There is a growing body of law analyzing the formation of online arbitration agreements, and the First Circuit’s recent opinion in Cullinane v. Uber Technologies, Inc., No. 16-2023 (1st Cir. June 25, 2018) (click here for a copy of the decision) adds to this growing corpus. This decision is a must-read for anyone creating or challenging online arbitration agreements.
The plaintiffs, Uber passengers, filed a class action challenging certain fees as violations of state consumer protection laws, and Uber tried to block the class action in court by compelling each plaintiff to submit to individual arbitration. The First Circuit ultimately held that the users were not reasonably notified of the terms of the arbitration agreement, and thus the arbitration agreement was not enforceable.
The First Circuit’s decision contains a few images of the screens that Uber’s passengers see during the registration process. An example of one screen appears below (if the image below is not clear, the image may appear clearer in the actual court opinion hyperlinked above):
According to the First Circuit, it was problematic that other terms (such as “scan your card” and “enter promo code”) were displayed with similar features as the terms of service, in bold and using a similar font. Also, the text used to notify potential users about the terms (“By creating an Uber account, you agree . . .”) was diminished in dark gray against a black background. As explained by the First Circuit,
[T]he presence of other terms on the same screen with a similar or larger size, typeface, and with more noticeable attributes diminished the hyperlink’s capability to grab the user’s attention. If everything on the screen is written with conspicuous features, then nothing is conspicuous.
Considering the broader context of the hyperlink to Uber’s terms of service and the design and content of the registration screens, the First Circuit found that users were not reasonably notified of the terms of the arbitration agreement.
I have a few observations about the court’s opinion:
1) The court suggested that Uber could have easily avoiding these problems by using a “common method of conspicuously informing users of the existence and location of terms and conditions: requiring users to click a box stating that they agree to a set of terms, often provided by hyperlink, before continuing to the next screen.”
In terms of designing apps, perhaps designers or business people are adverse to adding extra steps that could slow down or complicate the registration process. In other words, a “one click” approach to business appears to be more desirable from the perspective of a business or app designer, instead of forcing users to click through multiple screens or acknowledgment boxes. But to help ensure enforceability of arbitration clauses, the First Circuit suggests the inclusion of a click box that users must check in order to proceed.
2) The court’s reasoning runs the risk of FAA preemption. In Doctor’s Associates v. Casarotto, the Subway franchise case from 1996, the Supreme Court held that the FAA preempted state laws imposing special notice requirements for arbitration agreements. The First Circuit’s reasoning in this Uber case suggests that arbitration terms must grab the user’s attention and not be equally conspicuous as other terms, but more conspicuous. (“If everything on the screen is written with conspicuous features, then nothing is conspicuous.”) The First Circuit could have drafted its opinion more carefully to avoid FAA preemption, and under Casarotto and the Supreme Court’s broad preemption standards set forth in the AT&T v. Concepcion case, it looks like Uber arguably has some preemption arguments. I’m pleased with the First Circuit’s decision, but under the existing framework of arbitration law, there are some weaknesses in the First Circuit’s reasoning.
3) there is a big difference between the text of an arbitration agreement and its implementation. In other words, a party may have drafted air-tight, clear language for the text of an arbitration agreement, but if the “making” or implementation of the agreement is not done properly, the agreement is not enforceable. The FAA’s drafters were a little sloppy in more than a few places when drafting the federal statute, but they wisely directed courts to examine the “making” of arbitration agreements in section 4 of the FAA. In this Uber case and other modern cases involving online arbitration agreements, the relative font size, relative positions of different terms, and even ink color for the text and background can make a difference regarding the enforceability of an arbitration clause.