Arbitration provision in web-based contract was not enforceable

Defendants moved to compel arbitration based upon a purported arbitration clause in an agreement between them and plaintiffs that plaintiffs electronically signed through defendants’ website.

The court found that defendants failed to meet their burden to show, by undisputed material facts, that the parties entered into an agreement to arbitrate the claims in the case. The court looked to the Ninth Circuit decision in Nguyen v. Barnes & Noble Inc., 763 F.3d 1171 (9th Cir. 2014) to support the idea that courts will enforce clickwrap-type agreements where the user indicates actual notice of the terms of the agreement or was required to acknowledge the terms of the agreement before proceeding with further use of the site. Enforcement of a browsewrap-type agreement, which lacks such an acknowledgment, will depend upon whether the website’s design and content would put “a reasonably prudent user on inquiry notice of the terms of the contract.” The conspicuousness of the terms and notices, as well as the overall design of the webpage, will contribute to the determination that a user was on inquiry notice.

In this case, according to the court, defendants had not offered evidence explaining the design and content of the webpage in question, or how the agreement appeared on the website. The court could not determine whether the terms of the agreement appeared on the registration page itself, or if a user would have had to click a link to see the full terms. Likewise, the court could not determine other factors that might contribute to determining plaintiffs’ notice of the terms, such as the size of the font or other aspects of the appearance and presentation of the terms online. The declaration offered by defendant did not provide evidence to show that: (1) either of the plaintiffs had actual knowledge of the arbitration agreement; or (2) whether the agreement was a clickwrap or a browsewrap agreement, how the website was designed and where these terms appeared, and whether plaintiffs assented by clicking an “I agree” box, or were deemed to agree by continuing in the registration process.

Given the lack of evidence of how the registration process appeared on its website, how one of the plaintiffs had declared that he did not see an arbitration agreement, and the reasonable doubts and inferences that must be drawn in that plaintiff’s favor under the applicable standard, the court found that plaintiffs had presented a genuine issue of fact concerning notice of, and assent to, the arbitration agreement here. The court could not find that plaintiffs were reasonably on notice of the agreement to arbitrate, and the accordingly the motion to compel was denied.

Chen v. Premier Financial Alliance, Inc., 2019 WL 280944 (N.D. Cal. Jan. 22, 2019)