United States:
Ninth Circuit Refuses To Enforce Arbitration Clause Contained In "Browsewrap"Agreement
17 December 2014
Klein Moynihan Turco LLP
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Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir.
2014)
Facts:
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In response to an advertisement announcing a "fire
sale," plaintiff visited Barnes & Noble's website and
purchased two "Touchpads" (competitor to Apple's
iPad) at a discounted rate, and received an email confirming the
transaction.
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A day later, plaintiff received notification that his order was
cancelled due to unexpectedly high demand.
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Plaintiff filed this lawsuit on behalf of himself and a putative
class of consumers whose Touchpad orders had been cancelled.
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Plaintiffs alleged that Barnes & Noble had engaged in
deceptive business practices and false advertising in violation of
New York and California law.
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Defendant Barnes & Noble moved the case to federal court,
and then moved the court to compel arbitration according to its
website's Terms of Use (which included an arbitration
clause).
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The defendant's website featured a "Terms of Use"
hyperlink which was located in the bottom left corner of each page.
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The named plaintiff did not click on the "Terms of
Use" hyperlink, nor did he read the actual language of the
Terms.
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Users who click on the link are taken to a webpage, which
contains the full text of the company's Terms of Use.
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Part of that language indicates that a user who visits any area
of the website is deemed to have accepted the Terms of Use.
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Plaintiff argued that he was not bound by the arbitration
provision because he did not have notice of the Terms of Use and he
did not assent to them.
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Defendant argued that plaintiff was put on "constructive
notice" of the Terms of Use by virtue of the placement of the
hyperlink on the website. Such notice, in addition to
plaintiff's subsequent use of the website, should be deemed
sufficient to have bound plaintiff (and the class) to the Terms of
Use.
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The trial court disagreed and Barnes & Noble appealed.
Ninth Circuit Decision:
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In the course of discussing its reasoning behind the decision,
the Court of Appeals addressed the way that contracts are primarily
formed via the Internet: through "clickwrap" or
"click-through" agreements and "browsewrap"
agreements.
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According to the Court, in "pure-form" browsewrap
agreements, the website will include a notice that apprises users
that by "merely using the services of, obtaining information
from, or initiating applications within the website – the
user is agreeing to and is bound by the site's terms of
service."
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The Court pointed out that, "the defining feature of a
browsewrap agreement is that the user can continue to use the
website or its services without visiting the page hosting the
browsewrap agreement or even knowing that such a webpage
exists."
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A key aspect to the validity of the browsewrap agreement is
whether the user has actual or constructive knowledge of a
website's Terms of Use.
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Constructive knowledge has been found to exist where the
browsewrap agreement is similar to a clickwrap agreement, that is,
where the user is required to affirmatively acknowledge the
agreement before continuing with use of the website.
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Here, the Court found no evidence that users had actual
knowledge of the agreement, and therefore was required to determine
whether constructive knowledge existed.
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Significantly, this latter issue depends on the design and
content of the website and the agreement's applicable
webpage.
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Some of the relevant constructive knowledge factors include: the
conspicuousness and placement of the Terms of Use hyperlink; other
notices given to users of the Terms of Use; and the website's
general design.
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In reviewing the factors and reaching its decision, the Court
found that defendant had failed to provide persuasive legal
authority that supported the position that proximity or
conspicuousness of the hyperlink alone should be enough to give
rise to constructive notice of the Terms of Use.
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The Court noted that due to the lack of controlling authority on
this issue, it would adhere to courts' traditional reluctance
to enforce browsewrap agreements against individual consumers.
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The Court held that "where a website makes its terms of use
available via a conspicuous hyperlink on every page of the website
but otherwise provides no notice to users nor prompts them to take
any affirmative action to demonstrate assent, even close proximity
of the hyperlink to relevant buttons users must click on –
without more – is insufficient to give rise to constructive
notice."
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Take Away:
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Courts take very seriously the imposition of Terms of Use to the
individual consumer.
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This decision highlights the increasing ineffectiveness of
browsewrap agreements.
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There are certainly ways in which website operators can tailor
their hyperlinks and notice provisions in order to help ensure
their enforceability in the future.
-
If you have any questions about a website's design insofar
as it relates to Terms of Use or Terms and Conditions, as
applicable, be sure to retain an experienced Internet Marketing
attorney.
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The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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