, 931 F 3d 935 (9th Cir, 2019)

Saint Agnes Medical Center v PacifiCare of California, 31 Cal 4th 1187 (SC Cal, 2003)
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: International Commercial Arbitration
Number of paragraphs: 107
Date of hearing: 17 November 2021
Counsel for the Appellants / Cross-Respondents: Mr A Bannon SC, Dr R Garnett, Mr C Bannan and Ms N Oreb
Solicitor for the Appellants / Cross-Respondents: Corrs Chambers Westgarth
Counsel for the Respondent / Cross-Appellant: Dr O Bigos QC and Mr Z de Kievit
Solicitor for the Respondent / Cross-Appellant: Phi Finney McDonald

ORDERS

VID 42 of 2021
BETWEEN:

INSTAGRAM INC

First Appellant

META PLATFORMS INC

Second Appellant

FACEBOOK IRELAND LTD (and another named in the Schedule)

Third Appellant
AND:

DIALOGUE CONSULTING PTY LTD (ACN 153 007 259)

Respondent
AND BETWEEN:

DIALOGUE CONSULTING PTY LTD (ACN 153 007 259)

Cross-Appellant
AND:

INSTAGRAM INC (and others named in the Schedule)

First Cross-Respondent

ORDER MADE BY:

JAGOT, LEE AND STEWART JJ

DATE OF ORDER:

4 FEBRUARY 2022

THE COURT ORDERS THAT:

1.Leave to appeal be granted.

2.The appeal be dismissed.

3.The cross-appeal be dismissed.

4.The appellants pay the respondent’s costs of the appeal and cross-appeal.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

JAGOT J:

  1. I agree with the reasons of Stewart J.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment of the Honourable Justice Jagot.

Associate:

Dated:       4 February 2022

REASONS FOR JUDGMENT

LEE J:

  1. I agree with the reasons of Stewart J.

I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for…
CaseChat AU logo

Keep reading for free

Create a free CaseChat account to read Instagram Inc v Dialogue Consulting Pty Ltd and more:

  • Read every judgment in full
  • Ask AI and get answers linked to paragraphs
  • See how each paragraph was cited in later cases
  • Download judgments as PDF or Word
Continue with Google

One click creates your free account or signs you in.

By continuing you agree to the Terms and Privacy Policy.

Details
Case
[2022] FCAFC 7
Decision Date

CaseChat Overview and Summary

Instagram Inc v Dialogue Consulting Pty Ltd was a case involving a dispute between the social media platforms Instagram and Facebook, and Dialogue Consulting Pty Ltd, an Australian company that provided software services to manage content publishing on these platforms. The dispute centred around whether Dialogue was bound by an arbitration agreement contained in Instagram's terms of use, specifically whether the agreement applied to claims arising after the terms were updated. The case was heard in the High Court of Australia, which had to decide whether the primary judge's refusal to stay the proceedings in favour of arbitration was correct.
The legal issues before the court were whether Dialogue had waived its right to arbitration by not promptly asserting it, and whether the primary judge's decision not to refer the question of waiver to an arbitrator was an error of law. The court also had to consider whether Dialogue had suffered prejudice due to the respondents' conduct. The High Court held that Dialogue had not waived its right to arbitration and that the primary judge did not err in deciding the issue of waiver. The court also found that Dialogue had not suffered any prejudice due to the respondents' delay in asserting the arbitration agreement. Accordingly, the appeal was dismissed, and the cross-appeal did not arise for consideration. The appellants were ordered to pay the respondent's costs of the appeal and cross-appeal.

Orders

Orders of the court

1. Leave to appeal be granted.

2. The appeal be dismissed.

3. The cross-appeal be dismissed.

4. The appellants pay the respondent’s costs of the appeal and cross-appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The fact that the Meta parties assert a substantive right rather than merely a point of practice or procedure, the substantial injustice that would be done if the decision at first instance was wrong but not corrected on appeal, as well as the complexity of the matter, warrant that leave to appeal be granted. However, for the reasons which follow, the appeal should be dismissed. Given that conclusion, the notice of contention and cross-appeal do not arise for consideration.Background The following facts are relevant to the present appeal and cross-appeal. A comprehensive background is set out in the primary judgment. It need not be repeated here. The second appellant, Meta Platforms Inc (which was until 28 October 2021 known as Facebook Inc), provides a number of social media services (or platforms) including, relevantly, Facebook and Instagram. Meta Platforms has provided both services since July 2018. Prior to that time, Facebook was provided by the third appellant, Facebook Ireland Ltd, and Instagram was provided by the fourth appellant, Instagram LLC, although Facebook Inc (as it was then known) was the holding company of both. In these reasons, a reference to Facebook or Instagram as an entity (as opposed to a social media service or platform) is a reference to the second, third or fourth appellant at the relevant time, there being no issue that turns upon the precise identification of the relevant corporate entity. Dialogue is a company incorporated in Australia with its registered office in Melbourne. Its sole director is Hugh Stephens. Since 2013, Dialogue has provided a software product first called Schedugram and later Sked Social. The product is designed to manage the publishing of Dialogue’s clients’ content initially only on Instagram but later also on other social media platforms including Facebook. Dialogue’s clients, being Instagram users themselves, engage Dialogue on a subscription basis to interact with Instagram on their behalf. Clients select content that they wish to publish at a particular time and with a particular caption and Dialogue publishes that content through its product by an automated process. In order to do this, clients provide Dialogue with their Instagram login details on a confidential basis. In order to access or use Instagram, or register to use it, users are required at the point of registration to agree to Terms of Use. Instagram published Terms of Use on 19 January 2013 (2013 Terms), which were effective from that date until between 19 April 2018 and 14 July 2018 depending on when users consented to new terms that were published on 19 April 2018 (2018 Terms). The 2013 Terms contained (but the 2018 Terms do not) an arbitration clause, which provided as follows:ArbitrationExcept if you opt-out or for disputes relating to: (1) your or Instagram’s intellectual property (such as trademarks, trade dress, domain names, trade secrets, copyrights and patents); (2) violations of the API Terms; or (3) violations of provisions 13 or 15 of the Basic Terms, above (“Excluded Disputes”), you agree that all disputes between you and Instagram (whether or not such dispute involves a third party) with regard to your relationship with Instagram, including without limitation disputes related to these Terms of Use, your use of the Service, and/or rights of privacy and/or publicity, will be resolved by binding, individual arbitration under the American Arbitration Association’s rules for arbitration of consumer-related disputes and you and Instagram hereby expressly waive trial by jury. As an alternative, you may bring your claim in your local “small claims” court, if permitted by that small claims court’s rules. …You may opt out of this agreement to arbitrate. If you do so, neither you nor Instagram can require the other to participate in an arbitration proceeding. To opt out, you must notify Instagram in writing within 30 days of the date that you first became the subject to this arbitration provision. You must use this address to opt out: …Instagram, LLC ATTN: Arbitration Opt-out 1601 Willow Rd. Menlo Park, CA 94025(Emphasis added.)

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 25 May 2020, Dialogue filed its cross-application that is the subject of its cross-appeal. The primary judgment The primary judge held that Dialogue accepted the 2013 Terms and as such was a party to a binding arbitration agreement within the meaning of s 3(1) of the IAA: at [298]-[299]. His Honour found that as early as 14 January 2014 when Instagram first complained of Dialogue’s conduct, Dialogue had actual knowledge of the 2013 Terms: at [278]. Those findings are not challenged on appeal. The primary judge then considered whether s 7 of the IAA applied. That section relevantly provides:(1)Where:(a)the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a Convention country;(b)the procedure in relation to arbitration under an arbitration agreement is governed, whether by virtue of the express terms of the agreement or otherwise, by the law of a country not being Australia or a Convention country, and a party to the agreement is Australia or a State or a person who was, at the time when the agreement was made, domiciled or ordinarily resident in Australia;(c)a party to an arbitration agreement is the Government of a Convention country or of part of a Convention country or the Government of a territory of a Convention country, being a territory to which the Convention extends; or(d)a party to an arbitration agreement is a person who was, at the time when the agreement was made, domiciled or ordinarily resident in a country that is a Convention country;this section applies to the agreement.(2) Subject to this Part, where:(a)proceedings instituted by a party to an arbitration agreement to which this section applies against another party to the agreement are pending in a court; and(b)the proceedings involve the determination of a matter that, in pursuance of the agreement, is capable of settlement by arbitration;on the application of a party to the agreement, the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings or so much of the proceedings as involves the determination of that matter, as the case may be, and refer the parties to arbitration in respect of that matter.…(5)A court shall not make an order under subsection (2) if the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed. The primary judge found that ss 7(1)(a) and (d) were both satisfied and, accordingly, there was an arbitration agreement to which both ss 7(2) and (5) could apply: at [315]-[316]. As to the applicability of s 7(2), the primary judge found para (a) to be clearly satisfied: at [317]. As regards para (b), the primary judge held that the scope of the arbitration agreement is broad as it applies to “all disputes ‘with regard to’ the relationship between Dialogue and Instagram, LLC”: at [401]-[402]. Nonetheless, his Honour considered that the relationship referred to was that during the currency of the 2013 Terms: at [403]. Accordingly, his Honour held that the 2013 Terms, and hence the scope of the arbitration agreement, did not extend to the claims that arose after 19 April 2018: at [431]. Nor were claims relating to Dialogue’s use of Facebook or the Competition Claims within the scope of the arbitration agreement: at [421] and [434].

Ratio Decidendi

Legal Principle Established

The 2013 Terms contained (but the 2018 Terms do not) an arbitration clause, which provided as follows:ArbitrationExcept if you opt-out or for disputes relating to: (1) your or Instagram’s intellectual property (such as trademarks, trade dress, domain names, trade secrets, copyrights and patents); (2) violations of the API Terms; or (3) violations of provisions 13 or 15 of the Basic Terms, above (“Excluded Disputes”), you agree that all disputes between you and Instagram (whether or not such dispute involves a third party) with regard to your relationship with Instagram, including without limitation disputes related to these Terms of Use, your use of the Service, and/or rights of privacy and/or publicity, will be resolved by binding, individual arbitration under the American Arbitration Association’s rules for arbitration of consumer-related disputes and you and Instagram hereby expressly waive trial by jury. As an alternative, you may bring your claim in your local “small claims” court, if permitted by that small claims court’s rules. …You may opt out of this agreement to arbitrate. If you do so, neither you nor Instagram can require the other to participate in an arbitration proceeding. To opt out, you must notify Instagram in writing within 30 days of the date that you first became the subject to this arbitration provision. You must use this address to opt out: …Instagram, LLC ATTN: Arbitration Opt-out 1601 Willow Rd. Menlo Park, CA 94025(Emphasis added.) The 2013 Terms also included a choice of law and jurisdiction clause:Governing Law & VenueThese Terms of Use are governed by and construed in accordance with the laws of the State of California, without giving effect to any principles of conflicts of laws … For any action at law or in equity relating to the arbitration provision of these Terms of Use, the Excluded Disputes or if you opt out of the agreement to arbitrate, you agree to resolve any dispute you have with Instagram exclusively in a state or federal court located in Santa Clara, California, and to submit to the personal jurisdiction of the courts located in Santa Clara County for the purpose of litigating all such disputes. (Emphasis added.) In January 2014, during the currency of the 2013 Terms, Dialogue created an Instagram account and thereafter also accessed and used Instagram on behalf of its clients. There is no dispute that Dialogue was thereby bound by the 2013 Terms in respect of its use of Instagram during the currency of those terms. In January 2014, Instagram first raised with Dialogue that by collecting users’ (i.e., its clients’) login information Dialogue was in breach of the 2013 Terms. Dialogue denied any wrongdoing, and lengthy correspondence ensued. Ultimately, on 12 February 2019, Meta Platforms took what the primary judge described as self-help action and terminated Dialogue’s access to Instagram, banned the domain names used for Sked Social from Facebook and Instagram, and deactivated Mr Stephens’ personal Facebook account. These actions were taken without any prior warning and form the basis of Dialogue’s complaints in the principal proceeding.