In an opinion today, Judge Rakoff denied a motion to compel arbitration of antitrust claims against Uber’s CEO because he found that the arbitration clause was too concealed for the plaintiff to have reasonably agreed to it. (See our prior posts on the case here.)

When a user enters his or her credit card information, there is a button that says “Register,” and below that, in a “barely legible” font, it says: “By creating an Uber account you agree to the Terms of Service and Privacy Policy.” The phrase “Terms of Service” is a hyperlink to terms that include a mandatory arbitration clause.

Judge Rakoff acknowledged that there is extensive case law upholding arbitration agreements when users must click a button stating “I agree” to the terms of use (so called “clickwrap” agreements), but found that the facts here were towards the other end of the spectrum, where the clauses are not enforceable:

[T]he Court finds that plaintiff Meyer did not have “[r]easonably conspicuous notice” of Uber’s User Agreement, including its arbitration clause, or evince “unambiguous manifestation of assent to those terms.” Most importantly, the Uber registration screen. . . . did not adequately call users’ attention to the existence of Terms of Service, let alone to the fact that, by registering to use Uber, a user was agreeing to them. . . .[T]he Terms of [Service] hyperlink . . . [is] simply too inconspicuous . . . . When to this is coupled the fact that the key words “By creating an Uber account, you agree to” are even more inconspicuous, it is hard to escape the inference that the creators of Uber’s registration screen hoped that the eye would be drawn seamlessly to the credit card information and register buttons instead of being distracted by the formalities in the language below. And this, the Court finds, is the reasonably foreseeable result.

. . . .

At bottom, what is at stake is the “integrity and credibility” of “electronic bargaining.” 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.” One might be tempted to argue that the nature of electronic contracts is such that consumers do not read them, however conspicuous these contracts are, and that consumers have resigned themselves simply to clicking away their rights. But that would be too cynical and hasty a view, and certainly not the law.