Court rules Internet consumer did not agree to third-party arbitration by clicking on webpage

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by Jay Pate

Click here and you agree to all “terms and conditions”—whatever they are, wherever found and whenever revised.

Such “agreements” are a long way from the idealized notion of two equals negotiating back and forth until mutually arriving at a set of obligations and conditions that each knowingly finds acceptable under the circumstances. Unfortunately, courts often treat clicks and vague references to hyperlinks (usually further referencing additional hyperlinks) the same as a good ol’ fashioned bargained-for binding contract.

However, a recent decision from the federal Ninth Circuit Court of Appeals, approaching such an arrangement with well-deserved skepticism, has ruled that an Internet consumer did not enter into a contract to arbitrate with a company that was not even named on a webpage just because the consumer clicked on a button to indicate he agreed to “terms and conditions” set out on the side of a webpage, which included a hyperlink to further “terms and conditions.” Lee v. Intelius Inc., No. 11–35810 (9th Cir. December 16, 2013).

In June 2008, Donovan Lee purchased on the Internet a background check and report from Intelius, an Internet-based company that performs background checks, people searches and “reverse” telephone directory searches

After Lee gave his credit card number and clicked to confirm his purchase, he was directed to a new webpage. At the top of the new webpage was a message in large black letters, “Thank You,” and in smaller but still prominent black letters, “your order has been successfully completed.” This was followed, also at the top of the page, by Intelius’s colored logo; in large black letters, Intelius’s name; and, in smaller black letters, Intelius’s marketing slogan, “Live in the know.” Adaptive Marketing’s name appeared nowhere on the webpage.

On the left-hand side of the new page, was a box with an instruction in prominent white letters against a green background: “Please type your email address below.” Below that, in small, light grey print, was written, “By typing your email address below, it will constitute your electronic signature and is your written authorization to charge/debit your account according to the Offer Details to the right.” (Emphasis added.) There were two spaces in which to type, and then to confirm, an email address. Lee was not asked to resupply his credit card number. Lee clicked on a large orange button with the words “YES And show my report.”

Below two paragraphs “to the right” describing the “offer details” were two hyperlinks labeled, in small, underlined black print, “Privacy Policy” and “Terms and Conditions.” If Lee had clicked the “Terms and Conditions” hyperlink, he would have been sent to yet another webpage. This webpage contained a detailed “membership agreement.” The first sentence stated, “The following is the Membership Agreement between the Provider of this Membership Program (‘We’ and ‘Us’) and the enrolled member of this Membership Program (‘You’).” The identity of the “Provider” was nowhere disclosed in the agreement; nor was the name Adaptive Marketing ever mentioned in the agreement. Paragraph 10 of the agreement was an arbitration clause

About a year later, Lee discovered that Adaptive Marketing (“Adaptive”), a separate company from Intelius, had been charging his credit card $19.95 per month for the “Family Safety Report.” Lee and others brought a state-law class action against Intelius.

Intelius filed a third-party complaint against Adaptive. Adaptive moved to compel arbitration of both Lee’s and Intelius’s claims. The district court denied the motion to compel. Adaptive appealed to the Ninth Circuit with respect to Lee, contending that Lee agreed to arbitration by clicking the orange button.” In Lee v. Intelius Inc., the court of appeals has now affirmed the district court’s order denying the request to compel arbitration.

The Ninth Circuit first noted it was “skeptical that Lee ‘objectively manifested assent’ to the contract [with Adaptive Marketing] merely by providing and confirming his email address and by clicking on the prominent “YES” button.” Id. The court of appeals noted that Washington courts have not decided whether or under what circumstances a “click” constitutes a signature:

When Lee entered his email address and clicked on the large orange “YES” button, he had completed his purchase of the background check from Intelius but had not yet received a copy of his promised report. He did not re-enter his credit card number on the new webpage. The language on the “YES” button told him that the effect of clicking on that button would allow him to see the report he had already purchased. The critical text on the new webpage was written in small, light-colored print. We are skeptical that, under such circumstances, Lee objectively manifested assent to a contract.

Id.

However, the court of appeals rested its conclusion on another ground. The court noted that “identification of the parties to the contract” is a required, essential element of a contract. Here, “[t]here is nothing on the new webpage offering the Family Safety Report, to which Lee was directed, that identified either Adaptive or an Adaptive-related entity as the party with which Lee was contracting.”

The Ninth Circuit also agreed with the district court that, even on the assumption that Lee entered into a contract to purchase the Family Safety Report, Lee did not enter into a contract to arbitrate. It wrote:

Neither the text above the “YES” button nor the “Offer Details” themselves mention the “Privacy Policy” or the “Terms and Conditions.” By clicking the “YES” button, Lee objectively manifested his assent to be bound by the “Offer Details,” nothing more. The fact that there were additional hyperlinks on a webpage Lee reviewed does not establish assent to the terms embedded in those hyperlinks.

The court of appeals agreed, noting that the arbitration clause was contained in the “Terms and Conditions” that Lee would have seen only if he clicked on the hyperlink below “OFFER DETAILS” on the right-hand side of the webpage. The text on the left-hand side of the page twice directed a purchaser of the Family Safety Report to the “Offer Details.” It stated, “By typing your email address below, it will constitute your electronic signature and is your written authorization to charge/debit your account according to the Offer Details to the right” and “By clicking ‘YES’ I have read and agree to the Offer Details displayed to the right.” The three-sentence second paragraph of the “Offer Details,” located just above the “Terms and Conditions” hyperlink, stated in its second sentence, “The report is administered and provided by Intelius and is subject to their Terms of Site Use and Terms & Conditions.” Intelius’s “Terms and Conditions,” to which Lee had already agreed, contained no agreement to arbitrate:

Even an exceptionally careful consumer would not have understood that a purchaser of the Family Safety Report, by clicking the orange button, was agreeing to anything more than the “Offer Details.” That careful consumer would reasonably have understood, in light of the second sentence of the second paragraph, that the hyperlink to “Terms and Conditions” was to Intelius’s rather than Adaptive’s terms and conditions.

Id. Thus, the court of appeals held that Lee did not enter into a contract with Adaptive to purchase the Family Safety Report, and did not enter into a contract with Adaptive to arbitrate. The district court’s ruling was affirmed.

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