Two courts at opposite ends of the country have upheld online arbitration contracts in recent months. I've previously written about the hesitance some courts have had to enforce "click-wrap" arbitration provisions unless the person has actually seen and read the terms of the agreement. As ecommerce becomes an increasingly important facet of our everyday lives, however, some courts seem to be getting more comfortable with the idea.
In April 2014, the U.S. District Court for the Southern District of New York dismissed a class action lawsuit against the online retail outlet Gilt. The basis of the ruling was that, when the plaintiff, Adam Starke, had become a "member" of Gilt's website, he had clicked a button saying that he agreed with the site's Terms of Membership. The page where Starke clicked "Shop Now," however, contained only a hyperlink to those terms. Clicking that link would have brought Starke to the "Gilt Terms and Conditions," which in turn say that purchases are also governed by the "Website Terms of Use" contained on yet another hyperlinked page. Following that link would have taken Starke to another list of provisions. Paragraph 16 on that page contained an agreement to arbitrate any claim in New York.
"Regardless of whether he actually read the contract's terms," the court held, "Starke was directed exactly where to click in order to review those terms, and his decision to click the 'Shop Now' button represents his assent to them." In finding the clause itself reasonable, the court found "no reason ... why Starke should be surprised, in making a transaction of this nature, by having to arbitrate a dispute about it."
Separately, in July 2014, a Texas Court of Appeals panel in Dallas issued a similar ruling in favor of Momentis U.S. Corporation. Sheldon Weisfeld, an independent representive (or IR) of the company, had sued, claiming he was owed extra compensation for attending an IR conference. The court noted, however, that IRs like Weisfeld are recruited by emails that contain a link to an existing IR's website. "To access the application and agreement, the recruit must select the 'join' option on the recruiter's website ... and signs the application and agreement by clicking on the 'Sign & Submit' option."
Step 9 of the application contains a link to a PDF version of Momentis' Terms of Agreement and Policies & Procedures. As part of the online application, a recruit must click an "I agree" button signifying that he has read and agrees with these documents. The policies contain a provision requiring the arbitration of all disputes. The Court had no difficulty enforcing the plain language of these provisions against Weisfeld and dismissing his lawsuit.
Businesses can take away from these decisions that their online agreements will likely be enforced, as long as they can show that the other party indicated their assent to them. Consumers need to be reminded to read the terms they're agreeing to as part of an online transaction, even if those terms are contained in another document that is only linked to the page they see.
