In a case between an on-line customer and Barnes & Noble, the Ninth Circuit recently refused to enforce the arbitration agreement found in the website’s “Terms of Use.”Nguyen v. Barnes & Noble Inc., __ F.3d__, 2014 WL 4056549 (9th Cir. Aug. 18, 2014). The decision further calls into question the validity of “browsewrap” agreements, which the consumer does not have to assent to or acknowledge before making a purchase.

The plaintiff’s case against B&N stemmed from his attempt to buy a Touchpad during a “fire sale” on those devices in 2011. The plaintiff purchased two Touchpads on the B&N website and received an email confirmation. But the next day, B&N cancelled his order due to high demand. Plaintiff then brought a putative class action for false advertising and deceptive business practices against B&N. In response, B&N moved to compel arbitration. Both the district court and the Ninth Circuit refused to compel arbitration.

The issue was whether the plaintiff had “assented” to the website’s “Terms of Use,” which provided for binding arbitration on an individual (not consolidated or class) basis, thereby making them part of his contract. The Terms of Use were available to visitors of the B&N website via a hyperlink in the bottom left-hand corner of every page, and the hyperlink was underlined and in green typeface. However, the plaintiff never had to click on a box indicating he agreed to the Terms of Use. Indeed, the plaintiff never did click on the Terms of Use or otherwise read them. That structure made the Terms of Use a “browsewrap agreement”, which is one where “the user can continue to use the website or its services without visiting the page hosting the browsewrap agreement or even knowing that such a webpage exists.” (A “clickwrap” agreement requires the user to “click” on a box indicating agreement with the terms.)

The court found that the website did not put a reasonably prudent user “on inquiry notice of the terms of the contract.” It explained that

in keeping with courts’ traditional reluctance to enforce browsewrap agreements against individual consumers, we therefore hold that where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on–without more–is insufficient to give rise to constructive notice.

This case should give pause to any on-line retailers that still use browsewrap agreements.  If they want their arbitration agreements (with those valuable waivers of class actions) to be enforceable, the customers should have to read and assent to those terms before making a purchase.

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By Liz Kramer

Liz Kramer is a shareholder at Leonard, Street and Deinard, one of the largest law firms in Minnesota, where she litigates complex business and construction disputes. Liz graduated from Yale Law School and is deeply knowledgeable on arbitration law. Website: www.arbitrationnation.com