The Southern District of New York recently issued a ruling that raises new issues with customer consent and arbitration contracts in a simple click-through agreement, adding to the increasing judicial skepticism over the enforceability of browse-wrap agreements, despite the Supreme Court’s seeming endorsement of consumer arbitration clauses in AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), based on preemption by the Federal Arbitration Act.

The recent ruling from Judge Rakoff arose in the context of a motion to compel arbitration in a case brought against Uber. The court refused to compel arbitration, finding that the plaintiff had not accepted the Terms of Use that contained the arbitration provision and were included in the Uber app. Meyer v. Kalanick, No. 15-cv-09796 (S.D.N.Y. July 29, 2016). Judge Rakoff focused on the alleged lack of notification to consumers when using a mobile app and “situations where the consumer is not even asked to affirmatively indicate her consent” but rather the “mere act of accessing a service” is “allegedly consenting to an entire lengthy set of terms and conditions.”

Judge Rakoff scrutinized the company’s click-through method of requesting user consent. The court held that there was a lack of a binding agreement, in part, because the account registration process and acceptance of the terms allegedly made it difficult to view the terms. Judge Rakoff focused in particular on the following aspects of the registration process:

  • Checking a box expressly confirming agreement or consent was not required.
  • Reviewing the Terms before registering was not required.
  • Language indicating consent to the Terms and the hyperlink to the Terms was not prominently displayed due to its color, placement, and size. The court found that it was too far below the “Register” button and did not ensure a user’s eye would see it before clicking “Register.”
  • Nothing in the phrase “Terms of Service” indicates that the Terms included a waiver of the right to bring an action in court. Thus, even if the plaintiff had seen the language indicating consent to the Terms, it would be reasonable to assume the Terms of Service was a description of the services that Uber would provide to the user.
  • The hyperlinked “Terms of Service” text took the user to a new screen that did not contain the Terms, and required an additional step to actually view the Terms.
  • After accessing the Terms, the user must “scroll down several pages in order to come across” the agreement to arbitrate. There was no other indication that the Terms contained this arbitration clause.

Focusing on these factors, the court concluded that there was not enforceable agreement between the plaintiff and Uber, and the arbitration provision was not binding.

As this ruling makes clear, the design of the process of obtaining consumer consent matters for courts that analyze the issue through the lens of contract formation; and it can determine whether a company’s terms and conditions are enforceable. Although there are often pressures to make registration processes as consumer-friendly and seamless as possible, courts are suggesting a variety of considerations that may bear on enforceability. Whether a coherent set of principles evolves from these cases, and whether the Supreme Court would agree that these cases are consistent with its prior teaching, however, remains to be seen.