This month, in Berman v. Freedom Financial Network the United States Court of Appeals for the Ninth Circuit revisited the issue of whether websites can enforce mandatory arbitration clauses in hyperlinked “terms and conditions” that most users never read. The Ninth Circuit affirmed a District Court order denying the motion to compel arbitration brought by the defendant digital marketing company in response to a claim that the digital marketing company violated the Telephone Consumer Protection Act by directing telemarketing activity obtained from consumer information provided by visits to the defendant’s websites.
The Ninth Circuit explained its duty was to determine “whether a valid arbitration agreement exists and, if so, whether the agreement encompasses the dispute at issue.” It further explained, clickwrap agreements, where a website displays a contract that must be agreed to with a click by the consumer, are routinely found enforceable. Conversely, courts less often enforce browsewrap, in which a user “supposedly manifests assent” by clicking to continue in the presence of a hyperlink to the terms and conditions. Courts hesitate to enforce these because consumers are frequently left unaware that contractual terms were even offered. A contract is enforceable in this context only when: “the website provides reasonably conspicuous notice of the terms to which the consumer will be bound,” and if the consumer clicks a button or checks a box to show unambiguous assent to those terms.
To be enforceable a website must provide “reasonably conspicuous notice of the terms to which the consumer will be bound.” In Berman, the Ninth Circuit found that the “terms and conditions” text was “tiny gray font” and displayed much smaller than the other nearby graphics and text. As held in Nguyen, a website is required and did not capture the user’s attention and secure her assent. It also instructed, if a hyperlink is used to redirect users to the terms and conditions, it must be “readily apparent.”
In Berman, the hyperlink was exhibited in the same text color as surrounding words, not clearly distinguishing its existence to consumers. Thus, the Ninth Circuit concluded, as did the District Court, the defendant did not provide “reasonably conspicuous notice.”
The second requirement to bind users to a contract without their actual knowledge is through an unambiguous manifestation of assent. The defendant argued that the plaintiffs clicking on the “continue” button satisfied this standard. The Ninth Circuit however found that “merely clicking on a button” does not show actual agreement. Further, the court held that “even close proximity of the hyperlink” to other buttons to be clicked is “insufficient to give rise to constructive notice.” The Ninth Circuit explained defendant could have easily included language specifying what exactly users were agreeing to with the clicking of “continue,” and offered suggestions for similar companies looking to create enforceable agreements.
The Ninth Circuit affirmed the district court’s denial of defendant’s motion to compel arbitration. If you have terms and conditions that contain a mandatory arbitration agreement for your website, see your business attorney for a review and employ those steps outlined by the Ninth Circuit in Berman.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
