On August 12, the California Supreme Court answered a certified question from the Ninth Circuit, holding in White v. Square, Inc. that a person has standing under the California Unruh Civil Rights Act (“Unruh”) to sue an internet-based service provider for an alleged discriminatory policy even if the person does not use or subscribe to the provider’s services. Any business that operates a website should be on high alert because this decision creates a new level of legal exposure – internet-based service providers should be concerned not only with their actual users but also non-users.

Robert White is a bankruptcy attorney, and Square, Inc. is an internet-based service provider that allows individuals and merchants to “accept electronic payments without themselves directly opening up a merchant account with any Visa or MasterCard member bank.” White wanted to use Square for his bankruptcy practice and visited Square’s website with the intent to subscribe. But he encountered a barrier because Square’s “terms of service” require that when a new account is created, the user must confirm that it “will not accept payments in connection with the following businesses or business activities: … (28) bankruptcy attorneys or collection agencies engaged in the collection of debt.” After reading Square’s terms of service, White decided he could not register because he wanted to use the service in connection with his bankruptcy practice. White then filed a lawsuit alleging Square’s terms of service discriminate against bankruptcy attorneys in violation of Unruh.

Unruh provides broad protection against discrimination based on sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, and immigration status. It affords equal treatment to the aforementioned classes in all business establishments.

The question certified by the Ninth Circuit to the California Supreme Court was: “Does a plaintiff have standing to bring a claim under [Unruh] when the plaintiff visits a business’s website with the intent of using its services, encounters terms and conditions that allegedly deny the plaintiff full and equal access to its services, and then leaves the website without entering into an agreement with the service provider?” More specifically, “whether standing under [Unruh] extends to a plaintiff who intends to transact, but has not yet transacted, with an online business.”

In answering this certified question, the California Supreme Court drew parallels between brick-and-mortar businesses and internet websites to determine if a person has standing under Unruh. One example used was:

Suppose an African-American person approaches a brick-and-mortar furniture store, intending to buy a bed, and sees a sign in the window that says, “We sell on credit. (Black people must pay cash).” The person declines to enter the store. Does that person have standing?

Based on the above and other examples, the Court concluded that while “mere awareness of a business’s discriminatory policy or practice is not enough for standing under [Unruh], entering into an agreement with the business is not required.” To determine whether an injury was suffered by White, the California Supreme Court essentially drew a line between (1) learning about a business’s discriminatory policy or practices secondhand, and (2) visiting a website with specific intent to use its services. The Court held that “a person who visits a business’s website with intent to use its services and encounters terms or conditions that exclude the person from full and equal access to its services has standing under [Unruh], with no further requirement that the person enter into an agreement or transaction with the business.”

The California Supreme Court’s decision to confer standing is a major concern for all internet-based service providers, especially those in the payment processing industry. Payment processors regularly perform due diligence when on-boarding clients, which may result in payment processors having a list of industries which they do not presently serve. The effect of this opinion is not yet fully realized because the Court made clear that it expresses no view on the merits of White’s occupational discrimination claim. We will continue to monitor this case to see how the Ninth Circuit rules.