June 02, 2015 Practice Points

Web Layout Affects Enforceability of Arbitration Agreement

By Brian Farkas

In Sgouros v. TransUnion Corp., No. 14 C 1850, 2015 WL 507584, at *1 (N.D. Ill. Feb. 5, 2015) the court held that an arbitration agreement that the defendants had on their webpage was not sufficiently clear to bind potential plaintiffs.

Plaintiff Gary Sgouros brought a class action against Defendants TransUnion Corp., Trans Union LLC, and TransUnion Interactive, Inc. (collectively, TransUnion). TransUnion sells consumer credit scores and reports over its website for $39.99. Although credit reports are generally free to consumers under federal law, companies will also sell “scores” that supposedly help consumers determine how lenders and businesses will interpret their credit report. Here, the plaintiff alleged that the score itself was an inaccurate reflection of the consumer’s credit status. The specific claims centered on violations of the Fair Credit Reporting Act (FCRA) and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA).

The defendants moved to compel arbitration pursuant to the Federal Arbitration Act. Sgouros opposed the motion on the grounds that the arbitration agreement on the defendants’ website was unclear. The TransUnion website employed a so-called “clickwrap” agreement. These agreements require users to click a button that indicates that that they “agree” or “accept” certain terms after viewing them on the website. To determine whether such an agreement is valid, courts will consider whether users (i) had reasonable notice of the terms of a clickwrap agreement and (ii) manifested assent to the agreement. Courts generally will not enforce agreements with fine print buried in a small font or on an obscure page of the website, when the consumer lacked a reasonable opportunity to see the terms that they were agreeing to. See, e.g., Hines v. Overstock.com, Inc., 668 F.Supp.2d 362, 367 (E.D.N.Y. 2009), aff'd 380 F. App’x 22 (2nd Cir. 2010) (Arbitration clause and forum selection clause were in a link at the bottom of the pages of the website, but it was not necessary for a consumer to scroll to the bottom of any page to complete a transaction. Clickwrap agreement found not enforceable.)

The district court judge denied TransUnion’s motion to compel arbitration. The court analyzed images of the website to determine exactly when and how the consumer would “agree” to the terms and conditions. The court noted that, even though the font was reasonable in size, the placement of the “accept” button was confusing. Because there was separation between the terms and conditions, and the “acceptance” button, and because it was unclear exactly what was being accepted, the court held that “the placement… made it confusing enough to mislead a user…” and held the clickwrap agreement to be invalid.

Sgouros is a useful reminder to companies looking to insert arbitration agreements and class action waiver provisions into their website’s terms and conditions. Courts will carefully examine the layout and fonts of such clauses, as experienced by the consumer, to ensure that the arbitration provisions were brought to the consumer’s attention and that the consumer actually manifested agreement. Without both, the clickwrap agreement will not be enforced.

Keywords: arbitration, alternative dispute resolution, litigation, clickwrap agreement, browsewrap agreement, class action, waiver

Brian Farkas is with Goetz Fitzpatrick LLP in New York, New York.

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