Recent Court Decision is Warning to Website Owners

Recent Court Decision is Warning to Website Owners

BY JERRY GLOVER
AUGUST 22, 2016

Have you ever ordered something from a website? If so, did you have to indicate before placing your order that you had read and accepted the website’s “Terms of Service” or “Terms & Conditions”? If not, then that website may not be able to enforce the so-called contract it believes you entered into when placing your order. A recent federal court decision emphasizes the importance of obtaining mutual assent to a website’s terms of use contract if the site wants to enforce that contract including its arbitration clause. Meyer v. Kalanick, 2016 WL 4073071 (S.D.N.Y. July 29, 2016).

article-5.2-16In this case, the consumer plaintiff filed suit against defendant and Uber alleging antitrust conspiracy. The defendants argued that the plaintiff had agreed to arbitrate, not litigate, disputes when plaintiff signed up to use Uber’s ride services and asked the court to dismiss the case so that arbitration could be conducted.

The court noted the strong, fundamental right to a jury trial guaranteed by the U.S. Constitution and the laws of the states. But it noted that in the Internet age this right is often seemingly waived when consumers interact with websites because “they supposedly agree to lengthy ‘terms and conditions’ that they had no realistic power to negotiate or contest and often were not even aware of.”  Although the court acknowledged that the Federal Arbitration Act makes it clear that there is a libel federal policy favoring arbitration, it was skeptical that consumers actually are aware that they may have waived the right of jury trial when interacting with a website and by pressing a button on that site may have accepted “endless, turgid, often impenetrable sets of terms and conditions” including arbitration clauses. The court asked whether this should be the case if a consumer merely accesses the website or if the only indication that a consumer is consenting to a site’s terms and conditions is indicated by a label that is so small “that an ordinary consumer, if she could read it at all, would hardly notice it.”

In this case, the plaintiff denied that he had agreed to arbitrate his claims when he signed up for Uber’s services. He signed up using the Uber smartphone app (the court noted that the law governing contracts and acceptance of contract terms did not differ because an app was used rather than the Uber website). This required two steps: the first screen on the phone required the user to either register for Uber with Google+ or Facebook or to enter their name, email address, phone number and password and click the “Next” button. If that button was clicked, a second screen appeared where the consumer could make payment and finalize the registration. This second screen had a field where the user’s credit card details could be entered. Beneath that field was a large button labeled “Register.” Beneath that button were two addition buttons similar in size to the Register button that gave the user another way to pay. One of these buttons was labeled “PayPal” and the other “Google Wallet.” Beneath those two buttons in a much smaller font were the words “By creating an Uber account, you agree to the Terms of Service & Privacy Policy.” “Terms of Service” and “Privacy Policy” were in all caps; otherwise this sentence was not highlighted in any way and, according to the court, barely legible. Remember that the user was viewing this on a smartphone, not a computer.

The words “Terms of Service” and “Privacy Policy” were underlined and in blue suggesting that they were hyperlinks which, when clicked on would take the user to the actual documents. But that’s not how it worked. After clicking on a hyperlink the user was taken to a screen that contained a button that accesses the terms and privacy policy.

But there was no need to go this far. A user did not have to access these documents at all in order to register as an Uber user. Remember that the “Register” button appeared on the smartphone screen well before the sentence claiming use meant acceptance of the terms of service. So a user could sign up for Uber without every seeing, much less accessing, these documents.

But wait. There’s more.

If a reader did go so far as to access the Terms of Service document, the user would have been confronted with nine pages of highly legalistic language which the court believed “no ordinary consumer could be expected to understand.” The arbitration clause was found at the bottom of the seventh page and was labeled “Dispute Resolution.” In the middle of the arbitration clause was a sentence in boldface noting that the user was waiving his/her right to a jury trial and to participate in a class action proceeding against Uber.

The plaintiff claimed he did not remember noticing the Terms of Service hyperlink and Uber did not contest that. The court noted, however, that a person may have accepted an electronic agreement if a “reasonably prudent user” would have been put on “inquiry notice” of the agreement’s terms including the arbitration agreement. But what is this “inquiry notice?”

The court reviewed the two types of agreements found on websites: browserwraps and clickwraps. A browserwrap does not require the website user to visit the terms of service page or to even point out that it exists. In the case of consumer plaintiff’s, a browserwrap’s terms of service contract are seldom enforced against the plaintiff. A clickwrap agreement, however, is often enforced against the consumer plaintiff since a clickwrap points out to the site user that purchasing a product off the site or signing up to use it’s services requires the user to “click” a box which is followed by a sentence noting that the user has read and agrees to the site’s terms and conditions and provides a link to that document. Clicking on that box is a prerequisite to purchasing the product or signing up for the service. This click shows the consumer was on notice concerning the terms and conditions and assented to them—a basic requirement of contract law.

In the case at hand, the plaintiff was not required to click any box noting that he had read the terms and conditions and accepted them. But Uber argued that its app site was a “sign-in wrap” agreement since the user is supposedly notified of the terms and conditions existence when proceeding through the site’s sign-in or login process. The court noted that sign-in wraps are considered a questionable format of Internet contracting and added that any such notification on the Uber app was in a barely legible font size. The court pointedly stated that since that notification was below the “Register” button the notice “takes on the appearance of an afterthought.” In addition, the court refused to assume that the typical phone app user would know what would be found in the “terms of service” and “privacy policy.” The court even went so far as to conjecture that a reasonable app user might believe that “terms of service” refereed to a description of the types of services that Uber intended to provide, not to the user’s waiver of his/her right to a jury trial.

The court also noted that even if the user clicked on the “terms of service” hyperlink, the user was taken to another page where the user had to again click on the phrase “terms of service” in order to access the document. Then, the court added, the user had to scroll through the document before encountering the arbitration clause. The court concluded that all of this constituted a barrier to putting the user on notice.

The court ended its opinion with what sounds like a warning: “The purveyors of electronic form contracts are legally required to take steps to provide consumer with ‘reasonable notice’ of contract terms. …User interfaces designed to encourage users to overlook contractual terms in the process of gaining access to a product or service are hardly a suitable way to fulfill this legal mandate.”

TAKE AWAY: If you own a website that offers services or products to individuals or companies, then realize that it’s too late to continue to believe that placing a “Terms of Service” hyperlink at the bottom of each web page is sufficient notice to website users that they are going to be bound by some type of contract simply because they have accessed the site. Use a clickwrap agreement and avoid this type of consumer lawsuit. A case decided earlier this year by our own US Court of Appeals for the Seventh Circuit agrees with this approach. We wrote about that case here.

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