Go Daddy Loses On Economic Loss

Go Daddy.com, the Internet registration service with the splashy Super Bowl commercials took a hit recently in an Ohio appellate court. A customer complained that a Go Daddy customer service representative improperly transferred his account to a former business partner. As a result the former business partner got access to personal e-mails and other private information. Ohio’s First District Court of Appeals upheld a jury verdict awarding the customer damages for conversion and invasion of privacy. Go Daddy argued on appeal that the customer should have been barred by the “economic loss rule” from proceeding with the lawsuit. The economic loss rule essentially means that if one party to a contract has a claim against the other party to the contract, it should be fought out within the confines of the contract. And so, if the contract limits the remedy, that’s what the parties bargained for. Go Daddy argued that in this case, it’s customer service representative’s actions may have breached the customer’s service agreement with Go Daddy, but any remedy should have been limited to the terms of that agreement. But the court agreed with the customer that the economic loss rule only applies to “negligent” conduct, not intentional acts. The customer alleged that the Go Daddy employee’s actions went beyond negligence, because he clearly knew from information on his computer screen that the former business partner did not have the right to transfer the account. As a result, the customer could proceed with the “tort” claims, and Go Daddy’s carefully worded contractual limitations and disclaimers were rendered moot. The Ohio Supreme Court may, but does not have to, hear an appeal on this case. The Supreme Court generally looks for cases that have a broad impact. This one may qualify. Any business that collects personal information, and that wants to limit its exposure via contractual terms will be interested in the outcome here. If a customer can too easily avoid the terms of the contract by how he characterizes the nature of the case, it could be a problem. Go Daddy may need to dip into its Super Bowl commercial budget, but it’s probably worth the fight.