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July 05, 2018 Practice Points

Uber Defeated by the Color of Its Hyperlink

By Liz Kramer

A new case from the First Circuit creates a circuit split over the enforceability of the arbitration agreement in Uber's terms of service and creates an odd preference for blue hyperlinks.

In Cullinane v. Uber Technologies, Inc., 2018 WL 3099388 (1st Cir. June 25, 2018), the First Circuit refused to enforce an arbitration clause in Uber’s terms of service and allowed a putative class action to proceed. Although the district court had compelled arbitration and dismissed the action, the appellate court reversed. The case turned on whether the parties had formed an arbitration agreement under the relevant state contract law, which was Massachusetts law.

Massachusetts has held that forum selection clauses should be enforced in contracts of adhesion if they are “reasonably communicated and accepted.” In particular, there must be “reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent.” In this case, the Uber terms failed the first part of that test—relating to notifying customers the terms existed. The First Circuit found customers were not reasonably notified of Uber’s terms and conditions because the hyperlink to those terms was not sufficiently conspicuous.

What makes the Cullinane case more interesting is that just ten months ago, the Second Circuit praised the clean, readable design of Uber’s app in Meyer v. Uber Technologies. Because the reference to Uber’s terms of service was not cluttered and hyperlinked to the actual terms, the Second Circuit held Uber could enforce its arbitration agreement and the class action waiver within it.

So, what could explain the difference? The Cullinane opinion was applying Massachusetts law on contract formation. The Meyer opinion was applying California law on contract formation. But the test was identical because both states had borrowed it from a Second Circuit decision about Netscape. So, the state law at issue does not explain the different outcome.

The one thing that might explain the different outcome is that the two federal appellate courts appear to have analyzed slightly different versions of Uber’s app. In Cullinane, the lead plaintiffs had signed up between December 31, 2012, and January 10, 2014. (The court reproduced the actual screen shots early in its opinion.) In Meyer, the lead plaintiff had signed up in October 2014, and Uber had altered the design of its sign-up screens. (There, the screen shot is an addendum to its opinion.) For example, in late 2014, the background was white instead of black, and the “Terms of Service & Privacy Policy” were in teal, instead of white text.

And those are some of the aspects of the design that the First Circuit pointed to as critical. It noted that hyperlinked terms are usually in blue text and underlined, but that the Cullinane plaintiffs’ were presented with hyperlinked “Terms of Service” that were not blue or underlined. Instead they were in white text in a gray box, no different than other non-hyperlinked text like the words “scan your card” which appeared on the same screen. In addition, and for similar reasons, the First Circuit found that the words “by creating an Uber account you agree to the [Terms]” were insufficiently conspicuous. The Cullinane opinion concluded that because “the Plaintiffs were not reasonably notified of the terms of the Agreement, they did not provide their unambiguous assent to those terms.”

This is another example of how unsettled some aspects of arbitration law are (and maybe consumer contracting in general). The lesson here is two-fold. First, there is no clear standard for when terms on a website are sufficiently conspicuous, so judges are left to their own devices to answer that question. Second, unless an online provider wants judges to keep on getting to whatever result they please, the only solution is to require a consumer to actually click “I agree” after viewing a screen of the terms and conditions. And in the meantime, go and make all those hyperlinks blue and underlined.

Liz Kramer is a partner with Stinson Leonard Street in Minneapolis, Minnesota.

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