The Terms of Service state that it “constitute[s] a legal agreement between [user] and [the Company]. . . . In order to use the Service  and the associated Application , you must agree to the terms and conditions that are set out below.” It also states that, by using any of the Company’s services, the user “expressly acknowledge[s] and agree[s] to be bound by the terms and conditions of the Agreement.” Those terms and conditions include an arbitration provision containing a class action waiver: “You acknowledge and agree that you and [the 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.”
In 2014, plaintiffs filed a putative class action against the Company in Massachusetts state court on behalf of themselves and other users of the Company’s services in the Boston area. The Company removed the case to the U.S. District Court for the District of Massachusetts pursuant to the Class Action Fairness Act (CAFA), 28 U.S.C. § 1332(d), and filed a motion to compel arbitration and to stay or dismiss the case, relying on the arbitration clause in the Terms of Service.
The district court held the Terms of Service, including its arbitration provision, to be enforceable because “[t]he process through which the plaintiffs established their accounts put them on reasonable notice that their affirmative act of signing up also bound them to [the Company’s] Agreement.” In particular, the district court concluded that the notice on the registration screen that creation of an account bound the user to the Terms of Service was “prominent enough to put a reasonable user on notice of the terms of the Agreement.” The district court also concluded that plaintiffs had manifested their agreement to the Terms of Service because “[t]he language surrounding the button leading to the Agreement is unambiguous in alerting the user that creating an account will bind her to the Agreement,” and “the word ‘Done,’ although perhaps slightly less precise than ‘I accept,’ or ‘I agree,’ makes clear that by clicking the button the user has consummated account registration, the very process that the notification warns users will bind them to the Agreement.”
The First Circuit Reverses. On appeal, plaintiffs challenged the district court’s conclusions that the Terms of Service was reasonably communicated to and accepted by plaintiffs. The court of appeals determined that users were not reasonably notified of the Terms of Service because of how the hyperlink to the terms was displayed on the registration screen. Emphasizing that the conspicuousness of the link “may not be read in a vacuum,” but “must be contextualized,” the court scrutinized the appearance and placement of the link in relation to the other buttons and visual elements on the screen:
In short, it was the “design and content” of the screen that led the court of appeals to conclude that the Terms of Service hyperlink “was not conspicuous.” The court noted that “[e]ven though the hyperlink did possess some of the characteristics that make a term conspicuous, the 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.”
Even less conspicuous to the court of appeals was the notice directly above the hyperlink that creation of an account bound the user to the Terms of Service. The court noted that “[t]his notice was displayed in a dark gray small-sized non-bolded font against a black background,” and as a result, “[t]he notice simply did not have any distinguishable feature that would set it apart from all the other terms surrounding it.”
Because plaintiffs were not reasonably notified of the Terms of Service, it followed that they also did not provide their unambiguous assent to those terms. The court of appeals reversed the district court’s order compelling arbitration and dismissing the action, and remanded the case for further proceedings consistent with its opinion.