Accessing Website May Constitute Agreement to Arbitrate

According to one federal appellate court, just visiting a website may be consent to a binding arbitration agreement. In a lawsuit seeking refunds for defective gift cards, the retailer contended that a reference on the back of the cards to an arbitration provision on its website was sufficient notice to bind card purchasers. Reasoning that the case turned on unresolved factual questions over whether the consumers had actually agreed to arbitrate simply by the act of logging onto the retailer’s website, the appellate court reversed a denial of a retailer’s motion to compel arbitration and remanded for further proceedings. ABA Litigation Section leaders believe that the decision helps retailers going forward to argue that accessing a company’s website alone is sufficient to constitute consent to arbitration.

An Agreement to Arbitrate?

In Foster v. Walmart, Inc., the plaintiffs purchased gift cards from the retailer defendant that were rendered worthless after third parties tampered with the cards. The plaintiffs sued the retailer for refusing to refund the purchase price. In response, the retailer moved to compel arbitration. The back of each gift card told consumers to “see Walmart.com for complete terms.” In turn, the website referenced an arbitration provision applying to “ALL DISPUTES ARISING OUT OF OR RELATING TO THESE TERMS OF USE OR ANY ASPECT OF THE RELATIONSHIP BETWEEN YOU AND WALMART.”

The U.S. District Court for the Eastern District of Arkansas declined to hold an evidentiary hearing or trial regarding the question of arbitrability and denied the motion to compel, finding no agreement to arbitrate. The district court reasoned that the retailer was unable to prove that the “plaintiffs saw the terms of use, were otherwise aware that the terms existed before filing this lawsuit, or saw the notice on the gift cards that [the] terms applied.” More broadly, the lower court held “that an arbitration clause found in Walmart.com’s terms of use was unenforceable against purchasers of gift cards.”

Website Access Sufficient to Form an Agreement

On appeal, the U.S. Court of Appeals for the Eighth Circuit reversed and remanded for trial on the issue of whether an agreement to arbitrate existed. The appellate court first rejected the retailer’s point-of-purchase theory that “the parties had a binding arbitration agreement at the moment the plaintiffs purchased their gift cards.” The retailer had argued that the notation on the back of the cards directing the customer to “[s]ee Walmart.com for complete terms” was sufficient to create a binding contract. The Eighth Circuit disagreed, citing the express language of the arbitration provision at issue, which stated that a purchaser accepts arbitration only by “using or accessing the Walmart Sites.”

In so holding, the appellate court explained that the retailer was the “master of [its] offer” to arbitrate and that if it “wished to have the arbitration agreement bind the parties at the moment of purchase, it certainly could have said so.” Having expressly selected a different method of acceptance, the appellate court concluded that the retailer could not change the terms and argue that acceptance occurred at purchase.

The Fourth Circuit next held that there was a material question of fact as to whether the plaintiffs agreed to arbitrate in exactly the way the arbitration provision required: by accessing Walmart’s website. This arrangement, known as a “browse wrap,” imputes assent through a consumer’s performance of some specific act, such as website use or access. The issue for trial, the appellate court stated, was “whether the website puts a reasonably prudent user on inquiry notice of the terms.” This issue only could be decided if there was first sufficient proof that any of the plaintiffs used or accessed the website, which was another unresolved question of fact.

Buyer Beware of the Small Print

Litigation Section leaders voice concern about the potential reach of this decision. “This case opens the door for companies to be less vigilant about providing consumers with notice to binding terms,” suggests Ivey L. Workman, Lexington, KY, subcommittee chair of the Section’s Consumer Litigation Committee. “In this case a basic URL to Walmart’s main website, not even a URL specific to their TOU [terms of usage], was all that was provided to the consumer,” Workman adds. “Only after reaching that point is the consumer notified that their use of Walmart’s website constituted acceptance to arbitration. This seems to be an attenuated connection for the person picking up a gift card at a Walmart on their way to a birthday party,” she concludes.

“In this case, the appellate court applied well known principles that have been developed to assist in determining whether a consumer has agreed to arbitration in the course of purchasing goods. It shows that under the right circumstances a reference to a company’s website may be sufficient,” explains Harry L. Parr Jr., Greenville, SC, cochair of the Section’s International Litigation & Dispute Resolution Committee. However, even the purchase of the cards could have triggered arbitration, if the agreement properly was drafted. “It also demonstrates the importance of drafting the relevant language involved in the purchase to avoid the need for a trial regarding whether there was an agreement,” Parr counsels.