16‐2750‐cv, 16‐2752‐cv Meyer v. Uber Technologies, Inc.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term 2016
(Argued: March 24, 2017 Decided: August 17, 2017)
Docket Nos. 16‐2750‐cv, 16‐2752‐cv
SPENCER MEYER, Individually and on behalf of those similarly situated,
Plaintiff‐Counter‐Defendant‐Appellee,
v.
UBER TECHNOLOGIES, INC.,
Defendant‐Counter‐Claimant‐Appellant,
TRAVIS KALANICK,
Defendant‐Appellant,
ERGO,
Third‐Party Defendant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
Before: RAGGI, CHIN, AND CARNEY, Circuit Judges.
In this putative class action filed in the United States District Court
for the Southern District of New York (Rakoff, J.), a user of a technology
companyʹs car service smartphone application alleges that the company and its
former chief executive engaged in illegal price fixing. Defendants moved in the
district court to compel arbitration, contending that the user agreed to a
mandatory arbitration provision in the companyʹs terms of service when he
registered for an account using the application. The district court denied the
motions. In these consolidated appeals, defendants contend, inter alia, that the
district court erred in concluding that the notice of the Terms of Service was not
reasonably conspicuous and that the user did not unambiguously manifest
assent to the arbitration provision by registering for an account.
VACATED AND REMANDED.
JEFFREY A. WADSWORTH (Brian Marc Feldman, Edwin Michael Larkin, III, Gregory M. Dickinson, on the brief), Harter Secrest & Emery LLP, Rochester, New York, and Bryan L. Clobes, Ellen Meriwether, Cafferty Clobes Meriwether & Sprengel LLP, Philadelphia, Pennsylvania, and Matthew L. Cantor, Ankur Kapoor, Constantine
Cannon LLP, New York, New York, for Plaintiff‐ Counter‐Defendant‐Appellee Spencer Meyer.
THEODORE J. BOUTROUS JR. (Daniel G. Swanson, Cynthia E. Richman, Joshua S. Lipshutz, Reed Brodsky, on the brief), Gibson, Dunn & Crutcher LLP, Los Angeles, California, Washington, D.C., and New York, New York, for Defendant‐Counter‐Claimant‐ Appellant Uber Technologies, Inc.
Karen L. Dunn, William A. Isaacson, Ryan Y. Park, Peter M. Skinner, Boies, Schiller & Flexner LLP, Washington, D.C. and New York, New York, for Defendant‐Appellant Travis Kalanick.
Jonathan D. Selbin, Jason L. Lichtman, Lieff Cabraser, Heimann & Bernstein, LLP, New York, New York, and Jahan Sagafi, Paul W. Mollica, Outten & Golden LLP, San Francisco, California and Chicago, Illinois, for Amicus Curiae Public Justice, P.C.
Alexander H. Schmidt, Wolf Haldenstein Adler Freeman & Herz LLP, New York, New York, for Amici Curiae Law Professors.
Rees F. Morgan, Mark L. Hejinian, Skye D. Langs, Coblentz Patch Duffy and Bass LLP, San Francisco, California, for Amici Curiae Internet Association and Consumer Technology Association.
Kate Comerford Todd, Warren Postman, U.S. Chamber Litigation Center, Washington, D.C., and Andrew J. Pincus, Evan M. Tager, Archis A. Parasharami, Mayer Brown LLP, Washington, D.C., for Amicus
Curiae The Chamber of Commerce of the United States of America.
CHIN, Circuit Judge:
In 2014, plaintiff‐counter‐defendant‐appellee Spencer Meyer
downloaded onto his smartphone a software application offered by defendant‐
counter‐claimant‐appellant Uber Technologies, Inc. (ʺUberʺ), a technology
company that operates, among other things, a ride‐hailing service. Meyer then
registered for an Uber account with his smartphone. After using the application
approximately ten times, Meyer brought this action on behalf of himself and
other similarly situated Uber accountholders against Uberʹs co‐founder and
former Chief Executive Officer, defendant‐appellant Travis Kalanick, alleging
that the Uber application allows third‐party drivers to illegally fix prices. The
district court joined Uber as a defendant and denied motions by Kalanick and
Uber to compel arbitration. In doing so, the district court concluded that Meyer
did not have reasonably conspicuous notice of and did not unambiguously
manifest assent to Uberʹs Terms of Service when he registered. The district court
held that Meyer therefore was not bound by the mandatory arbitration provision
contained in the Terms of Service.
For the reasons set forth below, we vacate and remand for further
proceedings consistent with this opinion.
BACKGROUND
A. The Facts
The facts are undisputed and are summarized as follows:
Uber offers a software application for smartphones (the ʺUber Appʺ)
that allows riders to request rides from third‐party drivers. On October 18, 2014,
Meyer registered for an Uber account with the Uber App on a Samsung Galaxy
S5 phone running an Android operating system. After registering, Meyer took
ten rides with Uber drivers in New York, Connecticut, Washington, D.C., and
Paris.
In support of its motion to compel arbitration, Uber submitted a
declaration from Senior Software Engineer Vincent Mi, in which Mi represented
that Uber maintained records of when and how its users registered for the
service and that, from his review of those records, Mi was able to identify the
dates and methods by which Meyer registered for a user account. Attached to
the declaration were screenshots of the two screens that a user registering in
October 2014 with an Android‐operated smartphone would have seen during the
registration process.1
The first screen, at which the user arrives after downloading the
application and clicking a button marked ʺRegister,ʺ is labeled ʺRegisterʺ and
includes fields for the user to enter his or her name, email address, phone
number, and a password (the ʺRegistration Screenʺ). The Registration Screen
also offers the user the option to register via a Google+ or Facebook account.
According to Uberʹs records, Meyer did not sign up using either Google+ or
Facebook and would have had to enter manually his personal information.2
After completing the information on the Registration Screen and
clicking ʺNext,ʺ the user advances to a second screen labeled ʺPaymentʺ (the
ʺPayment Screenʺ), on which the user can enter credit card details or elect to
1 In his brief, Meyer argues that defendants did not establish a foundation for the screenshots, but yet concedes that the evidence in the record is undisputed. 2 The screenshots attached to the Mi Declaration are larger than the actual size of the Samsung S5ʹs screen, which is 5.1 inches, measured diagonally. The record does not contain accurately sized images of both screens. Uber submitted an accurately scaled screenshot of the Payment Screen with defendantsʹ joint motion to stay the case pending appeal, which is reproduced below as Addendum A. In his brief on appeal, Meyer included what he represents are accurately scaled screenshots of both the Registration and Payment Screens. These are reproduced below as Addendum B. Although the parties have not challenged the accuracy of these images, we note that the screenshots in Meyerʹs brief are slightly smaller (approximately 4.8 inches, measured diagonally) than the screenshot of the Payment Screen in the record.
make payments using PayPal or Google Wallet, third‐party payment services.
According to Uberʹs records, Meyer entered his credit card information to pay for
rides. To complete the process, the prospective user must click the button
marked ʺREGISTERʺ in the middle of the Payment Screen.
Below the input fields and buttons on the Payment Screen is black
text advising users that ʺ[b]y creating an Uber account, you agree to the TERMS
OF SERVICE & PRIVACY POLICY.ʺ See Addendum B. The capitalized phrase,
which is bright blue and underlined, was a hyperlink that, when clicked, took the
user to a third screen containing a button that, in turn, when clicked, would then
display the current version of both Uberʹs Terms of Service and Privacy Policy.3
Meyer recalls entering his contact information and credit card details before
registering, but does not recall seeing or following the hyperlink to the Terms
and Conditions. He declares that he did not read the Terms and Conditions,
including the arbitration provision.
When Meyer registered for an account, the Terms of Service
contained the following mandatory arbitration clause:
3 Although the hyperlink on the Payment Screen referenced ʺTerms of Service,ʺ the following screen referenced ʺTerms and Conditions.ʺ Because the initial hyperlink, which defendants argue notified Meyer of the arbitration clause, refers to the relevant agreement the Terms of Service, we use that title throughout this opinion.
Dispute Resolution
You and Company agree that any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof or the use of the Service or Application (collectively, ʺDisputesʺ) will be settled by binding arbitration, except that each party retains the right to bring an individual action in small claims court and the right to seek injunctive or other equitable relief in a court of competent jurisdiction to prevent the actual or threatened infringement, misappropriation or violation of a partyʹs copyrights, trademarks, trade secrets, patents or other intellectual property rights. You acknowledge and agree that you and Company are each waiving the right to a trial by jury or to participate as a plaintiff or class User in any purported class action or representative proceeding. Further, unless both you and Company otherwise agree in writing, the arbitrator may not consolidate more than one personʹs claims, and may not otherwise preside over any form of any class or representative proceeding. If this specific paragraph is held unenforceable, then the entirety of this ʺDispute Resolutionʺ section will be deemed void. Except as provided in the preceding sentence, this ʺDispute Resolutionʺ section will survive any termination of this Agreement.
Appellantsʹ App. at 111‐12.4 The Terms of Service further provided that the
American Arbitration Association (ʺAAAʺ) would hear any dispute, and that the
AAA Commercial Arbitration Rules would govern any arbitration proceeding.
4 A copy of the Terms of Service in effect at the time Meyer registered for an account was attached to the declaration of Uber Operations Specialist Michael Colman, submitted in support of Kalanickʹs motion to dismiss the Amended Complaint. The applicable version of the Terms of Service had been updated last on May 17, 2013.
B. The District Court Proceedings
On December 16, 2015, Meyer, on behalf of a putative class of Uber
riders, filed this action against Kalanick, alleging that the Uber App allows
drivers to fix prices amongst themselves, in violation of the Sherman Act, 15
U.S.C. § 1, and the Donnelly Act, N.Y. Gen. Bus. Law § 340. Meyer amended his
complaint on January 29, 2016; the Amended Complaint also named only
Kalanick, and not Uber, as the defendant.
The district court denied Kalanickʹs motion to dismiss the Amended
Complaint for failure to state a claim.5 Kalanick filed a motion to join Uber as a
necessary party, and Uber separately moved to intervene. On June 19, 2016, the
district court granted Kalanickʹs motion and ordered that Uber be joined as a
defendant. It subsequently denied Uberʹs motion as moot.
After the parties began to exchange discovery materials, Kalanick
and Uber filed motions to compel Meyer to arbitrate. The district court denied
the motions, concluding that Meyer did not have reasonably conspicuous notice
of the Terms of Service and did not unambiguously manifest assent to the terms.
See Meyer v. Kalanick, 200 F. Supp. 3d 408, 420 (S.D.N.Y. 2016). Holding that no
5 In his motion to dismiss, Kalanick ʺexpressly reserve[d] his right to move to compel arbitration in other cases arising out of the User Agreement.ʺ Supp. App. at 34 n.9.
agreement had been formed, the district court did not reach Meyerʹs other
defenses to arbitration, including whether defendants waived their right to
arbitrate by actively participating in the litigation and whether Kalanick was also
entitled to enforce an arbitration agreement to which he was not a signatory. Id.
at 412.
Defendants timely appealed the district courtʹs July 29, 2016 order
denying the motions to compel arbitration pursuant to 9 U.S.C. § 16, which
permits interlocutory appeals from the denial of a motion to compel arbitration.
The district court stayed the underlying action pending appeal on the joint
motion of defendants, taking into account, inter alia, ʺthe need for further
appellate clarification of what constitutes adequate consent to so‐called
ʹclickwrap,ʹ ʹbrowsewrap,ʹ and other such website agreements.ʺ Meyer v.
Kalanick, 203 F. Supp. 3d 393, 396 (S.D.N.Y. 2016).
DISCUSSION
We consider first whether there is a valid agreement to arbitrate
between Meyer and Uber and then whether defendants have waived their right
to enforce any such agreement to compel arbitration.
I. The Arbitration Agreement
We review de novo the denial of a motion to compel arbitration.
Specht v. Netscape Commcʹns Corp., 306 F.3d 17, 26 (2d Cir. 2002). The
determination of whether parties have contractually bound themselves to
arbitrate is a legal conclusion also subject to de novo review. Id. The factual
findings upon which that conclusion is based, however, are reviewed for clear
error. Id.
The parties dispute whether the district courtʹs determinations
regarding the lack of reasonably conspicuous notice or an unambiguous
manifestation of assent are findings of fact, subject to clear error review, or
conclusions of law, subject to de novo review. Although determinations
regarding mutual assent and reasonable notice usually involve questions of fact,
Chi. Title Ins. Co. v. AMZ Ins. Servs., Inc., 115 Cal. Rptr. 3d 707, 725 (Cal. Ct. App.
2010) (mutual assent); Union Oil Co. v. OʹRiley, 276 Cal. Rptr. 483, 492 (Cal. Ct.
App. 1990) (reasonable notice), the facts in this case are undisputed, and the
district court determined as a matter of law that no reasonable factfinder could
have found that the notice was reasonably conspicuous and the assent
unambiguous. Cf. HM DG, Inc. v. Amini, 162 Cal. Rptr. 3d 412, 418 (Cal. Ct. App.
2013) (ʺ[I]f the material facts are certain or undisputed, the existence of a contract
is a question for the court to decide.ʺ (citation and internal quotation omitted)).6
We therefore review the district courtʹs conclusions de novo. See
Specht, 306 F.3d at 27‐28; Long v. Provide Commerce, Inc., 200 Cal. Rptr. 3d 117, 123
(Cal. Ct. App. 2016) (ʺBecause the material evidence consists exclusively of
screenshots from the Web site and order confirmation e‐mail, and the
authenticity of these screenshots is not subject to factual dispute, we review the
issue de novo as a pure question of law.ʺ).
A. Applicable Law
1. Procedural Framework
Under the Federal Arbitration Act (the ʺFAAʺ), ʺ[a] written provision
in . . . a contract . . . to settle by arbitration a controversy thereafter arising out of
6 Meyer argues that the district court proceedings constituted, in essence, a bench trial ʺon the papersʺ and therefore that the district courtʹs conclusions are factual findings subject only to clear error review. Appelleeʹs Br. at 33‐34. The district court here did not present the proceedings as a bench trial, and the record does not reflect that it conducted any fact‐finding: there were no material facts in dispute, no hearings conducted, and only limited development of the record. Those factors distinguish the district court proceedings here from the exceptional case in which, although a district court did not conduct an evidentiary hearing, we might treat as factual findings the courtʹs conclusions about whether parties entered into an arbitration agreement. See U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 145 (2d Cir. 2001) (holding that district court findings were subject to clear error review where parties did not seek evidentiary hearing and ʺfiled multiple briefs and extensive evidence with the court over a two‐year periodʺ).
such contract . . . shall be valid, irrevocable, and enforceable.ʺ 9 U.S.C. § 2. The
FAA reflects ʺa liberal federal policy favoring arbitration agreements,ʺ AT&T
Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011) (quoting Moses H. Cone Memʹl
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)), and places arbitration
agreements on ʺthe same footing as other contracts,ʺ Schnabel, 697 F.3d at 118
(quoting Scherk v. Alberto‐Culver Co., 417 U.S. 506, 511 (1974)). It thereby follows
that parties are not required to arbitrate unless they have agreed to do so. Id.
Thus, before an agreement to arbitrate can be enforced, the district
court must first determine whether such agreement exists between the parties.
Id. This question is determined by state contract law. Nicosia v. Amazon.com, Inc.,
834 F.3d 220, 229 (2d Cir. 2016).
Here, the question of arbitrability arose in the context of a motion to
compel arbitration. Courts deciding motions to compel apply a ʺstandard similar
to that applicable for a motion for summary judgment.ʺ Id. (quoting Bensadoun
v. Jobe‐Riat, 316 F.3d 171, 175 (2d Cir. 2003)). On a motion for summary
judgment, the court ʺconsider[s] all relevant, admissible evidence submitted by
the parties and contained in ʹpleadings, depositions, answers to interrogatories,
and admissions on file, together with . . . affidavits,ʹʺ Chambers v. Time Warner,
Inc., 282 F.3d 147, 155 (2d Cir. 2002) (quoting Fed. R. Civ. P. 56(c)) (second
alteration in original), and draws all reasonable inferences in favor of the non‐
moving party. Nicosia, 834 F.3d at 229.
ʺ[W]here the undisputed facts in the record require the matter of
arbitrability to be decided against one side or the other as a matter of law, we
may rule on the basis of that legal issue and ʹavoid the need for further court
proceedings.ʹʺ Wachovia Bank, Nat. Assʹn v. VCG Special Opportunities Master
Fund, 661 F.3d 164, 172 (2d Cir. 2011) (quoting Bensadoun, 316 F.3d at 175). If a
factual issue exists regarding the formation of the arbitration agreement,
however, remand to the district court for a trial is necessary. Bensadoun, 316 F.3d
at 175; 9 U.S.C. § 4.
If the district court concludes that an agreement to arbitrate exists,
ʺit should then consider whether the dispute falls within the scope of the
arbitration agreement.ʺ Specht, 306 F.3d at 26 (quoting Genesco, Inc. v. T. Kakiuchi
& Co., 815 F.2d 840, 844 (2d Cir. 1987)). In this case, the parties do not dispute
that Meyerʹs claims would be covered by the arbitration provision of the Terms
of Service.
2. State Contract Law
ʺState law principles of contract formation govern the arbitrability
question.ʺ Nicosia, 834 F.3d at 231. The district court applied California law in its
opinion, but acknowledged that it ʺ[did] not view the choice between California
law and New York law as dispositive with respect to the issue of whether an
arbitration agreement was formed.ʺ Meyer, 200 F. Supp. 3d at 412‐13.
Defendants have not challenged the district courtʹs choice of law but state that ʺif
this Court concludes that New York law differs from California law with respect
to any determinative issues, it should apply New York law.ʺ Appellantsʹ Br. at
17 n.2. We agree with the district courtʹs determination that California state law
applies, and note that New York and California apply ʺsubstantially similar rules
for determining whether the parties have mutually assented to a contract term.ʺ
Schnabel, 697 F.3d at 119.
To form a contract, there must be ʺ[m]utual manifestation of assent,
whether by written or spoken word or by conduct.ʺ Specht, 306 F.3d at 29.
California law is clear, however, that ʺan offeree, regardless of apparent
manifestation of his consent, is not bound by inconspicuous contractual
provisions of which he is unaware, contained in a document whose contractual
nature is not obvious.ʺ Id. at 30 (quoting Windsor Mills, Inc. v. Collins & Aikman
Corp., 101 Cal. Rptr. 3d 347, 351 (Cal. Ct. App. 1972)). ʺThus, California contract
law measures assent by an objective standard that takes into account both what
the offeree said, wrote, or did and the transactional context in which the offeree
verbalized or acted.ʺ Id. at 30.
Where there is no evidence that the offeree had actual notice of the
terms of the agreement, the offeree will still be bound by the agreement if a
reasonably prudent user would be on inquiry notice of the terms. Schnabel, 697
F.3d at 120; Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1177 (9th Cir. 2014).
Whether a reasonably prudent user would be on inquiry notice turns on the
ʺ[c]larity and conspicuousness of arbitration terms,ʺ Specht, 306 F.3d at 30; in the
context of web‐based contracts, as discussed further below, clarity and
conspicuousness are a function of the design and content of the relevant
interface. See Nicosia, 834 F.3d at 233.
Thus, only if the undisputed facts establish that there is
ʺ[r]easonably conspicuous notice of the existence of contract terms and
unambiguous manifestation of assent to those termsʺ will we find that a contract
has been formed. See Specht, 306 F.3d at 35.
3. Web‐based Contracts
ʺWhile new commerce on the Internet has exposed courts to many
new situations, it has not fundamentally changed the principles of contract.ʺ
Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004). ʺCourts around
the country have recognized that [an] electronic ʹclickʹ can suffice to signify the
acceptance of a contract,ʺ and that ʺ[t]here is nothing automatically offensive
about such agreements, as long as the layout and language of the site give the
user reasonable notice that a click will manifest assent to an agreement.ʺ Sgouros
v. TransUnion Corp., 817 F.3d 1029, 1033‐34 (7th Cir. 2016).
With these principles in mind, one way in which we have previously
distinguished web‐based contracts is the manner in which the user manifests
assent ‐‐ namely, ʺclickwrapʺ (or ʺclick‐throughʺ) agreements, which require
users to click an ʺI agreeʺ box after being presented with a list of terms and
conditions of use, or ʺbrowsewrapʺ agreements, which generally post terms and
conditions on a website via a hyperlink at the bottom of the screen. See Nicosia,
834 F.3d at 233; see also Nguyen, 763 F.3d at 1175‐76.7 Courts routinely uphold
7 This nomenclature derives from so‐called ʺshrinkwrapʺ licenses, in which a software consumer arguably assents to the license terms contained inside after breaking the shrinkwrap seal and using the enclosed software. See Specht, 306 F.3d at 22 n.4.
clickwrap agreements for the principal reason that the user has affirmatively
assented to the terms of agreement by clicking ʺI agree.ʺ See Fteja v. Facebook, Inc.,
841 F. Supp. 2d 829, 837 (S.D.N.Y. 2012) (collecting cases). Browsewrap
agreements, on the other hand, do not require the user to expressly assent. See
Juliet M. Moringiello, Signals, Assent and Internet Contracting, 57 Rutgers L. Rev.
1307, 1318 (2005) (ʺ[B]rowse‐wrap encompasses all terms presented by a web site
that do not solicit an explicit manifestation of assent.ʺ). ʺBecause no affirmative
action is required by the website user to agree to the terms of a contract other
than his or her use of the website, the determination of the validity of the
browsewrap contract depends on whether the user has actual or constructive
knowledge of a websiteʹs terms and conditions.ʺ Nguyen, 763 F.3d at 1176
(citation omitted); see also Schnabel, 697 F.3d at 129 n.18; Specht, 306 F.3d at 32.
Of course, there are infinite ways to design a website or smartphone
application, and not all interfaces fit neatly into the clickwrap or browsewrap
categories. Some online agreements require the user to scroll through the terms
before the user can indicate his or her assent by clicking ʺI agree.ʺ See Berkson v.
Gogo LLC, 97 F. Supp. 3d 359, 386, 398 (E.D.N.Y. 2015) (terming such agreements
ʺscrollwrapsʺ). Other agreements notify the user of the existence of the websiteʹs
terms of use and, instead of providing an ʺI agreeʺ button, advise the user that he
or she is agreeing to the terms of service when registering or signing up. Id. at
399 (describing such agreements as ʺsign‐in‐wrapsʺ).
In the interface at issue in this case, a putative user is not required to
assent explicitly to the contract terms; instead, the user must click a button
marked ʺRegister,ʺ underneath which the screen states ʺBy creating an Uber
account, you agree to the TERMS OF SERVICE & PRIVACY POLICY,ʺ with
hyperlinks to the Terms of Service and Privacy Policy. We were first presented
with a similar agreement in Schnabel, but the plaintiffs had not preserved the
issue of whether they were on inquiry notice of the arbitration provision by a
ʺterms and conditionsʺ hyperlink on an enrollment form available before
enrollment. Schnabel, 697 F.3d at 121 n.9, 129‐30. Most recently in Nicosia, we
held that reasonable minds could disagree regarding the sufficiency of notice
provided to Amazon.com customers when placing an order through the website.
Nicosia, 834 F.3d at 237.8
8 In Nicosia, the Amazon website stated on the left side of the page: ʺBy placing your order, you agree to Amazon.comʹs privacy notice and conditions of use,ʺ with the latter phrases hyperlinked to the terms and conditions. Nicosia, 834 F.3d at 236. The user placed an order by clicking on a ʺPlace your orderʺ button on a different part of the page. Id.
Following our precedent, district courts considering similar
agreements have found them valid where the existence of the terms was
reasonably communicated to the user. Compare Cullinane v. Uber Techs., Inc., No.
14‐14750‐DPW, 2016 WL 3751652, at *7 (D. Mass. July 11, 2016) (applying
Massachusetts law and granting motion to compel arbitration); Starke v. Gilt
Groupe, Inc., No. 13 Civ. 5497(LLS), 2014 WL 1652225, at *3 (S.D.N.Y. Apr. 24,
2014) (applying New York law and granting motion to dismiss); and Fteja, 841 F.
Supp. 2d at 839‐40 (granting defendantʹs motion to transfer based on, inter alia,
forum selection clause in terms of service); with Applebaum v. Lyft, Inc., No. 16‐cv‐
07062 (JGK), 2017 WL 2774153, at *8‐9 (S.D.N.Y. June 26, 2017) (applying New
York law and denying motion to compel arbitration where notice of contract
terms was insufficient to bind plaintiff). See also Woodrow Hartzog, Website
Design As Contract, 60 Am. U. L. Rev. 1635, 1644 (2011) (ʺCourts oscillate on
ʹnotice sentence browsewraps,ʹ which provide users with a link to terms of use
but do not require users to acknowledge that they have seen them.ʺ).
Classification of web‐based contracts alone, however, does not
resolve the notice inquiry. See Juliet M. Moringiello and William L. Reynolds,
From Lord Coke to Internet Privacy: The Past, Present, and Future of the Law of
Electronic Contracting, 72 Md. L. Rev. 452, 466 (2013) (ʺWhether terms are
classified as clickwrap says little about whether the offeree had notice of them.ʺ).
Insofar as it turns on the reasonableness of notice, the enforceability of a web‐
based agreement is clearly a fact‐intensive inquiry. See Schnabel, 697 F.3d at 124.
Nonetheless, on a motion to compel arbitration, we may determine that an
agreement to arbitrate exists where the notice of the arbitration provision was
reasonably conspicuous and manifestation of assent unambiguous as a matter of
law. See Specht, 306 F.3d at 28.
B. Application
Meyer attests that he was not on actual notice of the hyperlink to the
Terms of Service or the arbitration provision itself, and defendants do not point
to evidence from which a jury could infer otherwise. Accordingly, we must
consider whether Meyer was on inquiry notice of the arbitration provision by
virtue of the hyperlink to the Terms of Service on the Payment Screen and, thus,
manifested his assent to the agreement by clicking ʺRegister.ʺ
As an initial matter, defendants argue that Meyer is precluded from
arguing that no contract was formed by an allegation in his complaint that ʺ[t]o
become an Uber account holder, an individual first must agree to Uberʹs terms
and conditions.ʺ Appellantsʹ Br. at 18‐19, 32 (quoting Compl. ¶ 29; Am. Compl.
¶ 29). We disagree. First, as the district court observed, the pleading is not
obviously a concession in that it makes no reference to Meyerʹs knowledge. See
Meyer, 200 F. Supp. 3d at 413. Second, Meyer volunteered to amend his
complaint on the record to delete the allegation at issue, an offer that was
accepted by the district court. Third, regardless of the allegation or even the
validity of Meyerʹs amendment, Meyer has attested that, at the time he signed up
for an Uber account, he was not aware of the existence of the Terms of Service or
the arbitration clause contained therein. Construing the facts in Meyerʹs favor,
we decline to hold that he agreed to arbitration based on the purported
concession in his complaint. See Windsor Mills, Inc., 101 Cal. Rptr. at 351 (ʺ[A]n
offeree, regardless of apparent manifestation of his consent, is not bound by
inconspicuous contractual provisions of which he is unaware, contained in a
document whose contractual nature is not obvious.ʺ).
1. Reasonably conspicuous notice
In considering the question of reasonable conspicuousness,
precedent and basic principles of contract law instruct that we consider the
perspective of a reasonably prudent smartphone user. See Schnabel, 697 F.3d at
124 (ʺ[T]he touchstone of the analysis is whether reasonable people in the
position of the parties would have known about the terms and the conduct that
would be required to assent to them.ʺ). ʺ[M]odern cell phones . . . are now such a
pervasive and insistent part of daily life that the proverbial visitor from Mars
might conclude they were an important feature of human anatomy.ʺ Riley v.
California, 134 S. Ct. 2473, 2484 (2014). As of 2015, nearly two‐thirds of American
adults owned a smartphone, a figure that has almost doubled since 2011. See
U.S. Smartphone Use in 2015, Pew Research Center, at 2 (Apr. 2015),
http://assets.pewresearch.org/wp‐content/uploads/sites/14/2015/
03/PI_Smartphones_0401151.pdf (last visited Aug. 17, 2017). Consumers use
their smartphones for, among other things, following the news, shopping, social
networking, online banking, researching health conditions, and taking classes.
Id. at 5. In a 2015 study, approximately 89 percent of smartphone users surveyed
reported using the internet on their smartphones over the course of the week‐
long study period. Id. at 33. A purchaser of a new smartphone has his or her
choice of features, including operating systems, storage capacity, and screen size.
Smartphone users engage in these activities through mobile
applications, or ʺapps,ʺ like the Uber App. To begin using an app, the consumers
need to locate and download the app, often from an application store. Many
apps then require potential users to sign up for an account to access the appʹs
services. Accordingly, when considering the perspective of a reasonable
smartphone user, we need not presume that the user has never before
encountered an app or entered into a contract using a smartphone. Moreover, a
reasonably prudent smartphone user knows that text that is highlighted in blue
and underlined is hyperlinked to another webpage where additional information
will be found.
Turning to the interface at issue in this case, we conclude that the
design of the screen and language used render the notice provided reasonable as
a matter of California law.9 The Payment Screen is uncluttered, with only fields
for the user to enter his or her credit card details, buttons to register for a user
account or to connect the userʹs pre‐existing PayPal account or Google Wallet to
the Uber account, and the warning that ʺBy creating an Uber account, you agree
to the TERMS OF SERVICE & PRIVACY POLICY.ʺ The text, including the
hyperlinks to the Terms and Conditions and Privacy Policy, appears directly
below the buttons for registration. The entire screen is visible at once, and the
9 In evaluating the application interface, we use the actual‐size screenshot of the last step in the registration process, as it would have appeared on Meyerʹs Samsung Galaxy S5.
user does not need to scroll beyond what is immediately visible to find notice of
the Terms of Service. Although the sentence is in a small font, the dark print
contrasts with the bright white background, and the hyperlinks are in blue and
underlined.10 This presentation differs sharply from the screen we considered in
Nicosia, which contained, among other things, summaries of the userʹs purchase
and delivery information, ʺbetween fifteen and twenty‐five links,ʺ ʺtext . . . in at
least four font sizes and six colors,ʺ and several buttons and advertisements.
Nicosia, 834 F.3d at 236‐37. Furthermore, the notice of the terms and conditions
in Nicosia was ʺnot directly adjacentʺ to the button intended to manifest assent to
the terms, unlike the text and button at issue here. Id. at 236.
In addition to being spatially coupled with the mechanism for
manifesting assent ‐‐ i.e., the register button ‐‐ the notice is temporally coupled.
As we observed in Schnabel,
inasmuch as consumers are regularly and frequently confronted with non‐negotiable contract terms, particularly when entering into transactions using the Internet, the presentation of these terms at a place and time that the consumer will associate with the initial purchase or enrollment, or the use of, the goods or services from
10 Defendants challenge the district courtʹs purported reliance on a low‐ resolution duplication of the Registration and Payment Screens. Defendants offer no basis, however, for their assumption that the district court evaluated the black‐and‐ white images reproduced in its opinion rather than the clearer versions available in the record. See Meyer, 200 F. Supp. 3d at 415 (describing blue hyperlink).
which the recipient benefits at least indicates to the consumer that he or she is taking such goods or employing such services subject to additional terms and conditions that may one day affect him or her.
Schnabel, 697 F.3d at 127. Here, notice of the Terms of Service is provided
simultaneously to enrollment, thereby connecting the contractual terms to the
services to which they apply. We think that a reasonably prudent smartphone
user would understand that the terms were connected to the creation of a user
account.
That the Terms of Service were available only by hyperlink does not
preclude a determination of reasonable notice. See Fteja, 841 F. Supp. 2d at 839
(ʺ[C]licking [a] hyperlinked phrase is the twenty‐first century equivalent of
turning over the cruise ticket. In both cases, the consumer is prompted to
examine terms of sale that are located somewhere else.ʺ). Moreover, the
language ʺ[b]y creating an Uber account, you agreeʺ is a clear prompt directing
users to read the Terms and Conditions and signaling that their acceptance of the
benefit of registration would be subject to contractual terms. As long as the
hyperlinked text was itself reasonably conspicuous ‐‐ and we conclude that it
was ‐‐ a reasonably prudent smartphone user would have constructive notice of
the terms. While it may be the case that many users will not bother reading the
additional terms, that is the choice the user makes; the user is still on inquiry
notice.
Finally, we disagree with the district courtʹs determination that the
location of the arbitration clause within the Terms and Conditions was itself a
ʺbarrier to reasonable notice.ʺ Meyer, 200 F. Supp. 3d at 421 (citing, inter alia,
Sgouros, 817 F.3d at 1033). In Sgouros, the Seventh Circuit determined that the
defendantʹs website actively misled users by ʺexplicitly stating that a click on the
button constituted assent for TransUnion to obtain access to the purchaserʹs
personal information,ʺ without saying anything about ʺcontractual terms,ʺ and
without any indication that ʺthe same click constituted acceptance of the Service
Agreement.ʺ 817 F.3d at 1035‐36. The website did not contain a hyperlink to the
relevant agreement; instead, it had a scroll box that contained the entirety of the
agreement, only the first three lines of which were visible without scrolling, and
it had no prompt for the reader to scroll for additional terms. See id. at 1035‐36
(ʺWhere the terms are not displayed but must be brought up by using a
hyperlink, courts outside of Illinois have looked for a clear prompt directing the
user to read them. . . . No court has suggested that the presence of a scrollable
window containing buried terms and conditions of purchase or use is, in itself,
sufficient for the creation of a binding contract . . . .ʺ). Here, there is nothing
misleading. Although the contract terms are lengthy and must be reached by a
hyperlink, the instructions are clear and reasonably conspicuous. Once a user
clicks through to the Terms of Service, the section heading (ʺDispute Resolutionʺ)
and the sentence waiving the userʹs right to a jury trial on relevant claims are
both bolded.
Accordingly, we conclude that the Uber App provided reasonably
conspicuous notice of the Terms of Service as a matter of California law and turn
to the question of whether Meyer unambiguously manifested his assent to those
terms.
2. Manifestation of assent
Although Meyerʹs assent to arbitration was not express, we are
convinced that it was unambiguous in light of the objectively reasonable notice
of the terms, as discussed in detail above. See Register.com, 356 F.3d at 403
(ʺ[R]egardless whether [a user] did or did not say, ʹI agreeʹ . . . [the userʹs] choice
was either to accept the offer of contract, taking the information subject to the
terms of the offer, or, if the terms were not acceptable, to decline to take the
benefits.ʺ); see also Schnabel, 697 F.3d at 128 (ʺ[A]cceptance need not be express,
but where it is not, there must be evidence that the offeree knew or should have
known of the terms and understood that acceptance of the benefit would be
construed by the offeror as an agreement to be bound.ʺ). As we described above,
there is ample evidence that a reasonable user would be on inquiry notice of the
terms, and the spatial and temporal coupling of the terms with the registration
button ʺindicate[d] to the consumer that he or she is . . . employing such services
subject to additional terms and conditions that may one day affect him or her.ʺ
Schnabel, 697 F.3d at 127. A reasonable user would know that by clicking the
registration button, he was agreeing to the terms and conditions accessible via
the hyperlink, whether he clicked on the hyperlink or not.
The fact that clicking the register button had two functions ‐‐
creation of a user account and assent to the Terms of Service ‐‐ does not render
Meyerʹs assent ambiguous. The registration process allowed Meyer to review the
Terms of Service prior to registration, unlike web platforms that provide notice
of contract terms only after the user manifested his or her assent. Furthermore,
the text on the Payment Screen not only included a hyperlink to the Terms of
Service, but expressly warned the user that by creating an Uber account, the user
was agreeing to be bound by the linked terms. Although the warning text used
the term ʺcreat[e]ʺ instead of ʺregister,ʺ as the button was marked, the physical
proximity of the notice to the register button and the placement of the language
in the registration flow make clear to the user that the linked terms pertain to the
action the user is about to take.
The transactional context of the partiesʹ dealings reinforces our
conclusion. Meyer located and downloaded the Uber App, signed up for an
account, and entered his credit card information with the intention of entering
into a forward‐looking relationship with Uber. The registration process clearly
contemplated some sort of continuing relationship between the putative user and
Uber, one that would require some terms and conditions, and the Payment
Screen provided clear notice that there were terms that governed that
relationship.
Accordingly, we conclude on the undisputed facts of this case that
Meyer unambiguously manifested his assent to Uberʹs Terms of Service as a
matter of California law.
3. Remand for trial
Finally, we see no need to remand this case for trial. Meyer offers no
basis for his argument that we should remand for further factfinding if we vacate
the district courtʹs ruling, other than his assertion that no circuit has previously
compelled arbitration in similar circumstances. Although Meyer purports to
challenge the evidentiary foundation for the registration screens, defendants
have submitted a declaration from an Uber engineer regarding Meyerʹs
registration for and use of the Uber App, as well as the registration process and
terms of use in effect at the time of his registration. Accordingly, we conclude on
this record, as a matter of law, that Meyer agreed to arbitrate his claims with
Uber.11
II. Waiver
Meyer argues in the alternative that defendants have waived their
right to arbitrate by actively litigating the underlying lawsuit. ʺ[O]rdinarily a
defense of waiver brought in opposition to a motion to compel arbitration . . . is a
matter to be decided by the arbitrator.ʺ S & R Co. of Kingston v. Latona Trucking,
Inc., 159 F.3d 80, 82‐83 (2d Cir. 1998) (citing Doctorʹs Assocs., Inc. v. Distajo, 66 F.3d
11 Although Kalanick is not a party to the Terms and Conditions between Uber and Meyer, he is nonetheless protected by them. ʺCourts in this and other circuits consistently have held that employees or disclosed agents of an entity that is a party to an arbitration agreement are protected by that agreement.ʺ See Roby v. Corp. of Lloydʹs, 996 F.2d 1353, 1360 (2d Cir. 1993) (holding that individual defendants were entitled to rely on arbitration provisions incorporated into their employersʹ agreements with investors notwithstanding that the individual defendants were not signatories to any of the agreements).
438 (2d Cir. 1995)). When the party seeking arbitration has participated in
litigation regarding the dispute, the district court can properly decide the
question of waiver. Bell v. Cendant Corp., 293 F.3d 563, 569 (2d Cir. 2002).
Because Meyerʹs waiver argument is based on defendantsʹ defense of this
litigation in the district court, we conclude that is a question for the district court
rather than an arbitrator. Accordingly, we remand the case to the district court
to consider in the first instance whether defendants have waived their right to
arbitrate.
CONCLUSION
For the reasons set forth above, the order of the district court
denying defendantsʹ motions to compel arbitration is VACATED, and the case is
REMANDED to the district court to consider whether defendants have waived
their rights to arbitration and for any further proceedings consistent with this
opinion.
32 Case 1:15-cv-09796-JSR Document 135 Filed 08/05/16 Page 5 of 5 Addendum A (Appellants' App. at 560) Addendum B (Appellee's Br. at 38)
The district court permissibly found that the phrase, “By creating an
Uber account, you agree to the” and the following hyperlink were not
reasonably conspicuous. The district court cited a series of observations that
supported these findings: “the key words, ‘By creating an Uber account, you
agree to’ are not in any way highlighted”; those key words were “in
approximately 6-point font” or “even smaller”; those key words and the
following hyperlink were “in considerably smaller font” than the text on the
buttons. (SPA 12 & n.15). The court ultimately found that the screen “did