December 13, 2016 Practice Points

Uber's Online Arbitration Provision Held Unenforceable

By Eileen Boyle

In Meyer v. Kalanick, No.15 C 9796, 2016 WL 4073012 (S.D.N.Y July 29, 2016), the U.S. District Court for the Southern District of New York denied defendants' motions to compel arbitration. The plaintiff sued Travis Kalanick, the President of Uber, as well as Uber Technologies, Inc. for antitrust violations. The court held that Uber's User Agreement (Agreement) did not put the plaintiff on notice of the arbitration provision in the Agreement and therefore, that the plaintiff had not agreed to submit his dispute against defendants to arbitration.

Relying on Specht v. Netscape Commc'ns Corp., 306 F.3d 17 (2d Cir. 2002), the court explained that adequate notice and assent are necessary to enforce an arbitration provision within an online agreement, like the Agreement.

To determine the validity of the Agreement's arbitration provision, the court described how users register for Uber's ride-sharing services via the Uber smartphone app. First, users are prompted to enter some personal information and press "Next." Second, users are taken to a different screen where they are prompted to enter credit card details. On that same screen, there are several other buttons for a user to choose: (1) a "large, prominent button whose width spans most of the screen" labeled "Register"; (2) two buttons, similar in size to the "Register" button that allows a user to make payments using PayPal or Google Wallet; and (3) an additional button below the others "in considerably smaller font" with the words "By creating an Uber account, you agree to the Terms of Service & Privacy Policy." The phrase "Terms of Service & Privacy Policy" is a hyperlink. If a user clicks on the hyperlink—which is not required to register with Uber—the user is still another click away from accessing the Agreement at issue.

The court said that, even if the user did ultimately access the Agreement, the Agreement's arbitration provision appeared on the very bottom of the seventh page. Furthermore, the Agreement was nine pages of "highly legalistic language that no ordinary consumer could be expected to understand."

Under those circumstances, the court found that the plaintiff did not have "reasonably conspicuous notice of the existence of contract terms and [did not] unambiguous[ly] manifest assent to those terms." Most notably, to the court, the plaintiff was not required to indicate his assent to the Agreement, the Agreement was only accessible by clicking on a non-prominent button, and even if the user did view the Agreement, the arbitration provision was near the end of the Agreement. The court thus denied the defendants' motion to compel arbitration.

Practice Point
Companies who want their websites to bind customers to contracts should design their websites so that it is clear to their customers that they are entering into a contract when they "click" through the website. When, as in this case, an arbitration clause is "buried" in an online service agreement and the website makes it less than clear that the customer was entering into an agreement by "clicking" through the website, a court might very well conclude the arbitration clause is not enforceable. Among other things, to help ensure enforceability, the website should be designed to require users to access the agreement prior to being able to use the company's services and the agreement itself should be directly accessible via a prominent button on the registration screen.

Keywords: alternative dispute resolution, adr, litigation, arbitration, online agreement, User Agreement, Uber, notice, assent

Eileen Boyle is an associate at Novack and Macey LLP in Chicago, Illinois.

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