In a recent decision, the First Circuit waded into the topic of online arbitration agreements and found that an arbitration provision presented by Uber through its ride share app was not conspicuous enough to be enforceable.
Factual and Procedural Background
First Circuit’s Analysis
The First Circuit court first analyzed the arbitration provision in the context of the Federal Arbitration Act (FAA), noting that the act describes arbitration agreements as creatures or contract and that the Supreme Court has interpreted the FAA to favor finding such agreements enforceable. Id at 5. The court then affirmed the trial court’s decision to apply Massachusetts contract law and relied on a state appellate court’s two-step test on enforceable arbitration clauses. Id at 6. The test required that 1) the terms of the contract “were reasonably communicated to the plaintiffs,” and 2) that the terms were accepted. Id.
The crux of the issue was centered around whether the provision was sufficiently conspicuous as Uber made no effort to argue that the plaintiffs saw or clicked on the terms. Id. The court disagreed and found the provision was not reasonably communicated to the plaintiffs because the terms were only accessible through a link during the account creation phase. Id. The court noted that Uber decided not to use the common technique of having users check a box denoting that they have read and understood the terms and policies set forth. Id. In addition, the fact that the link and rectangular box containing the link were in the same visual style as the credit card payment box and other terms was evidence that the arbitration provision was not conspicuous. Id.
Ultimately, the court found that since Uber failed to notify the plaintiffs in a reasonable manner of the arbitration provision, the arbitration clause was not enforceable, and the case was remanded. Id at 8.
Cullinane shows the importance of communicating online arbitration provisions effectively to consumers. Even though arbitration provisions are ubiquitous, and more and more agreements show up through online platforms, businesses cannot cut corners when presenting arbitration agreements to customers. While Uber easily could have avoided this situation by merely including a box to be checked that stated the user had read the agreement or by having any user scroll through the terms of the agreement, the First Circuit’s decision reveals that not all courts are eager to enforce online arbitration provisions presented to potential consumers through hyperlinks.
(Nick Leyh, a third-year student at the University of Missouri School of Law prepared this post.)