22-557-cv Najah Edmundson v. Klarna Inc.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
August Term 2022
(Argued: April 10, 2023 Decided: November 3, 2023)
Docket No. 22-557-cv
NAJAH EDMUNDSON, individually and on behalf of all others similarly situated,
Plaintiff-Appellee,
v.
KLARNA, INC.,
Defendant-Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT
Before: LEVAL, CHIN, AND SULLIVAN, Circuit Judges. Appeal from an order of the United States District Court for the
District of Connecticut (Nagala, J.), entered February 15, 2022, denying
defendant-appellant's motion to compel arbitration. In this putative consumer
class action, plaintiff-appellee brings claims for common-law fraud and
violations of the Connecticut Unfair Trade Practices Act against defendant-
appellant, a company offering "buy now, pay later" financial services.
Defendant-appellant moved in the district court to compel arbitration,
contending that the consumer agreed to a mandatory arbitration provision in the
company's terms on three occasions when she utilized defendant-appellant's
online services. The district court denied defendant-appellant's motion to
compel arbitration and stayed the underlying action pending this appeal.
REVERSED AND REMANDED.
LINNET DAVIS-STERMITZ (Matthew W.H. Wessler, on the brief), Gupta Wessler PLLC, Washington, DC, and Sophia Goren Gold, KalielGold, Berkeley, CA, for Plaintiff-Appellee.
ANTON METLITSKY (Leah Godesky and Kendall Turner, on the brief), O'Melveny & Myers LLP, New York, NY and Washington, DC, for Defendant-Appellant.
2 CHIN, Circuit Judge:
Defendant-appellant Klarna, Inc. ("Klarna") provides a "buy now,
pay later" service that allows shoppers to buy a product and pay for it in four
equal installments over time without incurring any interest or fees. App'x at 10-
11. In 2021, plaintiff-appellee Najah Edmundson paid for two online purchases
using Klarna. Shortly thereafter, Klarna automatically deducted partial
repayments for these purchases from Edmundson's checking account. Because
her account lacked sufficient funds to cover Klarna's deductions, Edmundson
incurred $70 in overdraft fees -- which were assessed not by Klarna, but by the
financial institution associated with her bank account.
Edmundson brought this action on behalf of herself and a class of
similarly situated consumers, alleging that Klarna misrepresents and conceals
the risk of bank-overdraft fees that consumers face when using its pay-over-time
service and asserting claims for common-law fraud and violations of the
Connecticut Unfair Trade Practice Act ("CUTPA"). Klarna moved to compel
arbitration on the grounds that Edmundson was presented with and assented to
its Services Terms, which include a mandatory arbitration provision, when she
(1) selected Klarna as her payment method for an online purchase; (2) used a
3 Klarna checkout "widget" to finalize this purchase; and (3) created an account
and logged into Klarna's software application for smartphones (the "Klarna
App"). The district court (Nagala, J.) denied Klarna's motion, concluding that at
no point did Edmundson have reasonably conspicuous notice of and
unambiguously manifest assent to Klarna's terms. See Edmundson v. Klarna, Inc.,
642 F. Supp. 3d 256, 260 (D. Conn. 2022). The district court held that Edmundson
therefore was not bound by the mandatory arbitration provision contained in
Klarna's terms. Id. at 274.
For the reasons set forth below, we REVERSE the district court's
order and REMAND with instructions to grant Klarna's motion to compel
arbitration.
STATEMENT OF THE CASE
I. The Facts
The facts are undisputed and are summarized as follows:
Klarna is one of the largest "buy now, pay later" services, reaching 90
million active customers across 17 countries. Klarna offers "point-of-sale loans
for online and in-store purchases" that allow shoppers to purchase products in
four installments without incurring any interest or fees. When making a
4 purchase from a merchant that offers Klarna's services, customers are asked at
checkout whether they would rather use a traditional upfront payment method
or Klarna's "Pay in 4" service. If the customer chooses to use Klarna, the
customer provides her name, address, date of birth, and debit card information
to Klarna, either through its checkout widget on a merchant's website or through
the Klarna App. Klarna then divides the total purchase price into four equal
installments. The first installment is charged to the customer at checkout. The
remaining three payments are automatically deducted from the customer's
checking account every two weeks until the balance is paid in full.
Edmundson is a former Klarna customer who resides in
Connecticut. In support of its motion to compel arbitration, Klarna submitted a
declaration from Senior Product Manager Erin Riffe, in which Riffe represented
that Klarna maintains records of each customer's transaction history, and
identified from those records the dates and methods by which Edmundson made
purchases using Klarna and logged into the Klarna App. Attached to the
declaration were screenshots of the three interfaces that Edmundson would have
seen when she first used Klarna to make a purchase and when she first logged
into the Klarna App.
5 On or about December 23, 2020, Edmundson arrived at the first
interface (hereinafter, the "Pay-with-Klarna Screen") when she was choosing
from six payment methods to make an online purchase on GameStop's website.
See Addendum A. Because GameStop is one of Klarna's merchant partners, all
consumers shopping on GameStop's website are offered the option of paying
with Klarna during the online checkout process. Once Edmundson selected to
pay with Klarna from a list of payment methods entitled "BUY NOW PAY
LATER," the interface displayed a schedule of four interest-free payments in the
amount of approximately $81 each. App'x at 23. Under the schedule, in a
smaller gray font were the words: "By continuing, I accept Klarna Services
terms, Privacy Policy, Pay Later in 4 terms and request electronic
communication." Id. These underlined phrases -- which were also bolded and in
black font on a white background -- were hyperlinks that, when clicked,
displayed the then-current versions of Klarna's Services Terms, Privacy Policy,
and "Pay Later in 4 Agreement," respectively. To continue purchasing the
GameStop item with Klarna, Edmundson selected the button marked "Pay with
Klarna." Addendum A.
6 Edmundson was thereafter prompted to enter her debit card
information. See Addendum B. After she clicked the button marked "Continue,"
Edmundson arrived at the second interface (hereinafter, the "Klarna Widget"),
where she was to finalize her purchase from GameStop. See Addendum C. From
top to bottom, the Klarna Widget instructed the user to "Review your plan" and
listed details about the "Payment plan," including the amount of the four equal
payments, the amount "Due today," and the total cost of the transaction. The
Widget then set forth the statement "I agree to the payment terms" and provided
a button marked "Confirm and continue." Id. The phrase "payment terms" was
underlined, bolded, and served as a hyperlink, which, when clicked, would
display the same "Pay Later in 4 Agreement" that was hyperlinked on the Pay-
with-Klarna Screen. Until the purchaser clicked on "Confirm and continue," she
was "free to exit the Klarna widget at any time . . . without incurring any fee or
penalty." App'x at 24. When Edmundson clicked on "Confirm and continue,"
she completed her purchase of the GameStop product. Addendum C.
On or about December 27, 2020, Edmundson interacted with the
third interface (hereinafter, the "App Login Screen") when she downloaded and
used the Klarna App for the first time. See Addendum D. This interface
7 presented Edmundson with the options to "Sign up," "Log in," or "Pay in-store."
Id. Below those options, in white text on a black background were two
disclaimers: (1) "Message and data rates may apply"; and (2) "By clicking 'Sign
in' I approve Klarna's User Terms and confirm that I have read Klarna's Privacy
Notice. Links in the app are sponsored." Id. The phrase "Klarna's User Terms"
was a hyperlink that, if selected, displayed the same Services Terms that were
hyperlinked on the Pay-with-Klarna Screen. To continue into the Klarna App
from this interface, Edmundson had to select "Sign up," "even though she had
already created an account with Klarna . . . in connection with her December 23,
2020 [GameStop] purchase." App'x at 25. For each subsequent use of the Klarna
App, Edmundson selected "Log in" on the App Login Screen.
Edmundson interacted with these three interfaces on subsequent
occasions. On January 22, 2021, when completing another purchase on
GameStop's website using Klarna, Edmundson again viewed the contents of the
Pay-with-Klarna Screen and the Klarna Widget. And from February 4 through
April 22, 2021, Edmundson viewed the App Login Screen before initiating
several transactions in the Klarna App.
8 At all times that Edmundson used Klarna's "Pay in 4" service,
Klarna's Services Terms included the following mandatory arbitration provision
and prohibition on representative litigation:
You agree that any and all disputes or claims, including without limitation federal and state regulatory and statutory claims, common law claims, and those based in contract, tort, fraud, misrepresentation or any other legal theory, arising out of or relating to these Terms or the relationship between you and Klarna . . . shall be resolved exclusively through final and binding arbitration . . . rather than in court . . . .
....
YOU AGREE THAT EACH PARTY MAY BRING CLAIMS AGAINST THE OTHER ONLY ON AN INDIVIDUAL BASIS AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS, CONSOLIDATED OR REPRESENTATIVE ACTION[.]
App'x at 49-50. This provision was also incorporated by reference in Klarna's
"Pay Later in 4 Agreement," which provided that users were, inter alia, subject to
the "Mandatory Arbitration of Disputes" and included a hyperlink to the
arbitration provision in Klarna's Services Terms. Id. at 28.
According to Klarna's records, Edmundson timely satisfied all her
installment payments and Klarna never charged Edmundson any interest or fees.
But Edmundson incurred other fees in connection with her use of Klarna's "Pay
9 in 4" service. On March 6 and March 7, 2021, Klarna deducted $15.83 and $9.31
from Edmundson's checking account at Nutmeg State Financial Credit Union as
partial repayments for Edmundson's earlier purchases with Klarna. But because
Edmundson lacked sufficient funds in her checking account to satisfy these
deductions, Nutmeg State Financial Credit Union assessed her two overdraft
fees, amounting to a total of $70.
II. The District Court Proceedings
On June 6, 2021, Edmundson brought this putative class action
against Klarna, seeking to represent a class of all persons who used Klarna's "Pay
in 4" service and incurred an overdraft fee from a third-party financial institution
"as a result of a Klarna repayment deduction." Id. at 14. The complaint asserts
claims for common-law fraud and violations of CUTPA. Specifically,
Edmundson alleges that Klarna "targets poor consumers and those struggling to
make ends meet" by falsely representing that its "Pay in 4" service is completely
free, with "[n]o interest" or "catch[es]," and failing to disclose that the users may
incur steep overdraft fees imposed by their own banks if their bank accounts lack
sufficient funds to cover the amount owed to Klarna. App'x at 8, 11.
Edmundson alleges that she "had no idea small, automatic Klarna repayments
10 could cause $35 bank fees," and that she would not have used Klarna "if she had
been adequately informed of the risks of bank fees." Id. at 13-14.
On August 16, 2021, Klarna moved to compel arbitration, arguing
that when Edmundson viewed each of the three interfaces discussed above, she
was presented with Klarna's Services Terms, including the mandatory arbitration
provision, and was instructed that continuing with the transaction would
constitute acceptance of those terms. Each time, according to Klarna,
Edmundson unambiguously manifested assent by choosing to transact with
Klarna. The district court denied the motion, analyzing all three interfaces and
concluding that none provided reasonably conspicuous notice of Klarna's terms
and that none supported the inference that Edmundson unambiguously
manifested assent to those terms. See Edmundson, 642 F. Supp. 3d at 267-74.
First, as to the Pay-with-Klarna Screen, the district court held that
notice of Klarna's terms was insufficiently conspicuous given the "clutter on the
screen." Id. at 268. The district court further held there was no manifestation of
assent to any terms at this point in the transaction because a reasonable user
could select "Pay with Klarna" and then choose, without consequence, to use
another payment method (or ditch the transaction altogether). Id. at 269.
11 As to the Klarna Widget and the App Login Screen, the district court
also concluded that these interfaces could not support an inference of
Edmundson's unambiguous assent to Klarna's terms. Because the Klarna Widget
simply stated "I agree to the payment terms," without indicating what action
would be sufficient to manifest such agreement, the district court held that
"[t]here is nothing anywhere on the screen that would alert a reasonable user to
the fact that clicking 'confirm and continue' has any contractual significance at
all, much less acceptance of a contract that includes an arbitration agreement."
Id. at 271. Similarly, because the App Login Screen instructed that a user assents
to Klarna's terms by clicking "Sign in" but only provided options for the user to
"Sign up" or "Log in," the district court held that a reasonable user could have
believed "that since she was not clicking a button labeled 'sign in,' she was not
bound" to any terms. Id. at 273-74. Finally, the district court rejected Klarna's
argument that the repeated references and hyperlinks to its terms across the
three interfaces provided inquiry notice, recognizing that each interface used
different labeling conventions, and therefore "it [was] likely that a reasonable
user would understand each of these links to lead to a different agreement." Id.
at 274.
12 Klarna timely appealed the district court's February 15, 2022 order
denying the motion to compel arbitration pursuant to 9 U.S.C. § 16, which
permits interlocutory appeals from the denial of a motion to compel arbitration.
On March 18, 2022, Klarna moved to stay all district court proceedings pending
resolution of its appeal. The district court granted that motion on May 6, 2022,
and stayed the underlying action, recognizing, inter alia, "that there are serious
questions going to the merits of [Klarna's] appeal" and that Klarna's "motion to
compel arbitration presented a close question." App'x at 101.
DISCUSSION
I. Applicable Law
A. Standard of Review
We review de novo a district court's denial of a motion to compel
arbitration. Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 26 (2d Cir. 2002). The
determination of whether parties have contractually bound themselves to
arbitrate a dispute is likewise subject to de novo review, but the factual findings
upon which that legal determination is based are reviewed for clear error. Id.1
1 "Although determinations regarding mutual assent and reasonable notice usually involve questions of fact," when, as here, "the facts . . . are undisputed, and the district court determined as a matter of law that no reasonable factfinder could have
13 In deciding motions to compel, courts apply a "standard similar to
that applicable for a motion for summary judgment." Bensadoun v. Jobe-Riat, 316
F.3d 171, 175 (2d Cir. 2003). We must "consider all relevant, admissible evidence
submitted by the parties and . . . draw all reasonable inferences in favor of the
non-moving party." Nicosia v. Amazon.com, Inc., 834 F.3d 220, 229 (2d Cir. 2016).
B. Arbitrability
The Federal Arbitration Act (the "Act") provides that "[a] written
provision in . . . a contract evidencing a transaction involving commerce to settle
by arbitration a controversy thereafter arising out of such contract . . . shall be
valid, irrevocable, and enforceable." 9 U.S.C. § 2. The Act also requires federal
courts, upon application of a party to the contract, to stay adjudication of claims
covered by an enforceable arbitration agreement until such arbitration has been
had. See id. § 3. It is well-established that these statutory provisions reflect both
a "liberal federal policy favoring arbitration and the fundamental principle that
arbitration is a matter of contract." AT&T Mobility LLC v. Concepcion, 563 U.S.
333, 339 (2011) (internal quotation marks and citations omitted). Accordingly,
found that the notice was reasonably conspicuous and the assent unambiguous," we review these conclusions from the district court de novo. Meyer v. Uber Techs., Inc., 868 F.3d 66, 73 (2d Cir. 2017).
14 while the Act "place[s] arbitration agreements on an equal footing with other
contracts," id., it "is not a substitute for contractual assent, and we will not
enforce arbitration unless and until it is determined that an agreement [to
arbitrate] exists," Soliman v. Subway Franchisee Advert. Fund Tr., Ltd., 999 F.3d 828,
834 (2d Cir. 2021).
Whether the parties have agreed to arbitrate is generally a question
of state contract law. See Specht, 306 F.3d at 27. The district court applied
Connecticut law on the question of contract formation, see Edmundson, 642 F.
Supp. 3d at 265-66, and the parties do not challenge that decision on appeal.
Nonetheless, as the parties acknowledge, traditional contract formation law does
not vary meaningfully from state to state, Appellant's Br. at 22 n.2; Appellee's Br.
at 25 n.8, and therefore, our precedents determining the enforceability of
arbitration provisions according to the contract-law principles of other states
may also be relevant to this dispute. See, e.g., Schnabel v. Trilegiant Corp., 697 F.3d
110, 119 (2d Cir. 2012) (noting that "Connecticut and California apply
substantially similar rules for determining whether the parties have mutually
assented to a contract term."); Meyer v. Uber Techs., Inc., 868 F.3d 66, 74 (2d Cir.
2017) (noting the same about New York and California). Accordingly, we need
15 not and do not limit ourselves to Connecticut law in resolving this question of
arbitrability.2
C. Formation of Web-Based Contracts
To form a contract, there must be "a manifestation of mutual assent
to the exchange between two or more parties" made by written or spoken word,
or by conduct. Ubysz v. DiPietro, 440 A.2d 830, 833-34 (Conn. 1981). These
principles are the "touchstone of contract" formation, Specht, 306 F.3d at 29, and
they apply with equal force to contracts formed online, see Register.com, Inc. v.
Verio, Inc., 356 F.3d 393, 403 (2d Cir. 2004) ("While new commerce on the Internet
has exposed courts to many new situations, it has not fundamentally changed
the principles of contract.").
We have, nonetheless, recognized that an offeree's manifestation of
assent to an offeror's terms looks different for consumer contracts formed online,
in which terms are usually unnegotiated and consumers often proceed without
reading the fine print. See Meyer, 868 F.3d at 75-76 (discussing how a user
manifests assent to different types of web-based contracts, including "clickwrap,"
2 At the same time, we recognize that contract formation through the internet is a subject of recent development. It would not be surprising if the courts of different states developed differing approaches and arrived at different conclusions to questions regarding the formation of web-based contracts.
16 "browsewrap," and "sign-in-wrap" agreements); see also Berman v. Freedom Fin.
Network, LLC, 30 F.4th 849, 856 (9th Cir. 2022) ("[C]ourts confronted with online
agreements such as those at issue here have devised rules to determine whether
meaningful assent has been given."). Courts have ruled that, where there is no
evidence that an internet or app user had actual knowledge of the contractual
terms, the user will still be bound if (1) a "'reasonably prudent' person would be
on inquiry notice" of the terms, Soliman, 999 F.3d at 834 (quoting Meyer, 868 F.3d
at 74-75), and (2) the user unambiguously manifests assent "through . . . conduct
that a reasonable person would understand to constitute assent," Schnabel, 697
F.3d at 120; see also Specht, 306 F.3d at 35 ("Reasonably conspicuous notice of the
existence of contract terms and unambiguous manifestation of assent to those
terms by consumers are essential if electronic bargaining is to have integrity and
credibility."). Both inquiries, therefore, are generally measured by an "objective
standard," Specht, 306 F.3d at 30, and are "clearly. . . fact-intensive," Meyer, 868
F.3d at 76.
Who is the "reasonably prudent" internet or smartphone user? The
standard does not require us to imagine a user who has "never before
encountered" a smartphone app or entered into an online contract. Meyer, 868
17 F.3d at 77. Nor are we to consider the perspective of a highly savvy and
sophisticated user, someone who spends all waking hours using some kind of
technology. See Berkson v. Gogo LLC, 97 F. Supp. 3d 359, 380 (E.D.N.Y. 2015)
(referring to the "average internet user" as "one who does not necessarily conduct
much of her business online"). Courts have viewed the reasonably prudent user
as somewhere in between; such a user is not a complete stranger to computers or
smartphones, having some familiarity with how to navigate to a website or
download an app. See, e.g., Meyer, 868 F.3d at 77-78 ("[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.");
see also Selden v. Airbnb, Inc., 2016 WL 6476934, at *5 (D.D.C. Nov. 1, 2016) ("The
act of contracting for consumer services online is now commonplace in the
American economy."), aff'd, 4 F.4th 148 (D.C. Cir. 2021); Small Just. LLC v. Xcentric
Ventures LLC, 99 F. Supp. 3d 190, 197 (D. Mass. 2015) (noting that a "reasonably
prudent internet user . . . is conversant in the basic navigation tools required to
effectively utilize a website" and therefore, would be familiar with a "scroll bar"),
aff'd, 873 F.3d 313 (1st Cir. 2017).
18 A reasonably prudent internet or smartphone user is on inquiry
notice of contractual terms where the terms are presented in a clear and
conspicuous way. See Specht, 306 F.3d at 30 ("Clarity and conspicuousness of
arbitration terms are important in securing informed assent."). "In the context of
web-based contracts, we look to the design and content of the relevant interface
to determine if the contract terms were presented to the offeree in [a] way that
would put her on inquiry notice of such terms." Starke v. SquareTrade, Inc.,
913 F.3d 279, 289 (2d Cir. 2019). For example, "when terms are linked in obscure
sections of a webpage that users are unlikely to see, courts will refuse to find
constructive notice." Nicosia, 834 F.3d at 233 (collecting cases). By contrast, when
terms are linked on an "uncluttered" interface and temporally and "spatially
coupled with the mechanism for manifesting assent," and the user does not need
to scroll beyond what is immediately visible to find the terms, we have
concluded, as a matter of law, that the interface provided reasonably
conspicuous notice of the existence of contractual terms. Meyer, 868 F.3d at 78-79
("That the Terms of Service were available only by hyperlink does not preclude a
determination of reasonable notice. . . . As long as the hyperlinked text was itself
19 reasonably conspicuous . . . a reasonably prudent smartphone user would have
constructive notice of the terms.").
As for the second requirement -- the unambiguous manifestation of
assent -- we have held that "acceptance 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." Schnabel, 697 F.3d at 128. In other words, where
an internet or smartphone user does not explicitly say "I agree" to the contractual
terms, a court must determine whether a reasonably prudent user would
understand his or her conduct to constitute assent to those terms. Id. at 120. In
making this determination in the context of web-based contracts, we have
considered (1) whether the interface clearly warned the user that taking a specific
action would constitute assent to certain terms, see Meyer, 868 F.3d at 80 ("[T]he
text on the [interface] not only included a hyperlink to the Terms of Service, but
expressly warned the user that by creating an . . . account, the user was agreeing
to be bound by the linked terms."); (2) whether notice of the contractual terms
was presented to the consumer in a location on the interface and at time when
the consumer would expect to receive such terms, see Nicosia, 834 F.3d at 236
20 (finding no "manifest[ation] [of] assent to [] additional terms" where "the
presentation of terms [was] not directly adjacent to the . . . button so as to
indicate that a user should construe clicking as acceptance"); Schnabel, 697 F.3d at
127 ("[T]he presentation of these terms at a place and time that the consumer will
associate with the initial . . . enrollment, or the use of . . . [the] services from
which the recipient benefits at least indicates 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."); and (3) the "course of dealing between the parties,"
Schnabel, 697 F.3d at 124, including whether the contract terms were
conspicuously presented to the consumer at each use of the offeror's service and
the consumer's conduct in response to the repeated presentation of conspicuous
terms, see Starke, 913 F.3d at 296 (noting that although the consumer transacted
with the offeror "on six prior occasions," he was never given "clear and
conspicuous notice that the transaction would subject him to binding
arbitration," and therefore, did not manifest assent); Register.com, 356 F.3d at 401
(finding assent to contract terms in part because consumer's use of service was
not "sporadic and infrequent," but daily, and consumer received notice of terms
with each use).
21 II. Analysis
There is no dispute that Klarna's terms include a mandatory
arbitration provision, and that Edmundson's claims fall within the scope of that
provision. Indeed, Edmundson concedes that if the arbitration provision is
deemed enforceable as to her, she would be prohibited from adjudicating her
claims against Klarna before the district court. Therefore, the only issues on
appeal are whether (1) notice of Klarna's terms (and thus the arbitration
provision contained therein) was reasonably clear and conspicuous such that a
reasonable internet or smartphone user would be on inquiry notice of them, and
(2) Edmundson objectively and unambiguously manifested assent to the terms.
Because we conclude that Edmundson's interaction with the Klarna Widget
satisfied these requirements, we conclude, as a matter of law and pursuant to this
Court's precedents, that Edmundson agreed to arbitrate her claims against
Klarna.3
3 We do not address whether the Pay-with-Klarna Screen or the App Login Screen provided inquiry notice of Klarna's terms. Because we find that the Klarna Widget provided Edmundson with inquiry notice, we need not engage further with the Pay- with-Klarna Screen or the App Login Screen.
22 A. Reasonably Conspicuous Notice
Several factors weigh in favor of finding that the Klarna Widget
provided "reasonably conspicuous notice" of Klarna's terms. Specht, 306 F.3d at
32.
To start, the Klarna Widget interface is "uncluttered" and bears close
resemblance to the interface we endorsed in Meyer, which presented the user
with fields with which to enter credit card details, one link to the terms at issue,
and three buttons to select either to register for a new account or to connect to
two types of pre-existing accounts. Meyer, 868 F.3d at 78, 82 (Addendum B). On
the Klarna Widget, the only link provided is to Klarna's terms, and the user is
presented with only one button to click -- that is, selecting "Confirm and
continue." See Addendum C. This content is "visible at once, and the user does
not need to scroll beyond what is immediately visible to find notice" of Klarna's
terms. Meyer, 868 F.3d at 78; cf. Specht, 306 F.3d at 23, 31-32 (holding that a
reasonably prudent user would not have known of terms that were visible only if
user "happen[ed] to scroll down" to the bottom of webpage).
Given the relative lack of clutter on the Klarna Widget, this interface
differs sharply from those in prior cases that we deemed insufficient, as a matter
23 of law, to provide inquiry notice. For example, in Soliman, we held that an
arbitration provision would not have been conspicuous to a reasonably prudent
consumer in part because notice of the terms "was buried within a fine-print
paragraph with over eighty other words [and] was not set off in any way within
that paragraph (by color, emphasis, etc.)." 999 F.3d at 835. In Nicosia, we held
that "reasonable minds could disagree on the reasonableness of notice" where the
interface in question contained "between fifteen and twenty-five links," "various
text . . . in at least four font sizes and six colors (blue, yellow, green, red, orange,
and black), alongside multiple buttons and promotional advertisements," and
"the customers' personal address, credit card information, shipping options, and
purchase summary." 834 F.3d at 237-38, 241 (Addendum B). And finally, the
overall clutter of the interface in Starke led us to conclude that it was "[l]ike the
interface in Nicosia, and in sharp contrast with the screen in Meyer," and we
similarly held there was no reasonably conspicuous notice of the terms at issue.
Starke, 913 F.3d at 293.
Although the hyperlinks to Klarna's terms are in a smaller font
relative to other text on the Klarna Widget, they are set apart from surrounding
information by being underlined and in a color that stands in sharp contrast to
24 the color of the interfaces' backgrounds. See Addendum C (black text on white
background). And because the interface does not include a plethora of clutter or
extraneous information, the notice to Klarna's terms -- even if in a smaller font --
appears sufficiently "conspicuous in light of the whole [interface]." Nicosia, 834
F.3d at 237.
Moreover, as in Meyer, the hyperlink to Klarna's terms on the Klarna
Widget is spatially and temporally coupled with the user's transaction with
Klarna. See 868 F.3d at 78; cf. Starke, 913 F.3d at 294 (holding that terms of service
were not spatially or temporally coupled when provided only after user's
purchase of service). Spatially, the hyperlink to Klarna's terms appears directly
adjacent to the "button intended to manifest assent to the terms." Meyer, 868 F.3d
at 78. The statement "I agree to the payment terms" is directly above the
"Confirm and continue" button, which a user must click to complete the purchase
using Klarna. App'x at 24. See Addendum C. A reasonable internet user,
therefore, could not avoid noticing the hyperlink to Klarna's terms when the user
selects "Confirm and continue" on the Klarna Widget.
Temporally, a reasonably prudent internet or smartphone user
would expect terms of service to be presented when the user has navigated to the
25 Klarna Widget. We have held that "the presentation of these terms at
. . . purchase or enrollment . . . 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,
users only arrive at the Klarna Widget when they are about to finalize a purchase
using Klarna's "Pay in 4" service. See Addendum C. Accordingly, at this instance
of purchase -- when the user is about to receive a benefit from Klarna -- a
reasonably prudent user would understand that the terms presented on the
interface govern the user's future relationship with Klarna.
Finally, the interface includes language signaling to users that they
will be agreeing to Klarna's terms through their conduct. As discussed, included
on the Klarna Widget is the statement "I agree to the payment terms."
Addendum C. This language is more akin to the warning provided in Meyer
than to the vague references to "terms and conditions" used in other cases, which
we deemed to undermine the conspicuousness of notice. Compare Meyer, 868
F.3d at 78 ("By creating an Uber account, you agree to the TERMS OF SERVICE &
PRIVACY POLICY."), with Soliman, 999 F.3d at 832 ("Terms and conditions at
subway.com/subwayroot/ TermsOfUse.aspx"), and Starke, 913 F.3d at 294 ("Terms
26 & Conditions"). Moreover, we look at the "totality of the circumstances" to
determine whether notice was reasonably conspicuous, Soliman, 999 F.3d at 831,
and therefore, the "particular language used in relation to the hyperlinked or
otherwise-referenced terms and conditions," id. at 837, is just one factor to
consider. Here, in light of the totality of the circumstances -- the overall lack of
clutter on the Klarna Widget, the conspicuousness of the notice of Klarna's terms
in relation to the interface as a whole, the spatial and temporal proximity of the
terms to the mechanisms for manifesting assent, the obvious fact that there
would be a continuing relationship involving the payment of installments over
time, and the language advising users that they are agreeing to Klarna's terms --
we conclude that a reasonably prudent internet or smartphone user would have
been on notice that the hyperlinked terms were connected to finalizing a
purchase on the Klarna Widget.
To be sure, the Klarna Widget has some deficiencies. For example, it
could be argued that blue font is a better signal to consumers that text contains a
hyperlink. Meyer, 868 F.3d at 77–78. But, as we have previously emphasized,
there are "no particular features that must be present to satisfy the reasonably
conspicuous standard," Soliman, 999 F.3d at 842, "there are infinite ways to design
27 a website or smartphone application," Meyer, 868 F.3d at 75, and "the format used
in Meyer is [not] the only effective way to" form an online contract, Starke, 913
F.3d at 296-97. And most importantly, none of these deficiencies are fatal to our
finding that, under the totality of the circumstances, the Klarna Widget provided,
as a matter of law, reasonably conspicuous notice of Klarna's terms, including the
mandatory arbitration provision.
B. Unambiguous Manifestation of Assent
Although Edmundson's assent to arbitration was not express, we
conclude that Edmundson unambiguously manifested assent "through
. . . conduct that a reasonable person would understand to constitute assent."
Schnabel, 697 F.3d at 120. Edmundson unambiguously manifested assent to
Klarna's terms when, on December 23, 2020, she selected "Confirm and continue"
to finalize her GameStop purchase using Klarna's "Pay in 4" service. App'x at 23.
Reasonable internet users would understand that selecting "Confirm
and continue" on the Klarna Widget constitutes their confirmation that they
"agree to the payment terms" and continues the user's transaction using Klarna's
"Pay in 4" Service. As described above, a reasonable user could not avoid the
notice of Klarna's terms, which were hyperlinked in the statement, "I agree to the
28 payment terms." Indeed, this statement was placed directly above the "Confirm
and continue" button, the interface was, as a whole, uncluttered, and the terms
were presented at a time when a reasonable user would expect to receive them.
See Addendum C. Aside from the "Confirm and continue" button, the only other
selections a user could make on the Klarna Widget were to "change" the debit
card associated with the purchase, or to exit the purchase altogether, neither of
which objectively constitute assent to Klarna's "payment terms." But selecting
"Confirm and continue" clearly does constitute such assent.
In these circumstances, it would be unreasonable for an internet user
to read the conspicuous and clear statement, "I agree to the payment terms," with
the button marked "Confirm and continue" directly below it, and not understand
that the "Confirm and continue" button is the mechanism by which the user
"[c]onfirm[s]" his or her "agree[ment] to the payment terms" and "continue[s]" the
transaction with Klarna. See id.; see also Meyer, 868 F.3d at 80 ("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 [the user's] assent ambiguous.").
"The transactional context of the parties' dealings reinforces [this]
conclusion." Meyer, 868 F.3d at 80. Edmundson navigated to the Klarna Widget
29 only after (1) selecting Klarna from a list of six payment methods to purchase an
item from the GameStop website, see Addendum A, and (2) entering her debit
card information with the intention of receiving the benefits of Klarna's "Pay in 4"
service, see Addendum B. When Edmundson arrived at the Klarna Widget, she
knew well that purchasing the GameStop item with Klarna meant that she was
entering into a continuing relationship with Klarna, one that would endure at
least until she repaid all four installments. The Klarna Widget provided clear
notice that there were terms that would govern this continuing relationship. A
reasonable internet user, therefore, would understand that finalizing the
GameStop transaction, entering into a forward-looking relationship with Klarna,
and receiving the benefit of Klarna's service would constitute assent to those
terms.
We recognize that some of Edmundson's arguments are not
unreasonable. To be sure, Klarna could have chosen to include clearer
instructions, such as "By selecting 'Confirm and continue,' I agree to the terms set
forth under this hyperlink: payments terms." Moreover, the Klarna Widget's
statement "I agree to the payment terms" appears just below a specification of
what may reasonably be considered payment terms -- including the specification
30 that there would be four payments of equal specified amount, the amount of the
payment that was "due today," and the total cost of the purchase. Addendum C.
Nonetheless, upon full consideration of Edmundson's arguments,
we are not convinced. Contrary to Edmundson's assertion, we have never held
that "a company must 'explicitly advise[]' the user 'that the act of clicking will
constitute assent to [its] terms and conditions.'" Appellee's Br. at 55 (quoting
Berman, 30 F.4th at 857). Rather, we have only required that the interface "make
clear" to the reasonable internet user that a specific "click" signifies assent. See
Specht, 306 F.3d at 29-30 ("[A] consumer's clicking on a download button does not
communicate assent to contractual terms if the offer did not make clear to the
consumer that clicking on the download button would signify assent to those
terms[.]" (emphasis added)); Schnabel, 697 F.3d at 128 ("[T]here 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."). The Klarna Widget satisfies this burden.
Furthermore, Edmundson could not have reasonably believed that
the information set forth on the Klarna Widget above the hyperlinked "payment
terms" represented all the terms governing her use of Klarna's service. The
31 Klarna Widget set forth some "payment terms," but it did not mention, for
example, when future payments would be due, how payments would be
collected, and what would be the consequences for failing to make timely
payments. Accordingly, Edmundson was on inquiry notice that her
"agree[ment] to the payment terms," Addendum C, necessarily encompassed
more than the information provided on the Klarna Widget, and the burden was
then on her to find out to what terms she was accepting, see Meyer, 868 F.3d at 77-
78.
Accordingly, we conclude on the undisputed facts of this case that
Edmundson unambiguously manifested her assent to Klarna's terms, and hold,
as a matter of law, that Edmundson agreed to arbitrate her claims against Klarna.
CONCLUSION
For the reasons set forth above, the order of the district court is
REVERSED, and the case is REMANDED with instructions to grant Klarna's
motion to compel arbitration.
32 ATTACHMENTS
Addendum A (App'x at 36) Addendum B (App'x at 61)
Addendum C (App'x at 62)
34 Addendum D (App'x at 64)