Mandatory arbitration clauses have become routine ingredients in website user terms and conditions. Disclosure and efforts to disclose and obtain consumer agreement to these provisions is generally sought through highlighted links to the details, including the arbitration commitment. But what is “enough” to confirm that the consumer has “signed on” to arbitrating a dispute, including one relating to alleged violations of the Telephone Consumer Protection Act (TCPA)? Not a new question, but understanding and adhering to judicial articulated parameters are increasingly important if the clause is to be successfully enforced.
In Daniel Berman et al. v. Freedom Financial Network, LLC et al., 2020 U.S. Dist. Lexis 160406, Case No. 18-cv-01060-YGR, United States District Court for the Northern District of California, September 1, 2020, plaintiffs brought a TCPA class action lawsuit after allegedly received autodialed text messages and prerecorded voice calls as part of a telemarketing campaign by, among others, Fluent, Inc., promoting the services of defendant Freedom and an affiliate. Fluent obtained leads for the text messaging campaign via consumer facing websites, which collected the users data (e.g., at least two of named plaintiffs) for use in its clients’ (e.g., defendant Freedom) marketing campaigns.
In response to the lawsuit, Freedom moved to compel arbitration of the TPCA claims raised by the two plaintiffs and Judge Yvonne Gonzales Rogers was faced with determining “whether: (i) an agreement exists between the parties to arbitrate; (ii) the claims at issue fall within the scope of the agreement; and (iii) the agreement is valid and enforceable.” In this case, the Court did not need to go beyond the first prong of the analytical framework, concluding that “the defendants have failed to meet their burden to establish that plaintiffs Hernandez and Russell entered into an agreement for mandatory arbitration.”
First, in support of its motion, Freedom offered website screen shots – described by the Court as “the equivalent of blank form contracts” – to show that the two plaintiffs had in fact agreed to arbitrate. Judge Rogers observed that the “contracts” provided “no clear indication that these plaintiffs agreed to them.” Moreover, the screen shots provided, along with a declaration of a Fluent computer system engineer, omitted pages “which might have demonstrated that these particular users interacted with these particular pages,” including “images of checked boxes, additional identifying information, and a system timestamp image.” Since the plaintiffs submitted their own declarations disputing seeing elements of these pages and the defendant’s exhibits were not authenticated, the Court concluded “there are material facts in dispute.”
But factual disputes aside, Judge Gonzales Rogers had much more to say on the subject. While the webpages did include text – “I understand and agree to the Terms & Conditions which includes mandatory arbitration …”- including a hyperlink, the Court ultimately found the webpage features were not enough to establish that the two plaintiffs had in fact agreed to arbitrate.
Judge Gonzales Rogers’ assessment was based largely on the framework established in the 2014 Ninth Circuit decision in Nguyen v. Barnes & Noble Inc. Therein, a terms of use hyperlink was near the button a user would need to complete an online purchase, along with other website layout features designed to support “conspicuousness” of the link and ultimately what the consumer was agreeing to. But the website “contained no admonition to ‘review terms’ or otherwise prompt the user to take affirmative action to demonstrate assent to the terms at issue, including the arbitration clause.”
Armed with that guidance, Judge Gonzales Rogers noted that “the [Fluent] webpages do not conspicuously indicate to users that they are agreeing to the Terms and Conditions, including an agreement to mandatory arbitration.” More specifically, they “do not include a specific affirmative means of indicating consent to the Terms & Conditions or arbitration clause” (emphasis supplied).
Further elaborating, the Court added that while the hyperlink to the terms of agreement, which was located near the button the user must click to continue, “there is no text that notifies users that they will be deemed to have agreed to these terms ‘nor prompts them to take any affirmative action to demonstrate assent.’…There is no tickbox or ‘I agree’ button for the Terms & Conditions.”
By way of further critique, the “This is Continue” and “Continue” buttons “plainly refer to the entry of other information on the page, not assent to the Terms & Conditions.” So although the user must click a button to continue using the website, “that click is completely divorced from an expression of assent to the Terms & Conditions or to mandatory arbitration.” Rather on its face, it seemed more focused on attempting to gain consent to arbitration by verifying identifying information provided above.
Finally, not to be left unaddressed, there was the matter of the format and font. The Court noted that the language including the Terms and Conditions hyperlink “is formatted in black font against a white background which is exceedingly small compared to the larger, more colorful and high contrast fonts on the rest of the page, making it difficult to read on a large, high resolution monitor, much less a mobile device.” Back to the website design drawing board.
As final reminder of the crux of her analysis, Judge Rogers discounted the fact that the text providing the hyperlink also uses the words “which includes mandatory arbitration.” This “does not change the analysis since the website does not prompt affirmative assent to this statement.”
TCPAWorld Takeaways: Ensure that there are available complete records of consent when using consumer data collected by third parties. To ensure an enforceable agreement to mandatory arbitration, a conspicuous means for website users to affirmatively sign on to such a process is the best practice.