By Michael S. Oberman
By opinion issued August 17 in Meyer v. Uber Technologies, the Second Circuit reversed a district court denial of a petition to compel arbitration and held that the arbitration provision within Uber’s terms of service as presented in Uber’s app interface resulted in a valid agreement to arbitrate.
Finding that New York and California law was essentially the same on contract formation but applying California law, the Second Circuit stated (at 21) that “we may determine that an agreement to arbitrate exists where the notice of the arbitration provision was reasonably conspicuous and manifestation of assent unambiguous as a matter of law.”
The court found reasonably conspicuous notice on these bases (at 24-26):
Accordingly, when considering the perspective of a reasonable smartphone user, we need not presume that the user has never before encountered an app or entered into a contract using a smartphone. Moreover, a reasonably prudent smartphone user knows that text that is highlighted in blue and underlined is hyperlinked to another webpage where additional information will be found.
In addition to being spatially coupled with the mechanism for manifesting assent ‐‐ i.e., the register button ‐‐ the notice is temporally coupled… Here, notice of the Terms of Service is provided simultaneously to enrollment, thereby connecting the contractual terms to the services to which they apply. We think that a reasonably prudent smartphone user would understand that the terms were connected to the creation of a user account.
That the Terms of Service were available only by hyperlink does not preclude a determination of reasonable notice…. Moreover, the language ʺ[b]y creating an Uber account, you agreeʺ is a clear prompt directing users to read the Terms and Conditions and signaling that their acceptance of the benefit of registration would be subject to contractual terms. As long as the hyperlinked text was itself reasonably conspicuous ‐‐ and we conclude that it was ‐‐ a reasonably prudent smartphone user would have constructive notice of the terms. While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice.
The Court further held (at 27), expressly reversing the district court, that although the terms were lengthy and must be reached by a hyperlink, the arbitration clause was not unreasonably hidden. “Once a user clicks through to the Terms of Service, the section heading (‘Dispute Resolution’) and the sentence waiving the user’s right to a jury trial on relevant claims are both bolded.”
Finally, the Court found manifestation of assent given the objectively reasonable notice and the user’s election to click on the registration button. “The fact that clicking the register button has two functions—creation of a user account and assent to the Terms of Service—does not render Meyer’s assent ambiguous.” (At 29). The Court added (at 30): “The transactional context of the partiesʹ dealings reinforces our conclusion. Meyer located and downloaded the Uber App, signed up for an account, and entered his credit card information with the intention of entering into a forward‐looking relationship with Uber. The registration process clearly contemplated some sort of continuing relationship between the putative user and Uber, one that would require some terms and conditions, and the Payment Screen provided clear notice that there were terms that governed that relationship.”
In sum, the Court applied traditional contract principles to smartphone technology, and placed heavy emphasis on Uber’s screen design—the clarity of the hyperlink to the Terms of Service and, within the Terms of Service, the bolding of the Dispute Resolution heading. This reasonable disclosure, coupled with the user’s intent to create an account with Uber, proved sufficient for an agreement to arbitrate. In distinguishing the present case from the Court’s own recent opinion in Nicosia, the Court has provided some specific guidance on the graphic features that can separate a binding agreement from an unenforceable agreement in the smartphone era.