September 14, 2017 Practice Points

Uber Arbitration Clause Upheld by Second Circuit

By Michael Oberman

On August 17, 2017, in Meyer v. Uber Technologies, Inc.,
the Second Circuit reversed the district court and held that the arbitration provision in Uber's terms of service as presented in Uber's app interface resulted in a valid agreement to arbitrate.

Finding that New York and California law were essentially the same on contract formation but applying California law, the Second Circuit stated that "we may determine that an agreement to arbitrate exists where the notice of the arbitration provision was reasonably conspicuous and manifestation of assent unambiguous as a matter of law."

The court found reasonably conspicuous notice on these bases:

[W]hen considering the perspective of a reasonable smartphone user, we need not presume that the user has never before encountered an app or entered into a contract using a smartphone. Moreover, a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found.

[T]he design of the screen and language used render the notice provided reasonable as a matter of California law. The Payment Screen is uncluttered, with only fields for the user to enter his or her credit card details, buttons to register for a user account or to connect the userʹs pre‐existing PayPal account or Google Wallet to the Uber account, and the warning that ʺBy creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY.ʺ The text, including the hyperlinks to the Terms and Conditions and Privacy Policy, appears directly below the buttons for registration. The entire screen is visible at once, and the user does not need to scroll beyond what is immediately visible to find notice of the Terms of Service. . . . Furthermore, the notice of the terms and conditions in Nicosia was ʺnot directly adjacentʺ to the button intended to manifest assent to the terms, unlike the text and button at issue here.

In addition to being spatially coupled with the mechanism for manifesting assent ‐‐ i.e., the register button ‐‐ the notice is temporally coupled…Here, notice of the Terms of Service is provided simultaneously to enrollment, thereby connecting the contractual terms to the services to which they apply. We think that a reasonably prudent smartphone user would understand that the terms were connected to the creation of a user account.

That the Terms of Service were available only by hyperlink does not preclude a determination of reasonable notice…. [T]he language ʺ[b]y creating an Uber account, you agreeʺ is a clear prompt directing users to read the Terms and Conditions and signaling that their acceptance of the benefit of registration would be subject to contractual terms. As long as the hyperlinked text was itself reasonably conspicuous ‐‐ and we conclude that it was ‐‐ a reasonably prudent smartphone user would have constructive notice of the terms. While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice.

The court further held that although the terms were lengthy and must be reached by a hyperlink, the arbitration clause was not unreasonably hidden. "Once a user clicks through to the Terms of Service, the section heading ('Dispute Resolution') and the sentence waiving the user's right to a jury trial on relevant claims are both bolded."

Finally, the court found manifestation of assent given the objectively reasonable notice and the user's election to click on the registration button. "The fact that clicking the register button has two functions—creation of a user account and assent to the Terms of Service—does not render Meyer's assent ambiguous." The court added: "The transactional context of the partiesʹ dealings reinforces our conclusion. Meyer located and downloaded the Uber App, signed up for an account, and entered his credit card information with the intention of entering into a forward‐looking relationship with Uber. The registration process clearly contemplated some sort of continuing relationship between the putative user and Uber, one that would require some terms and conditions, and the Payment Screen provided clear notice that there were terms that governed that relationship."

Michael Oberman is counsel with Kramer, Levin Naftalis & Frankel LLP in New York, New York.


Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).