A D.C. district court ruled that an eBay user did not assent to a later-added arbitration clause to the user agreement by virtue of a provision that stated eBay could amend the agreement at any time, as the user may not have received sufficient notice of the amendment. (Daniel v. eBay, Inc., No. 15-1294 (D.D.C. July 26, 2018)). Notably, the court declined to find adequate notice sufficient to demonstrate an agreement to arbitrate merely based on the fact that the amended user agreements were posted on eBay’s website (at least under Utah, Louisiana or Texas law). This case is interesting as many websites and services have added mandatory arbitration clauses to their terms in recent years, yet may have a stable of legacy users that agreed to a prior set of terms that did not contain such a provision.

In Daniel v. eBay, the plaintiff purchased an allegedly counterfeit watch in July 2015 from an eBay seller and was unable to resolve the issue, eventually bringing breach of contract and other claims against eBay and the seller. eBay moved to compel arbitration based on plaintiff’s assent to the 1999 User Agreement, which did not have an arbitration clause but contained the change-in-terms clause (i.e., eBay may “amend this Agreement at any time by posting the amended terms on our site”). Because eBay later amended its user agreement in 2012 and 2015 to require arbitration pursuant to the change-in-terms clause, eBay argued that plaintiff agreed to the amendment and failed to opt out of the arbitration provision by mail within a certain time period. eBay also stated that it notified the plaintiff of the 2015 User Agreement via an email sent to his registered email address. In response, plaintiff contended that he never agreed to the 2012 and 2015 arbitration clauses because he never received notification of the amended user agreement.

At issue was whether plaintiff consented to and was bound by the later-added arbitration clause under either Utah, Texas or Louisiana law (the court did not resolve the choice of law issue as it believed the motion would be similarly decided in each of those jurisdictions). The magistrate judge’s recommendation concluded that the plaintiff agreed to arbitrate because he accepted the 1999 user agreement which contained the change-in-terms provision. However, the district court judge declined to adopt the magistrate’s recommendation and denied eBay’s motion to compel.

According to the court, a party may consent to a later-added arbitration clause if the party: (1) is notified about the arbitration clause; and (2) assents via continued use of the product or service. Essentially, the court examined whether the agreement to arbitrate was a “remedy freely bargained for by the parties,” and reviewed the evidence regarding notice given to the plaintiff.

“Therefore, while a party need not necessarily sign a contract with a later-added arbitration clause in order to assent, the party cannot agree to a newly-added arbitration clause without personal notice of that provision.”

“This is not to say that eBay must prove that Mr. Daniel actually receivednotice. However, eBay must show and the record must reflect that it undertook specific efforts to send notice of the new arbitration provisions to Mr. Daniel on a certain date.”

Ultimately, the court found that eBay failed to establish that it notified plaintiff about the 2012 and 2015 amended user agreements containing the arbitration clauses. The court first rejected the contention that plaintiff received notice when eBay posted the amended agreements on its website, noting that eBay did not provide any binding authority that such posts constituted notice sufficient to demonstrate an agreement to arbitrate. The court then found that the record did not support eBay’s assertion that it sent notice of the 2015 amendment to plaintiff via email, concluding that eBay’s email exhibit was a form email purportedly sent to eBay users not directly addressed to plaintiff and there was a lack of evidence showing that an email was sent to the plaintiff – a statement that eBay had mailed a notice to all users was not sufficient.

The court’s opinion offers some lessons on building a record that establishes that users have been given notice of a later-added arbitration clause and that an actual mailing or attempt to mail have been directed personally to the user. These include such things as evidence of the company’s quality assurance controls to ensure that every customer received notice of a later-added arbitration provision or specific efforts to send notice of the new arbitration provisions to the user in question on a certain date.