Just how clear do a website's terms and conditions need to be? That was the subject of a recent decision by the Ninth Circuit Court of Appeals. The 9th Circuit upheld a lower court's decision to deny a motion to compel arbitration by a defendant facing a class action lawsuit. It called into question the degree to which a website is required to alert users about the details of any agreement they might sign.
Wrap It Up
Katherine Chabolla is the lead plaintiff in a class-action suit based in California against ClassPass, Inc. Chabolla signed up for a gym membership through the ClassPass website in early 2020. Payments were halted when the nation went into COVID lockdown, but resumed when it was lifted.
Citing violations of California's Automatic Renewal Law, Unfair Competition Law, and the Consumers Legal Remedy Act, Chabolla filed suit over the automatic renewal kicking in and other deceptive practices once the lockdown ended. ClassPass filed a motion to compel arbitration instead of the jury trial Chabolla had demanded.
In their motion, ClassPass argued that Chabolla had entered her personal information and a credit card over the course of navigating multiple pages on their website. ClassPass claimed that each page contained a link to their Terms of Use (ToU), which state that signing up for a gym membership through ClassPass means accepting mandatory arbitration for the resolution of any issues.
For a business website, the burden is on the company to establish either a ToU or Terms of Service (ToS) formation with their customer. This often means making ToU/ToS easy to find at the very least. In the strongest version, they should be impossible to avoid.
Where You Must Click Matters to the 9th Circuit
The Ninth Circuit has established working definitions for methods of ToU/ToS interactions. They modified these definitions in this opinion:
- Scrollwrap - A user must scroll through all terms of the ToU/ToS. Only when the document has been fully viewed can they click an "I agree" box. Court rulings prove this to be the strongest method of proving a user has seen all requirements and terms.
- Clickwrap - A pop-up containing the ToU/ToS requires a user to click a box indicating agreement. Courts often enforce this method.
- Sign-in Wrap - Links are provided on the site to take a user to the ToU/ToS page and may mention binding agreements, but have no requirement that the user visit the ToU/ToS. These do not fare as well in court as scrollwraps or clickwraps.
- Browsewrap - By browsing the website, a user accepts the ToU/ToS. The terms may not be obvious. Courts consistently rule against browsewraps.
The majority ruled that the small font and bland gray color of the ToU/ToS links on the ClassPass web pages fell under, at best, a sign-in wrap.
They also noted possible confusion caused through a "Sign Up With Facebook" button, with the same small text below the only indication that doing so was also acceptance of the ToU/ToS and thus binding arbitration. They agreed with the lower court decision that it was possible Chabolla and others were unaware of the binding arbitration clause in the ToU/ToS when they signed up to use ClassPass. Judges Salvador Mendoza, Jr. and Michael W. Fitzgerald cited a 2023 Ninth Court ruling against binding arbitration in Oberstein v. Live Nation.
Not Everyone Agrees
To put it mildly, Circuit Judge Jay S. Bybee disagreed with his fellow panel members. He cited 2022's Berman v. Freedom Financial Network, LLCas having established a test for determining if a hybrid wrap adequately alerts a user to a site's ToU/ToS agreements.
Bybee argued that the links provided "reasonably conspicuous notice" of their existence and that Chabolla had to click "action" buttons to move from one screen to the next. He expressed concerns that focusing on minute differences between sites will lead to an uneven application of justice in the future.
As Bybee was outnumbered in the decision, Chabolla's suit will get the type of trial she desired. Whether or not the final verdict goes her way will depend on the jury.
Related Resources
- U.S. Federal Court System (FindLaw's Legal System)
- Website Legal Requirements (FindLaw's Small Business Law)
- The Arbitration Process (FindLaw's Arbitration Law)
