Last month, in a putative class action lawsuit against Guthy-Renker, a federal court judge in Los Angeles shed some light on when a class action waiver clause in online terms and conditions is – or is not – enforceable against consumers.

If such a clause is enforceable, then it means consumers cannot sue the company in court and cannot bring claims as part of a class action; instead, each individual consumer would need to go through his or her own arbitration to arbitrate the merits, or lack thereof, of his or her own claim. If, on the other hand, such a clause is not enforceable, then the company in question will face a class action lawsuit in court on behalf of all consumers.

In the Guthy-Renker case, there were two plaintiffs named as class representatives who presented the judge with two different scenarios. Amy Friedman and Krystal Henry-McArthur each claimed they had suffered hair loss as a result of having used the company's Wen conditioner, and each had ordered it from the company's website by clicking a checkbox to complete their purchases. However, Friedman had purchased the product prior to Henry-McArthur, and in between the two purchases, the company had made changes to its website. Thus, the website had looked one way, to Friedman, but another way to Henry-McArthur.

To the judge, this made all the difference. For Friedman, the judge ruled that the content of the website had not been sufficient to put her or any other reasonably prudent person on notice that, by purchasing the product, they would be subject to "terms and conditions" that included a class action waiver clause. For Henry-McArthur, however, the judge ruled that the content of the revised website had been sufficient, and therefore she (and anyone else like her who had purchased from the site during that later time period) could not pursue a class action.

So what was it, on the website, that made all the difference?

When Friedman had purchased the product, the final checkout screen entitled, "Your Shopping Cart," had a checkbox near the bottom. The checkbox was right below the total cost, and right above the "Complete Your Order" button. It read, "By checking this box you are electronically signing your order and authorizing us to charge payments against credit card provided above." The checkbox itself was labeled "Agree to terms." It was not until lower down at the bottom of the page that there was a hyperlink entitled "Terms & Conditions."

In finding that this was insufficient to enforce the class action waiver clause, the judge noted that "Agree to terms" with a lower case "t" did not put a reasonably prudent person on notice that the "terms" referred to the "Terms & Conditions" at the bottom of the page, and that – in any event – the checkbox had nothing that preceded it that would make this clear. On the contrary, above "Agree to terms" was only the credit card information, so "Agree to terms" could be interpreted as simply an acknowledgment of credit card authorization – not an acknowledgement of agreement to the company's "Ts & Cs."

In contrast, when Henry-McArthur bought the product from the site later, the site now read, "Agree to Terms and Conditions," using initial capital letters. Those words also were now in bold, underlined and hyperlinked to the "Ts & Cs."

The placement of the words on the page also had changed: now, the credit card authorization text was below, not above, the checkbox, and it was modified to read, "By checking this box you are agreeing to the Terms and Conditions, electronically signing your order and authorizing us to charge payments against credit card provided."

Thus, the judge dismissed Henry-McArthur from the case, finding her bound by the Ts & Cs and the class action waiver clause that they contained, but let the case go forward for Friedman who, now, will try to pursue her claims as a class action if she can get a class certified.

Previously published in DRMA - April 2015

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