United States: Second Circuit Court Of Appeals Reaffirms Strong Federal Preference For Enforcing Arbitration Agreements In The Evolving Era Of Web-Based Contracting

In a big win for the tech industry and app developers, and for other companies seeking to enforce arbitration agreements through web-based interactions, last week the Second Circuit Court of Appeals held that the plaintiff in a putative class action entered into an enforceable arbitration agreement when he registered for Uber Technology, Inc.'s (Uber) app. See Meyer v. Uber Technologies, Inc., et al., Nos. 16-2750-cv, 16-2752-cv (2d Cir. Aug. 17, 2017). The Uber app publishes Uber's terms and conditions, which contain a mandatory arbitration clause, via hyperlink on the app's registration screen. The lower court had concluded that Uber's notice of its terms of service was not reasonably conspicuous to users, and thus, users did not unambiguously assent to a mandatory arbitration provision contained in those terms. Id. The Second Circuit disagreed. It held that Uber's publication of its terms and conditions via a conspicuous hyperlink put users on inquiry notice of the relevant terms, including the mandatory arbitration provision. In reversing the lower court, the Second Circuit did, however, remand the case so that the lower court could determine whether Uber had waived its right to arbitration by engaging in discovery in the case.

In the underlying case before the United States District Court for the Southern District of New York, the plaintiff, on behalf of a putative class, alleged that Uber and its former chief executive officer engaged in illegal price fixing. Uber moved to compel arbitration based on an arbitration provision that the plaintiff agreed to when he registered on Uber's mobile app. Op. at 2. The lower court denied Uber's motion, and ruled that the plaintiff did not have reasonably conspicuous notice of Uber's terms of service (containing the mandatory arbitration provision), and therefore, the plaintiff did not agree to arbitrate his claims. Op. at 9. In staying the lawsuit pending Uber's appeal, the district court noted the need for the Second Circuit to "clarif[y]...what constitutes adequate consent to so-called 'clickwrap,' 'browsewrap,' and other such website agreements." Meyer v. Kalanick, 203 F. Supp. 3d 393, 396 (S.D.N.Y. 2016).

At the outset of its opinion, the Second Circuit noted the "liberal federal policy favoring arbitration agreements." Op. at 13 (citing AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011)). The Second Circuit also noted that, when it comes to web-based contracts, "there is nothing automatically offensive about such agreements, as long as the layout and language of the site give the user reasonable notice that a click will manifest assent to an agreement." Op. at 17 (citing Sgouros v. TransUnion Corp., 817 F.3d 1029, 1033-34 (7th Cir. 2016). The Second Circuit went on to distinguish between two general types of web-based contracts: "clickwrap" (or "click-through") agreements; and "browsewrap" agreements. Clickwrap agreements generally require users to click an "I agree" box after being presented with a list of terms and conditions of use, while browsewrap agreements generally post terms and conditions on a website via a hyperlink at the bottom of the screen. Op. at 17.

In this case, Uber's arbitration provision was contained in a browsewrap agreement accessible via hyperlink under a button marked "Register," near the statement that "By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY." Op. at 19. Because browsewrap agreements do not require users to expressly assent to them, courts scrutinize these types of agreements more closely to determine whether a user has actual or constructive knowledge of a website's terms and conditions.

The plaintiff argued that he was not on actual notice of the hyperlink to Uber's terms of service or the arbitration provision therein. As such, the Second Circuit looked to whether the plaintiff was on inquiry notice of the arbitration provision by virtue of the hyperlink on the registration screen and, thus, manifested his assent to the agreement by clicking "Register." Op. at 21. In doing so, the Second Circuit considered the "perspective of a reasonably prudent smartphone user." Op. at 22.

The Second Circuit considered the following facts in holding that the plaintiff was on inquiry notice of the arbitration provision: (1) the registration screen was uncluttered, with few fields for the plaintiff to input information into; (2) the conspicuous warning that "By creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY;" and (3) the fact that this text, with the hyperlink to the terms of service containing the arbitration provision, appears directly below the registration buttons. Op. at 24. The Second Circuit also found the fact that notice of Uber's terms of service was given at the time of enrollment as evidence that the contractual terms were connected to the services Uber provided to which those terms apply. Op. at 26. Whether the user did or did not actually click on the hyperlink to read the terms and service is irrelevant, as in this case, the Second Circuit deemed Uber users as having inquiry notice of those terms. Op. at 27.

In sum, the Second Circuit reversed the district court's finding that a verbal arbitration agreement did not exist, and remanded the case to the lower court to determine whether Uber had waived its right to arbitration by engaging in discovery in the case. Op. at 32. The Second Circuit's opinion underscores the strong federal policy preference in favor of enforcing arbitration provisions, even in the evolving world of web-based contracts. To increase the likelihood that arbitration provisions accessible to website or app users via hyperlink will be enforceable, businesses should: (1) keep the screens surrounding the hyperlink as uncluttered and clear as possible; (2) make the hyperlink font, size, and color clear and conspicuous; and (3) place the hyperlink on all website screens, or include it in a pronounced way on screens linked to transactions (like a payment) to ensure that users know their transaction is subject to additional terms. Businesses can also opt to include arbitration provisions in a clickwrap agreement, which generally becomes enforceable once a user scrolls through otherwise fair and reasonable terms and either checks a box acknowledging assent, or clicks an "I agree" button. When in doubt, businesses should consult legal counsel capable of advising them on best practices.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions