August 22, 2017
In 2014, the plaintiff (an Uber passenger) downloaded and registered for Uber's mobile app. As part of Uber's registration process at issue in this case, users were directed to a screen called "Register," which asked for certain information about their users, or allowed them to link third-party accounts. After clicking "Next," the user advanced to a second screen where they enter their payment information.
The court denied Uber's motion to compel arbitration3 and Uber appealed the decision to the Second Circuit.
The Second Circuit Analysis
The Second Circuit began its analysis by reiterating the well-established law that, "an agreement to arbitrate exists where the notice of the arbitration provision was reasonably conspicuous and manifestation of assent unambiguous."4 The Second Circuit disagreed, however, with the lower court's application of these principles and reversed.
Because the plaintiff contended that he lacked actual notice of the arbitration provision (i.e., that he had not seen it), the Second Circuit used an objective standard to analyze whether the plaintiff had "inquiry notice" based on the perspective of a "reasonably prudent smartphone user."5 The court found the notice to be reasonable based on the following: (1) the screen was "uncluttered," or without excessive information; (2) relevant text could be viewed on the screen without scrolling; (3) the black text contrasted with the white background and the hyperlink was bright blue, in contrast to the other text; and (4) the relevant text was spatially and temporally adjacent to the registration button, in a way that "connect[ed] the contractual terms to the services to which they apply."6
Parallel Proceedings in the Ninth Circuit
As mentioned above, Uber has faced challenges to arbitration provisions in other contexts (e.g., its agreements with drivers), including by the Ninth Circuit—the appellate court whose jurisdiction includes California. For example, in Mohamed v. Uber Technologies, Inc., the Ninth Circuit reversed a decision by the U.S. District Court for the Northern District of California. In that case, drivers were also bound by click-through terms they had assented to. The Ninth Circuit held that questions regarding enforceability of Uber's arbitration provision were properly delegated to, and should have been determined by, the designated arbitrator, and not the courts.8
Notwithstanding the directive from Mohamed, other plaintiffs have continued to press claims in court, which Uber routinely appeals if the lower court denies its motions to compel arbitration. Earlier this year, for instance, the Ninth Circuit began coordinating multiple pending appeals that raise similar issues, i.e., the validity of the arbitration class action waiver in its driver agreements, and continues to hear arguments on them. The consolidated cases are scheduled to have a hearing in September 2017.
Even after the Ninth Circuit resolves the pending appeals, it appears there will be additional cases as well, including Metter v. Uber Technologies, Inc. In an order dated April 17, 2017, the Northern District of California denied Uber's motion to compel arbitration on the basis that the user was "without inquiry notice of Uber's terms of service and without understanding that registering is a manifestation of assent to those terms."9 This decision involved the same registration process as the Meyer case, with the added facts that, when the plaintiff reached the second screen, the hyperlink was blocked by a pop-up keypad, and Uber did not dispute that the obstruction occurred.10 Uber has appealed this decision.
State of the Law
Generally speaking, the federal courts have been a more favorable forum for entities seeking to enforce arbitration clauses, while the California state courts continue to view them with suspicion. The California Supreme Court's recent decision in McGill v. Citibank, N.A.12 is a recent example. In that case, the court held that companies cannot prohibit consumers from seeking a so-called "public injunction" in any forum, and that Citibank's effort to do so was not enforceable. Although it is unclear if McGill v. Citibank will receive further review from the U.S. Supreme Court, companies with arbitration clauses applicable to California consumers should review their arbitration provisions and consider whether changes to their terms may be required.