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An arbitration clause in a website’s terms of service must be sufficiently conspicuous in order to be enforceable

California

,

USA

None of the Textual Notices on the Defendant’s Website Were Sufficiently Conspicuous to Bind the Plaintiffs to the Arbitration Provision in the Terms of Service In Sellers v. Justanswer Llc, D077868 (Cal. Ct. App. December 30, 2021), the defendant appealed from an order denying its petition to compel arbitration. In the underlying suit, the plaintiffs filed a class-action lawsuit against the defendant, alleging that it routinely enrolled online consumers like them in automatic renewal membership programs without providing clear and conspicuous disclosures and obtaining their affirmative consent as mandated by the Automatic Renewal Law (“ARL”) (Cal. Bus. & Prof. Code § 17600, et seq.) The defendant claimed that the plaintiffs agreed to their “Terms of Service,” which included a class action waiver and a binding arbitration clause, when they entered their payment information on the website and clicked a button that read, “Start my trial.” The California Court of Appeal for the Fourth District considered whether and under what circumstances a “sign-in wrap” agreement over the internet is valid and enforceable. The defendant’s notices on the "Start my trial" screens of their website were not sufficiently conspicuous to bind the plaintiffs The Court explained that the full context of the transaction is critical to determining whether a given textual notice is sufficient to put an internet consumer on inquiry notice of contractual terms. In this case, the transaction involved a $5 trial that automatically enrolled consumers in a recurring monthly paid membership. Since the Legislature specifically addressed the notice requirements for this type of transaction under the ARL, the Court considered those requirements when evaluating the transaction as a whole. The Court also considered subjective criteria applied in recent federal cases and ultimately concluded that the textual notices were not sufficiently conspicuous to bind the plaintiffs.(1) ARL’s statutory notice requirementsThe ARL makes it unlawful for a business to enroll a customer in an automatic renewal or continuous service agreement without presenting the service terms to the customer in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity to the request for consent to the offer (Cal. Bus. & Prof. Code § 17602(a)(1)). “Clear and conspicuous” is defined as: “in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.” (Cal. Bus. & Prof. Code § 17601(c)) In this case, the textual notices of the existence of the terms of service which included a class action waiver, and a binding arbitration clause were significantly less conspicuous than the statutory notice requirements.(2) Subjective criteria for conspicuousnessWhen determining whether a textual notice is sufficiently conspicuous under California law, federal courts have generally considered the following criteria: 1) the size of the text; 2) the color of the text as compared to the background it appears against; 3) the location of the text and, specifically, its proximity to any box or button the user must click to continue using the website; 4) the obviousness of any associated hyperlink; and 5) whether other elements on the screen clutter or otherwise obscure the textual notice. In this case, the defendant’s textual notice was attached to a hyperlink and that notice was in extremely small print and not immediately adjacent to the “Start my trial” button. The textual notices on the mobile "View Response" screen were not sufficiently conspicuous to bind the plaintiffs The Court also held that the defendant’s textual notices on the mobile “View response” screen were not sufficiently conspicuous to bind the plaintiffs as the screen did not appear in visual proximity to the request for consent to the offer, the textual notices were not at least as conspicuous as the notice required by the ARL, the textual notices did not appear where a reasonably prudent user would expect to enter into a contract, and the terms were only available if the consumer scrolled through disclaimers and clicked on a secondary link to the terms of service. Disposition The Court held that none of the textual notices on the defendant’s website were sufficiently conspicuous to bind the plaintiffs to the arbitration provision set forth in the terms of service and affirmed the trial court’s order denying the defendant’s petition to compel arbitration.

April 14, 2022
Sellers v. Justanswer Llc, D077868 (Cal. Ct. App. December 30, 2021)
California Courts