Executive Summary and Takeaway. User agreements for websites and apps have become increasingly prevalent in recent years, and courts have had to adapt traditional rules of contract interpretation to the new digital frontier. On June 25, 2018, the First Circuit reversed a district court decision enforcing an arbitration clause contained in the terms of service for the defendant’s smartphone app, finding that those terms were not sufficiently “conspicuous” for a user to know that he or she had agreed to be bound by them. The First Circuit’s decision continues a trend of judicial hostility to arbitration clauses, and is notable for its scrutiny of the record below: the court studied in minute detail the design and content of the registration screen containing a hyperlink to the terms of service—including the size, shape, color, font, and location of the hyperlink—and concluded that the link to the terms of service failed “to grab the user’s attention.” Businesses with similar user agreements governed by Massachusetts law or that could potentially apply to Massachusetts consumers should review their websites and/or apps to ensure that their platforms disclose any terms of use in a clear and conspicuous manner in relation to the rest of the content on the screen.

Additional Background. To use the services provided by the defendant company (the “Company”) via its smartphone app, a customer must first register with the Company by creating an account. As part of the registration process, users are shown a screen that requests their payment information and notifies them that by creating an account they are agreeing to the Company’s Terms of Service and its Privacy Policy:

The words “Terms of Service & Privacy Policy” are in a clickable box that includes a hyperlink. Upon clicking on that hyperlink, the user is directed to a screen with two other links: one to the Terms of Service, and the other to the Privacy Policy. The user can view either document by clicking on the appropriate link.


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On Monday, the U.S. Supreme Court issued its highly-anticipated opinion in  DirecTV, Inc. v. Imburgia et al., 577 U.S. ___ (2015), which reaffirmed its ruling in AT&T Mobility LLC v. Concepcion, 56 U.S. 333 (2011), dealing yet another blow to California Courts’ attempts to invalidate class action waivers.

Background

The plaintiffs in Imburgia

In American Express Co. v. Italian Colors Restaurant, the Supreme Court held in a 5-3 decision that class waivers in arbitration agreements are enforceable, even if the plaintiff’s cost of arbitrating her federal statutory claim exceeds her potential recovery.

Background

Italian Colors brought a class action against American Express for alleged federal antitrust violations