A federal judge in San Jose refused on August 13, 2026 to move a Grok privacy class action to Texas, holding that neither the chatbot's sign-up page nor its chat screen gave users conspicuous enough notice to form a contract. Both versions of xAI's terms of service went unenforced against the plaintiff.

The order, signed by United States District Judge Beth Labson Freeman in Skaggs v. X.AI, LLC, Case No. 26-cv-04550-BLF, denied xAI's motion to transfer the case to the Northern District of Texas under 28 U.S.C. section 1404(a). The dispute never reached the merits of the privacy claims. It turned entirely on whether a California resident who created a Grok account and typed queries into a black screen had agreed to anything at all.

The Court concluded that he had not. According to the order, the plaintiff "lacked reasonably conspicuous notice of Defendant's forum selection clauses and therefore could not have unambiguously assented to them."

What the case is about

Austin Skaggs filed the putative class action on May 14, 2026, on behalf of himself and, in the words of the complaint, "all United States residents who have accessed and entered queries into Grok.com." The complaint alleges that xAI "disclosed private and confidential information" to third parties in violation of the Electronic Communications Privacy Act, 18 U.S.C. section 2511 et seq., the California Invasion of Privacy Act at Cal. Penal Code sections 630 to 638, the California Constitution and California common law. Those counts occupy paragraphs 99 through 149 of the complaint.

One week later, on May 21, 2026, xAI moved to transfer. The company relied on forum selection clauses in two versions of its terms of service. The 2025 clause states that disputes "shall be brought exclusively in the state and federal courts in Tarrant County, Texas." The 2026 clause, effective April 10, 2026, is broader, directing that disputes "shall be brought and must proceed exclusively in the federal U.S. District Court for the Northern District of Texas or state courts located in Wichita County or Tarrant County, Texas."

Skaggs did not argue that the clauses were unfair or unenforceable on their own terms. He argued something narrower and, as it turned out, more damaging: that he never received notice of them, and therefore never assented. The Court had already vacated the hearing and decided the motion on the papers.

Two screens, one design problem

Under Ninth Circuit law applying California contract principles, a user without actual notice can still be bound if the site provides "reasonably conspicuous notice" and the user takes an action that "unambiguously manifests" assent. Courts weigh two things: the transactional context, and the visual presentation.

xAI pointed to two moments of purported agreement. The first was the sign-up screen the plaintiff used in September 2025 to create an account. The second was the Grok chat screen, which the company said he re-agreed to by entering queries "since 2025 ... and as recently as May 2026."

The sign-up screen

The order describes the page in unusual detail. Black background. The xAI logo in white at top left. Large white text reading "Create your account." Below it, four stacked oval buttons offering sign-up by X, email, Apple and Google, all in the same, smaller type. Immediately under the Google button sits the line "Already have an account? Sign in." Then empty space. Then, at the very bottom, gray text: "By continuing, you agree to xAI's Terms of Service and Privacy Policy," with both document names in white, underlined and hyperlinked.

The Court agreed with xAI that this is a sign-in wrap agreement, the middle category between unenforceable browsewrap and routinely enforced clickwrap and scrollwrap forms.

It then agreed with the plaintiff on everything that mattered. xAI had called the notice "a prominent banner" positioned "directly beneath every sign-up button." The order responds that "calling something 'a prominent banner' does not make it so," and notes that the characterisation "is dubious given that the notice is aesthetically identical to the rest of the sign-up page."

The deeper problem, according to the Court, is that the argument treats all four buttons as one entity. A reasonable user presented with four sign-up methods picks one, at which point the others become superfluous. Even a user selecting the lowest button, Google, would next encounter "Already have an account? Sign in," text that by definition does not apply to somebody creating an account, and would likely read no further.

The color argument

xAI defended its typography by pointing to "the maximum visibility of white text against an all-black background." The Court found the contrast between the hyperlink and the background beside the point, because it says nothing about the contrast between the hyperlink and the light gray text sitting immediately next to it. In a line Freund reproduced in full, "the difference between light gray and white is a matter of degree and hardly one that maximizes visibility."

Two further observations cut against the company. Other non-clickable text on the page, including the "Create your account" heading, is also white, so the color signals nothing about clickability. And the single colorful element on the screen is the multi-colored Google logo on the third sign-up button, near the center of the page, which the order says likely draws attention away from the monochrome notice at the bottom.

The Court summarised the failure in borrowed language: "the notice's distance from relevant action items, its placement outside of the user's natural flow, and its font - notably timid in both size and color."

The chat screen

The chat screen fared no better, though for different reasons and after a ruling that partly favored xAI. Skaggs had called it a "prototypical browsewrap" agreement. The Court disagreed. Because the advisal reads "By messaging Grok, you agree to our Terms and Privacy Policy," a visitor who arrives and sends nothing has agreed to nothing. On a plain English reading, that makes it a sign-in wrap as well.

That classification did not save it. xAI told the Court the notice sat "directly beneath the query box that Plaintiff admits using repeatedly." The order calls this "patently untrue" and adds: "Nothing is directly beneath the query box except a lot of empty space." The query box occupies the top third of the page. The notice sits at the very bottom. Nothing in between gives a user any reason to look down.

One more detail proved decisive. Unlike the sign-up screen, the hyperlinked words on the chat screen are not underlined at all. Color is the only differentiator, and the Court had already held that white against light gray is not a contrasting font color. Quoting Ninth Circuit precedent, the order states that "Consumers cannot be required to hover their mouse over otherwise plain-looking text" to locate hyperlinks.

Where xAI actually won

The transactional context factor went the company's way, and the order is careful about why.

An account is not required to use Grok. The plaintiff created one anyway. He then used the service repeatedly "throughout 2025 and 2026" to enter, according to his own complaint, "queries related to sensitive information about finances, investment strategy, private health conditions, business projects, and other private information."

That combination, optional registration plus recurring use, persuaded the Court that a reasonable user should contemplate "some sort of continuing relationship" governed by terms. The sensitivity of the subject matter pushed the same direction, by analogy to a case involving biometric data shared with a dating service.

It made no difference. Reasonable expectation of terms does not substitute for conspicuous presentation of them. As the order puts it, xAI "chose to use a textual notice attached to a hyperlink as opposed to a pure clickwrap or scrollwrap form" and then displayed that notice in muted type away from the buttons. "By doing so, [Defendant] ran the risk of a court concluding, as we do here, that the notice was not sufficiently conspicuous."

Five prior wins, all distinguished

xAI cited five decisions in which its own or affiliated forum selection clauses were enforced: Doe v. X Corp. from November 6, 2025, Eliza Labs v. X Corp. from October 27, 2025, Taddeo-Waite v. X Corp. from November 20, 2025, Williams v. X Corp. from October 1, 2025, and St. Clair v. X.AI Holdings Corp. from June 23, 2026 in the Southern District of New York.

The order works through each. In Eliza Labs and St. Clair, the plaintiffs conceded they had seen the terms. In Taddeo-Waite, the hyperlinks were blue and positioned between the action buttons. Doe involved those features plus a banner displayed across a month-long notice period and press coverage of the updated terms. Williams did not address contract formation at all.

The Court also declined to follow Wood v. MyPillow, Inc., decided June 18, 2026 and submitted by the plaintiff, because that case turned on unambiguous assent rather than notice.

Notably, the order rejects the idea that any of this produces a template. Quoting the Ninth Circuit, it states there is no "checklist for website designers," nor are there "per se design rules that must be followed," and "even minor differences in the design elements" can decide a case.

The practitioner reading

Rob Freund, a lawyer who advises brands, agencies and creators on marketing and ecommerce matters, published an analysis of the order on X today that had drawn 9,138 views by early evening.

His framing was blunt. "If your terms of service or terms of sale aren't enforceable, then they're meaningless," Freund wrote, adding that a site declining to use a mandatory checkbox means "you invite courts to scrutinize design elements on your site and apps."

Freund identified the specific fixes the order implies: moving the language up the page, increasing its size, and giving the hyperlinks a different color. He also identified the fix that would have removed the question entirely. "And if it had required checkbox consent, there would have been no need to get into these design minutiae."

The commercial stake, in his account, is not academic. Enforceable terms, he wrote, "can be the difference between having to face class action exposure or not."

Not everyone in the thread agreed the exercise was worthwhile. One reply argued that the whole apparatus is theatre because nobody reads terms regardless of the mechanism. Another respondent, a developer, wrote that such terms "should be meaningless" and that contracts ought to require a genuine meeting of the minds. Freund replied to the first point by addressing the commercial objection directly: business owners who resist checkout consent because it might depress conversion cannot then claim the benefit of an alternative mechanism.

Why this matters for the marketing community

The immediate consequence is procedural. A privacy class action stays in Northern California rather than moving to a forum xAI selected, and the company litigates under Ninth Circuit law that has grown steadily less friendly to hyperlinked terms since Berman v. Freedom Financial Network in 2022 and Chabolla v. ClassPass in 2025.

The broader consequence reaches any operator whose risk model assumes its terms will hold.

That model is now doing heavy lifting across the advertising and commerce stack. Amazon reinstated binding individual arbitration and a class action waiver in its consumer Conditions of Use effective August 14, 2026, one day after this order issued, with mass arbitration batching thresholds and no acknowledgment step: continued use of the service is the acceptance mechanism. Reddit brought binding arbitration and class action waivers into its advertising terms in August 2025. Every one of those provisions is worth precisely what a court says the formation process was worth.

The litigation wave the Skaggs case belongs to is also accelerating. A structurally similar complaint against OpenAI was filed on May 13, 2026, one day before Skaggs, alleging that ChatGPT.com forwarded query contents to Meta and Google trackers under the same ECPA and CIPA theories. An earlier action against Perplexity, Meta and Google was voluntarily dismissed on May 1, 2026 without any test of the merits. A meeting-transcription vendor was sued in 2026 over recording without all-party consent under the same statute. Retailers face parallel exposure: a class action against Ace Hardware alleges tracking continued after users declined non-essential cookies.

In that environment, the forum and formation question is often the whole game. A defendant that can compel arbitration or transfer venue changes the economics of a claim before any judge examines what data moved where. The Ninth Circuit declined in April 2026 to revive a damages class in the Google Incognito matter, leaving small-value claims to be pursued individually or not at all. Freeman, the same judge, denied PayPal's motion to compel arbitration in the Honey affiliate litigation and later declined to dismiss any part of the creators' consolidated complaint, sending it into full discovery.

There is a design lesson embedded in the order that has nothing to do with law departments. The element that undermined xAI's position on the sign-up screen was a third-party sign-in button rendered in brand colors, sitting where the eye goes, adjacent to a compliance notice rendered in the site's own palette. Conversion-rate optimisation and consent architecture were pulling in opposite directions, and the court read the page the way a user would rather than the way a wireframe describes it.

For xAI, the ruling is one item in a crowded docket. The company lost a bid in March 2026 to block California's AI training data disclosure law, an Amsterdam court imposed daily fines over Grok image generation the same month, and the European Commission extended its Digital Services Act proceedings against X in January 2026 over Grok's deployment. The Irish Data Protection Commission has had an inquiry open since April 2025 into the training of the Grok models on EU user posts.

The transfer denial does not resolve any of the privacy allegations. It determines only that they will be heard in San Jose, under a set of terms that, as to this plaintiff, the Court treated as though they had never been presented.

Timeline

Summary

Who: Plaintiff Austin Skaggs, a California resident, and defendant X.AI, LLC, before United States District Judge Beth Labson Freeman in the San Jose Division of the Northern District of California. Rob Freund, a lawyer advising brands, agencies and creators, published the practitioner analysis that circulated the ruling.

What: An order denying xAI's motion to transfer a putative privacy class action to the Northern District of Texas. The Court held that neither the Grok sign-up screen nor the Grok chat screen provided reasonably conspicuous notice of the terms of service, so the plaintiff could not have assented to the forum selection clauses in either the 2025 or the 2026 version. Both screens were classified as sign-in wrap agreements. The underlying claims arise under the Electronic Communications Privacy Act, the California Invasion of Privacy Act, the California Constitution and California common law.

When: The complaint was filed May 14, 2026 and the transfer motion on May 21, 2026. The 2026 terms took effect April 10, 2026. The order issued August 13, 2026. Freund's analysis was published today.

Where: Case No. 26-cv-04550-BLF, United States District Court for the Northern District of California, San Jose Division. The requested transfer forum was the Northern District of Texas, with the 2025 clause naming Tarrant County and the 2026 clause naming Wichita or Tarrant County.

Why: The visual presentation failed the Ninth Circuit test. The advisal sat at the bottom of both screens, away from the action items, in gray type whose hyperlinks were distinguished from adjacent text only by a shift to white, and on the chat screen were not underlined at all. The transactional context favored xAI, because the plaintiff chose to create an optional account and used the service repeatedly for sensitive queries, but conspicuousness is a separate requirement and it was not met. The order carries weight beyond this case because forum and formation questions increasingly determine whether privacy claims against platforms are heard collectively, individually, or in arbitration.