Ninth Circuit Invalidates Online Marketing Company Consumer Contract, Arbitration Agreement


On December 16, the U.S. Court of Appeals for the Ninth Circuit held that an online marketing company cannot compel arbitration in a suit brought by a putative class of consumers who claim they were improperly charged for a subscription service they never intended to purchase. Lee v. Intelius, Inc. No. 11-35810, 2013 WL 6570899 (9th Cir. Dec. 16, 2013). The named plaintiffs sued a company that performs background checks after noticing regularly monthly charges for a report they allegedly did not intend to purchase. The background check company added an online marketing firm as a third-party defendant, arguing it was that firm whose subscription service the consumers were allegedly misled into purchasing. The district court explained that the background check company provided the marketing company space on its website and used the now illegal “data pass” method of sharing credit card information to assist the marketing company in enrolling consumers in free trial subscription offers, which converted to a monthly billed subscription without cancellation. The district court held that the consumers entered into a contract for the subscription service, but denied the marketing company’s motion to compel arbitration. On appeal the Ninth Circuit disagreed, determining that the subscription service website to which consumers were directed after purchasing background reports was designed to deceive consumers. The appellate court reasoned that under Washington law, a contract requires mutual assent to its essential terms—including the names of the parties—in order to be binding, and in this case the web page through which the consumers allegedly purchased the subscription service did not sufficiently identify the marketing company as the contracting entity. The court expressed skepticism that the consumers assented to the contract by providing their email addresses and clicking a “yes” button, but given that Washington law is not settled on whether a website “click” can constitute an electronic signature, the court did not rest its conclusion on whether the consumers objectively manifested consent to the contract. Further, the court held that even on the assumption that consumers did enter a contract to purchase the subscription service by clicking on the “yes” button, they did not agree to arbitration because the arbitration terms were included in a separate hyperlink that consumers did not click.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© BuckleySandler LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.