Blind Justice: Can Individuals Be Bound to Arbitration Clauses They Can’t Read?

By Michael Heller

The First U.S. Circuit Court of Appeals in Boston recently declined to enforce an arbitration clause in the Container Store’s loyalty program against blind customers. The ruling followed a trend of other circuits requiring a minimum level of notice for arbitration agreements to be binding.

In the case, Nat’l Fed’n of the Blind v. Container Store, Inc., No. 16-2112, 2018 U.S. App. LEXIS 26122 (1st Cir. Sept. 14, 2018)(available at, a unanimous circuit panel that included retired U.S. Supreme Court Justice David Souter, sitting by designation, examined whether an arbitration clause in the retailer’s loyalty program agreement was binding to blind customers.

The plaintiffs alleged that the Container Store’s sign-up process wasn’t handicap accessible. The retailer’s in-store touch screen interface required the customers to announce their private account information to clerks, creating privacy concerns. The complaint alleged violations of the Americans with Disabilities Acts and under the state laws where the plaintiffs joined the loyalty program, Massachusetts, California, Texas and New York.

Three of the plaintiffs signed up for the loyalty program in-store, and one registered online. The in-store customers signed up on a touch-screen device with the aid of an employee, but there was no evidence that they were notified by that they were agreeing to waive any rights to court by signing up for the program, which included an arbitration clause.

The plaintiff who signed up on her home computer said she didn’t recall being presented with the arbitration agreement.

The court held that no valid agreement to arbitrate was formed with the in-store customers because they did not receive a “minimum level of notice,” pursuant to the Americans with Disabilities Act that they were waiving any rights to pursue future ADA claims in court. The court held that an agreement was formed with the online customer, but that it was void as illusory under Texas state law.

The Container Store contended the suit was an attack on the validity of the entire agreement, but the appeals panel agreed with the plaintiffs that the problem was that there was no valid contract formed for arbitration.

Traditionally, courts have upheld the rule that an inability to read a contract is not a defense to contract formation. But “at the same time,” the opinion noted, “a party cannot enter into a contract to arbitrate when it does not know or have reason to know the basic terms of the offer.”

The unanimous opinion authored by First Circuit Judge O. Rogeriee Thompson, and joined by Senior Circuit Judge Bruce M. Selya, as well as retired Supreme Court Associate Justice Souter, cited recent case law that has begun to carve out an exception where a party is not made aware that they are entering into an agreement in the first place.

In Noble v. Samsung Elecs. Am., Inc., 682 Fed. App’x. 113 (3d. Cir. 2017), the Third Circuit examined an agreement to arbitrate that was buried deep within a lengthy smartwatch operation manual. The court held that no agreement to arbitrate was formed because a customer cannot be deemed to have consented to a writing that does not even appear to be a contract.

In Sgouros v. TransUnion Corp., 817 F.3d 1029 (7th Cir. 2016), the Seventh Circuit held that a link to a service agreement on a credit-score website did not properly identify itself as an agreement containing an arbitration clause and therefore did not create a valid agreement to arbitrate.

In Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279 (9th Cir. 2017), the Ninth Circuit acknowledged a rule that, “an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he was unaware, contained in a document whose contractual nature is not obvious.”

And in Nicosia v. Inc., 834 F.3d 220, (2d Cir. 2016), a Second Circuit panel held that where a customer was not required to manifest assent to conditions of use containing an arbitration provision, they were not bound to those terms.

These cases, the Nat’l Fed’n of the Blind opinion noted, demonstrated that courts recognize that parties cannot be bound by an agreement to arbitrate that they are not given notice of.

But the opinion noted that parties can be bound to an agreement to arbitrate that they were not made aware of in situations where it is clear that parties are entering into a contractual relationship. The court referenced obtaining a loan, employment and being admitted into a nursing home as situations where a contractual relationship could be presumed.

Companies seeking to ensure the enforceability of their arbitration clauses should take these recent developments into account. The burden imposed by these cases are seemingly minimal: only that parties are made aware that they are entering into a contractual relationship.

In addition, as this case shows, special considerations have to be taken into account for people with disabilities.

The author is a Brooklyn Law School student who is a CPR Institute Fall 2018 Intern.

No Notice: NJ Federal Court Declines to Compel Arbitration

By Elena Gurevich

Morgan Stanley has lost a bid to compel arbitration against a former employee.

A New Jersey federal district court ruled that the arbitration agreement circulated by the company via email could not be constituted as adequate notice, and therefore was not binding on the plaintiff.

This is not the first time a New Jersey court has struck down a motion to compel arbitration. There seems to be a trend in the approach that New Jersey state and federal courts take in examining the ADR process. The courts are looking closely at arbitration clauses in light of the state’s consumer protection and employment discrimination laws. See “Examining New Jersey’s Arbitration Scrutiny,” CPR Speaks blog  (July 12, 2016)(available at

In Schmell v. Morgan Stanley & Co., Civ. No. 17-13080 (D.C. N.J. March 1)(available at, the court did not even look at the cases Morgan Stanley relied on, saying that the fact the plaintiff—a senior vice president in the financial services company’s Red Bank, N.J., office—had notice of the agreement was in dispute.

The court found that the defendant company’s evidence that the plaintiff was working and accessing emails on the day the email in question was sent could not be considered as proof of adequate notice.

U.S. District Court Judge Anne E. Thompson also found that the plaintiff’s certified statements that he had no recollection of receiving and viewing the email were indicative of the fact that there had been no meeting of the minds, and therefore no mutual assent to the agreement.

Noting the plaintiff’s certification, the opinion also stated that the email notification and the plaintiff’s continued employment did not constitute notice, despite contrary case law. Therefore, Thompson reasoned, the court did not have to “consider whether this dispute falls within the scope of the Arbitration Agreement.”

She declined to compel arbitration, rejecting Morgan Stanley’s motion. The firm had fired the plaintiff last October, alleging discrimination for past conduct involving drug and alcohol abuse that the plaintiff detailed in a book about his life. The Thompson opinion states that the plaintiff was terminated even though he had made the changes to the book that Morgan Stanley had demanded he make, in order to continue working at the company.

According to the plaintiff’s attorney, Joshua Bauchner, a partner in the Woodland Park, N.J., office of Ansell Grimm & Aaron, no notice of appeal has been filed in the case. Attorney for Morgan Stanley, Kerrie Heslin, a partner in Chatham, N.J.’s Nukk-Freeman & Cerra, has not responded to an email request for comment.

The New Jersey treatment of arbitration agreements continues to evolve. A December attempt to make legislative changes died in committee, but it is likely that similar initiatives will emerge.

A Senate bill attempted to bar provisions in employment contracts that waive rights or remedies as well as agreements that conceal details relating to discrimination claims. Though the bill didn’t mention arbitration, the accompanying statement makes its intention clear, noting that “provision in any employment contract or agreement which has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment, including claims that are submitted to arbitration, would be deemed against public policy and unenforceable.”

The proposal can be found here:

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The author is a CPR intern.