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Uber Wins Arbitration Clause Case, Keeping Disputes out of Court

Amid controversies over sexual harassment, data security, and an ousted CEO, Uber scored one legal victory last week. The Second Court of Appeals for the Southern District of New York ruled that clicking Uber's "Register" button means consenting to a forced arbitration clause in its terms of service, meaning that customer disputes must be resolved in arbitration, rather than in court.

Spencer Meyer had sued the company over its "surge" pricing feature, but may not be able to get the case in front of a jury.

Reasonably Conspicuous

We know, we know -- nobody reads the terms of service when downloading, registering, or using an app. But that doesn't mean you can't be bound by those terms. As the unanimous court asserted, as long as there was "'[r]easonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms' ... we [will] find that a contract has been formed." The court also described Meyer's registration process:

To complete the process, the prospective user must click the button marked "REGISTER" in the middle of the Payment Screen. Below the input fields and buttons on the Payment Screen is black text advising users that "[b]y creating an Uber account, you agree to the TERMS OF SERVICE & PRIVACY POLICY." See Addendum B. The capitalized phrase, which is bright blue and underlined, was a hyperlink that, when clicked, took the user to a third screen containing a button that, in turn, when clicked, would then display the current version of both Uber's Terms of Service and Privacy Policy. Meyer recalls entering his contact information and credit card details before registering, but does not recall seeing or following the hyperlink to the Terms and Conditions. He declares that he did not read the Terms and Conditions, including the arbitration provision.

Manifestation of Assent

The court in this case was clear that not all arbitration clauses are enforceable, and "an agreement to arbitrate exists where the notice of the arbitration provision was reasonably conspicuous and manifestation of assent unambiguous as a matter of law." So is a term buried behind a hyperlink almost no one will click conspicuous enough, and does clicking a button labeled "Register" (as opposed to, say, "I agree" or "I have read the terms and conditions") classify as unambiguous manifestation of assent? In this case, the court ruled, yes:

As long as the hyperlinked text was itself reasonably conspicuous -- and we conclude that it was -- a reasonably prudent smartphone user would have constructive notice of the terms. While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice.

Meyer's case might not be dead yet -- Uber may have waived the arbitration clause by actively participating in the litigation. But it's a clear indication as to where New York and California law stands on terms of service agreements, and the clauses contained therein.

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