The First Circuit recently held that an arbitration clause contained in the online contract of the ride sharing app, Uber Technologies, Inc., is unenforceable under Massachusetts law.
At the outset, the First Circuit acknowledged that federal policy favors arbitration under the Federal Arbitration Act ("FAA"). Despite this, the court stated a valid agreement to arbitrate must exist before the FAA applies. The Court then analyzed whether Uber's mandatory arbitration clause was enforceable under Massachusetts law, and concluded that an online contract is enforceable only if it is reasonably communicated to the plaintiff, and accepted by the plaintiff. The First Circuit then found that Uber had not reasonably communicated its Terms of Service, including the mandatory arbitration clause, to its customers because the link to the Terms was not sufficiently conspicuous. The Court noted that Uber did not use a common method of conspicuously informing online app users of its terms by requiring users to click a box stating that they agree to the terms before continuing to the next screen. Instead, Uber displayed, on an enrollment screen, a rectangular box with the language "Terms of Service," which customers were not required to click in order to review the contract. The Court noted that Uber's terms were not conspicuously disclosed to its users because the link was not designed in a way that most users associate with hyperlinks and thus did not have the appearance of a hyperlink. Further, the hyperlink box was not sufficiently distinct from the rest of the screen, which had other links in bold with similarly sized font that were "more noticeable." The First Circuit noted: "if everything on the screen is written with conspicuous features, then nothing is conspicuous." Thus, the First Circuit found that the arbitration clause is unenforceable, and reversed the Massachusetts federal court decision and remanded the case.
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