Ninth Circuit Provides Guidance Regarding Online Contract Formation

• Published date: 19 April 2022
• Subject Matter: Corporate/Commercial Law, Consumer Protection, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Consumer Law, Arbitration & Dispute Resolution
• Law Firm: Mayer Brown
• Author: Michael Jaeger, Dominique Shelton Leipzig, Archis A. Parasharami and Kevin S. Ranlett

Summary

In a recent decision upholding the denial of a motion to compel arbitration, a panel of the Ninth Circuit provided new guidance about the formation of online contracts under California and New York law.¹ The court held that, to place a consumer on inquiry notice of terms and conditions on a website, the website must provide "reasonably conspicuous" notice of the terms and the consumer must "unambiguously manifest[]" acceptance of those terms. In the course of its analysis, the court provided several examples. Berman follows on the heels of a recent California state appellate court decision, Sellers v. JustAnswer LLC, 73 Cal. App. 5th 444 (2021), that similarly concluded that a company had failed to provide "sufficiently conspicuous" notice of its terms. Businesses that seek to enter into online contracts with consumers in California and New York'especially when their terms include arbitration agreements with class waivers'should consider reviewing their current website flows in light of these decisions.

Background

One of the defendants in Berman, Fluent, Inc., is a digital marketing company that offers rewards to consumers who provide it with contact information that the company then uses in targeted marketing campaigns.² The plaintiffs were several consumers who visited Fluent's websites and alleged that they subsequently received unsolicited telephone calls and text messages in violation of the Telephone Consumer Protection Act.³ The plaintiffs filed a class action against Fluent and other companies involved in the alleged marketing campaigns. The defendants moved to compel arbitration, arguing that when the plaintiffs provided their information to Fluent on its websites, they had consented to Fluent's terms and conditions ("Terms"), which included an arbitration provision.⁴ The relevant portions of the webpages (as reproduced in the Berman opinion) appeared as follows:

Webpage 1:

Webpage 2:

Id. at Appendices A and B.

The defendants argued that in each instance, by clicking the "Continue" button, the plaintiffs had agreed to the Terms, including the arbitration provision, which were referenced and linked above the "Continue" button.⁵ The district court denied the defendants' motion, concluding that the webpage layout did not sufficiently indicate to the plaintiffs that clicking the "continue" button constituted agreement to the Terms. The defendants appealed.⁶

The Ninth Circuit's Decision

Choice of Law and Categories of Online Contracts

As a threshold matter, the court declined to decide whether New York or California law governed...