As businesses continue to face unprecedented challenges navigating the global pandemic and depressed consumer spending and demand, companies are looking for cost-saving measures across the board to stay afloat and to maintain corporate profits. Many businesses have shifted to adding arbitration agreements with binding class action waivers to the sale of goods and use of services to consumers to flatten company annual litigation defense spending. These agreements require consumers to bring any claim arising out of their purchase or use of a product or service in arbitration rather than in court, and prevent consumers from bringing such claims as part of a class or consolidated action.
The first part of this article, published in the January issue of The Computer & Internet Lawyer, discussed why an arbitration clause can be a powerful tool in a company's litigation defense arsenal; the enforceability of arbitration agreements under the Federal Arbitration Act; the two most common types of web-based contracts (a "clickwrap" or "clickthrough" agreement and a "browsewrap" agreement); and best practices for drafting those web-based contracts; and elements that attorneys defending a company's arbitration agreement in court should incorporate into any motion to compel arbitration.
This Part II and the subsequent parts of this article survey recent decisions (in chronological order based on date of publication) over the past year or so across all jurisdictions involving the enforceability of consumer electronic acceptance of arbitration agreements. The summaries are focused principally on the question of contract formation, that is, whether the consumer had notice of the arbitration agreement and manifested their agreement to it, and the arguments plaintiffs have invoked in an effort to evade a finding of mutual assent to arbitrate any disputes.
The summaries include imagery of the corporate website and app presentations of the arbitration agreements at issue in each case, and explain how those agreements fared when tested in court. Take the motion to compel arbitration at issue in Mason v. Midland Funding LLC, for example, which the Eleventh Circuit found wanting, not because of any issue necessarily with the agreement itself, but because of deficiencies in the company's motion papers; particularly, imprecise and ambiguous language used in a company declaration submitted to authenticate the particular agreement that was presented to the plaintiff. Or consider the agreements at issue in Wilson v. Huuuge, Inc., and Benson v. Double Down Interactive, LLC, which the Ninth Circuit characterized as so convoluted that "[o]nly curiosity or dumb luck might bring a user to discover the Terms" tucked away deep in the companies' apps and websites. By contrast, the agreement at issue in Porcelli v. JetSmarter, Inc., exemplifies a pure clickwrap agreement where a user could not consent to arbitration without affirmatively assenting to the terms of the agreement by checking a box next to the phrase "I accept terms and conditions of the Membership Agreement," which was displayed in a different color font than the surrounding text and was underlined, tipping off a reasonable user that the phrase was hyperlinked so that, if clicked on, it would display the relevant terms. Together, the various cases summarized in this Part II and subsequent parts are intended to serve as a resource for both in-house counsel designing these agreements and outside counsel moving to enforce them and defend them in court, as the cases highlight common pitfalls and agreement features credited by courts as strengthening a finding that a reasonable user would have had notice of the arbitration agreement.
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Mason v. Midland Funding LLC, 2018 WL 9439879 (N.D. Ga. Sept. 5, 2018) (May, J.) (applying Utah law), aff'd in part, rev'd in part, and remanded, 815 F. App'x 320 (11th Cir. 2020) (per curiam) - The following case illustrates the perils of submitting an incomplete motion to compel arbitration and imprecise supporting company declaration that is intended to detail the steps the plaintiff took to assent to the arbitration agreement and authenticate the agreement. This was a Fair Debt Collection Practices Act putative class action filed by plaintiffs against Encore Capital Group, alleging that the company was engaged in a scheme of purchasing vast amounts of uncollectable debt that was unsupported by evidence and that the company would then file debt collection lawsuits to induce consumers into believing that Encore had a claim and intended to collect on the debt. Defendants moved to compel plaintiffs to arbitrate their claims pursuant to their clickwrap agreement.
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Originally published in The Computer & Internet Lawyer
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