A multidistrict litigation court in California has ordered false-advertising, class-action claims filed against personal genetics company 23andMe to arbitration, finding that, while the company’s terms of service (TOS), including the arbitration clause, provided insufficient notice to consumers at the time of purchase and they were procedurally unconscionable for lack of sufficient notice and as a contract of adhesion, they were valid as a post-purchase agreement and not substantively unconscionable. Tompkins v. 23andMe, Inc., No. 13-5682 (U.S. Dist. Ct., N.D. Cal., San Jose Div., order entered June 25, 2014). So ruling, the court dismissed the claims, finding no concerns about statutes of limitation and noting that the dismissal would render the decision immediately appealable. The court’s order applies to a number of class actions that were consolidated for pre-trial proceedings; details about the claims appear in Issues 69 and 71 of this Bulletin.

According to the court, hyperlinks to the company’s TOS appear throughout its Website, but consumers are not required to actively indicate acceptance until after they have purchased a home DNA test kit and have registered to view its results online. The TOS includes a “Miscellaneous” section that requires the submission of all disputes to arbitration “under the rules and auspices of the American Arbitration Association [AAA].” Addressing whether a valid agreement existed between the parties, the court discussed “shrinkwrap,” “clickwrap,” and “browsewrap” agreements—those agreements presented either online or after a product purchase, implicitly accepted by the consumer by opening and keeping the product. The court found that the agreement here closely resembled a browsewrap agreement that provided insufficient notice at the time of purchase and was ineffective to bind Website visitors or those who only purchased the kit without creating an account or registering the kit.

Still, the court determined that each plaintiff had accepted the TOS postpurchase and concluded that adequate consideration was provided for the consumer’s post-purchase acceptance. In California, “[a] written instrument is presumptive evidence of a consideration,” and, in the employment context, a “promise to be bound by the arbitration process itself serves as adequate consideration.” In addition, the TOS gave consumers certain rights, such as a “limited license” to use 23andMe’s “Services.” “Furthermore, in exchange for clicking ‘I ACCEPT,’ customers received the health and ancestry results from their DNA samples.” The court also determined that the TOS resembled a clickwrap agreement and thus provided those registering adequate notice.

Because the arbitration provision was not specific enough as to whether questions of arbitrability, such as unconscionablity, were delegated to an arbitrator, the court determined that it had jurisdiction to decide the matter. The court stated, “[A] bare reference to the AAA rules in 23andMe’s online contract does not show that the parties clearly and unmistakably intended to delegate arbitrability,” in part because the language used “forces a customer to comprehend the import of the ‘rules and auspices’ of the AAA; locate those rules independently; determine that the AAA Commercial Rules apply by operation of Rule R-1(a); and then specifically identify Rule R-7(a) to learn of the delegation provision. The possibility that the Consumer Rules might also apply creates an additional ambiguity.”

Citing the notice infirmities previously discussed and the take-it-orleave- it aspects of the TOS, the court found the agreement procedurally unconscionable, but, because the terms were not so unreasonable and one-sided as to “shock the conscience,” ruled that it was enforceable.