By Russ Bleemer
A highly anticipated Florida Supreme Court case on the effect of incorporating arbitration rules into a consumer contract was decided this morning in favor of the app provider, Airbnb, sending a decision about whether a case is arbitrated to an arbitrator, instead of a court.
Today’s opinion in Airbnb v. Doe, No. SC 20-1167, means that the inclusion of the American Arbitration Association rules, which are referenced in Airbnb’s “clickwrap” agreement—linked and behind the box that is checked before purchasing access to one of the company’s rental accommodations listings—are considered a part of the customer’s obligations under their contract with Airbnb.
The decision is posted on the Court’s website here.
The Florida case is important because the U.S. Supreme Court last year balked at addressing the incorporation question. Today’s 6-1 opinion by Florida Supreme Court Justice Ricky Polston notes that in endorsing the incorporation concept, it is following every U.S Circuit Court opinion on the subject.
The opinion reverses a detailed decision on the effects of clickwrap agreements and ambiguities in incorporating arbitration rules. The 2-1 Second Florida District Court of Appeals found the reference vague and not in line with Supreme Court caselaw that requires the reference to an arbitration rule to be clear and unmistakable. John Doe & Jane Doe v. Natt & Airbnb Inc., 299 So. 3d 599 (Fla. 2d DCA 2020) (available at https://bit.ly/3BPYPcu).
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In June 2020, the nation’s top Court agreed to hear a case on the effect of a carve-out from arbitration in a sales contract between two medical devices companies. At the same time, the Court denied a separate cross-petition in the same case on challenging the determination of arbitrability of the case on a question of incorporation by reference of AAA rules.
When the December 2020 argument in Henry Schein Inc. v. Archer and White Sales Inc., No. 19-963, was held, the Court got stuck, repeatedly, on the incorporation by reference point. It appeared that the effect of the delegation of the arbitrability question—whether the incorporation of the rules was effective to put the decision of arbitrability, as well as the decision about the carve-out, in the arbitrator’s hands–depended on an analysis of whether that delegation was “clear and unmistakable,” the issue the Court had rejected.
A month later, the U.S. Supreme Court dismissed the case as improvidently granted. See Russ Bleemer, “Scotus’s Henry Schein No-Decision,” CPR Speaks (Jan. 25) (available here).
So this morning’s Florida Supreme Court decision will be seen as a reaffirmation of what many drafters consider standard drafting practice in incorporating a set of rules into their arbitration contracts–though after the Florida Second District fairness opinion associated with the app and the delegation, drafters likely will proceed with heightened awareness that the arbitrability provisions will be a potential target for parties who don’t want to arbitrate. Today’s case provides guidance for the U.S. Supreme Court’s “clear and unmistakable” arbitration delegation requirement.
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Justice Polston signaled his strong support of the effectiveness of Airbnb’s contractual incorporation by reference of the AAA rules at the Nov. 2 oral arguments in the case. See Arjan Bir Singh Sodhi, “Florida’s Top Court Takes on ‘Who Decides?’ in Airbnb Arbitration Case,” CPR Speaks (Nov. 5) (available here).
Today, he followed up with a majority opinion that eviscerated the state appeals court decision, relying instead on the reasoning in the dissent by Florida Second District Court of Appeal Judge Craig C. Villanti. (See appeals court opinion link above.) “Here,” Polston wrote, “Airbnb and the Does clearly and unmistakably agreed that an arbitrator decides questions of arbitrability.” He continued:
Airbnb’s Terms of Service explicitly incorporate by reference the AAA Rules: “The arbitration will be administered by the American Arbitration Association (‘AAA’) in accordance with the Commercial Arbitration Rules and the Supplementary Procedures for Consumer Related Disputes (the ‘AAA Rules’) then in effect.” The Terms of Service also provide a hyperlink to the AAA Rules and a phone number for the AAA. Further, the incorporated AAA Rules specifically provide that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” (Emphasis added.) The Terms of Service incorporate the AAA Rules, and the express language in the AAA Rules empowers the arbitrator to decide arbitrability. Accordingly, consistent with the persuasive and unanimous federal circuit court precedent, we conclude that incorporation by reference of the AAA Rules that expressly delegate arbitrability determinations to an arbitrator clearly and unmistakably evidences the parties’ intent to empower an arbitrator to resolve questions of arbitrability.
Florida Supreme Court Justice Jorge LaBarga dissented. He wrote,
Because the arbitrability provisions relied upon by the majority to reach its decision in this case were buried within voluminous pages of rules and policies incorporated only by reference in a clickwrap agreement, the parties’ agreement to defer the consequential decision of arbitrability to the arbitrator was anything but clear and unmistakable.
Agreeing with and quoting heavily from the now-quashed appeals court decision, LaBarga wrote, “Unsuspecting consumers should not be expected to find the proverbial needle in the haystack in order to make a clear and unmistakable decision about arbitrability—that choice should be conspicuously located in the clickwrap agreement for the consumer to consider.
The case began when an anonymous Texas couple filed a complaint against Airbnb and the condominium owner who had listed the Florida property on the Airbnb platform. The complaint included intrusion against the condominium owner, and constructive intrusion against Airbnb, as well as loss of consortium against both the condominium owner and Airbnb. The plaintiffs had rented the condominium for three days in May 2016 from the Airbnb website, and later learned that the owner had installed hidden cameras and recorded the couple without their knowledge.
The plaintiffs filed their complaint in the Manatee County, Fla., circuit court. Airbnb moved to compel to settle the dispute through an arbitration proceeding. Airbnb claimed that the Does are bound to an arbitration proceeding under the signed terms and conditions when they accepted the app’s clickwrap agreement—that is, the legal contract in the Airbnb online software in which the customer indicates acceptance by typing in yes, or selecting a particular icon or link before they may use the service.
Today, the Florida Supreme sent the decision on how their case will proceed to an AAA arbitrator.
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The author edits Alternatives to the High Cost of Litigation for CPR at altnewsletter.com.