View more from News & Articles or Primerus Weekly

Website Terms and Conditions (TOCs) have come under scrutiny due to their location on a website. For example, in Nghiem v Dick’s Sporting Goods, Inc., No. 16-00097 (C.D. Cal. July 5, 2016), the Central District of California held “browse wrap” TOCs to be unenforceable because the hyperlink to the TOCs was “sandwiched” between two links near the bottom of the third column of links in a website footer.

This case is part of an emerging trend of judicial scrutiny over browse wrap agreements, where a website’s terms and conditions are posted on the website via a hyperlink at the bottom of the screen and users are presumed to manifest assent to the terms by use of the website, as opposed to a “click through” agreement, where users are expressly presented with and required to assent to the terms (by “clicking” a box). There are also other flavors of website agreements called “scroll wrap” or “sign-in-wrap” agreements.

Many courts have refused to enforce browse wrap agreements because of a lack of user notice and assent. In Nghiem, the plaintiff brought claims under the Telephone Consumer Protection Act (TCPA) seeking statutory damages and an order certifying a class action. The defendant Dick’s Sporting Goods (DSG) moved to compel arbitration based upon the DSG’s website TOCs. The Court denied DSG’s motion, ruling that the plaintiff had no knowledge of the website TOCs and was not bound by the arbitration clause contained in the browse wrap agreement.

The Nghiem Court noted that browse wrap agreements are enforced with “reluctance,” and only when a consumer has “actual or constructive knowledge of a website’s terms and conditions.” The Court noted that DSG’s terms appeared at the bottom in the website footer of the home page (and on the page about its mobile alerts), and within a grouping of 27 other hyperlinks arranged in four columns that covered a variety of diverse topics (e.g., careers, gift cards, find a store, etc.), and noted that the hyperlink to the terms was “sandwiched between ‘Only at DICK’s’ and ‘California Disclosures,’ near the bottom of the third column of links.” The Court ruled that the placement was not conspicuous enough alone to put consumers on inquiry notice of the terms.

The ruling dovetails with other decisions examining browse wrap agreements. See, e.g., Sgouros v. TransUnion Corp., No. 15-1371 (7th Cir. Mar. 25, 2016) (declining to enforce a website’s arbitration clause because it failed to provide the site’s users with reasonable notice that an online purchase manifested assent to its terms; Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1178-79 (9th Cir. 2014) (“[W]here a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on - without more - is insufficient to give rise to constructive notice”); Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002) (declining to enforce an arbitration provision contained in a software licensing browse wrap agreement where the hyperlink to the agreement appeared on “a submerged screen” below the “Download” button that the plaintiffs clicked to initiate the download); Long v. Provide Commerce, Inc., 200 Cal. Rptr. 3d 117 (Cal. App. 2016) (affirming denial of a motion to compel arbitration based upon website terms that were only viewable at the bottom of each page via a capitalized and underlined hyperlink, the hyperlink was displayed in a light green typeface on the site’s lime green background, and was among fourteen other hyperlinks of the same color, font and size). Compare ADP, LLC v. Lynch, No. 2-1053 (D.N.J. June 30, 2016) (upholding enforceability of “click wrap” employee agreement).

Key Takeaway. Companies should examine their electronic contracting practices to ensure that consumers are offered notice sufficient to understand that use of a website will constitute agreement to the TOCs.  Ultimately, in designing a website, we recognize that retailers must balance design and usability with the protections that come with enforceable TOCs, but the smallest of details matter. As an example of how details matter, for example, on July 29, 2016, the Southern District of NY Court, in Meyer v. Kalanick, et al., No. 15-9796 (S.D.N.Y. July 29, 2016), refused to enforce mandatory arbitration and jury waiver provisions included in a “sign-in-wrap” agreement against a putative class of Uber consumers. Interestingly, two weeks prior to the Meyer decision, a U.S. District Judge in Massachusetts did enforce an arbitration clause in Uber’s online customer agreement and dismissed a putative class action against Uber. The Massachusetts court ruled that the plaintiffs, which had signed up for Uber’s services using a slightly different version of Uber’s mobile app than in Meyer, did receive reasonable notice of Uber’s terms of service agreement and, by signing up for Uber’s services, assented to those terms.

Please contact Khizar A. Sheikh, Esq. (ksheikh@lawfirm.ms or 973-243-7980) for more information.