Plaintiff Spencer Meyer is litigating a class action lawsuit against Uber for alleged price fixing. Judge Jed Rakoff rejected Uber’s attempt to force the case into arbitration on the basis of an arbitration clause contained in the Terms and Policy section of the agreement.  On July 29th, Judge Rakoff found that the difficulty in finding the arbitration clause in the electronic contract with multiple hyperlinks meant the consumer did not give his assent to the arbitration agreement simply by using the service.

Judge Rakoff based his opinion largely on a decision written for Second Circuit Court of Appeals in 2002, by then-Circuit Judge Sonia Sotomayor who presciently held that “[r]easonably conspicuous notice of the existence of contract terms and unambigious manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility.” Specht v. Netscape Communications Corp., 306 F.3d 17, 35 (2002).  Judge Rakoff concluded, “Applying these principles to the matter at hand, the Court finds that the plaintiff here never agreed to waive his right to a jury trial or to submit to mandatory arbitration.”

Judge Rakoff reviewed a wide variety of arbitration clause opinions before reaching his conclusion. Courts addressing electronic contract formation have at times distinguished between two types of agreements: “‘clickwrap’ (or ‘click-through’) agreements, in which website users are required to click on an ‘I agree’ box after being presented with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website’s terms and conditions of use are generally posted on the website via a hyperlink at the bottom of the screen.

The agreement in this case was of the “browsewrap” variety. The plaintiff did not have to see or agree to this term to use the Uber service. Judge Rakoff discussed how difficult it would be for the consumer to find the arbitration clause; especially on a smart phone. A customer would have had to scroll past the button authorizing his registration for the service, and then click onto a small hyperlink that would have directed him to a company webpage. Further still, Judge Rakoff wrote, “even if a user were to arrive at the Terms and Conditions, these terms (which the Court calls the “User Agreement”) consist of nine pages of highly legalistic language that no ordinary consumer could be expected to understand.  Only then would the consumer see the “agreement” in question, “You acknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding.”

Judge Rakoff concluded:

When contractual terms as significant as the relinquishment of one’s right to a jury trial or even of the right to sue in court are accessible only via a small and distant hyperlink titled “Terms of Service & Privacy Policy,” with text about agreement thereto presented even more obscurely, there is a genuine risk that a fundamental principle of contract formation will be left in the dust: the requirement for “a manifestation of mutual assent.”

Judge Rakoff acknowledged that consumers have little choice but to assent to these fairly ubiquitous electronic agreement clauses, but decided that some legal restraint on how deeply the arbitration clause was buried was justified.

As a result of the opinion the plaintiff has hurdled one obstacle in his class action suit. Uber will likely add an “I agree” button before you can use the service (if it hasn’t already), but I don’t think much else will change. I myself have “agreed” to many such arbitration clauses on my smart phone and laptop and don’t see much choice but to keep clicking away and hope I haven’t sold my soul somewhere in the fine print.

The case is SPENCER MEYER, et. al. v. TRAVIS KALANICK and UBER TECHNOLOGIES, INC., Civil No. 15-9796 (S.D.NY. July 29, 2016)(JR).

Thanks for reading.

PS.  Uber did not have a good week before Judge Rakoff. He raked them over the coals for hiring a private investigator to try to dig up dirt on the plaintiff and his lawyer.  Judge Rakoff wrote:

“It is a sad day when, in response to the filing of a commercial lawsuit, a corporate defendant feels compelled to hire unlicensed private investigators to conduct secret personal background investigations of both the plaintiff and his counsel. It is sadder yet when these investigators flagrantly lie to friends and acquaintances of the plaintiff and his counsel in an (ultimately unsuccessful) attempt to obtain derogatory information about them.”

Full story at the Corporate Crime Reporter (here).

Thanks for reading.  (And by the way, by reading this blog you have assented to _________.   So really, thanks for reading 🙂