In a ruling issued yesterday, Judge Casey Pitts of the U.S. District Court for the Northern District of California addressed the case Doe v. SpaceXAI Corp, in which four plaintiffs—Jane Doe, South Carolina Roe, New Jersey Doe, and Ohio Doe—bring suit against SpaceX.AI Corp and SpaceX.AI LLC. The plaintiffs contend that Grok, the company’s artificial intelligence product, allows users to modify legitimate photographs to render individuals nude or depicted in sexualized or otherwise explicit contexts or videos, and all plaintiffs allege they have been victims of such alterations. The defendants have moved to transfer the matter to the Northern District of Texas, asserting that the forum-selection clause is unconscionable.
The request to relocate the action centers on the forum-selection clause. Under California law, a contract is deemed unconscionable if it is both procedurally unconscionable—arising when a party did not have a meaningful option in agreeing—and substantively unconscionable when the terms excessively favor the other party. The two aspects are evaluated on a sliding scale: a finding of substantial procedural unconscionability can compensate for a lesser degree of substantive unconscionability, and the converse is true as well.
A contract is procedurally unconscionable when oppression or surprise occurs during its formation. Oppression implies a lack of negotiation and meaningful choice. Here, the defendants presented X’s terms on a take-it-or-leave-it basis with no room for bargaining, signaling at least an element of adhesion and a lack of negotiation and meaningful choice. Adhesion alone suffices to render a contract procedurally unconscionable. (Note that Ninth Circuit precedent cited by the court indicates that adhesion renders a contract “procedurally unconscionable to at least some degree.”)
Surprise can arise when the agreed-upon terms are concealed within a lengthy document drafted by the party seeking to enforce them. The defendants include Version 20 of X’s Terms of Service in full. Plaintiffs observe that the forum-selection clause sits toward the end of the terms of service, in the middle of the second paragraph within the section labeled “General.” This is precisely the kind of concealment of a term “in a prolix printed form drafted by the party seeking to enforce the disputed term” that the Ninth Circuit has recognized as supporting a finding of surprise.
Beyond procedural concerns, the clause must be evaluated for substantive unconscionability, which looks at the fairness of the contract’s terms—particularly whether one party used its superior bargaining position to impose terms that are excessively harsh, oppressive, or unreasonably one-sided. Provisions that favor one side inordinately can be substantively unconscionable.
In this case, the plaintiffs have shown that the forum-selection clause is markedly one-sided. X’s terms compel disputes to be heard exclusively in federal or state courts located in Tarrant County, Texas. By contrast, the defendants may bring any claim against users in any competent court in the country where those users reside, so long as jurisdiction and venue align with the claim. The defendants fail to offer any business justification for imposing such a one-sided venue restriction on plaintiffs while not subjecting themselves to a similar constraint.
James Hannaway and Sophia Marie Rios of Berger Montague PC serve as counsel for the plaintiffs.
