Ninth Circuit Refuses To Enforce Class Action Waiver In Web-Based Arbitration Clause

Although recent Supreme Court decisions are making it significantly easier to enforce class action waivers, a recent Ninth Circuit decision confirms that the moving party still must establish that the consumer agreed to arbitrate.  In Nguyen v. Barnes & Noble, Inc., No. 12-56628 (9th Cir. Aug. 18, 2014), the court affirmed the denial of an arbitration motion because the consumer was not “prompted to assent to the Terms of Use” on the defendant’s website, and “never in fact read them.”  The court also rejected the argument that the plaintiff’s invocation of a choice-of-law provision in the same Terms of Use estopped him from denying that he agreed to arbitrate.

Nguyen follows a line of cases distinguishing between “clickwrap” and “browsewrap” agreements on websites.  The former agreements generally are enforceable because they require the consumer to consent affirmatively, such as by clicking an “I agree” button, while the latter are enforceable only if the company can demonstrate that the consumer had actual or constructive notice of the agreement (e.g., through deposition testimony or based on clear and conspicuous website language urging the consumer to review the hyperlinked terms and conditions).  Finding Barnes & Noble’s browsewrap agreement unenforceable, the court wrote:  “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers.  . . . [C]onsumers cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”

Notably, the court also rejected Barnes & Noble’s argument that the plaintiff’s reliance on the choice-of-law provision in the Terms and Conditions equitably estopped him from disputing his agreement to those terms, or constituted a ratification.  In doing so, the court reasoned that the plaintiff derived no direct benefit from his reliance on the choice-of-law provision, and even went so far as to suggest that estoppel in the arbitration context applies only to nonsignatories to an arbitration agreement. 

The lesson of Nguyen plainly is that companies must be prepared to prove their customers agreed to arbitrate if they wish to enforce their class action waivers.  Whether on a website or not, arbitration agreements should be reviewed on a regular basis for adherence to current best practices.