Maryland Bar Bulletin
Publications : Bar Bulletin : July 2013

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We all routinely “agree” to clickwrap agreements – that is agreements found on the Internet and other electronic media where the user views the terms of service and is asked to click “OK” or “I Agree” –  but can we be compelled to arbitrate when we do?

While the Maryland courts have yet to rule directly on this issue, such agreements likely would bind a business – but not necessarily a consumer – to arbitrate.

And here’s why.

The Federal Arbitration Act (FAA) provides that agreements to arbitrate “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In AT&T Mobility LLC v. Concepcion, the Supreme Court held that the FAA preempted California’s judicial rule regarding the unconscionability of class arbitration waivers in consumer contracts, but reiterated that “[t]his saving clause permits agreements to arbitrate to be invalidated by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” Thus, Maryland’s substantive law regarding contract formation applies to arbitration agreements and is not preempted by the FAA.

As the Court of Appeals “noted more than 60 years ago, the question of arbitrability is one of intention.  No one is under a duty to resort to arbitration tribunals, however helpful their process, except to the extent that he has signified his willingness.” In Blue Bird, LLC v. Nolan, a case between businesses involving the validity of a clickwrap agreement’s forum selection clause, the Maryland Circuit Court noted that under Maryland law, a party’s conduct may manifest intent to be bound to a written contract and found that the defendants accepted the terms of their click-wrap agreement when they clicked on the “I Accept” button. Is there really more to the issue?

In Specht v. Netscape Commc’n Corp., then Circuit Judge Sotomayor affirmed the district court’s decision not to enforce an arbitration clause in a clickwrap agreement against a putative class of individuals. There, users downloaded free software which came with terms of use that included an arbitration clause, but the terms were located on a screen below the download button. Thus, the court concluded that “plaintiffs’ bare act of downloading the software did not unambiguously manifest assent to the arbitration provision contained in the license terms.” Specht continues to be applied by courts considering arbitration clauses in clickwrap agreements.  As reflected in these three recent decisions, courts focus both on the notice of terms provided to the plaintiffs, as well as the actions taken by plaintiffs to acknowledge and agree to those terms.

In Hancock v. AT&T, the Tenth Circuit noted that, applying state law contract principles, “[c]ourts evaluate whether a clickwrap agreement’s terms were clearly presented to the consumer, the consumer had an opportunity to read the agreement, and the consumer manifested an unambiguous acceptance of the terms.” In that case, consumer plaintiffs were presented with a printed copy of terms (including the arbitration clause) related to the use of defendant’s Internet service, and specifically had to click an “I Acknowledge” button on a technician’s laptop prior to installation, and had to click another “I Agree” button when registering for the service. The court affirmed the district court’s enforcement of the arbitration provision.

“The user should be given an opportunity to review it, and the user should be asked to “click” his or her assent unambiguously.”

In Vernon v. Qwest Comm’n Intl., Inc., a Colorado District Court enforced an arbitration provision in a clickwrap agreement in a putative consumer class action challenging an early termination fee relating to Internet service. Plaintiffs were repeatedly provided a link to terms of use; warned that the terms included an arbitration provision; provided an opportunity to cancel service within 30 days; and, on installation, clicked a button labeled “I accept the terms of the license agreement” that specifically noted that the plaintiffs were acknowledging that they understood and agreed to terms, even if plaintiffs did not read such terms and even if the terms could “have been more user-friendly.”

In Rasschaert v. Frontier Comm’n Corp., a Minnesota District Court again compelled arbitration in a putative class action involving Internet service. In a “close” call, the court found that an arbitration agreement existed even though it was not present in the defendant’s original terms of use, and it was added unilaterally. There, the plaintiffs were notified in their monthly bills that the arbitration provision would be added to the terms of use (to be effective 45 days from the date of the bill), and the bill directed plaintiffs to the terms of use.      

Particularly when dealing with individual users, courts focus on whether an objectively reasonable plaintiff would be aware of the terms of the contract he or she is asked to accept by conduct. Consistent with that, Maryland has adopted the Uniform Computer Information Transactions Act, Md. Code Ann., Comm. Law Art., § 22-101, et seq. (UCITA),which provides that a user takes an action – electronically signing or other conduct – that manifests assent only after an opportunity to review terms that would be called to the attention of a reasonable person. Applying the UCITA, in CVent, Inc. v. Eventbrite, Inc., the Eastern District of Virginia dismissed a breach of contract claim between two businesses where the alleged contract was predicted on terms of use found only through a link at the bottom of the first page of the plaintiff’s website, and no allegations in the complaint reflected actual or constructive knowledge of the terms, let alone any manifestation of assent to them. The Eastern District of Virginia noted that screen shots of the website contradicted the UCITA’s requirement that terms of use must be available in a matter that would be called to the attention of a reasonable person, and further noted that mere use of the website was not assent to the terms of use.  Were the court in Rasschaert applying the UCITA, the “close” call may well have tipped in favor of the plaintiffs and against finding the existence of an agreement, as it did in the CVent case.  

Thus, when seeking to enforce an arbitration clause in a clickwrap agreement in Maryland – particularly against an individual – the arbitration provision should be presented clearly, the user should be given an opportunity to review it, and the user should be asked to “click” his or her assent unambiguously.

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Publications : Bar Bulletin : July 2013

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