Almost a year ago, the Second Circuit praised the clean, readable design of Uber’s app. Because the reference to Uber’s terms of service was not cluttered and hyperlinked to the actual terms, the Second Circuit held Uber could enforce its arbitration agreement and the class action waiver within it. But, just last week, the First Circuit disagreed. In Cullinane v. Uber Technologies, Inc., 2018 WL 3099388 (1st Cir. June 25, 2018), it refused to enforce an arbitration clause in Uber’s terms of service and allowed a putative class action to proceed. The First Circuit found customers were not reasonably notified of Uber’s terms and conditions, because the hyperlink to those terms was not conspicuous.
The Cullinane opinion was applying Massachusetts law on contract formation. Massachusetts has not specifically addressed online agreements (or smart phone apps), but in analogous contexts has held that forum selection clauses should be enforced if they are “reasonably communicated and accepted.” In particular, there must be “reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent.” The Meyer opinion was applying California law on contract formation. But the test was identical, because both states had borrowed it from a Second Circuit decision about Netscape. So, the state law at issue does not explain the different outcome.
And, those are some of the aspects of the design that the First Circuit pointed to as critical. It noted that hyperlinked terms are usually in blue text and underlined, but that the Cullinane plaintiffs’ were faced with hyperlinked “Terms of Service” that were not blue or underlined. Instead, they were in white text in a gray box, no different than other non-hyperlinked text like “scan your card” on the same screen. In addition, the First Circuit found the text stating “by creating an Uber account you agree to the [Terms]” was insufficiently conspicuous for similar reasons. For those reasons, the Cullinane opinion found “the Plaintiffs were not reasonably notified of the terms of the Agreement, they did not provide their unambiguous assent to those terms.”
This is another example of how unsettled some aspects of arbitration law are (and maybe consumer contracting in general). In Meyer, the district court had denied Uber’s motion to compel arbitration, and the appellate court reversed, granting the motion to compel arbitration. And in Cullinane, the district court had granted Uber’s motion to compel arbitration, and the appellate court reversed, denying the motion to compel arbitration. Those four courts were applying the exact same legal standard of conspicuousness, and reached opposite conclusions in the span of less than a year.
The lesson here is two-fold. First, there is no clear standard for when terms on a website (or on a receipt, or in a box) are sufficiently conspicuous, so judges are left to their own devices (pun intended) to answer that question. Second, unless an on-line provider wants judges — who are likely untrained in the psychology of consumer design related to five inch screens (and may not even have any apps) — to keep on getting to whatever result they please, the only solution is to require a consumer to actually click “I agree” after viewing a screen of the terms and conditions. Unless, of course, SCOTUS grants certiorari of this new “circuit split” and issues guidance…