Square Inc.'s ban of certain businesses, including bankruptcy services, from using its online payment processing is under scrutiny in California.

A bankruptcy attorney argued before the California Supreme Court May 30 that he has standing to sue Square for occupational discrimination after learning from the company’s terms and conditions that it won’t service his profession and 27 other business categories.

Tech giants, including Alphabet Inc.'s Google and Facebook Inc., are monitoring the case, concerned that it could limit how they market their services. The outcome also could open the floodgates to other lawsuits claiming discrimination based on online services’ terms and conditions.

The plaintiff, Robert White, wanted to use Square’s credit card processing services, but he couldn’t sign up because of the ban, according to his attorney, Myron Moskovitz. White argued that the “occupational discrimination” violated California’s Unruh Act, which gives individuals the right to sue for statutory damages for unlawful discrimination.

The district court dismissed his complaint, saying White failed to adequately show he was personally injured by the exclusion.

Standing to Sue

The U.S. Court of Appeals for the Ninth Circuit referred the case to California’s high court, which will determine if White did enough to get standing to sue.

White doesn’t have standing just by reading Square’s website without signing up to become a customer, Square’s attorney Fred Rowley of Munger Tolles & Olson LLP, told the court. If White were a customer, he’d have standing because the damages would have been personal to him, Rowley said.

“It’s the difference between actual denial of equal treatment versus anticipation of unequal treatment,” he said.

The justices asked the parties’ attorneys what a plaintiff would have to do to obtain standing.

“Under your rule, standing could be accorded to anyone who learns about the discriminatory conduct,” Chief Justice Tani G. Cantil-Sakauye told Moskovitz. “How do you limit the floodgates of litigation?”

Moskovitz said that standing turns on intent—the plaintiff must intend to use the service but didn’t because of the discrimination. That’s a question for trial, he said.

Square insists on customer sign-up for standing because its terms and conditions require customers to settle disputes through forced arbitration, Moskovitz said.

The Internet Association, a trade group representing large internet companies, including Microsoft Corp., Amazon.com Inc. and PayPal Holdings Inc., filed a brief to oppose White’s position.

The association said that internet companies would be subject to “groundless claims for substantial monetary damages” if customers can get standing for an Unruh Act complaint simply by accessing a website and disagreeing with the company’s policies.

Once the California Supreme Court answers the standing question, the case will go back to the Ninth Circuit to determine whether to affirm the district court’s dismissal or to send the case back for trial.

The case is White v. Square, Cal., S249248, Case Docket 5/30/19.