Ninth Circuit Refuses To Enforce Arbitration Clause Contained In 'Browsewrap'Agreement

Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014) Facts:

In response to an advertisement announcing a "fire sale," plaintiff visited Barnes & Noble's website and purchased two "Touchpads" (competitor to Apple's iPad) at a discounted rate, and received an email confirming the transaction. A day later, plaintiff received notification that his order was cancelled due to unexpectedly high demand. Plaintiff filed this lawsuit on behalf of himself and a putative class of consumers whose Touchpad orders had been cancelled. Plaintiffs alleged that Barnes & Noble had engaged in deceptive business practices and false advertising in violation of New York and California law. Defendant Barnes & Noble moved the case to federal court, and then moved the court to compel arbitration according to its website's Terms of Use (which included an arbitration clause). The defendant's website featured a "Terms of Use" hyperlink which was located in the bottom left corner of each page. The named plaintiff did not click on the "Terms of Use" hyperlink, nor did he read the actual language of the Terms. Users who click on the link are taken to a webpage, which contains the full text of the company's Terms of Use. Part of that language indicates that a user who visits any area of the website is deemed to have accepted the Terms of Use. Plaintiff argued that he was not bound by the arbitration provision because he did not have notice of the Terms of Use and he did not assent to them. Defendant argued that plaintiff was put on "constructive notice" of the Terms of Use by virtue of the placement of the hyperlink on the website. Such notice, in addition to plaintiff's subsequent use of the website, should be deemed sufficient to have bound plaintiff (and the class) to the Terms of Use. The trial court disagreed and Barnes & Noble appealed. Ninth Circuit Decision:

In the course of discussing its reasoning behind the decision, the Court of Appeals addressed the way that contracts are primarily formed via the Internet: through "clickwrap" or "click-through" agreements and "browsewrap" agreements. According to the Court, in "pure-form" browsewrap agreements, the website will include a notice that apprises users that by "merely using the services of, obtaining information from, or initiating applications within the website - the user is agreeing to and is bound by the site's terms of service." The Court pointed out that, "the defining feature of a browsewrap agreement...