In an important decision underscoring the challenges faced by retailers and others in enforcing online arbitration agreements with their customers, the U.S. Court of Appeals for the Second Circuit has reversed a district court's ruling that an Amazon customer agreed to arbitrate his dispute against the web giant. In Nicosia v. Amazon.com, the court, applying Washington law, held that reasonable minds could differ on whether Amazon provided reasonably conspicuous notice that by placing an order, the plaintiff agreed to the company's conditions of use which included an arbitration provision with a class action waiver.
The Second Circuit characterized Amazon's contract as a "hybrid" between a "clickwrap" and a "browsewrap" agreement. A typical clickwrap agreement, the court explained, asks the user to click an "I agree" box after being presented with a list of terms or conditions of use. A browsewrap agreement involves terms and conditions posted via hyperlink and does not request an express manifestation of assent, requiring courts to determine whether the user had actual or constructive knowledge of the website’s terms and conditions and whether the design and content of the webpage rendered the existence of terms reasonably conspicuous.
By contrast, an Amazon purchaser was not required to click on an "I agree" box after being presented with terms and conditions, nor was the purchaser left to browse the page to find a hyperlink to terms and conditions. The Amazon purchaser was presented with a sentence stating, "By placing your order, you agree to Amazon.com's privacy notice and conditions of use." This message was not bold faced, capitalized, or conspicuous in light of the whole webpage. There was also substantial additional information on the webpage, displayed in four different font sizes and six colors, concerning purchase and delivery information, promotional advertising, customer assistance, and product returns. Between 15 and 25 links were embedded on the same webpage as the link for conditions of use. At the very bottom of the page were links to the conditions of use and privacy policy terms.
The Second Circuit concluded that the substantial additional information on the webpage "obscured the message" about the conditions of use and was "distracting." It concluded that Amazon failed to show that the plaintiff was on notice of the arbitration provision and agreed to mandatory arbitration. The court emphasized that while clickwrap agreements are not required, "they are certainly the easiest method of ensuring that terms are agreed to."
Companies that offer their financial products online should take heed of the Second Circuit's scrutiny when they design their webpages. Great care must be taken not only in drafting the substantive terms of the arbitration provision, but also in ensuring that a court asked to enforce the provision will conclude that the consumer agreed to it contractually.
