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1st Circuit: Class-action against Uber not arbitrable

Federal appellate panel says users not reasonably notified of ADR clause

The Uber app on an iPad in Baltimore in March.  The 1st U.S. Circuit Court of Appeals rejected the company’s attempt to compel arbitration in a class-action lawsuit alleging users were charged fictitious fees, finding its display of a notice deemed acquiescence to a contract and a hyperlink to the terms was not enough notice. (Patrick Semansky/AP file photo)

The Uber app on an iPad in Baltimore in March.  The 1st U.S. Circuit Court of Appeals rejected the company’s attempt to compel arbitration in a class-action lawsuit alleging users were charged fictitious fees, finding its display of a notice deemed acquiescence to a contract and a hyperlink to the terms was not enough notice. (Patrick Semansky/AP file photo)

BOSTON – A putative class-action accusing the ride-share service Uber of imposing fictitious fees was not subject to arbitration, the 1st U.S. Circuit Court of Appeals has ruled.

Defendant Uber Technologies moved to compel arbitration under a provision in its online contract with the plaintiffs, who had used Uber’s iPhone app to hail rides in Massachusetts.

Though other online vendors and service providers commonly inform users of the existence and location of terms and conditions by requiring them to click a box stating that they agree to the terms, often provided by hyperlink, before continuing to the next screen, Uber simply displayed a notice of deemed acquiescence and a hyperlink to the terms.

Uber argued its online presentation was conspicuous enough to constitute reasonable notice of the arbitration clause regardless of whether customers chose to click through the relevant terms.

The 1st Circuit disagreed.

“Even though the hyperlink did possess some of the characteristics that make a term conspicuous, the presence of other terms on the same screen with a similar or larger size, typeface, and with more noticeable attributes diminished the hyperlink’s capability to grab the user’s attention,” Judge Juan R. Torruella wrote for the panel June 25. “If everything on the screen is written with conspicuous features, then nothing is conspicuous.”

‘Basic standard’

Plaintiffs’ counsel Matthew W.H. Wessler, who practices in Washington and Boston, said the decision confirms that a company seeking to bind customers to contractual terms located behind a “terms and conditions” hyperlink must clearly and conspicuously inform them that by clicking the button, they are assenting to those terms.

“As the 1st Circuit made clear, Uber’s smartphone app failed to meet this basic standard,” Wessler said. “As a result, Uber cannot now avoid facing this lawsuit by forcing its riders into arbitration.”

Uber’s lead attorney, S. Elaine McChesney of Boston, could not be reached for comment, but Benjamin G. Robbins, senior staff attorney at the New England Legal Foundation and author of an amicus brief filed on the defendant’s behalf, said the court disfavored Uber’s use of a familiar method of online contract formation from the outset.

“The court apparently expressed its preference for requiring consumers to check off a box indicating that they have read the contract’s terms, as opposed to the one-step, ‘deemed acceptance’ method of contract formation,” Robbins said, describing the decision as an “exacting and arguably fussy critique” of Uber’s screen layout and text formatting.

Arbitration clause

Plaintiffs Rachel Cullinane, Jacqueline Nunez, Elizabeth Schaul and Ross McDonagh all downloaded the Uber app between Dec. 31, 2012, and Jan. 10, 2014.

When they first registered with Uber, they were taken through three screens asking for user information.

The first screen, titled “Create an Account,” asked users to enter an email address, phone number and account password. The phone’s keyboard occupied half the screen. Above the keyboard, in dark gray against a black background, appeared text informing the users that Uber would use their email and phone number to send ride confirmations and receipts.

A second screen, entitled “Create a Profile,” prompted users to enter a first and last name and upload a picture. The screen also had dark gray text on a black background explaining that the name and photo would help the driver identify the user at pickup.

The third screen varied slightly during the period the various plaintiffs registered, but both variations had a black background – with a white rectangle near the top to enter payment information and right below that space – and both versions had buttons, just below the payment info box, for scanning cards and entering promo codes.

One version also had a blue rectangular PayPal button right below. And both versions – toward the bottom of the black background – had, in dark gray text, the words “By enacting an Uber account, you agree to the” and, on the next line, in white text, the words, “Terms of Service & Privacy Policy” enclosed in a faint rectangular outline.

That rectangle apparently was a hyperlink button with which users could access a 10-page “Terms and Conditions” document, but users were not required to click through to the agreement or access it at all before completing the registration process.

The agreement itself contained a “Dispute Resolution” section stating that users waived the right to a jury trial in any dispute with Uber or to participate in any class action, agreeing to resolve disputes via binding arbitration instead.

The plaintiffs all claimed that they were charged an allegedly fraudulent $8.75 “Massport Surcharge” fee for travel to and from Logan International Airport.

In November 2014, the plaintiffs filed a putative class action in state court alleging the state did not require Uber to charge such fees.

Uber removed the case to federal court and moved to compel arbitration, citing the mandatory arbitration provision in the online agreement. U.S. District Court Judge Douglas P. Woodlock granted the motion, and the plaintiffs appealed, arguing that the terms were not conspicuous enough to bind them.

The case is Cullinane, et al. v. Uber Technologies Inc., No. 16-2023.


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