Gogo LLC provides in-flight Wi-Fi to travelers in a variety of airports and airlines. Plaintiffs Adam Berkson and Kerry Welsh sued Gogo, claiming that the company improperly increased its sales by misleading customers into purchasing a service that charged a customer’s credit card, on an automatically-renewing continuing monthly basis, without adequate notice or consent. Gogo charged Berkson and Welsh between $35 and $40 per month for three and 16 months, respectively. Gogo moved to compel arbitration pursuant to the terms and conditions agreement; the plaintiffs countered that they lacked notice of the terms and conditions at the point of sale.
In a lengthy opinion, U.S. District Judge Jack B. Weinstein surveyed the law relating to Internet-based contracts of adhesion, sometimes referred to as clickwrap agreements. Clickwrap agreements require a user to click a box on the website acknowledging agreement to certain terms and conditions before making a transaction. These sorts of agreements are generally enforceable, since it would be impossible for companies to negotiate them with each end-user. Therefore, terms and conditions are presented as a contract of adhesion—take it or leave it. In digital commerce, courts generally hold that such contracts of adhesion are enforceable only to the extent that their terms are reasonable and that end-users have manifested their assent to be bound in a meaningful manner. Typically, the manifestation of assent involves forcing the user to see (or scroll through) the full terms, and then click “accept.” Courts have further held that the terms must be presented clearly at the point of sale—not hidden in a tiny font on an obscure page of the site.
The court ultimately held that Gogo failed to bring the arbitration clause to a user’s attention and that it could not fairly bind users to its terms. The judge found that Gogo did not do enough during the sign-up process to draw users’ attention to the terms and conditions hyperlink containing the arbitration clause.
Practice Pointer: Companies cannot rely upon arbitration agreements hidden in “terms and conditions” on websites—especially if users are not required to scroll through the terms first. For an arbitration clause to be enforced against a consumer in an internet-based contract, the clause must be physically prominent, perhaps in bold lettering or in a large font. Intentional or even unintentional “burying” of the clause will render it unenforceable. Courts will examine the point-of-sale page to determine whether a reasonable Internet user would have been on sufficient notice of any terms to the agreement.
Keywords: alternative dispute resolution, adr, waiver, litigation, arbitration, clickwrap, scrollwrap